Amendment SSA1-SB172

LRBs0135/1

EKL:emw

2021 - 2022 LEGISLATURE

SENATE SUBSTITUTE AMENDMENT 1, TO SENATE BILL 172

May 10, 2021 - Offered by Senator Bernier.

SB172-SSA1,1,5 An Act to renumber 76.639 (3); to amend 71.05 (6) (a) 15., 71.21 (4) (a), 71.26 (2) (a) 4., 71.34 (1k) (g), 71.45 (2) (a) 10. and 76.67 (2); and to create 71.07 (8f), 71.10 (4) (fd), 71.28 (8f), 71.30 (3) (cu), 71.47 (8f), 71.49 (1) (cu), 76.639 (3) (b), 76.6395 and 234.46 of the statutes; relating to: state workforce housing income and franchise tax credit.

Analysis by the Legislative Reference Bureau

This bill creates a state workforce housing tax credit program that is administered by the Wisconsin Housing and Economic Development Authority.

Under the bill, WHEDA may certify a person to claim a nonrefundable credit to offset income and franchise taxes if all of the following conditions are satisfied:

1. The person has an ownership interest in a qualified housing development. Under the bill, a “qualified housing development” is a residential rental property development located in Wisconsin if at least 25 percent of the rental units are occupied by individuals whose income is at least 61 percent but not more than 100 percent of area median income and the rents for such units do not exceed 30 percent of area median income.

2. The tax credit is necessary for the financial feasibility of the development.

3. The qualified housing development is the subject of a recorded restrictive covenant requiring that the development be maintained and operated as a qualified housing development for at least 15 years.

4. The tax credit certification is issued in accordance with a qualified allocation plan established by WHEDA.

The bill requires that WHEDA allocate at least 50 percent of the annual credit allocation to qualified housing developments located in cities, villages, and towns with fewer than 150,000 residents. The bill caps at $42,000,000 the total amount of credits WHEDA may issue each year, including all amounts each person is eligible to claim for each year of the credit. However, the bill raises that cap for each year by an amount equal to all unallocated credits from prior years, all previously allocated credits that have been revoked, canceled, or otherwise recovered by WHEDA, and credits allocated for qualified housing developments in small municipalities that were not claimed.

The bill also amends the existing low-income housing tax credit that insurers may claim against certain state-imposed fees. The bill provides that an insurer that is a partner or member of a partnership or limited liability company that directly or indirectly owns a qualified housing development may claim the low-income housing tax credit in proportion to the insurer's interest or in accordance with the allocation of credits pursuant to a timely written agreement among the partners or members.

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

SB172-SSA1,1 Section 1. 71.05 (6) (a) 15. of the statutes is amended to read:

SB172-SSA1,2,7 71.05 (6) (a) 15. Except as provided under s. 71.07 (3p) (c) 5., the amount of the credits computed under s. 71.07 (2dm), (2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n), (5e), (5i), (5j), (5k), (5r), (5rm), (6n), (8f), and (10) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1k) (g).

SB172-SSA1,2 Section 2 . 71.07 (8f) of the statutes is created to read:

SB172-SSA1,2,9 71.07 (8f) State workforce housing credit. (a) Definitions. In this subsection:

SB172-SSA1,3,2 1. “Allocation certificate” means a statement issued by the authority certifying that a qualified housing development is eligible for a credit under this subsection and specifying the amount of the credit that the owners of the development may claim for each taxable year of the credit period.

SB172-SSA1,3,4 2. “Area median gross income” has the meaning as used for purposes of 26 USC 42.

SB172-SSA1,3,6 3. “Authority” means the Wisconsin Housing and Economic Development Authority.

SB172-SSA1,3,8 4. “Claimant” means a person who has an ownership interest in a qualified housing development and who files a claim under this subsection.

SB172-SSA1,3,10 5. “Compliance period” means the 10-year period beginning with the first taxable year of the credit period.

SB172-SSA1,3,15 6. “Credit period” means the 6-year period beginning with the taxable year in which a qualified housing development is placed in service. For purposes of this subdivision, if a qualified housing development consists of more than one building, the qualified housing development is placed in service in the taxable year in which the last building is placed in service.

SB172-SSA1,4,2 7. “Qualified basis” means the amount equal to the applicable fraction of the adjusted basis of the qualified housing development as of the close of the first taxable year of the credit period. The applicable fraction is the smaller of a fraction whose numerator is the number of qualified units in the qualified housing development and denominator is the total number of residential rental units in the qualified housing development or a fraction whose numerator is the total floor space of the qualified units in the qualified housing development and denominator is the total floor space of all the residential rental units in the qualified housing development. In calculating the applicable fraction, the number of qualified units and residential rental units and the amount of floor space shall be determined as of the close of the taxable year.

SB172-SSA1,4,7 8. “Qualified housing development” means a residential rental property development that is located in this state if at least 25 percent of the development's residential rental units are rent-restricted units and occupied by individuals whose tenant income is at least 61 percent but not more than 100 percent of area median gross income.

SB172-SSA1,4,10 9. “Qualified unit” means a rent-restricted unit that is occupied by individuals whose tenant income is at least 61 percent but not more than 100 percent of area median gross income.

