On Friday, July 31, 2015, President Barack Obama signed HR 3236, the "Surface Transportation and Veterans Health Care Choice Improvement Act of 2015" (the "Act"). The Act modifies the extended six-year statute of limitations applicable to understatements of income (overruling the Supreme Court's Home Concrete decision), changes the due dates for certain tax returns, requires additional information to be included in mortgage information statements, and requires consistent basis reporting for estates and estate beneficiaries.
Application of the Six-Year Statute to Basis Overstatement Cases: Overruling Home Concrete
The new law specifically provides that the extended six-year statute of limitations applies to a case in which there is an "overstatement of basis" in connection with a tax return position. Section 6501(e)(1)(B) of the Internal Revenue Code of 1986, (the "Code") was amended to provide that an overstatement of basis constitutes an "omission from gross income." This change applies to returns filed after the date of enactment (and to previously filed returns that are still open under the law applicable prior to the Act).
This amendment overrules the United States Supreme Court holding in Home Concrete & Supply, LLC, 132 S. Ct. 1836 (2012), which had held that the extended six-year statute of limitations does not apply when a taxpayer "overstates its basis" in property that it sells. In effect, the Home Concrete Court held that an "overstatement of basis" does not constitute an "omission of income" for purposes of extending the statute, and the Act specifically changes this result.
Tax Return Due Date Changes
The Act sets new due dates for partnership returns, C corporation returns, FBAR returns, (i.e., FinCEN Form 114, Report of Foreign Bank and Financial Accounts), and several other IRS information returns.
For a partnership return (IRS Form 1065, U.S. Return of Partnership Income), the new due date is March 15 for calendar-year partnerships and the 15th day of the third month following the close of the fiscal year for fiscal-year partnerships. This is a one-month acceleration in due date for partnership returns. There also is a maximum extension of six months allowed for partnership returns that are extended.
For C corporations, the new due date is the 15th day of the fourth month following the close of the corporation's year. This is a one-month deferral in due date for C corporations. C corporations also generally will be allowed a six-month extension: a calendar-year C corporation is allowed a five-month extension until 2026, and a C corporation with a June 30 year end would get a seven-month extension until 2026.
These new tax return due dates apply to tax returns for tax years beginning after Dec. 31, 2015.
The due date for the return, which is now filed using critically important FBAR, FinCEN Form 114, was changed from June 30 to April 15. Moreover, for the first time, taxpayers will be allowed a six-month extension for filing this information return. The Act also provides specific penalty waiver authority for taxpayers that are required to file an FBAR return for the first time if they file it late by mistake.
The due date for Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, will be April 15 for calendar-year filers, with a maximum six-month extension. The new law also makes changes to other miscellaneous tax return due dates and extension periods.
Additional Information to be Included in Mortgage Interest Statements
For information returns and statements due after Dec. 31, 2016, the Act requires that additional information be included in the mortgage information statements that must be sent by lenders (or lender's agents) to individuals who pay more than $600 in mortgage interest during a tax year. These statements now must report the outstanding principal balance on the mortgage at the beginning of the calendar year, the mortgage origination date, and the address of the property securing the mortgage.
Consistency in Basis Reporting for Estates and Beneficiaries
New law requires that any beneficiary who receives property from an estate must not treat the property received as having a basis higher than the basis reported by the estate for estate tax purposes. The Act also requires administrators of estates that are required to file an estate tax return to furnish information returns to the IRS and payee statements to any beneficiary who acquires an interest in property from the estate. The required statements must identify the value of each interest in property that was reported in the estate tax return. These new basis reporting rules apply to property included in an estate tax return that is filed after the Act's date of enactment.