SB720: Bill Text

Disability income subtraction

Current law allows an individual with less than $20,200 of federal adjusted gross income to claim a disability income subtraction on the individual's state tax return, if the individual is at least 65 years of age and retired on disability, and, when the individual retired, was permanently and totally disabled. For a married couple filing a joint return, each spouse may claim the credit if they meet the criteria and their combined income is less than $25,400. The bill replaces an obsolete reference to the federal Internal Revenue Code with the language used to determine the claimant's eligibility that existed under the obsolete reference.

Homestead credit

Under current law, an individual who is under the age of 62 and who does not have a disability must have earned income in order to claim the homestead credit. However, current law does not define earned income for purposes of claiming the credit. The bill defines “earned income” for purposes of claiming the homestead credit as wages, salaries, tips, and other employee compensation that may be included in federal adjusted gross income for the taxable year, plus the amount of net earnings from self-employment.

Current law also requires individuals who wish to claim the homestead credit to add certain disqualified losses to homestead income in order to determine eligibility to claim the credit. However, the requirement does not apply to an individual whose primary income is from farming and whose farming operation generates less than $250,000 in the year to which the claim relates. The bill clarifies that an individual's primary income is from farming if the individual's gross income from farming for the year in which the claim relates is greater than 50 percent of the individual's total gross income from all sources for that year.

Pass-through entity audits

Under current law, in order to conduct an audit of a “pass-through” entity, DOR must interact with each member of the entity. A pass-through entity is an entity such as a partnership or limited liability company that passes the income of the entity on to the individual partners or members. The bill requires a pass-through entity to designate a member to act on the entity's behalf so that DOR may conduct an audit without having to interact with each individual member.

Final audit determinations

Under current law, a taxpayer who receives a final audit determination from DOR has 90 days to report to DOR any changes or corrections related to that determination. The bill increases the time for providing that report to 180 days.

Historic rehabilitation credit

The bill modifies the procedure for transferring the historic rehabilitation tax credit so that the person transferring the credit may file a claim for more than one taxable year.

Nonresident income

The bill modifies current law so that nonresidents who derive business income from services performed both in and outside this state determine the amount that is subject to state income or franchise tax by using the same apportionment formula under current law that applies to resident entities.

Sales tax

Property transferred with services

Current law provides that persons providing landscaping, printing, fabricating, processing, or photographic services or performing services to tangible personal property may purchase for resale, without paying the sales tax, items that the person will transfer to a customer in conjunction with providing a service that is subject to the sales tax. The bill provides that the exemption applies regardless of whether the service is taxable.

Nonprofit organizations

The bill modifies the sales and use tax exemption for churches, religious organizations, and certain nonprofit organizations to conform with DOR's current practice with regard to the administration of the exemption. The bill provides that the exemption applies to organizations that are exempt from federal taxation under section 501 (c) (3) of the Internal Revenue Code and have received a determination letter for the Internal Revenue Service. The bill also provides that the exemption applies to churches and religious organizations that meet the requirements of section 501 (c) (3) of the Internal Revenue Code, but are not required to apply for or obtain tax-exempt status from the IRS.

Out-of-state retailer

Under current law, an out-of-state retailer that has annual gross sales into this state in excess of $100,000 or 200 or more annual separate sales transactions into this state must register with DOR and collect the sales tax on those sales and transactions. The determination of the annual gross sales and transactions is based on the retailer's taxable year for federal income tax purposes.

Under the bill, an out-of-state retailer that has annual gross sales into this state in excess of $100,000 in the previous or current calendar year must register with DOR and collect the sales tax on those sales.

Disclosure to state auditor

The bill allows the state auditor and Legislative Audit Bureau to examine sales and use tax returns and related documents to the extent necessary for the bureau to carry out its duties.

Other

Payments from counties to towns

Under current law, during the period beginning on the third Monday of March and ending ten days after the annual town meeting, a county treasurer may not pay to a town treasurer any money that belongs to the town and that is in the hands of the county treasurer except upon a written order of the town board. The bill eliminates this restriction.

