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(3) Base year. The term base year means, with respect to any applicable election year, the taxable year of the partnership or S corporation preceding such applicable election year. (4) Special rules for certain applicable election years(i) First applicable election year of new entities. If an applicable election year is a partnership's or S corporation's first year in existence (i.e., the partnership or S corporation is newly formed and therefore does not have a base year), the required payment for such applicable election year is zero. (ii) Applicable election years ending prior to the required taxable year. If a partnership or S corporation makes a section 444 election and the resulting applicable election year (the first applicable election year) of the partnership or S corporation ends prior to the last day of the required year, the required payment for the first applicable election year is zero. See example (5) in paragraph (b)(5)(vi) of this section. (5) Net base year income(i) In general. Except as provided in paragraph (b)(5)(v) of this section (relating to short base years), the net base year income of a partnership or S corporation is the sum of (A) The deferral ratio multiplied by the partnership's or S corporation's net income for the base year, plus (B) The excess (if any) of