Amendment ASA1-AB2

Analysis by the Legislative Reference Bureau

This bill makes changes to the laws administered and enforced by the Department of Revenue.

shared revenue

Reimbursement amounts

Under current law, the state reduces the shared revenue payments to counties and municipalities for various purposes, including for the collection of penalties and the reimbursement for other amounts. However, current law is not consistent with regard to which components of shared revenue are reduced for these purposes. This bill provides that all such reductions are from the payment of all shared revenue components that the counties and municipalities receive on the fourth Monday in July and the third Monday in November.

Expenditure restraint payments

Under current law, counties and municipalities receive 15 percent of their shared revenue payments on the fourth Monday in July and the remainder on the third Monday in November, except that municipalities receive the entire amount of their payment under the expenditure restraint program on the fourth Monday in July. The bill allows municipalities to receive their entire expenditure restraint payment before the fourth Monday in July, upon certification by DOR.

Under current law, the inflation factor used to compute a municipality's expenditure restraint payment is a percentage equal to the average annual 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. The bill modifies the consumer price index provision so that it is for the 12 months ending on August 31.

property

Omitted property

Current law requires a taxation district clerk to annually submit to DOR a listing of the taxes on property omitted from assessment in any of the previous two years that are to be included in the next assessment. However, the clerk reports the omitted taxes only if those taxes exceed $5,000. The bill modifies that $5,000 threshold so that the clerk reports the omitted taxes that are $250 or more for any single description of property. The bill also provides that the clerk may not list an omitted tax that was levied on property within a tax incremental district unless the current value of the district is lower than the tax incremental base.

Objections

Current law requires a person who files an objection to the assessment of the person's manufacturing property to pay a $45 fee. The bill increases the filing fee to $200.

License fees

Current law imposes license fees instead of property taxes on certain public utilities. The fees are based, generally, on the value of a utility's property. Utilities that are subject to the fees include light, heat, and power companies, pipeline companies, and railroad companies. Each such company, other than a railroad company, must file a report with DOR on or before May 1 of each year. DOR determines the value of the company's property on or before September 15. A railroad company must file its report on or before April 15 and its value is determined on or before August 1. The bill changes the filing and determination dates for a railroad company so that those dates are the same as those for other public utilities.

The bill also decreases the interest rate paid on refunds of license fees paid by public utilities from 9 percent to 3 percent.

Board of review

Current law requires that at least one member of the board of review attend DOR training within the two-year period beginning on the date of the board's first meeting. The bill requires one member of the board of review to complete the training each year.

Assessor certification

Current law requires a person applying for an assessor certification examination to submit a $20 fee with the application. A person applying for a renewal of an assessor certification pays a $20 recertification fee with the application. The bill allows DOR to determine the amount of the fee for an assessor certification examination on the basis of DOR's estimate of the actual cost to administer and grade the examination, but the fee may not exceed $75. The bill also allows DOR to determine the recertification fee.

Levy limit; joint fire departments

The property tax levy limit under current law does not apply to the amount that a city, village, or town levies to pay for charges assessed by a joint fire department or joint emergency medical services district if the current year increase in such charges is equal to or less than 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 of the year of the levy, plus 2 percent. The bill modifies the consumer price index provision so that it is for the 12 months ending on August 31 of the year of the levy.

Leasing property owned by a church or religious organization

Current law provides a property tax exemption for property owned by educational associations and institutions, benevolent associations, churches, religious associations, and certain nonprofit entities licensed by the Department of Health Services. Leasing such property does not render the property taxable as long as the lessor uses the leasehold income for maintenance or construction debt retirement of the leased property. However, current law allows some leased property to retain its exemption regardless of how the leasehold income is used. For example, leasing a part of property that is owned and operated by a licensed nonprofit entity as residential housing does not render the property taxable, regardless of how the lessor uses the leasehold income.

Under this bill, leasing all or part of any property owned by a church or religious organization to an educational association or institution that is also exempt from taxation does not render the property taxable, regardless of how the lessor uses the leasehold income.

INCOME tax

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 under 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.

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.

