Just a day before the current highway funding bill was about to expire, the Senate passed by a vote of 91-4, a temporary measure to handle short-term needs. This three-month funding extension bolsters the Highway Trust Fund, which would have been nearly depleted by July 31. It is expected that President Obama will sign the bill. This short term fix, titled the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (HR 3236), is funded by tax compliance revenue.
In addition, the Senate passed a long-term highway funding bill that will later be reconciled with a similar measure to be produced by the House. The Senate’s six-year highway funding bill, the Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act (S 1647), is funded for three years with revenue from tax compliance measures, some of which overlap the revenue measures contained in short-term bill noted above. The source of the revenue for the remaining three years will be determined by the next Congress.
As congressional rules of procedure require all tax-related bills originate in the House of Representatives, the Senate used HR 22 as a legislative vehicle for its multi-year highway bill into which Senate Majority Leader Mitch McConnell, R-Ky. later inserted the DRIVE ACT (Senate Amendment 2266). The House and Senate are planning to go to conference in October to reconcile their respective multi-year bills.
Senate Finance Committee Chairman Orrin Hatch (R-UT) said in a speech on the Senate floor, that although there are some divisions in the House about the Senate’s overall strategy and some of the particulars in its bill (S 1647), he believes that Senate has shown that a long-term bill is “a realistic goal and a preferable option to yet another short-term highway patch.” The House is expected to assemble its own multi-year highway funding bill when it returns from the August recess in September.
McConnell noted the multi-year nature of the Senate-passed legislation is “one of its most critical components. It’s also something the House and Senate are now united on.” On passing the three-month measure, he said it would provide time for the House to come up with a multi-year highway bill. “We all want the House to have the space it needs to develop its own bill, because we all want to work out the best possible legislation.”
The funding elements of the Senate bill are similar to those in the House Report. Duplication of revenue offsets in House Report 3236 and Senate bill 1647 include a modification of mortgage information reporting requirements, consistency between estate tax value and income tax basis of assets acquired from a decedent, a change in the filing due dates of certain tax and information returns, and allowing employers to transfer excess defined-benefit-plan assets to retiree medical accounts and group-term life insurance.
Tax-Related Provisions
An important part of this act is a number of changes to due dates for several tax returns, including partnership and C corporation returns; FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR); and several other IRS information returns.
- For partnership returns, 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). Currently, these returns are due on April 15, for calendar-year partnerships. The act directs the Internal Revenue Service to allow a maximum extension of six months for Forms 1065, U.S. Return of Partnership Income.
- For C corporation returns, the new due date is the 15th day of the fourth month following the close of the corporation’s year. Currently, these returns are due on the 15th day of the third month following the close of the corporation’s year. The new due dates will apply to returns for tax years beginning after Dec. 31, 2015. However, for C corporations with fiscal years ending on June 30, the new due dates will not apply until tax years beginning after Dec. 31, 2025.
- The act also directs the Internal Revenue Service to modify its regulations to allow the following maximum extensions:
5½months:
– Form 1041, U.S. Income Tax Return for Estates and Trusts
3½ months:
– Form 5500, Annual Return/Report of Employee Benefit Plan
6 months:
– Form 990, Return of Organization Exempt From Income Tax;
– Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code;
– Form 5227, Split-Interest Trust Information Return;
– Form 6069, Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction;
– Form 8870, Information Return for Transfers Associated With Certain Personal Benefit Contracts; and
– Form 3520-A, Annual Information Return of a Foreign Trust With a U.S. Owner
- The due date for FinCEN Form 114 is changed from June 30 to April 15, and for the first time taxpayers will be allowed a six-month extension.
- 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 many changes in due dates are sure to cause confusion initially, but are better set to match the needs of taxpayers as the new dates are far more logical than before. These changes are supported by the American Institute of CPAs.
Questions relating to the income tax revenue offset provisions of either bill may be directed to Bob Grossman, Don Johnston or Rick Dynoske at 412.338.9300.
