Tax Compliance Measures in the Surface Transportation Act of 2015
President Obama signed The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (P.L. 114-41) into law on July 31, 2015. The bill was enacted as a “stop-gap” measure that funds federal highway and transportation spending and, effectively pays for that spending, in part, through new and modified tax compliance requirements. This article highlights the Act’s revenue-raising provisions with broad application to individuals, corporations, partnerships, trusts, and estates.
The Act Requires Consistent Reporting as Between a Decedent’s Estate and the Person Acquiring Property from the Decedent.
Section 2004(a) of the Act adds subsection (f) to Internal Revenue Code §1014. Subsection (f) requires beneficiaries of the properties received from the Deceased’s estate to establish basis in the property for an amount equal to the value reported by on the Decedent’s estate tax return.
The Act Requires Executors of Large Estates to Inform the IRS and Beneficiaries of the Value of Interests Received as Reported on the Estate Tax Return.
Section 2004(b) of the Act adds new 26 U.S.C. §6035 which requires the executor of any estate required to file IRS Form 706 to provide the IRS and each person acquiring any interest in property included in the decedent’s gross estate for federal estate tax purposes with a statement that identifies the value of each interest in the property as reported on the estate tax return and “such other information with respect to such interest as the Secretary may prescribe.” The statement must be provided no later than 30 days after the earlier of: (i) the due date of estate tax return, or (ii) the date the estate tax return is filed.
The Act Establishes a Reasonable Cause Standard for Failure to File the Basis Information Statement.
Section 2004 of the Act amends IRC §6724 by adding the basis information statement to the list of information statements, which if not filed, are subject to penalty and penalty waiver assessment under the reasonable cause standard under IRC §6724(a).
In IRS Notice 2015-57, the Treasury Department delayed to February 29, 2016 the due date for basis information statements otherwise required to be filed with the IRS or furnished to a beneficiary before that date. The delay allows the Treasury Department and IRS to issue guidance related to reporting requirements. In the meantime, executors and other persons otherwise required to file or furnish a statement under section 6035(a)(1) or (a)(2) are instructed by Notice 2015-57 not to do so until the issuance of forms or further guidance by the Treasury Department.
The Act Subjects Any Inconsistent Estate Basis to the 20 Per Cent Accuracy-Related Penalty of IRC §6662(a).
Section 2004 of the Act provides that there is an “inconsistent estate basis” if the basis of property claimed on a return exceeds the basis as determined under IRC §section 1014(f). This revenue provision applies to property reportable on an estate tax return filed after July 31, 2015.
The Act Provides that Any Overstatement of Basis Results In a Substantial Omission for Purposes of the Six-Year Statute of Limitations for Assessments.
Section 2005 of the Act clarifies that for purposes of applying IRC §6501(e) — the provision that extends the statutes of limitations for assessment of tax deficiencies from three years to six years — an understatement of basis is a “substantial omission” when the overstatement of basis results in an understatement of gross income by more than 25 per cent. This provision is effective for returns filed after July 31, 2015.
The Act Modifies Due Dates For Partnership Returns, Forms K-1, Corporation Income Tax Returns, and FBARs.
Section 2006 of the Act accelerates the filing date of calendar year partnership Forms 1065, U.S. Return of Partnership Income and Schedule K-1 from April 15 to March 15; fiscal year filers will have 2 ½ months after the close of its tax year to file. For Partnership return extension requests filed beginning in 2017, an extension may be granted to provide for a filing deadline of September 15; for years after 2025, the extended due date will become October 15 for calendar year filers.
Section 2006 of the Act defers the filing date of calendar year corporation Forms 1120, to April 15. For tax years through 2025, the six-month extension will be shortened from six months to five months such that the extended due date of calendar year returns remains September 15.
Section 2006 of the Act provides amended extension dates for Form 1041 such that calendar year trusts may request a 5 ½ month extension (to September 30) to file form 1041.
Section 2006 also accelerates the filing due date for the Report of Foreign Bank and Financial Accounts from June 30 to April 15.
Tax compliance measures from the Act are projected to generate $5 billion in revenues over 10 years.