Several significant tax changes came from an unlikely source – the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (HR 3236).
Among the important tax provisions of HR 3236 are the following.
Modified FBAR Filing Date
Certain US persons with foreign financial accounts are required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). The FBAR form originated under the Bank Secrecy Act and has historically been due by June 30, with no extension available. In some instances, noncompliance has resulted from the fact that the FBAR deadline does not coincide with any of the deadlines for income tax returns.
Beginning with tax year 2016, FBARs will be due on April 15 rather than June 30. In addition, for the first time, taxpayers will be allowed to obtain a six-month extension for FBARs, making the extended due date October 15. By harmonizing the due dates and extension rules for federal individual tax returns and FBARs, Congress intended to alleviate one source of confusion for taxpayers.
Furthermore, HR 3236 specifically authorizes the Internal Revenue Service (IRS) to waive an FBAR penalty for first-time filers who fail to file by April 15, but do so by October 15. The IRS historically has had the authority to reduce or waive FBAR penalties. Therefore, it is unclear whether this provision broadens the authority of the IRS.
Tax Return Due Date Changes for Partnerships, S Corporations, and C Corporations
HR 3236 also changes the due dates for partnership, S corporation, and C corporation returns, beginning with tax year 2016.
Tax returns for calendar-year partnerships and S corporations will be due on March 15, rather than April 15. In addition, tax returns for fiscal-year partnerships and S corporations will be due on the 15th day of the third month following the close of the fiscal year. Under HR 3236, partnerships, like S corporations, will be able to extend their filing due date by six months.
For calendar-year C corporations, the new due date will be April 15. Currently, calendar-year C corporations must file their returns by March 15. Similarly, the due date for fiscal-year C corporations will be extended. Fiscal-year C corporations will have until the 15th day of the fourth month following the close of the C corporation’s fiscal year, to file their returns (an additional month). However, in the case of C corporations with fiscal years ending on June 30, the new due dates will not apply until tax years beginning after December 31, 2025. Beginning with tax year 2016, and until 2026, calendar-year C corporations will be able to extend their due date by only five months, making the effective due date September 15. During that same period of time, C corporations with fiscal years ending on June 30 will be able to extend their due date by seven months. All other fiscal-year C corporations will be able to take a six-month extension.
Six-Year Statute of Limitations in Case of Overstatement of Basis – Overruling Home Concrete
An overstatement of basis is now included as an omission from gross income in the determination by the IRS as to whether it can invoke a six-year statute of limitations. Generally, Section 6501(a) of the Internal Revenue Code (Code) permits the IRS three years from the date the tax return was filed, to assess any tax. However, Section 6501(e)(1) of the Code extends the period to six years when there is a substantial omission of income. A substantial omission of income is defined as 25 percent or more of the gross income properly includible on the tax return.
In Home Concrete & Supply, LLC, 132 S. Ct. 1836 (2012), the Supreme Court held that the extended six-year statute of limitations under Section 6501(e)(1) of the Code does not apply when a taxpayer overstates its basis in property it has sold.
Responding to this Supreme Court decision, HR 3236 revises Section 6501(e)(1) of the Code so that an omission from gross income includes an overstatement of basis. The change applies to tax returns filed after July 31, 2015 and to any previously filed tax returns that are still open for assessment (e.g., returns filed within the past three years, among others).