SB720: Bill Text

SB720,14 Section 14. 71.04 (1) (b) (intro.) of the statutes is amended to read:

SB720,12,3 71.04 (1) (b) (intro.) For Except as provided in par. (c), for purposes of determining the situs of income under this section:

SB720,15 Section 15. 71.04 (1) (c) of the statutes is created to read:

SB720,12,6 71.04 (1) (c) Except as provided in subs. (4), (9), and (9m), the situs of income or loss of nonresident individuals and nonresident estates and trusts is as follows:

SB720,12,8 1. Except as provided in subds. 3. and 4., income from services performed by nonresident individuals shall follow the situs of the services.

SB720,12,13 2. Income or loss from business, not requiring apportionment under sub. (4), (10), or (11), shall follow the situs of the business from which derived, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.

SB720,12,19 3. All items of income, loss, and deductions derived from a tax-option corporation not requiring apportionment under sub. (9) shall follow the situs of the business of the corporation from which derived, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.

SB720,12,25 4. All items of income, loss, and deductions derived from a partnership or limited liability company not requiring apportionment under sub. (9m) shall follow the situs of the business of the partnership or limited liability company from which derived, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.

SB720,13,4 5. Income or loss derived from rentals and royalties from real estate or tangible personal property, or from the operation of any farm, mine or quarry, or from the sale of real property or tangible personal property shall follow the situs of the property from which derived.

SB720,13,8 6. Income from the state lottery under ch. 565 is taxable to this state. Income from any multijurisdictional lottery under ch. 565 is taxable by this state, but only if the winning lottery ticket or lottery share was purchased from a retailer, as defined in s. 565.01 (6), located in this state or from the department.

SB720,13,10 7. Income from pari-mutuel winnings or purses under ch. 562 is taxable by this state.

SB720,13,13 8. Income from winnings from a casino or bingo hall that is located in this state and that is operated by a Native American tribe or band shall follow the situs of the casino or bingo hall.

SB720,13,16 9. Income derived by a nonresident individual from a covenant not to compete is taxable by this state to the extent that the covenant was based on a Wisconsin-based activity.

SB720,13,23 10. All other income or loss of nonresident individuals and nonresident estates and trusts, including income or loss derived from land contracts, mortgages, stocks, bonds, and securities or from the sale of similar intangible personal property, shall follow the residence of such persons, except as provided in par. (b) and subs. (9) and (9m), except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.

SB720,16 Section 16. 71.04 (3) (b) of the statutes is amended to read:

SB720,14,7 71.04 (3) (b) Part-year residents, nonresidents. All partners or members who are residents of this state for less than a full taxable year or who are nonresidents shall compute taxes for that year on their share of partnership or limited liability company income or loss under this chapter for the part of the taxable year during which they are nonresidents by recognizing their proportionate share of all items of income, loss or deduction attributable to a business in, services performed in, or rental of property in, this state.

SB720,17 Section 17. 71.04 (4) (intro.) of the statutes is amended to read:

SB720,14,25 71.04 (4) Nonresident allocation and apportionment formula. (intro.) Nonresident individuals and nonresident estates and trusts engaged in business within and without the state shall be taxed only on such income as is derived from business transacted and property located within the state. The amount of such income attributable to Wisconsin may be determined by an allocation and separate accounting thereof, when the business of such nonresident individual or nonresident estate or trust within the state is not an integral part of a unitary business, but the department of revenue may permit an allocation and separate accounting in any case in which it is satisfied that the use of such method will properly reflect the income taxable by this state. In all cases in which allocation and separate accounting is not permissible, the determination shall be made in the following manner: for all businesses except air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, railroads, and car line companies there shall first be deducted from the total net income of the taxpayer the part thereof (less related expenses, if any) that follows the situs of the property or the residence of the recipient. The remaining, the net income shall be apportioned to this state by use of the following:

SB720,18 Section 18. 71.04 (9) of the statutes is amended to read:

SB720,15,18 71.04 (9) Nonresident income from multistate tax-option corporation. Nonresident individuals and nonresident estates and trusts deriving income from a tax-option corporation which is engaged in business within and without this state shall be taxed only on the income of the corporation derived from business transacted and property located in this state as computed under the apportionment formula under subs. (4) and (4m) and losses and other items of the corporation deductible by such shareholders shall be limited to their proportionate share of the Wisconsin loss or other item as computed under the apportionment formula under subs. (4) and (4m), except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state. For purposes of this subsection, all intangible income of tax-option corporations , including intangible income, passed through to shareholders is business income that follows the situs of the business as computed under the apportionment formula under subs. (4) and (4m), except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.

