Legislative update: House passes revised highway bill, revenue (tax) provisions

House passes revised highway bill, revenue provisions

The House today passed, 385 to 34, a bill to extend the highway trust fund authorization through October 29, 2015, from its current expiration date of July 31, 2015.

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The bill—H.R. 3236 [PDF 334 KB]—was introduced by House Ways and Means Chairman Paul Ryan (R-WI) and House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA), and is known as the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015.

The bill also contains provisions to raise approximately $5 billion in revenue to offset the cost of the additional months of spending for surface transportation. Further, it includes tax provisions relating to (1) liquefied natural gas (LNG) and liquefied petroleum gas (LPG) and (2) health care of veterans. Read the Joint Committee on Taxation’s revenue table for the bill.

Revenue provisions

  • Tax-filing deadlines - The bill generally would modify the schedule for filing tax returns to: (1) March 15 (or two and a half months after the close of the tax year) for partnerships and S corporations; and (2) April 15 (or three and a half months after the close of the tax year) for C corporations.

In addition, the bill would direct the Secretary of Treasury to modify the rules governing extensions for returns for partnerships, trusts, employee benefit plans, tax exempt organizations, and others. The bill would also modify the automatic extension of filing deadlines for C corporations.

  • Basis reported by estates - The bill would require estates with positive estate tax liability to report to both the IRS and the appropriate heirs the value, on the owner’s death, of bequeathed property. This is intended to allow the IRS to track the basis of the inherited property more easily.
  • Mortgage reporting - The bill would require lenders to expand Form 1098 reporting to include: (1) the origination date, (2) outstanding principal, and (3) the property address that relate to the reported mortgage interest expense.
  • Statute of limitations in instances of overstatement of basis - The bill would provide that an overstatement of basis is an omission of gross income for purposes of determining whether a substantial income omission was made on the return. Thus, an overstatement of basis that contributes to a substantial understatement of income could trigger the extended six-year statute of limitation.
  • Transfer of excess pension assets to retiree health accounts - The bill would extend the ability of employers to transfer excess defined benefit plan assets to retiree medical accounts and retiree group-term life insurance through 2025. Originally enacted in 2012, the underlying provision currently expires on December 31, 2021.
  • TSA fees - The bill would make certain budget accounting changes regarding Transportation Security Administration (TSA) fees. The provision would not change the TSA fees paid by airlines or passengers but would only address the budgetary treatment of the fees.

Changes to the Code

In addition to these revenue offsets, the bill would make the following modifications to the Internal Revenue Code:

  • Decrease the excise tax on LNG and LPG to 14.1 cents per gallon (down from 24.3 cents) and 13.2 cents per gallon (down from 18.3 cents), respectively, for sales or use of fuel after December 31, 2015
  • Clarify that, for purposes of the large employer test for the Employer Health Insurance Mandate, an employee would not be taken into account during any month for which he or she receives health coverage under TRICARE or a Veterans Administration program
  • Clarify that the receipt of services from the Veterans Administration for a service connected disability would not solely disqualify an individual from eligibility to participate in a Health Savings Account

What’s next?

Now that the House has passed the bill, the Senate is expected to take up the legislation within the next few days.

With the House expected to adjourn this evening, until September, the Senate will be left with the choice of passing H.R. 3236 before July 31 or seeing the federal highway programs face significant funding challenges. The Obama Administration has already indicated that the president is expected to sign the bill if Congress were to present it to him for his signature.

KPMG observation

For almost a week, the Senate has been moving forward with its own highway transportation funding bill that would extend the authorization of the programs for six years. Over the next few days, the Senate is likely to continue to move forward with that bill. That six-year bill could be part of future negotiations to determine how the highway trust fund authorization will be extended beyond the expected new October 29, 2015 deadline.

However, by passing the three-month highway bill and immediately adjourning until September, the House is effectively forcing the Senate to accept the House leaders’ preference for a short-term highway bill funding extension.

As previously discussed in TaxNewsFlash-United States, House leaders—particularly Ways and Means Chairman Ryan—have been vocal in their desire to use the opportunity created by a need to readdress highway funding again this fall to potentially develop and enact major modifications to the international provisions of the Internal Revenue Code. By tying together the need for additional government revenue to fund highway spending with significant international tax modernization that could generate one-time tax revenues (such as through a tax imposed on untaxed accumulated foreign earnings of U.S. multinational corporations—“deemed repatriation”), some members may hope to generate additional support for enacting some form of international tax modernization in 2015.

If, as looks increasingly likely, the House prevails this week in its desire to extend the highway trust fund spending only for three months, the possibility of the enactment of international tax modifications this year remains alive.

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