Overview
On June 29, the President signed into law the Trade Preferences Extension Act of 2015. While the law primarily deals with extending the African Growth and Opportunity Act, it does contain some tax provisions as “offsets.” The tax provisions are summarized below.
Tax Provisions
Section 407 retroactively reinstates effective for tax years beginning after 2013, the health care tax credit available under I.R.C. §35 that had expired at the end of 2013. This credit was available to providers of “qualified health insurance” who received health care tax credit advance payments from the IRS on behalf of eligible recipients. Form 1099-H was used to report those payments. The amount of the advance payment could not exceed 72.5 percent of the total health insurance premium for the individual at issue. The credit relates to a provision in the health care law involving the mandate that an “applicable large employer” provide “qualified” health insurance to employees. Under the mandate, to avoid a tax of up to eight percent on total payroll costs (average wages), the employer must pay at least 72.5 percent of the cost of an individual employee’s cost of insurance coverage.
Section 803 sets forth an increase in the corporate estimated tax payments for “large” corporations (defined as those corporations with assets of $1 billion or more as of the end of the preceding tax year). The increase is 8 percent for the payment due in July, August or September of 2020, with the next required installment payment reduced to 92 percent of the amount that otherwise would have been due. In other words, the Congress is accelerating estimated tax payments for these corporations for the year in issue.
Section 804 says that no education credit (specifically, the American Opportunity Tax Credit, the Hope Scholarship Tax Credit and the Lifetime Learning Credit) is to be allowed unless the taxpayer receives a valid 1098-T from the education institution at issue. If the Form is received by a dependent of the taxpayer, that counts as being received by the taxpayer. This provision is effective for tax years beginning after June 29, 2015.
Section 805 specifies that an educational institution is granted penalty relief if it cannot obtain taxpayer identification numbers that would enable them to issue Forms 1098-T. To obtain the relief, the educational institution must certify that it properly requested the taxpayer identification information from the student at issue in accordance with Treasury Regulations for obtaining such information. This provision is applicable to returns required to be made, and statements required to be furnished after 2015.
Section 806 provides for increased penalties for failing to file correct information returns and/or failing to provide them to payees. This provision is applicable to returns and statements required to be filed after 2015.
Section 807 states that the Child Tax Credit is not refundable for taxpayers that elect to exclude foreign earned income from taxation. The provision is effective for tax years beginning after 2014.
keywords: trade preferences extension act of 2015, african growth and opportunity act, section 407, health care tax credit, i.r.c. §35, form 1099-H, applicable large employer, section 803, section 804, 1098-T, section 805, treasury regulations, section 806, section 807, child tax credit