Trade act includes tax provisions

The Sec. 35 health coverage tax credit is extended and modified, and the Sec. 24 child tax credit is disallowed for taxpayers excluding foreign earned income.
By Alistair M. Nevius, J.D.

The Trade Preferences Extension Act of 2015, P.L. 114-27, enacted on June 29, contains a few tax provisions in addition to the trade measures that were the focus of the act.

Sec. 35 provides a credit equal to 72.5% of the amount paid by a taxpayer who is an eligible recipient of trade adjustment assistance or a Pension Benefit Guaranty Corp. pension for qualified health insurance coverage of the taxpayer and qualifying family members for eligible coverage months. The credit expired at the end of 2013, but the act retroactively extended it through 2020. The act also coordinates the Sec. 35 credit with the Sec. 36B premium tax credit. Any month in which Sec. 35 applies will not be treated as a coverage month for purposes of Sec. 36B.

The act also amends Sec. 24 to provide that taxpayers who exclude foreign earned income under Sec. 911 cannot claim the child tax credit. This provision is effective for tax years beginning after Dec. 31, 2014.

The act also requires taxpayers to receive a payee statement containing the information required in Sec. 6050S(d)(2) before they can claim an American opportunity, Hope, or lifetime learning credit or take the deduction for qualified tuition and related expenses under Sec. 222. These changes are effective for tax years beginning after the act's date of enactment.

The act also accelerates a portion of corporate estimated taxes due in the third quarter of 2020 and increases penalties under Sec. 6721 for failure to file correct information returns and to provide payee statements, effective for information returns and payee statements required to be filed after Dec. 31, 2015. The basic penalty is increased from $100 per return to $250, with the maximum annual penalty increased from $1.5 million to $3 million.

—By Alistair M. Nevius, J.D., the JofA's editor-in-chief, tax.

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