United States – Congress Proposes Legislation to Amend ITIN Application, Deactivation Procedures

United States – Congress Proposes Legislation to Amend

This GMS Flash Alert reports that the U.S. Congress has proposed legislation that would affect the use of community-based certified acceptance agents for Individual Taxpayer Identification Numbers (ITINs) and the expiration dates of ITINs.

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flash alert 2016-051

The U.S. Congress has proposed legislation1 that would affect the use of community-based certified acceptance agents for Individual Taxpayer Identification Numbers (ITINs) and the expiration dates of ITINs.  If the legislation is enacted:

  • Taxpayers who reside outside the United States may use a community-based certified acceptance agent when submitting an application to obtain an ITIN;
  • The expiration date of an ITIN that has not been used for three consecutive tax years would occur on the date following the due date of the tax return of such third consecutive year; and
  • The expiration date for ITINs issued prior to January 1, 2013, would occur on the earlier of the day following the due date of the tax return for the third consecutive year of non-use, or the applicable expiry dates provided under the PATH Act2. (See GMS Flash Alert 2015-152 (December 23, 2015) for a list of expiration dates.)

KPMG NOTE

The proposals are part of the Technical Corrections Act of 2016 (TCA 2016), which is currently under consideration by the U.S. Congress; these changes are not yet in effect.  A subsequent Flash Alert will be issued should the proposed legislation be enacted and signed into law.

WHY THIS MATTERS

If these changes are enacted, the process for obtaining ITINs will be easier for taxpayers living outside the United States as they will be able to use community-based certified acceptance agents to obtain an ITIN for purposes of completing their U.S. tax filing obligations.  Thus the TCA 2016, if enacted, would enable taxpayers residing outside the United States to submit an ITIN application:

  • in person at a community-based certified acceptance agent, as well as at the Internal Revenue Service, a U.S. diplomatic mission or consular post; or 
  • by mail.

Also, the change to the expiry date for an ITIN means that the taxpayer’s ITIN – in cases where the ITIN has not been used for three consecutive years – will be valid and not expired for an extended period of time as compared with the situation under current rules.  The expiry of an ITIN that has not been used for three consecutive tax years would occur on the date following the due date of the tax return of the third consecutive tax year of non-use.  Currently, the expiry dates for ITINs that have not been used for three consecutive tax years occur on the last day of the third consecutive year of non-use.3   

What Could Change for ITINS If TCA 2016 Is Enacted

The U.S. House of Representatives and the U.S. Senate separately introduced proposed legislation in the Technical Corrections Act of 2016, which would amend recently passed tax legislation4 by clarifying certain provisions.  

The law as currently in effect under the PATH Act prohibits taxpayers who reside outside the United States from using an approved certified acceptance agent when submitting an application to obtain an ITIN.

The TCA 2016 would amend the current law by clarifying that community-based certified acceptance agents are among the entities available to taxpayers living outside the United States who wish to obtain an ITIN for purposes of completing their U.S. tax filing obligations.  Thus the TCA 2016, if enacted, would enable taxpayers residing outside the United States to submit an ITIN application: 1) by mail; or, 2) in person at the Internal Revenue Service, a community-based certified acceptance agent, or at a U.S. diplomatic mission or consular post.

In addition, the TCA 2016 clarifies that the expiration date of an ITIN that has not been used for three consecutive tax years would occur on the date following the due date of the tax return of the third consecutive tax year. Currently, the expiry dates for ITINs that have not been used for three consecutive tax years occur on the last day of the third consecutive year.

ITINs issued prior to January 1, 2013, would expire on the applicable date provided under current law, or, if earlier, the day following the due date of the tax return for the third consecutive tax year if the ITIN has already not been used for three consecutive years.  Currently, pre-2013 ITINs are set to expire on the earlier of December 31, 2015, if the ITIN has already not been used for three consecutive years, or, regardless of use, according to the schedule provided in the PATH Act.

Proposed Effective Date of TCA 2016

If signed into law, the provisions under the TCA 2016 relating to the changes of the ITIN application process and certain deactivation procedures would be effective as if the amendments were included in the original legislation to which the amendments relate.  Thus, these changes, if enacted, would be effective as of December 18, 2015.

FOOTNOTES

1  Introduced on April 11, 2016, in the House of Representatives as H.R. 4891 and in the Senate as S. 2775.

For text of H.R. 4891, click here.  For an explanation of the proposed legislation, see Joint Committee on Taxation, Technical Explanation of the Technical Corrections Act of 2016, JCX-16-16 (April 11, 2016).

2  For the Division Q of the Consolidated Appropriations Act, 2016, H.R. 22 (herein referred to as the “PATH Act”), click here.  For prior coverage, see GMS Flash Alert 2015-152 (December 23, 2015).

3  For a list of expiry dates under the PATH Act, see GMS Flash Alert 2015-152 (December 23, 2015).

4  See footnote 2.

The above information is not intended to be "written advice concerning one or more Federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 as the content of this document is issued for general informational purposes only.

The information contained in this newsletter was submitted by the KPMG International member firm in the United States.

© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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