New Highway Law Includes Tax Provisions

On July 31, 2015, President Obama signed into law "The Surface Transportation and Veterans Health Care Choice Improvement Act" (the "Act").  The primary focus of the Act is to provide an extension of funding out of the Highway Trust Fund, but it also includes several important tax provisions not obviously related to highway funding or veterans' health care.  This Client Alert provides a brief summary of some of those provisions. 

Change In Filing Deadlines

  • The filing deadline for a partnership to file its return is accelerated by one month.  The new deadline is the 15th day of the third month following the close of the partnership's tax year.  Therefore, a partnership using the calendar year as its tax year must file its return by March 15 of the following year.  The extension period to file the return will be 6 months.
  • The filing deadline for a C corporation to file its return is delayed by one month.  The new deadline is the 15th day of the fourth month following the close of the corporation's tax year.  Therefore, a C corporation using the calendar year as its tax year must file its return by April 15 of the following year.  Subject to certain exceptions, the extension period to file the return will be 6 months. 
  • The current deadline for filing the FBAR form, FinCEN Report 114, Report of Foreign Bank and Financial Accounts, is June 30 and the deadline may not be extended.  Under the Act, the filing deadline changes to April 15 with a 6-month extension period ending on October 15.  In addition, the Act authorizes a penalty waiver for non-compliant taxpayers required to file the form for the first time.

These new filing deadlines are effective for tax years beginning after December 31, 2015.

Additional Requirements for Mortgage Reporting

Currently, lenders receiving mortgage interest are required to report certain information on Form 1098, Mortgage Interest Statement.  However, the Act expands the amount of information required on statements due after December 31, 2016.  The Act requires a lender to report the following additional information:

  • The amount of outstanding principal on the mortgage as of the beginning of the calendar year;
  • The mortgage origination date; and,
  • The address (or other description in the case of property without an address) of the property securing the mortgage.

Application of Six Year Statute of Limitations

The IRS generally has three years after a return is filed in which to assess a deficiency against the taxpayer.  The three-year assessment period is extended to a six-year period if the taxpayer omits a substantial amount of gross income from a return.  The United States Supreme Court, however, has previously held that an overstatement of an asset's basis is not an omission of income for purposes of extending the assessment period to six years. 

The Act overrides the Supreme Court's decision and provides that the six-year period will apply when an overstatement results in a substantial omission of gross income.  The new provision applies to tax returns filed after July 31, 2015 and to previously filed returns with an unexpired assessment period as of July 31, 2015.

Consistent Basis Reporting

A beneficiary's basis in property received from a decedent is generally stepped-up to the fair market value of the property as of the decedent's date of death.  To prevent mismatches between the value reported by the estate and the value reported by the beneficiary, the Act imposes a new basis consistency requirement.  As a result, the beneficiary's basis in the property may be limited to the basis reported by the estate for estate tax purposes.  To ensure compliance, the Act imposes new information reporting requirements on the executor of an estate.  The new provision applies to property with respect to which an estate tax return is filed after July 31, 2015.

© 2024 Ward and Smith, P.A.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

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