TaxNewsFlash-Exempt Organizations

June 30, 2008
No. 2008-59

PRINTABLE VERSION

Regulations Generally Provide Six-Month Automatic Extension of Time to File Certain Returns; Five-Month Period to Apply for Certain Pass-Through Entities

The Treasury Department and IRS today released for publication in the Federal Register final and temporary regulations (T.D. 9407) and by cross-reference, proposed regulations (REG-115457-08) relating to the simplification of procedures for obtaining automatic extensions of time to file certain returns. Today’s regulations allow certain taxpayers to file a single request for an automatic extension of time to file certain returns. Because the extension is automatic, the taxpayer’s signature and an explanation for the reason why an extension is needed are no longer required.

For individual taxpayers, corporations, and certain other taxpayers, the period of the automatic extension is six months. For certain partnerships and other pass-through entities, the length of time for the automatic extension period is five months (effective for returns to be filed after January 1, 2009).

For electronic versions of today’s regulations: T.D. 9407 and REG-115457-08

Background

In November 2005, temporary and proposed regulations included new procedures and changes to forms for use by individual taxpayers, corporate taxpayers, partnerships, real estate mortgage investment conduits (REMICs), certain trusts, and administrators and sponsors of employee benefit plans, as well as individuals required to file gift tax returns in requesting an extension of time to file a return. The new procedures replaced a two-step process under which non-corporate taxpayers could only obtain a six-month extension by first obtaining an extension (typically automatic) for part of that period and then requesting a discretionary extension for the remainder.

The 2005 regulations did not change the rules for filing extensions for corporate income tax returns, but included changes to the title and appearance of Form 7004, Application for Automatic 6-Month Extension of Time to File Certain Business Income Tax, Information, and Other Returns.

The revised Form 7004 was to be used by a larger number of taxpayers that file other types of returns to obtain an automatic six-month extension of time to file. For instance, taxpayers (including partnerships, REMICs, and certain trust taxpayers) that previously filed Form 2758 or Form 8736 to request an extension of time to file certain excise, income, information, and other returns were to use Form 7004 to request an automatic six-month extension of time to file.

Today’s Regulations

With today’s release, the regulations proposed in 2005 are adopted with certain revisions and the 2005 temporary regulations are withdrawn.

Among the changes in today’s release:

For individual taxpayers, the final regulations replace the process under which an individual could obtain an initial four-month extension and then apply for an additional two-month extension. An automatic six-month extension applies for individual taxpayers who timely file Form 4868, Application for Automatic Extension of Time to File a U.S. Individual Income Tax Return.

For individual taxpayers, Form 2688, Application for Extension of Time to File U.S. Individual Income Tax Return, has been eliminated. Treasury and the IRS noted that a small number of individual taxpayers who are abroad may apply for an additional extension of time to file beyond six months. Such an extension application previously was submitted using Form 2688. In the future, these taxpayers must submit a letter explaining the need for the extension.

For corporate taxpayers, the appearance and title of Form 7004 are changed.

For corporate taxpayers, the regulations retain a requirement to list the name(s) and address(es) of each member of the affiliated group with the extension request. The final regulations have been amended to specifically state that the list of affiliated entities attached to the Form 7004 will grant an extension for each member’s separate return in the event that the member does not file as part of the consolidated group.

For partnerships filing Form 1065, U.S. Partnership Return of Income or Form 8804, Annual Return for Partnership Withholding Tax, and trusts and estates filing Form 1041, U.S. Income Tax Return for Estates and Trusts, the temporary regulations provide for a five-month automatic extension period, and no additional extension. The IRS and Treasury indicate that these changes are being made to allow these entities adequate time to prepare the return and also to disseminate information to taxpayers who need it to complete their own income tax returns. The temporary regulations provide a transition rule for the five-month extension period—entities will be allowed an automatic six-month extension of time to file their returns if such returns are required to be filed before January 1, 2009.

Comments Due-Date

Concerning corporations that have ownership interests in pass-through entities, and certain tiered partnerships, Treasury and the IRS specifically have requested comments as to whether the five-month automatic extension of time increases or reduces overall taxpayer burden.

Comments and requests for a public hearing must be received within 90 days after publication of these regulations in the Federal Register (which is scheduled for Tuesday, July 1, 2008).

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084 or rspeizma@kpmg.com

To print a copy of this TaxNewsFlash article, go to: File>Print>Preferences or Properties>Landscape.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in TaxNewsFlash-Exempt Organizations is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to US-KPMGWNT@kpmg.com. For more information, contact KPMG’s Federal Tax Legislative and Regulatory Services Group at + 1 202.533.4366, 2001 M Street NW, Washington, DC 20036-3310.

To unsubscribe from TaxNewsFlash-Exempt Organizations, reply to US-KPMGWNT@kpmg.com and type ‘Exempt Organizations: Unsubscribe' in the subject line, then click on the SEND button.

Privacy | Legal