SB720,19 Section 19. 71.04 (9m) of the statutes is created to read:

SB720,16,13 71.04 (9m) Nonresident income from multistate partnership and limited liability company. Nonresident individuals and nonresident estates and trusts deriving income from a partnership or limited liability company which is engaged in business within and without this state shall be taxed only on the income of the partnership or limited liability company derived from business transacted and property located in this state as computed under the apportionment formula under subs. (4) and (4m) and losses and other items of the partnership or limited liability company deductible by such partners and members shall be limited to their proportionate share of the Wisconsin loss or other item as computed under the apportionment formula under subs. (4) and (4m), except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state. For purposes of this subsection, all partnership or limited liability company income, including intangible income, passed through to partners and members is presumed business income that follows the situs of the business as computed under the apportionment formula under subs. (4) and (4m), except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.

SB720,20 Section 20 . 71.05 (6) (b) 4. of the statutes is amended to read:

SB720,17,10 71.05 (6) (b) 4. Disability payments other than disability payments that are paid from a retirement plan, the payments from which are exempt under sub. (1) (ae), (am), and (an), if the individual either is single or is married and files a joint return, to the extent those payments are excludable under section 105 (d) of the Internal Revenue Code as it existed immediately prior to its repeal in 1983 by section 122 (b) of P.L. 98-21, except that if is at least 65 years of age before the close of the taxable year to which the subtraction relates, retired on disability, and, when the individual retired, was permanently and totally disabled. If an individual is divorced during the taxable year that individual may subtract an amount only if that person is disabled and the amount that may be subtracted then is $100 for each week that payments are received or the amount of disability pay reported as income, whichever is less. If the exclusion under this subdivision is claimed on a joint return and only one of the spouses is disabled, the maximum exclusion is $100 for each week that payments are received or the amount of disability pay reported as income, whichever is less. In this subdivision, “permanently and totally disabled" means an individual who is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered permanently and totally disabled for purposes of this subdivision unless proof is furnished in such form and manner, and at such times, as prescribed by the department.

SB720,21 Section 21. 71.07 (9m) (h) of the statutes is amended to read:

SB720,17,23 71.07 (9m) (h) Any person, including a nonprofit entity described in section 501 (c) (3) of the Internal Revenue Code, may sell or otherwise transfer the credit under par. (a) 2m. or 3., in whole or in part, to another person who is subject to the taxes imposed under s. 71.02, 71.23, or 71.43, if the person notifies the department of the transfer, and submits with the notification a copy of the transfer documents, and the department certifies ownership of the credit with each transfer. The transferor may file a claim for more than one taxable year on a form prescribed by the department to compute all years of the credit under par. (a) 2m. or 3., at the time of the transfer request. The transferee may first use the credit to offset tax in the taxable year of the transferor in which the transfer occurs and may use the credit only to offset tax in taxable years otherwise allowed to be claimed and carried forward by the original claimant.

SB720,22 Section 22. 71.25 (6) (intro.) of the statutes is amended to read:

SB720,18,17 71.25 (6) Allocation and separate accounting and apportionment formula. (intro.) Corporations engaged in business within and without the state shall be taxed only on such income as is derived from business transacted and property located within the state. The amount of such income attributable to Wisconsin may be determined by an allocation and separate accounting thereof, when the business of such corporation within the state is not an integral part of a unitary business, but the department of revenue may permit an allocation and separate accounting in any case in which it is satisfied that the use of such method will properly reflect the income taxable by this state. In all cases in which allocation and separate accounting is not permissible, the determination shall be made in the following manner: for all businesses except air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, railroads, car line companies and corporations or associations that are subject to a tax on unrelated business income under s. 71.26 (1) (a) there shall first be deducted from the total net income of the taxpayer the part thereof (less related expenses, if any) that follows the situs of the property or the residence of the recipient. The remaining, the net income shall be apportioned to this state by use of the following:

SB720,23 Section 23. 71.28 (6) (h) of the statutes is amended to read:

SB720,19,5 71.28 (6) (h) Any person, including a nonprofit entity described in section 501 (c) (3) of the Internal Revenue Code, may sell or otherwise transfer the credit under par. (a) 2m. or 3., in whole or in part, to another person who is subject to the taxes imposed under s. 71.02, 71.23, or 71.43, if the person notifies the department of the transfer, and submits with the notification a copy of the transfer documents, and the department certifies ownership of the credit with each transfer. The transferor may file a claim for more than one taxable year on a form prescribed by the department to compute all years of the credit under par. (a) 2m. or 3., at the time of the transfer request. The transferee may first use the credit to offset tax in the taxable year of the transferor in which the transfer occurs, and may use the credit only to offset tax in taxable years otherwise allowed to be claimed and carried forward by the original claimant.