Because this bill relates to an exemption from state or local taxes, it may be referred to the Joint Survey Committee on Tax Exemptions for a report to be printed as an appendix to the bill.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB720,1 Section 1. 48.561 (3) (a) 3. of the statutes is amended to read:

SB720,6,3 48.561 (3) (a) 3. Through a deduction of $20,101,300 from any state payment due that county under s. 79.035, 79.04, or 79.08 79.02 (1), as provided in par. (b).

SB720,2 Section 2. 48.561 (3) (b) of the statutes is amended to read:

SB720,6,16 48.561 (3) (b) The department of administration shall collect the amount specified in par. (a) 3. from a county having a population of 750,000 or more by deducting all or part of that amount from any state payment due that county under s. 79.035, 79.04, or 79.08 79.02 (1). The department of administration shall notify the department of revenue, by September 15 of each year, of the amount to be deducted from the state payments due under s. 79.035, 79.04, or 79.08 79.02 (1). The department of administration shall credit all amounts collected under this paragraph to the appropriation account under s. 20.437 (1) (kw) and shall notify the county from which those amounts are collected of that collection. The department may not expend any moneys from the appropriation account under s. 20.437 (1) (cx) for providing services to children and families under s. 48.48 (17) until the amounts in the appropriation account under s. 20.437 (1) (kw) are exhausted.

SB720,3 Section 3 . 59.25 (3) (i) of the statutes is amended to read:

SB720,7,5 59.25 (3) (i) Make annually, on the 3rd Monday of March, a certified statement, and forward the statement to each municipal clerk in the county, showing the amount of money paid from the county treasury during the year next preceding to each municipal treasurer in the county. The statement shall specify the date of each payment, the amount thereof and the account upon which the payment was made. It shall be unlawful for any county treasurer to pay to the treasurer of any town any money in the hands of the county treasurer belonging to the town from the 3rd Monday of March until 10 days after the annual town meeting except upon the written order of the town board.

SB720,4 Section 4 . 66.0602 (3) (h) 2. a. of the statutes is amended to read:

SB720,7,12 66.0602 (3) (h) 2. a. The total charges assessed by the joint fire department for the current year increase, relative to the total charges assessed by the joint fire department for the previous year, by a percentage that is less than or equal to the percentage change in the U.S. consumer price index for all urban consumers, U.S. city average, as determined by the U.S. department of labor, for the 12 months ending on September 30 August 31 of the year of the levy, plus 2 percent.

SB720,5 Section 5. 66.0602 (6) (a) of the statutes is amended to read:

SB720,7,16 66.0602 (6) (a) Reduce the amount of county and municipal aid payments the payment to the political subdivision under s. 79.035 79.02 (1) in the following year by an amount equal to the amount of the penalized excess.

SB720,6 Section 6. 66.0602 (6) (b) of the statutes is amended to read:

SB720,7,19 66.0602 (6) (b) Ensure that the amount of any reductions in county and municipal aid payments under par. (a) lapses to the general fund.

SB720,7 Section 7. 66.1105 (6m) (d) 4. of the statutes is amended to read:

SB720,8,3 66.1105 (6m) (d) 4. If an annual report is not timely filed under par. (c), the department of revenue shall notify the city that the report is past due. If the city does not file the report within 60 days of the date on the notice, except as provided in this subdivision, the department shall charge the city a fee of $100 per day for each day that the report is past due, up to a maximum penalty of $6,000 per report. If the city does not pay within 30 days of issuance, the department of revenue shall reduce and withhold the amount of the shared revenue payments to the city under subch. I of ch. 79 s. 79.02 (1), in the following year, by an amount equal to the unpaid penalty.

SB720,8 Section 8. 70.46 (4) of the statutes is amended to read:

SB720,8,13 70.46 (4) No board of review may be constituted unless it includes at least one voting member who, within 2 years of the board's first meeting, has attended all members complete in each year a training session under s. 73.03 (55) and unless that member is the municipality's chief executive officer or that officer's designee. All but one member of the board may satisfy the training requirement under this subsection by participating in the training online. At least one member shall attend training in-person each year. The municipal clerk shall provide an affidavit to the department of revenue stating whether the requirement under this subsection has been fulfilled.

