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Surface Transportation and Veterans Health Care Choice Improvement Act of 2015

Posted 12:00 PM by

On July 31, 2015, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Surface Transportation Act”) was signed into law. The Surface Transportation Act includes a wide variety of provisions including:

  • Provisions changing tax return due dates and extension dates
  • An extension of the statute of limitations when gross income is understated due to an overstatement of basis
  • A change in the reporting requirements for mortgage service issuers
  • A provision requiring basis conformity for the property of estates
  • Updates in the excise tax calculation for alternative fuels

Changes to Return Due Dates

The Surface Transportation Act has set new due dates for a variety of returns. For calendar year taxpayers, the new due dates will first apply to the 2016 tax year (i.e., tax returns that will be filed in 2017 for the 2016 tax year). Under these new provisions both Form 1065 and Schedule K-1s for partnerships will be due on March 15. This new due date is meant to help individuals receive their Schedule K-1s and file Form 1040 by the April 15 deadline, so that fewer extensions will be necessary.

Similarly, the due date for the return of calendar year C-corporations will be moved from March 15 to April 15. If the C-corporation has a June 30 year end, the corporation will continue to have a Sept. 15 due date until tax year 2026. Beginning with tax year 2026, C-corporations with a June 30 year end will have an Oct. 15 due date. Additionally, the Report of Foreign Bank and Financial Accounts (FBARs) will have an April 15 due date beginning in 2016.

Changes in Extension Dates

The Surface Transportation Act also sets new extension periods for a wide variety of returns beginning for the 2016 tax year. Changes in extension periods include:

  • Partnerships filing Form 1065 will have a 6-month extension period ending on Sept. 15.
  • Trusts filing Form 1041 will have a 5 ½-month extension period ending on Sept. 30.
  • Exempt organizations filing Form 990 will have an automatic 6-month extension period ending on Nov. 15.
  • Trusts filing Form 5227 (Split-Interest Trust Information Return) will have an automatic 6-month extension period.
  • Employee benefit plans filing Form 5500 will have an automatic 3 ½-month extension period ending on Nov. 15.
  • FBARs will have a 6-month extension period ending on Oct. 15.
  • C-corporations with a calendar year tax period will have an automatic 5-month extension period.
    • C-corporations with a June 30 year-end will have an automatic 7-month extension.
    • C-corporations with any other year-end will have a 6-month extension.
    • Beginning with 2026 tax year, all C-corporations will have an automatic 5-month extension.

Statute of Limitations for Overstatement of Basis

As a general rule, the Internal Revenue Service must assess a deficiency against a taxpayer within three years of the date that a return was filed. If there is a substantial omission from the taxpayer’s gross income, the statute of limitations increases from three years to six years. A substantial omission, in this context, is defined as an omission in excess of 25% of the gross income shown on the return.

However, in 2012 the Supreme Court ruled that an overstatement of basis does not constitute an omission for the purpose of extending the statute-of-limitations. The Surface Transportation Act adds a provision that specifically provides a six year statute of limitations where an overstatement of basis results in a substantial omission to gross income thus, overruling the Supreme Court’s opinion.

Mortgage Reporting

Another provision in the Surface Transportation Act requires mortgage servicers to provide additional information when issuing Form 1098. Mortgage servicers must now provide the outstanding balance of the mortgage, the address of the property subject to the mortgage and the loan origination date on all Form 1098s issued after Dec. 31, 2016.

Basis Conformity

The Surface Transportation Act also created a new requirement in valuing property in an estate. Under this provision, the fair market value of property must be determined while the property is still held by the estate, and any beneficiary receiving estate property must use this valuation as their basis in the property. The provision requires that, for any estate tax returns filed after July 31, 2015, the executor of an estate provide disclosure statements to both the IRS and to the beneficiaries, identifying the value of each item in the estate.

Excise Tax on Alternative Fuels

An additional provision in the Surface Transportation Act changes the way excise tax on certain alternative fuels is calculated. Under this provision, beginning in 2016, liquefied natural gas and liquefied petroleum gas will be taxed on an energy equivalent basis with diesel and gasoline respectively. The effect of this provision will be to lower the tax on liquefied natural gas from 24.2 cents to 14.1 cents per gallon, and to lower the tax on liquefied petroleum gas from 18.3 cents to 13.2 cents per gallon. 

About the Author
Ryan Miller is a partner in Katz, Sapper & Miller’s Tax Services Group. Ryan provides consulting services on a variety of technical tax matters, with an emphasis on international tax, oversees tax compliance and handles tax controversies. His experience includes entity taxation, among other areas.

About the Author
Alex Szarenski is a manager in Katz, Sapper & Miller's Tax Services Group. Alex's focus includes analytical research and planning services to a diverse clientele in numerous industries. Connect with him on LinkedIn.

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