SB720,24 Section 24. 71.47 (6) (h) of the statutes is amended to read:

SB720,19,18 71.47 (6) (h) Any person, including a nonprofit entity described in section 501 (c) (3) of the Internal Revenue Code, may sell or otherwise transfer the credit under par. (a) 2m. or 3., in whole or in part, to another person who is subject to the taxes imposed under s. 71.02, 71.23, or 71.43, if the person notifies the department of the transfer, and submits with the notification a copy of the transfer documents, and the department certifies ownership of the credit with each transfer. The transferor may file a claim for more than one taxable year on a form prescribed by the department to compute all years of the credit under par. (a) 2m. or 3., at the time of the transfer request. The transferee may first use the credit to offset tax in the taxable year of the transferor in which the transfer occurs, and may use the credit only to offset tax in taxable years otherwise allowed to be claimed and carried forward by the original claimant.

SB720,25 Section 25. 71.52 (1g) of the statutes is created to read:

SB720,20,3 71.52 (1g) “Earned income” means wages, salaries, tips, and other employee compensation that may be included in federal adjusted gross income for the taxable year, plus the amount of the claimant's net earnings from self-employment for the taxable year determined with regard to the deduction allowed to the taxpayer by section 164 (f) of the Internal Revenue Code. For purposes of this subsection, a claimant's earned income is computed without regard to any marital property laws and a claimant may elect to treat amounts excluded from federal adjusted gross income as earned income, as provided under section 112 of the Internal Revenue Code. “Earned income” does not include the following:

SB720,20,4 (a) Any amount received as a pension or annuity.

SB720,20,5 (b) Any amount to which section 871 (a) of the Internal Revenue Code applies.

SB720,20,7 (c) Any amount received for services provided by an individual while the individual is an inmate at a penal institution.

SB720,20,12 (d) Any amount received for service performed in work activities under paragraphs (4) or (7) of section 407 (d) of the Social Security Act to which the claimant is assigned under any state program under part A of title IV of the Social Security Act. This paragraph applies only to amounts subsidized under any such state program.

SB720,26 Section 26. 71.55 (10) of the statutes is amended to read:

SB720,20,22 71.55 (10) Farmers. Notwithstanding the provision in s. 71.52 (6) that requires the addition of certain disqualified losses to income, such an addition may not be made by a claimant who is a farmer whose primary income is from farming and whose farming generates less than $250,000 in gross receipts from the operation of farm premises in the year to which the claim relates. For purposes of this subsection, a claimant's primary income is from farming if the claimant's gross income from farming for the year to which the claim relates is greater than 50 percent of the claimant's total gross income from all sources for the year to which the claim relates. In this subsection, “gross income” has the meaning given in s. 71.03 (1).

SB720,27 Section 27. 71.738 (3c) of the statutes is created to read:

SB720,21,3 71.738 (3c) “Pass-through entity" means a partnership, a limited liability company, a tax-option corporation, an estate, or a trust that is treated as a pass-through entity for federal income tax purposes.

SB720,28 Section 28. 71.738 (3d) of the statutes is created to read:

SB720,21,8 71.738 (3d) “Pass-through item" means a tax-option item under s. 71.34 (3) or an item of income, gain, loss, deduction, credit, or any other item that originates with a pass-through entity and is required to be reported by one or more pass-through members under this chapter.

SB720,29 Section 29. 71.738 (3f) of the statutes is created to read:

SB720,21,14 71.738 (3f) “Pass-through member" means a person who is a partner in a partnership, shareholder in a tax-option corporation, beneficiary of an estate or a trust, or any other person whose tax liability under this chapter is determined in whole or in part by taking into account the person's share of pass-through items, directly or indirectly, from a pass-through entity.

SB720,30 Section 30. 71.738 (3g) of the statutes is created to read:

SB720,21,16 71.738 (3g) “Person” includes a pass-through entity,

SB720,31 Section 31. 71.738 (5b) of the statutes is created to read:

SB720,21,18 71.738 (5b) “Taxpayer” includes a pass-through entity,

SB720,32 Section 32. 71.745 of the statutes is created to read:

SB720,22,2 71.745 Pass-through entity audits, additional assessments and refunds at the entity level. (1) Audit assessments and refunds. Except as provided in s. 71.80 (27), the department may audit and assess tax to a pass-through entity on income otherwise reportable by the pass-through members at the highest tax rate applicable under this chapter. The department may issue a refund to a pass-through entity when the audit results in an overpayment of tax originally paid by the entity.

