Will The 2015 Transportation and Health Care Act Affect Your Credit Union?August 7, 2015
On July 31, 2015 H.R. 3236, the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” (the Act), was signed into law by President Obama. Included in the Act are numerous tax provisions and changes. Why would a credit union be interested in the tax provisions of the new law? Because within “Title II – Revenue Provisions” of the Act lurks Section 2003, “Modification of Mortgage Reporting Requirements.” This Section will directly impact credit unions offering mortgage loans to members.
A Refresher on Form 1098 Reporting
As you most likely know, a lender must file a separate information return with the IRS for each qualified mortgage for which it receives $600 or more in interest for a calendar year. The return must include:
- The name and address of the individual from whom the interest was received,
- The amount of such interest (other than points) received for the calendar year,
- The amount of points on the mortgage received during the calendar year and whether such points were paid directly by the borrower, and
- Such other information as IRS may prescribe.
Regulations prescribe certain additional information that must be provided, such as the tax payer identification number (TIN) of the borrower and the name, address, and TIN of the interest recipient.
The Act’s Additional Reporting Requirements
The Act which amends the Internal Revenue Code of 1986 (IRC) requires the following additional information to be included on the information returns:
- The amount of the outstanding mortgage principal as of the beginning of the calendar year;
- The mortgage origination date; and
- The address (or other description, in the case of a property without an address) of the property which secures the mortgage.
Corresponding changes relating to the returns that must be provided by the lender to the payor of mortgage interest (Form 1098) are also made to the IRC to accommodate the new law.
Your Two Favorite Words – Due Diligence
The new requirements will apply to returns required to be made and statements required to be furnished after December 31, 2016. Therefore, the mortgage information returns filed with the IRS and mortgage interest statements provided to borrowers for calendar year 2016 must include the new information. Be sure to begin your due diligence early enough to ensure your systems will be able to generate the required reporting information in a timely fashion and appropriate format to meet the reporting deadlines.
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