Internal Revenue Code

The bill adopts for state income and franchise tax purposes various provisions of the federal Internal Revenue Code, including provisions of the Consolidated Appropriations Act of 2020 related to the earned income tax credit, the paycheck protection program, the economic injury disaster loan program, payment assistance for certain loan programs, and grants to shuttered venue operators.

Medical care insurance subtraction

The bill eliminates obsolete provisions related to the medical care insurance subtraction for self-employed persons.

Payments from a retirement plan

Under current law, payments or distributions of $5,000 or less received each year by an individual from a qualified retirement plan is exempt from income tax if the individual is at least 65 years of age and has income of less than $15,000 if single or filing a tax return as head of household or less than $30,000 if married. The bill changes the exemption to a subtraction that the taxpayer can choose not to claim if not claiming the subtraction would result in the taxpayer receiving a greater homestead credit.

Sales tax

University of Wisconsin Hospitals and Clinics Authority

This bill provides a sales and use tax exemption for tangible personal property sold to a construction contractor who transfers the property to the University of Wisconsin Hospitals and Clinics Authority as part of constructing a facility for the authority in this state. A similar exemption applies under current law to property sold to a contractor who transfers the property to a local unit of government, technical college district, or institution or campus of the University of Wisconsin System. Under current law, a sale of tangible personal property directly to the University of Wisconsin Hospitals and Clinics Authority is exempt from the sales and use tax, but the exemption does not apply to a contractor who purchases tangible personal property on the authority's behalf.

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 LAB 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 10 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:

AB2-ASA1,1 Section 1. 48.561 (3) (a) 3. of the statutes is amended to read:

AB2-ASA1,7,3 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).

AB2-ASA1,2 Section 2. 48.561 (3) (b) of the statutes is amended to read:

AB2-ASA1,8,2 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.

AB2-ASA1,3 Section 3 . 59.25 (3) (i) of the statutes is amended to read:

AB2-ASA1,8,12 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.

AB2-ASA1,4 Section 4. 66.0602 (3) (h) 2. a. of the statutes is amended to read:

AB2-ASA1,8,20 66.0602 (3) (h) 2. a. The total charges assessed by the joint fire department or the joint emergency medical services district for the current year increase, relative to the total charges assessed by the joint fire department or the joint emergency medical services district 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.

AB2-ASA1,5 Section 5. 66.0602 (6) (a) of the statutes is amended to read:

AB2-ASA1,8,24 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.

AB2-ASA1,6 Section 6. 66.0602 (6) (b) of the statutes is amended to read:

AB2-ASA1,9,2 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.

AB2-ASA1,7 Section 7. 66.1105 (6m) (d) 4. of the statutes is amended to read:

AB2-ASA1,9,11 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.

AB2-ASA1,8 Section 8 . 70.11 (4) (b) 3. of the statutes is created to read:

AB2-ASA1,9,16 70.11 (4) (b) 3. Leasing all or part of property described in par. (a) that is owned by a church or religious association or institution to an educational association or institution exempt under par. (a) does not render the property taxable, regardless of how the lessor uses the leasehold income.

AB2-ASA1,9 Section 9. 70.46 (4) of the statutes is amended to read:

AB2-ASA1,9,23 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 at least one member completes 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. The municipal clerk shall provide an affidavit to the department of revenue stating whether the requirement under this subsection has been fulfilled.

AB2-ASA1,10 Section 10. 70.855 (4) (b) of the statutes is amended to read:

AB2-ASA1,10,5 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).

AB2-ASA1,11 Section 11. 70.995 (8) (c) 1. of the statutes is amended to read:

AB2-ASA1,10,21 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.

AB2-ASA1,12 Section 12. 70.995 (8) (d) of the statutes is amended to read:

AB2-ASA1,11,10 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.

AB2-ASA1,13 Section 13 . 70.995 (14) (b) of the statutes is amended to read:

AB2-ASA1,11,15 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.

AB2-ASA1,14 Section 14 . 71.01 (6) (c), (d), (e), (f), (g), (h) and (i) of the statutes are repealed.