On July 31, 2015, President Obama signed into law the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” (the Act). The Act was primarily designed as a temporary extension of the Highway Trust Fund and related issues. However, the Act also includes a number of important tax provisions, some of which are outlined below.
New Due Dates for Certain Income Tax Returns.
The Act changes the due dates for both partnership and C corporation income tax returns. Effective generally for returns for tax years beginning after December 31, 2015, partnerships will have to file their returns by the 15th day of the third month after the end of the tax year. Thus, a calendar year partnership will have to file its return by March 15th of the following year. This due date is the same as the due date for S corporations. Both organizations are “flow through” entities and the earlier due date will assist individuals having to file their returns timely. The prior due date for partnerships was the same due date as individuals which often created the difficulties in filing individual returns timely.
C corporations will have to file their returns by the 15th day of the fourth month after the end of the tax year. The former deadline was the 15th day of the third month so this amounts to an extension of one month for C corporation returns.
New Extension Periods for Certain Income Tax Returns.
The new law also revises the extended due dates for many returns that will be effective for returns for tax years beginning after December 31, 2015. The Act directs the IRS to modify it regulations to provide that the maximum extension for the following returns will be as follows:
- Partnerships (Form 1065) – 6 month period ending on September 15th for calendar year taxpayers.
- Trusts (Form 1041) – 5½ month period ending on September 30th for calendar year taxpayers.
- Exempt organizations filing Form 990 – 6 month period ending on November 15th for calendar year filers.
The Act also included a number of other revised extension dates for other less common types of returns.
New Basis Consistency and Reporting Rules.
The Act requires consistent basis reporting for transfer tax and income tax purposes requiring a taxpayer to use the value as finally reported on a federal estate tax return for income tax basis purposes. The Act implements a new information reporting requirement for inherited property requiring the executor of an estate required to file a federal estate tax return to submit an information return as prescribed by the IRS. This is effective for any estate tax return filed after July 31, 2015. While only required for estates that are required to file federal estate tax returns, the Secretary is given the authority to prescribe regulations to apply a similar rule to property where no estate tax return is required to be filed. Therefore, it appears that the intent of the Act is to implement an information reporting system to connect that transfer tax system to the income tax system for purposes of basis reporting.
The Act also overrules a Supreme Court case that had held the overstatement of one’s basis was not an omission of gross income for purposes of a 6 year statute of limitations for the IRS to assess a deficiency. The Act provides that the overstatement of basis will be an omission of gross income that could trigger the 6 year statute of limitations as opposed to the general 3 year statute of limitations. This change is effective for returns filed after July 31, 2015 and for returns filed on or before that date if the assessment period under the prior law had not yet expired as of July 31, 2015.