US Senate Approves Highway Funding Bill
On July 31st President Obama signed the short-term highway funding bill (HR-3236) providing a three month extension of general expenditure authority for the Highway Trust Fund. Wrapped up in this legislation are a number of significant changes to tax compliance provisions:
- Changes to mortgage interest form 1098 sent to homeowners: Beginning December 31, 2016, lenders must now include the mortgage origination date, the address of the property securing the mortgage and the amount of outstanding principal of the mortgage at the beginning of the calendar year. The intent is to make sure taxpayers comply with the $1 million mortgage debt limit used to compute mortgage interest deduction and 2nd home mortgage deduction rules.
- Clarification to the statute of limitations where basis is overstated: In 2012 the Supreme Court ruled, in Case Home Concrete & Supply LLC, that the extended 6-year statute of limitations (as opposed to the normal 3-year statute) which applies when a taxpayer “omits from gross income an amount properly includible” in excess of 25% of gross income, does not apply when a taxpayer overstates its basis in property it has sold. This new legislation amends the law so that an overstatement of basis is considered an omission of gross income for purposes of determining whether a substantial income omission was made on the return. If the overstatement of basis contributes to a substantial understatement of income, it could now trigger the extended 6-year statute of limitation.
- New requirement for Estates: Estates are required to provide the IRS with the estate value of each piece of property at the owner’s Date of Death and payee statements to any person acquiring an interest in property from the estate.
- Modification to several Tax Return Filing Dates: The law sets new due dates as follows (effective for tax years beginning after December 31, 2015):
- Partnership Returns (Form 1065): The new due date is moved from April 15th (for calendar-year partnerships) to March 15th (or the 15th day of the third month following the close of the fiscal year for fiscal-year partnerships).
- C Corporation Returns (Form 1120): The due date was moved from March 15th (for calendar-year corporations) to April 15th (or the 15th day of the forth month following the close of the fiscal year for fiscal-year corporations). For C Corporations with a tax year ending on June 30, this change is effective for tax years beginning after December 31, 2025. The new law provides C Corporations with an automatic six-month extension of the applicable filing date. For calendar year C Corporations, the automatic extension is up to five months (September 15) until tax years beginning after December 31, 2025, at which time the extension would be up to six months (October 15). For C Corporations with tax years ending on June 30, the current filing date (September 15) remains in effect until tax years beginning after December 31, 2025, and will be extended to October 15 after that.
- FBAR / FinCen Form 114 (Foreign Bank Reporting): The due date is changed from June 30th to April 15th. However, taxpayers will be allowed an extension period of six months. Due date 4/15 with extension of 10/15.
- 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 15th, with a six- month extension.
- The extension periods of certain other IRS forms are also adjusted:
i. Form 990: Six months for the Return of Organization Exempt from Income Tax (Form 990), 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).
ii. Form 1041: A maximum of five and one-half months is allowed for U.S. Income Tax Return for Estates and Trusts (Form 1041).
iii. Form 5500: Three and one-half months for Annual Return/Report of Employee Benefit Plan (Form 5500)