SB720,22,7 (2) Adjustment of credits. Except as provided in s. 71.80 (27), the department may correct the credit computation of a pass-through entity resulting from a department audit under this subchapter at the pass-through entity level, and may apply the credit adjustment to an assessment or refund issued to the pass-through entity.

SB720,22,13 (3) Adjustments to the pass-through entity are attributable to the members. Except when an election under s. 71.21 (6) (a) or 71.365 (4m) (a) is made, any adjustments to income, gain, loss, deduction, or credit made to the pass-through entity under this section are attributable to each pass-through member in a manner that is consistent with the treatment of such income, gain, loss, deduction, or credit to the pass-through entity.

SB720,22,20 (4) Liability may be assessed to more than one person. If for any reason a pass-through entity fails to timely make any report or payment required under this subchapter, the department may assess the pass-through members for any liability resulting from an audit under this subchapter. If for any reason a pass-through member fails to timely make any report or payment required under this subchapter, the department may assess the pass-through entity for any liability resulting from an audit under this subchapter.

SB720,33 Section 33. 71.75 (11) of the statutes is created to read:

SB720,22,23 71.75 (11) The department shall not issue a refund to a pass-through entity except when the claim is for overpayment of tax originally paid by the entity.

SB720,34 Section 34. 71.76 of the statutes is amended to read:

SB720,23,18 71.76 Internal revenue service and other state adjustments. If for any year the amount of federal net income tax payable, of a credit claimed or carried forward, of a net operating loss carried forward or of a capital loss carried forward of any taxpayer as reported to the internal revenue service is changed or corrected by the internal revenue service or other officer of the United States, such taxpayer shall report such changes or corrections to the department within 90 180 days after its final determination and shall concede the accuracy of such determination or state how the determination is erroneous. Such changes or corrections need not be reported unless they affect the amount of net tax payable under this chapter, of a credit calculated under this chapter, of a Wisconsin net operating loss carried forward, of a Wisconsin net business loss carried forward or of a capital loss carried forward under this chapter. Any taxpayer submitting an amended return to the internal revenue service, or to another state if there has been allowed a credit against Wisconsin taxes for taxes paid to that state, shall also file, within 90 180 days of such filing date, an amended return if any information contained on the amended return affects the amount of net tax payable under this chapter of a credit calculated under this chapter, of a Wisconsin net operating loss carried forward, of a Wisconsin net business loss carried forward or of a capital loss carried forward under this chapter.

SB720,35 Section 35. 71.77 (7) (b) of the statutes is amended to read:

SB720,24,2 71.77 (7) (b) If notice of assessment or refund is given to the taxpayer within 90 180 days of the date on which the department receives a report from the taxpayer under s. 71.76 or within such other period specified in a written agreement entered into prior to the expiration of such 90 180 days by the taxpayer and the department. If the taxpayer does not report to the department as required under s. 71.76, the department may make an assessment against the taxpayer or refund to the taxpayer within 4 years after discovery by the department.

SB720,36 Section 36. 71.775 (1) (intro.) and (a) of the statutes are consolidated, renumbered 71.775 (1) and amended to read:

SB720,24,8 71.775 (1) Definitions. In this section: (a) “Nonresident", “nonresident” includes an individual who is not domiciled in this state; a partnership, limited liability company, or corporation whose commercial domicile is outside the state; and an estate or a trust that is a nonresident under s. 71.14 (1) to (3m).

SB720,37 Section 37. 71.775 (1) (b) of the statutes is repealed.

SB720,38 Section 38. 71.78 (1) of the statutes is amended to read:

SB720,25,4 71.78 (1) Divulging information. Except as provided in subs. (4), (4m) and, (10), and (11), no person may divulge or circulate or offer to obtain, divulge, or circulate any information derived from an income, franchise, withholding, fiduciary, partnership, or limited liability company tax return or tax credit claim, including information which may be furnished by the department as provided in this section. This subsection does not prohibit publication by any newspaper of information lawfully derived from such returns or claims for purposes of argument or prohibit any public speaker from referring to such information in any address. This subsection does not prohibit the department from publishing statistics classified so as not to disclose the identity of particular returns, or claims or reports and the items thereof. This subsection does not prohibit employees or agents of the department of revenue from offering or submitting any return, including joint returns of a spouse or former spouse, separate returns of a spouse, individual returns of a spouse or former spouse, and combined individual income tax returns, or from offering or submitting any claim, schedule, exhibit, writing, or audit report or a copy of, and any information derived from, any of those documents as evidence into the record of any contested matter involving the department in proceedings or litigation on state tax matters if, in the department's judgment, that evidence has reasonable probative value.