SB172-SSA1,4,14 10. “Rent-restricted unit” means a residential rental unit if the gross rent with respect to the unit does not exceed 30 percent of area median gross income, determined as if the unit is occupied by one individual in a unit without a separate bedroom and 1.5 individuals for each separate bedroom in any other unit.

SB172-SSA1,4,16 11. “Tenant income” means the income determined under 26 USC 142 (d) (2) (B) of individuals occupying a residential rental unit.

SB172-SSA1,4,21 (b) Filing claims. Subject to the limitations provided in this subsection and in s. 234.46, for taxable years beginning after December 31, 2020, a claimant may claim as a credit against the taxes imposed under s. 71.02, up to the amount of the tax, the amount allocated to the claimant by the authority under s. 234.46 for each taxable year within the credit period.

SB172-SSA1,4,24 (c) Limitations. 1. No person may claim the credit under par. (b) unless the claimant includes with the claimant's return a copy of the allocation certificate issued for the qualified housing development.

SB172-SSA1,5,19 2. A partnership, limited liability company, or tax-option corporation may not claim the credit under this subsection. The partners of a partnership, members of a limited liability company, or shareholders in a tax-option corporation may claim the credit under this subsection based on eligible costs incurred by the partnership, limited liability company, or tax-option corporation. The partnership, limited liability company, or tax-option corporation shall calculate the amount of the credit that may be claimed by each partner, member, or shareholder and shall provide that information to each of them. Credits computed by a partnership or limited liability company may be claimed in proportion to the ownership interests of the partners or members or allocated to partners or members as provided in a written agreement among the partners or members that is entered into no later than the last day of the taxable year of the partnership or limited liability company for which the credit is claimed. Any partner or member who claims the credit as allocated by a written agreement shall provide a copy of the agreement with the tax return on which the credit is claimed. For shareholders of a tax-option corporation, the credit may be allocated in proportion to the ownership interest of each shareholder. A person claiming the credit as provided under this subdivision is solely responsible for any tax liability arising from a dispute with the department related to claiming the credit.

SB172-SSA1,5,22 3. No credit may be claimed under this subsection for the same costs for which a credit is claimed under sub. (8b), (9m), or (9r) or s. 71.28 (6) or (8b), 71.47 (6) or (8b), or 76.639.

SB172-SSA1,6,5 (d) Recapture. 1. As of the last day of any taxable year during the compliance period, if the qualified basis of a qualified housing development with respect to a claimant is less than the qualified basis as of the last day of the previous taxable year, the amount of the claimant's tax liability under this subchapter shall be increased by an amount equal to the excess of the aggregate credit claimed under this subsection in prior taxable years over the aggregate credit that would be claimed in those years if the full credit amount allocated to the claimant for the credit period was claimed ratably over 10 years.

SB172-SSA1,6,11 2. Subdivision 1. does not apply if the reduction in qualified basis for the taxable year is by reason of a casualty loss if the loss is restored by reconstruction or replacement within a reasonable period; a minimal change in floor space; or a disposition of an interest in the qualified housing development if it is reasonably expected that the development will continue to be operated as a qualified housing development for the remainder of the compliance period.

SB172-SSA1,6,14 3. In the event that the recapture of a credit is required in a taxable year, the taxpayer shall include the recaptured amount on the return submitted for the taxable year in which the recapture event is identified.

SB172-SSA1,6,16 (e) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

SB172-SSA1,3 Section 3 . 71.10 (4) (fd) of the statutes is created to read:

SB172-SSA1,6,18 71.10 (4) (fd) State workforce housing credit under s. 71.07 (8f).

SB172-SSA1,4 Section 4. 71.21 (4) (a) of the statutes is amended to read:

SB172-SSA1,6,23 71.21 (4) (a) The amount of the credits computed by a partnership under s. 71.07 (2dm), (2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n), (5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), (8f), and (10) and passed through to partners shall be added to the partnership's income.

SB172-SSA1,5 Section 5. 71.26 (2) (a) 4. of the statutes is amended to read:

SB172-SSA1,7,6 71.26 (2) (a) 4. Plus the amount of the credit computed under s. 71.28 (1dm), (1dx), (1dy), (3g), (3h), (3n), (3q), (3t), (3w), (3wm), (3y), (5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), (8f), (9s), and (10) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1k) (g).

SB172-SSA1,6 Section 6 . 71.28 (8f) of the statutes is created to read:

SB172-SSA1,7,8 71.28 (8f) State workforce housing credit. (a) Definitions. In this subsection:

SB172-SSA1,7,12 1. “Allocation certificate” means a statement issued by the authority certifying that a qualified housing development is eligible for a credit under this subsection and specifying the amount of the credit that the owners of the qualified housing development may claim for each taxable year of the credit period.

SB172-SSA1,7,14 2. “Area median gross income” has the meaning as used for purposes of 26 USC 42.

SB172-SSA1,7,16 3. “Authority” means the Wisconsin Housing and Economic Development Authority.

SB172-SSA1,7,18 4. “Claimant” means a person who has an ownership interest in a qualified housing development and who files a claim under this subsection.