SB720,9 Section 9. 70.855 (4) (b) of the statutes is amended to read:

SB720,8,19 70.855 (4) (b) If the department of revenue does not receive the fee imposed on a municipality under par. (a) by March 31 of the year following the department's determination under sub. (2) (b), the department shall reduce the distribution made to the municipality under s. 79.02 (2) (b) (1) by the amount of the fee and shall transfer that amount to the appropriation under s. 20.566 (2) (ga).

SB720,10 Section 10. 70.995 (8) (c) 1. of the statutes is amended to read:

SB720,9,10 70.995 (8) (c) 1. All objections to the amount, valuation, taxability, or change from assessment under this section to assessment under s. 70.32 (1) of property shall be first made in writing on a form prescribed by the department of revenue that specifies that the objector shall set forth the reasons for the objection, the objector's estimate of the correct assessment, and the basis under s. 70.32 (1) for the objector's estimate of the correct assessment. An objection shall be filed with the state board of assessors within the time prescribed in par. (b) 1. A $45 $200 fee shall be paid when the objection is filed unless a fee has been paid in respect to the same piece of property and that appeal has not been finally adjudicated. The objection is not filed until the fee is paid. Neither the state board of assessors nor the tax appeals commission may waive the requirement that objections be in writing. Persons who own land and improvements to that land may object to the aggregate value of that land and improvements to that land, but no person who owns land and improvements to that land may object only to the valuation of that land or only to the valuation of improvements to that land.

SB720,11 Section 11. 70.995 (8) (d) of the statutes is amended to read:

SB720,9,24 70.995 (8) (d) A municipality may file an objection with the state board of assessors to the amount, valuation, or taxability under this section or to the change from assessment under this section to assessment under s. 70.32 (1) of a specific property having a situs in the municipality, whether or not the owner of the specific property in question has filed an objection. Objection shall be made on a form prescribed by the department and filed with the board within the time prescribed in par. (b) 1. If the person assessed files an objection and the municipality affected does not file an objection, the municipality affected may file an appeal to that objection within 15 days after the person's objection is filed. A $45 $200 filing fee shall be paid when the objection is filed unless a fee has been paid in respect to the same piece of property and that appeal has not been finally adjudicated. The objection is not filed until the fee is paid. The board shall forthwith notify the person assessed of the objection filed by the municipality.

SB720,12 Section 12 . 70.995 (14) (b) of the statutes is amended to read:

SB720,10,4 70.995 (14) (b) If the department of revenue does not receive the fee imposed on a municipality under par. (a) by March 31 of each year, the department shall reduce the distribution made to the municipality under s. 79.02 (2) (b) (1) by the amount of the fee.

SB720,13 Section 13. 71.04 (1) (a) of the statutes is amended to read:

SB720,11,25 71.04 (1) (a) All income or loss of resident individuals and resident estates and trusts shall follow the residence of the individual, estate or trust. Income or loss of nonresident individuals and nonresident estates and trusts 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. All items of income, loss and deductions of nonresident individuals and nonresident estates and trusts 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. Income or loss of nonresident individuals and nonresident estates and trusts 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. Income from personal services of nonresident individuals, including income from professions, shall follow the situs of the services. A nonresident limited partner's distributive share of partnership income shall follow the situs of the business, 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. A nonresident limited liability company member's distributive share of limited liability company income shall follow the situs of the business, 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. Income of nonresident individuals, estates and trusts from the state lottery under ch. 565 is taxable by this state. Income of nonresident individuals, estates and trusts 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. Income of nonresident individuals, nonresident trusts and nonresident estates from pari-mutuel winnings or purses under ch. 562 is taxable by this state. Income of nonresident individuals, estates and trusts 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. 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. 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 sub. (9), 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.

SB720,14 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.