Updated November 2016
In addition to providing continued funding for federal transportation projects, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, which was signed into law July 31, includes several important tax-related provisions affecting businesses and individuals.
Perhaps most significantly, it changes the original or extended due dates for many different types of tax and information returns. The revised due dates and extension periods are generally effective for tax years beginning after December 31, 2015. In other words, they don’t apply to the tax returns for 2015 that are due in 2016.
Partnership Income Tax Returns
New filing due dates for partnership income tax returns:
- March 15 for partnerships with tax years ending December 31
- The 15th day of the third month after the close of the tax year for partnerships with fiscal year-ends
Under prior law, returns for calendar-year partnerships were due April 15, and returns for fiscal-year partnerships were due the 15th day of the fourth month after the close of the fiscal tax year.
Under the new law, the IRS may allow a maximum extension of six months (until September 15) for calendar-year partnerships filing their tax return. This is up from five months under prior law. Therefore, while the original due date for calendar-year partnerships changes from April 15 to March 15, the extended due date doesn’t change—it remains September 15.
C Corporation Income Tax Returns
New filing due dates for C corporation income tax returns:
- April 15 for C corporations with tax years ending December 31
- The 15th day of the fourth month after the close of the tax year for C corporations with fiscal year-ends that aren’t June 30
Previously, returns for C corporations were due on the 15th day of March, or the third month after the close of the tax year.
C corporations with tax years ending June 30, however, aren’t subject to the new due dates until tax years beginning after December 31, 2025. Therefore, their tax returns would still be due September 15 until the 2026 tax year.
C corporations are generally allowed an automatic six-month extension. However, until 2026, calendar-year corporations will be able to request only a five-month extension. Therefore, for calendar-year C corporations, despite the original due date changing from March 15 to April 15, the extended due date doesn’t change—it remains September 15 until 2026. After 2025, the extended due date will be October 15.
From 2016 through 2025, fiscal taxpayers with a June 30 year-end will be able to request a seven-month extension to April 15. Beginning in 2026, such taxpayers will be able to request a six-month extension in line with the general rules for all C corporations. Consequently, even though the original due date will change beginning in 2026, the extended due date that begins in 2016 won’t change in 2026—it will remain April 15.
The new law doesn’t change the return filing date and extended due date for S corporations; they remain March 15 and September 15, respectively, for calendar-year S corporations.
Deadlines for Forms
- FinCEN Form 114. The new, earlier deadline for Report of Foreign Bank and Financial Accounts is April 15—the original date was June 30—with a maximum six-month extension. No extension was allowed for this form under prior law.
- Form 3520. The deadline for Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts changes from June 30 to April 15 for taxpayers with a calendar year-end, with a maximum six-month extension ending October 15.
Extensions for Forms
- Form 1041. A maximum extension of 5 1/2 months (until September 30) is available for calendar-year taxpayers who file US Income Tax Return for Estates and Trusts. Under prior law, only five-month extensions (to September 15) could be requested for the form, which has a standard due date of April 15.
- Form 5500. A maximum extension of 3 1/2 months (until November 15) is available for Annual Return/Report of Employee Benefit Plan for calendar-year plans. This is an extra month over the previous extension date.
Update: The extension is now 2 1/2 months until October 15 due to a legislation change.
In addition to the forms referenced above, extensions up to six months may be obtained for other forms, such as:
- Form 5227, Split-Interest Trust Information Return (from the due date)
- Form 8870, Information Return for Transfers Associated With Certain Personal Benefit Contracts (from the due date)
- Form 3520-A, Annual Information Return of Foreign Trust With a US Owner, for taxpayers that use calendar year-ends (until September 15)
Changes for Large Estates
Under the highway funding law, executors of large estates (those subject to estate tax) must provide the IRS and each of the estate’s heirs with statements identifying the fair market value of the inherited property as reported on the estate tax return. Any underpayment of tax resulting from an understatement of basis under this provision will be subject to a 20 percent accuracy-related penalty.
These requirements are intended to ensure consistent reporting for estate and income tax purposes. The changes apply to any estate tax returns filed after July 31, 2015.
Statue of Limitations for Overstated Tax Basis
In 2012, the United States Supreme Court held that the extended six-year statute of limitations, which applies when a taxpayer “omits from gross income an amount properly includible” in excess of 25 percent of the gross income, didn’t apply to the overstatement of basis in sold property.
The new law amends the tax code to clarify that an understatement of gross income due to an overstatement of unrecovered cost or other basis is an omission from gross income. The amendment applies to returns filed after July 31, 2015, as well as previously filed returns that are still open.
Provisions for Veterans
The law has several provisions related to veterans.
One specifies that veterans who are enrolled in the Department of Defense’s TRICARE or the Department of Veterans Affairs’ medical programs shouldn’t count as employees for purposes of determining whether an employer is considered an “applicable large employer” under the Affordable Care Act (ACA).
Applicable large employers are generally those with 50 or more full-time employees or the equivalent. And they’re subject to information reporting requirements and at risk for penalties under the ACA’s shared responsibility provision, also known as the play-or-pay provision.
Exempting veterans from the 50-full-time-employee-or-equivalent calculation provides an added incentive for businesses near the threshold to hire them. Why? Hiring veterans rather than nonveterans can minimize their reporting requirements and risk for play-or-pay penalties.
More Time to Transfer Excess Pension Assets
The new law extends the deadline to the end of 2025, which gives employers four more years to transfer—without adverse tax consequences—excess defined benefit plan assets to a retiree’s health benefits account or group term life insurance that’s part of the plan.
To make such transfers (which are allowed only once a year), a defined benefit plan must have assets of at least 125 percent of its funding target.
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 is a somewhat misleading name. The new law is about much more than just transportation funding and veterans’ health care services—it will also result in noteworthy changes to the income tax obligations and reporting requirements for business owners and individuals. For more information about the act or questions about how these tax provisions might affect you, contact your Moss Adams professional.