KPMG report: New tax filing deadlines, other tax provisions now enacted

New tax filing deadlines, other tax provisions enacted

President Obama on 31 July 2015 signed into law the “highway bill”—H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015—that extends the highway trust fund authorization through 29 October 2015, and provides $7 billion in additional funding. The new revenue is provided by a number of compliance-related tax provisions, including a provision changing tax filing deadlines.

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The law also includes other tax provisions including provisions relating to: (1) the excise tax on certain liquefied gases; and (2) veterans’ health.

changes in tax filing deadlines

The law generally makes the schedule for filing tax returns:

  • 15 March for calendar year partnerships and S corporations (or the 15th day of the third month after the close of the fiscal year in the case of non-calendar years)
  • 15 April for calendar year C corporations (or the 15th day of the fourth month after the close of the fiscal year in the case of non-calendar years)

This schedule generally applies to returns for tax years beginning after 31 December 2015 (it will apply to 2016 returns).

However, a special rule applies to C corporations with a fiscal year ending 30 June. For these taxpayers, the new law will not apply until returns for tax years beginning after 2025. Thus, the due date of their returns will continue to be two and a half months after the close of the year (15 September) until their 2026 tax years.

In addition, the law modifies the automatic extension of filing deadlines for C corporations for returns for tax years beginning after 2015 and before 2026 to provide:

  • Calendar year C corporations with an automatic five-month extension
  • C corporations with a 30 June fiscal year-end with an automatic seven-month extension
  • Other fiscal year C corporations with an automatic six-month extension

Beginning with 2026 returns, the automatic extension period for all C corporations will be six months.

Other returns, due date changes

The law also directs the Treasury Secretary to modify the regulations governing due dates and extensions for returns for tax years beginning after 2015 as follows:

  • The maximum extension for the returns of partnerships filing Form 1065, U.S. Return of Partnership Income, will be a six-month period ending on 15 September for calendar year taxpayers.
  • The maximum extension for the returns of trusts filing Form 1041 will be a 5½-month period ending on 30 September for calendar year taxpayers. 
  • The maximum extension for the returns of employee benefit plans filing Form 5500 will be an automatic 3½-month period ending on 15 November for calendar year plans.
  • The maximum extension for the returns of organizations exempt from income tax filing Form 990 (series) will be an automatic six-month period ending on 15 November for calendar year filers.
  • The maximum extension for the returns of organizations exempt from income tax that are required to file Form 4720, Returns of Certain Excise Taxes, will be an automatic six-month period beginning on the due date for filing the return (without regard to any extensions). 
  • The maximum extension for the returns of trusts required to file Form 5227, Split-Interest Trust Information Return, will be an automatic six-month period beginning on the due date for filing the return (without regard to any extensions). 
  • The maximum extension for filing Form 6069, Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction, will be an automatic six-month period beginning on the due date for filing the return (without regard to any extensions).
  • The maximum extension for a taxpayer required to file Form 8870, Information Return for Transfers Associated with Certain Personal Benefit Contracts, will be an automatic six-month period beginning on the due date for filing the return (without regard to any extensions).
  • The due date of Form 3520–A, Annual Information Return of a Foreign Trust with a United States Owner, will be the 15th day of the third month after the close of the trust's tax year, and the maximum extension will be a six-month period beginning on such day. 
  • The due date of Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, for calendar year filers will be 15 April with a maximum extension for a six-month period ending on 15 October. 
  • The due date of FinCEN Form 114, Report of Foreign Bank and Financial Accounts (known as the “FBAR”), will be 15 April (rather than 30 June), with a maximum extension for a six-month period ending on 15 October and with provision for an extension under rules similar to the rules in Reg. section 1.6081–5. For any taxpayer required to file such form for the first time, any penalty for failure to timely request for, or file, an extension, may be waived by the Secretary. 

KPMG observation

Although there is no official legislative history for the new law, the change in filing dates appears designed, at least in part, to provide for the distribution of Schedule K-1s before the individual, trust, and C corporation filing deadlines—thereby improving the accuracy of information included in those individual, trust, and corporate returns. However, that goal may have limited effect for calendar year partnerships and calendar year C corporations that request extensions to file their respective returns as the extended due date for both will continue to be 15 September until 2026.

Moving the due date of partnership returns forward will compress the period for filing these returns and the attachments required with the returns (e.g., international information returns, reportable transaction disclosures, and certain elections made on the timely filed return). Nonetheless, preparers and taxpayers will have some time to adjust to the new deadlines given that the changes in due dates do not apply to 2015 returns. Still, keep in mind that the new filing due dates could apply in early 2016 in some cases—for example, if a calendar year partnership has a technical termination in February 2016 requiring a short-year return.In addition, note that although the new law did not specifically address the due date for Form 8804, Annual Return for Partnership Withholding Tax (Section 1446), and Form 8805, Foreign Partner’s Information Statement of Section 1446 Withholding Tax, it appears the due dates for these items may be accelerated by one month because their filing due dates are tied to the due date for filing the partnership’s Form 1065.

The special rules for 30 June fiscal year-end C corporations contribute to causing the changes in tax filing deadlines so as to raise revenue within the 10-year scoring window that ends 30 September 2025. The change in filing dates provision was scored as raising approximately $314 million over that window.

Finally, there is something new for FBAR filers. Starting with reports for calendar year 2016, FBAR filers will have an opportunity to request an extension of time to file. Presumably the IRS will create an extension request form for FBARs similar to those used for tax returns.

New Reporting requirements

The new law also includes two reporting provisions:

  • One applies to certain estates.
  • The other applies to certain lenders.

Basis reported by estates: The law requires 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 provision applies to property with respect to which an estate tax return is filed after the date of enactment of the law (i.e., after 31 July 2015).This appears intended to allow the IRS to track the basis of the inherited property more easily. This provision was estimated as raising approximately $1.542 billion over the 10-year scoring window.

Mortgage information reporting: For returns required to be made and statements required to be furnished after 2016, the law requires lenders to expand Form 1098 reporting to include: (1) the mortgage origination date; (2) the outstanding principal on the mortgage at the beginning of the calendar year; and (3) the property address that relates to the reported mortgage interest expense. This provision was estimated as raising approximately $1.806 billion over the 10-year scoring window.

Statute of limitations in situations of overstatement of basis

The new law generally provides 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. This provision applies to returns filed after 31 July 2015, as well as to returns filed on or before such date if the assessment period for such return had not expired as of such date.

This provision was estimated as raising approximately $1.209 billion over the 10-year scoring window.

Transfer excess pension assets to retiree health accounts

The law extends 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 31 December 2021.

This provision was estimated as raising approximately $172 million over the 10-year scoring window.

Decrease the excise tax on certain liquefied gases

The law decreases the excise tax on liquefied natural gas (LNG) and liquefied petroleum gas (LPG) to 14.1 cents per gallon (down from 24.3) and 13.2 cents per gallon (down from 18.3), respectively, for sales or uses of fuel after 31 December 2015.

This provision was estimated as losing approximately $90 million over the 10-year scoring window.

Veterans’ health provisions

The law also includes two revenue provisions in its veterans’ health title. These provisions were estimated as losing approximately $1.2 billion in the aggregate over the 10-year revenue window.

Very generally, the provisions:

  • Clarify that, for purposes of the large employer test for the Employer Health Insurance Mandate, an employee will not be taken into account during any month for which he or she receives health coverage under TRICARE or a Department of Veterans Affairs (VA) program
  • Clarify that the receipt of services from the VA for a service connected disability will not solely disqualify an individual from eligibility to participate in a health savings account

documents

There are no committee reports for the tax provisions of the new law.

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