SB720,39 Section 39. 71.78 (11) of the statutes is created to read:

SB720,25,9 71.78 (11) Pass-through entity audits. If the department audits a pass-through entity for the income or franchise taxes of its pass-through members, including when an election is made under s. 71.21 (6) (a) or 71.365 (4m) (a) to pay tax at the entity level, the department may disclose the following:

SB720,25,14 (a) To a pass-through member that the pass-through entity is under audit or was audited, if the disclosure is necessary to explain any amounts assessed or refunded to the pass-through member or to obtain information necessary to determine the proper amount of adjustment to make at the pass-through entity level.

SB720,25,20 (b) To a pass-through entity, the identities of one or more members who have failed to report pass-through items originating with the entity on their Wisconsin returns, if the disclosure is necessary to explain any amounts assessed or refunded to the pass-through entity or to obtain information about a pass-through member's return in order to determine the proper amount of adjustment to make at the pass-through entity level.

SB720,40 Section 40. 71.80 (26) of the statutes is created to read:

SB720,26,8 71.80 (26) Tax matters member of a pass-through entity. (a) Each pass-through entity filing a return in this state under this chapter shall designate one pass-through member as the tax matters member on the pass-through entity's return filed in this state for each taxable year. If no tax matters member is designated on the return or no return is filed, the pass-through entity shall appoint a tax matters member no later than 30 days after a written request by the department. If no member is so appointed, the department may designate the tax matters member and notify the pass-through entity in writing of the designation. The pass-through entity may at any time provide a written statement designating a new tax matters member and the department shall accept it if it is signed by an authorized agent of the pass-through entity. The tax matters member for this state may be different from the entity's federal tax matters member.

SB720,26,11 (b) With regard to a department audit of a pass-through entity for income or franchise taxes, the tax matters member has the power and duty to do all of the following:

SB720,26,14 1. Act as the sole authority on behalf of the pass-through entity with respect to the year under review. The pass-through members are bound by actions of the tax matters member under this subdivision.

SB720,26,17 2. Provide the department sufficient information to identify each pass-through member, and the profits interest of each pass-through member, for each taxable year affected by the audit.

SB720,26,19 3. Represent the pass-through entity and keep all pass-through members informed.

SB720,26,21 4. Enter extension agreements on behalf of the pass-through entity under s. 71.77 (5).

SB720,26,22 5. Receive pass-through entity adjustment notices.

SB720,26,25 6. Notify all pass-through members of their share of corrections and adjustments made to the pass-through entity within 90 days after the final determination date of the notice.

SB720,27,1 7. File appeals of pass-through entity adjustment notices.

SB720,27,3 8. Enter a settlement agreement related to pass-through entity items from the entity that is binding on the pass-through members.

SB720,27,5 (c) The tax matters member may delegate the powers and duties under par. (b) to an authorized agent.

SB720,41 Section 41. 71.80 (27) of the statutes is created to read:

SB720,27,15 71.80 (27) Exception to pass-through entity level assessment. No later than 60 days after receipt of the department's audit determination, in a manner prescribed by the department, a pass-through entity with 5 or fewer members for all years under review may elect an audit assessment to be assessed separately to each pass-through member. This subsection does not apply to a pass-through entity if one or more of its members is a pass-through entity for any year under review or if the pass-through entity has made an election for the taxable year under s. 71.21 (6) (a) or 71.365 (4m) (a). The election under this subsection does not dismiss the duties of a tax matters member provided under sub. (26) (a) and (b) 2., 3., and 6.

SB720,42 Section 42. 71.83 (1) (a) 12. of the statutes is created to read:

SB720,27,23 71.83 (1) (a) 12. `Incomplete or incorrect pass-through entity return.' If any pass-through entity, as defined in s. 71.738 (3c), required under this chapter to file a return files an incomplete or incorrect return, the department, upon a showing by the department under s. 73.16 (4), shall assess the pass-through entity an amount equal to 25 percent of the amount of tax assessed under s. 71.745. The amount shall be assessed, levied, and collected in the same manner as additional income or franchise taxes.

SB720,43 Section 43. 71.87 of the statutes is amended to read:

SB720,28,6 71.87 Definition. In this subchapter, “person feeling aggrieved" and “person aggrieved" include includes a pass-through entity, as defined in s. 71.738 (3c), and the spouse of a person against whom an additional assessment was made or who was denied a claim for refund for a taxable year for which a separate return was filed and include either spouse for a taxable year for which a joint return was filed or, if no return was filed, a joint return could have been filed.

SB720,44 Section 44. 73.0305 of the statutes is amended to read: