July 31, 2015

Highway Funding Bill 2015 Tax Provisions

Highway Funding Bill 2015 Tax Provisions Tax & Business

The Senate has passed the short-term highway funding bill, providing a three-month extension of general expenditure authority for the Highway Trust Fund. This bill was signed by President Obama on July 31, 2015.

Included in the bill are a number of significant tax compliance provisions, which the Congressional committees estimate will raise about $5 billion in revenue.

1. Lenders must report additional information relating to outstanding mortgage interest.
Under current law, lenders must file mortgage information statements to individuals who pay more than $600 in mortgage interest in a year. The new bill requires the statements to include the origination date of the loan, the amount of outstanding principal of the mortgage at the beginning of the year, and the address of the property securing the loan. This additional information is intended to reduce inaccurate reporting in the future. This change applies to statements due after December 31, 2016.

2. The law clarifies the statute of limitations where basis is overstated.
Current law permits the IRS up to six years (instead of the normal three years) to assess additional tax where taxpayers substantially understate income by 25 percent or more. In the recent Home Concrete & Supply, LLC, Supreme Court Case, it was determined that the additional time period does not apply where the tax understatement is caused by a taxpayer overstating the basis of property sold. The new bill amends the law so that the six-year statute of limitations would apply in this situation. This change applies to returns filed after the date of enactment of the bill and also to returns previously filed for which the limitations period is still open.

3. Estates are required to report the estate tax value of transferred property.
The new law provides that an estate which is required to file a federal estate tax return must furnish an information return to the IRS and payee statements to any person acquiring an interest in property from the estate. The statements must identify the estate tax value of each property interest acquired. This provision is intended to promote consistent reporting.

4. Tax Return Filing Dates are adjusted.
The law contains changes to the due dates of several tax returns, including partnership and C corporation returns, Report of Foreign Bank and Financial Accounts, and other IRS information returns.

  1. Partnership (Form 1065). Currently, the return is due on the 15th day of the fourth month following the close of the tax year with a five-month extension. For a calendar year partnership, the original due date is April 15, and the extended due date is September 15. Under the new law, the original due date is changed to the 15th day of the third month following the year-end. IRS is directed to provide a six-month extension. The change in due dates applies to returns for tax years beginning after December 31, 2015.
  2. C Corporation (Form 1120). Currently, the tax return is due on the 15th day of the third month following the end of the tax year, with a six-month extension. Under the new law, the new due date for most C corporation returns will be the 15th day of the fourth month after year-end (4/15 for a calendar year corporation). However, a C corporation with a June 30 year- end keeps the current filing date (September 15) until tax years beginning after December 31, 2025. The original filing date is extended to October 15 thereafter. The extension period for most C corporation returns is generally five months until tax years beginning after December 31, 2025, and then the extension period is increased to six months. For a C Corporation with a June 30 year-end, the extension period is initially seven months until tax years beginning after December 31, 2015. The change in due dates applies to returns for tax years beginning after December 31, 2015.
  3. FinCen Form 114 (Foreign Bank Reporting). The due date is changed from June 30 to April 15. However, taxpayers will be allowed an extension period of six months.
  4. Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts (Form 3520). The due date under the new law will be April 15, with a six- month extension.
  5. The extension periods of certain other IRS forms are also adjusted.
    1. Five and one-half months for U.S. Income Tax Return for Estates and Trusts (Form 1041).
    2. Three and one-half months for Annual Return/Report of Employee Benefit Plan (Form 5500)
    3. Six months for the Return of Organization Exempt from Income Tax (Form 5500), Return of Certain Excise Taxes Under Chapters 41 and 42 of the IRC (Form 4720), Split-Interest Trust Information Return (Form 6069), Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction (Form 8870), Annual Information Return of a Foreign Trust With a U.S. Owner (Form 3520-A).

5. Transfer of Excess Defined Benefit Plan Assets to Retiree Medical Accounts and Group-Term Life Insurance.
The Highway, Investment, Job Creation, and Economic Growth Act of 2012 provided employers this option through the end of 2021. The new law extends this rule through the end of 2025.

6. Affordable Care Act Applicable Large Employer definition.
The law contains a provision which exempts veterans enrolled in health care provided by TRICARE or by the Veteran’s Administration from being counted in determining whether an employer has 50 full-time employees (or full-time equivalent employees).

7. Veteran Health Savings Accounts. The new law provides that an otherwise eligible veteran can contribute to a Health Savings Account (HSA) despite receiving medical care under the Veteran’s Administration for a service-connected disability.

Contact your Marcum Tax Professional if you have any questions related to this new Bill or how the changes may affect you.

A special thanks to article contributor Michael D’Addio, Principal, Tax & Business Services.


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