SB172-SSA1,7,20 5. “Compliance period” means the 10-year period beginning with the first taxable year of the credit period.

SB172-SSA1,7,25 6. “Credit period” means the 6-year period beginning with the taxable year in which a qualified housing development is placed in service. For purposes of this subdivision, if a qualified housing development consists of more than one building, the qualified housing development is placed in service in the taxable year in which the last building is placed in service.

SB172-SSA1,8,11 7. “Qualified basis” means the amount equal to the applicable fraction of the adjusted basis of the qualified housing development as of the close of the first taxable year of the credit period. The applicable fraction is the smaller of a fraction whose numerator is the number of qualified units in the qualified housing development and denominator is the total number of residential rental units in the qualified housing development or a fraction whose numerator is the total floor space of the qualified units in the qualified housing development and denominator is the total floor space of all the residential rental units in the qualified housing development. In calculating the applicable fraction, the number of qualified units and residential rental units and the amount of floor space shall be determined as of the close of the taxable year.

SB172-SSA1,8,16 8. “Qualified housing development” means a residential rental property development located in this state if at least 25 percent of the development's residential rental units are rent-restricted units and occupied by individuals whose tenant income is at least 61 percent but not more than 100 percent of area median gross income.

SB172-SSA1,8,19 9. “Qualified unit” means a rent-restricted unit that is occupied by individuals whose tenant income is at least 61 percent but not more than 100 percent of area median gross income.

SB172-SSA1,8,23 10. “Rent-restricted unit” means a residential rental unit if the gross rent with respect to the unit does not exceed 30 percent of area median gross income, determined as if the unit is occupied by one individual in a unit without a separate bedroom and 1.5 individuals for each separate bedroom in any other unit.

SB172-SSA1,8,25 11. “Tenant income” means the income determined under 26 USC 142 (d) (2) (B) of individuals occupying a residential rental unit.

SB172-SSA1,9,5 (b) Filing claims. Subject to the limitations provided in this subsection and in s. 234.46, for taxable years beginning after December 31, 2020, a claimant may claim as a credit against the taxes imposed under s. 71.23, up to the amount of the tax, the amount allocated to the claimant by the authority under s. 234.46 for each taxable year within the credit period.

SB172-SSA1,9,8 (c) Limitations. 1. No person may claim the credit under par. (b) unless the claimant includes with the claimant's return a copy of the allocation certificate issued for the qualified housing development.

SB172-SSA1,9,25 2. A partnership, limited liability company, or tax-option corporation may not claim the credit under this subsection. The partners of a partnership, members of a limited liability company, or shareholders in a tax-option corporation may claim the credit under this subsection based on eligible costs incurred by the partnership, limited liability company, or tax-option corporation. The partnership, limited liability company, or tax-option corporation shall calculate the amount of the credit that may be claimed by each partner, member, or shareholder and shall provide that information to each of them. Credits computed by a partnership or limited liability company may be claimed in proportion to the ownership interests of the partners or members or allocated to partners or members as provided in a written agreement among the partners or members that is entered into no later than the last day of the taxable year of the partnership or limited liability company for which the credit is claimed. Any partner or member who claims the credit as allocated by a written agreement shall provide a copy of the agreement with the tax return on which the credit is claimed. For shareholders of a tax-option corporation, the credit may be allocated in proportion to the ownership interest of each shareholder. A person claiming the credit as provided under this subdivision is solely responsible for any tax liability arising from a dispute with the department related to claiming the credit.

SB172-SSA1,10,5 3. No credit may be claimed under this subsection for the same costs for which a credit is claimed under sub. (6) or (8b) or s. 71.07 (8b), (9m), or (9r), 71.47 (6) or (8b), or 76.639.

SB172-SSA1,10,13 (d) Recapture. 1. As of the last day of any taxable year during the compliance period, if the qualified basis of a qualified housing development with respect to a claimant is less than the qualified basis as of the last day of the previous taxable year, the amount of the claimant's tax liability under this subchapter shall be increased by an amount equal to the excess of the aggregate credit claimed under this subsection in prior taxable years over the aggregate credit that would be claimed in those years if the full credit amount allocated to the claimant for the credit period was claimed ratably over 10 years.

SB172-SSA1,10,19 2. Subdivision 1. does not apply if the reduction in qualified basis for the taxable year is by reason of a casualty loss if the loss is restored by reconstruction or replacement within a reasonable period; a minimal change in floor space; or the disposition of an interest in the qualified housing development if it is reasonably expected that the development will continue to be operated as a qualified housing development for the remainder of the compliance period.

SB172-SSA1,10,22 3. In the event that the recapture of a credit is required in a taxable year, the taxpayer shall include the recaptured amount on the return submitted for the taxable year in which the recapture event is identified.

SB172-SSA1,10,24 (e) Administration. Subsection (4) (e) to (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

SB172-SSA1,7 Section 7 . 71.30 (3) (cu) of the statutes is created to read:

SB172-SSA1,11,1 71.30 (3) (cu) State workforce housing credit under s. 71.28 (8f).

SB172-SSA1,8 Section 8. 71.34 (1k) (g) of the statutes is amended to read: