Net operating loss carryback
The bill repeals the provision under which an individual may carry back a net
operating loss to the two prior taxable years in order to reduce the amount of income
subject to tax in those years.
Pass-through entities and refundable tax credits
Current law allows businesses operating in this state to claim a number of
income and franchise tax credits to promote job creation and economic development.
The following credits allow a business to receive a refund if the amount of the credit
exceeds its tax liability: the jobs tax credit, the business development credit, the
enterprise zones jobs credit, the electronics and information technology
manufacturing zone credit, and the research credit. Partnerships, limited liability
companies, and tax-option corporations may not claim these credits, but, instead,
the partners, members, and shareholders of the respective entities may claim the
credits in proportion to their ownership interests in the entity. Generally, the entities
determine the aggregate amount of the credits that the partners, members, or
shareholders may claim.
The bill allows partnerships, limited liability companies, and tax-option
corporations to claim the refundable tax credits, not including the electronics and
information technology manufacturing zone credit and the research credit.
Research credit refunds
Current law allows a person to claim an income and franchise tax credit equal
to a percentage of the person's qualified research expenses that exceed 50 percent of
the average qualified research expenses for the three taxable years immediately
preceding the taxable year for which the person claims the credit. For example, a
person may claim a credit equal to 11.5 percent of the person's excess qualified
research expenses related to research related to the design and manufacturing of
energy efficient lighting systems, building automation and control systems, or
automotive batteries for use in hybrid-electric vehicles.
If the amount of the credit exceeds the person's tax liability, the person will
receive a refund in an amount not exceeding 10 percent of the allowable claim. The
taxpayer may apply any remaining unused portion of the credit to subsequent
taxable years. Under the bill, if the amount of the credit exceeds the person's tax
liability, the person will receive a refund in an amount not exceeding 20 percent of
the allowable claim and may continue to claim the remaining unused portion in
subsequent taxable years.
Federal changes to college savings accounts
The bill adopts for state income tax purposes current and future provisions of
the federal Internal Revenue Code related to qualified tuition programs, including
the provision that requires a taxpayer to reduce the amount that he or she claims as
interest on education loans by the amount of distributions from a qualified tuition
program treated as qualified higher education expenses under federal law. In
addition, current state law requires a taxpayer to add back to his or her federal
adjusted gross income any amount distributed from a qualified tuition program that
was not used for qualified higher education expenses, if the amount was contributed
to the qualified tuition program account after December 31, 2013, and the taxpayer
also claimed that amount as a subtraction. Under the bill, the taxpayer must make
that addition regardless of when the amount was contributed to the account.
Broker-dealer apportionment factor
Under current law, multistate businesses must apportion their income to
Wisconsin and the other state or states for income and franchise tax purposes.
Current law requires that DOR promulgate rules for apportioning the income of
specialized industries. A DOR rule provides that broker-dealers, investment
advisers, investment companies, and underwriters apportion income using a single
receipts factor. The rule also provides that, under certain circumstances, the factor's
numerator includes the modified gross receipts from the sales of trading assets,
unless DOR orders or allows modified net gains to be used instead. The bill amends
the DOR rule to provide that the factor's numerator includes the modified net gains
from the sales of trading assets, rather than modified gross receipts.
Internal Revenue Code references
The bill adopts, for state income and franchise tax purposes, certain changes
made to the Internal Revenue Code by the federal Tax Cuts and Jobs Act, enacted
in December 2017. The bill adopts provisions of the act related to amortization of
research and experimental expenditures, certain special rules for the taxable year
of inclusion, and limitations on excessive employee renumeration, the
business-related deduction for interest, the deduction by employers of expenses for
fringe benefits, the deduction for Federal Deposit Insurance Corporation premiums,
and losses for taxpayers other than for corporations,.
Property taxation
Assessments; leased property and comparable sales
The bill provides that, for property tax purposes, real property includes any
leases, rights, and privileges pertaining to the property, including assets that cannot
be taxed separately as real property, but are inextricably intertwined with the real
property. The bill also requires real property to be assessed at its highest and best
use. Current law requires that real property be assessed at its full value and upon
actual view or from the best information that the assessor can obtain from
“arm's-length sales" of comparable property. The bill defines an “arm's-length sale"
as a sale between a willing buyer and willing seller, neither being under compulsion
to buy or sell and each being familiar with the attributes of the property sold.
The bill also provides that an assessor may determine the value of leased
property by considering the lease provisions and actual rent pertaining to the
property, if the lease provisions and rent are the result of an “arm's-length
transaction.” The bill defines an “arm's-length transaction” as an agreement
between willing parties, neither being under compulsion to act and each being
familiar with the attributes of the property.
The Wisconsin Supreme Court decided in 2008 that a property tax assessment
of leased retail property using the income approach must be based on “market rents,"
which is what a person would pay to rent the property, based on rentals of similar
property, as opposed to “contract rents," which is the amount that the lessee actually
paid to rent the property. See, Walgreen Company v. City of Madison, 2008 WI 80,
752 N.W.2d 689. The bill changes Wisconsin law to specify that an assessment using
the income approach must be based instead on contract rents.
The bill also provides that to determine the value of property using generally
accepted appraisal methods, an assessor must consider all of the following as
comparable to the property being assessed:
1. Sales or rentals of properties exhibiting the same or a similar highest and
best use with placement in the same real estate market segment.
2. Sales or rentals of properties that are similar to the property being assessed
with regard to age, condition, use, type of construction, location, design, physical
features, and economic characteristics.
The bill defines “real estate market segment” to mean a pool of potential buyers
and sellers that typically buy or sell properties similar to the property being
assessed, including potential buyers who are investors or owner-occupants.
The bill also provides that a property is not comparable to the property being
assessed if the seller has placed restrictions on the highest and best use of the
property or if the property is dark property and the property being assessed is not
dark property. The bill defines “dark property” as property that is vacant or
unoccupied beyond the normal period for property in the same real estate market
segment.
Manufacturing property assessment fees
Under current law, DOR assesses manufacturing property for property tax
purposes and imposes a fee on each municipality in which the property is located to
cover part of the assessment costs. DOR bills the municipalities for the fee. If a
municipality does not pay by March 31 of the following year, DOR reduces the
municipality's July shared revenue distribution by the amount of the fee.
The bill directs DOR to first collect the fees by reducing municipalities' July and
November shared revenue distributions. If DOR is unable to collect the fee from a
municipality in this manner, then the fee is directly imposed on the municipality.
Community health centers
The bill creates a property tax exemption for the property of a community
health center that receives federal grants to provide health services to vulnerable
populations, is a nonprofit organization exempt from federal income taxes, and
annually treats at least 30,000 patients. With regard to land owned by the
community health center, the exemption is limited to 25 acres necessary for the
location and convenience of buildings while such property is not used for profit.
Current law provides similar property tax exemptions for property owned by
churches or religious, educational, or benevolent associations. Under current law,
land owned by churches or religious associations that is necessary for the location
and convenience of buildings and used for educational purposes and not for profit is
subject to a 30-acre limitation.
Sales of certain lands to American Indian tribes
Current law provides that before a county may sell tax delinquent real estate
in its possession it must provide public notice of the sale and the property's appraised
value. In addition, although the county may accept any bid on the property that is
advantageous to it, the county may not accept at the first attempt to sell the property
a bid that is less than the property's appraised value. After that first attempt, the
property may be sold at less than its appraised value if the sale is reviewed and
approved by the county board or by a committee designated by the board. Also, the
county may not sell the property for less than the highest bid unless the county board
prepares a written statement for public inspection that explains its reasons for
accepting a lower bid. Under current law, these provisions do not apply to the sale
or exchange of lands to or between municipalities or to the state. Under the bill, the
provision for the sale of tax delinquent real estate also does not apply to the sale or
exchange of lands to or between federally recognized American Indian tribes or
bands.
School aid reduction information
The bill requires that a person's property tax bill include information from the
school district in which the property is located regarding the amount of any gross
reduction in state aid to the district as a result of pupils enrolled in the statewide
choice program, the Racine choice program, or the Milwaukee choice program or as
a result of making payments to private schools under the special needs scholarship
program.
General taxation
County and municipality sales and use taxes
Current law allows a county to enact an ordinance to impose sales and use taxes
at the rate of 0.5 percent of the sales price or purchase price on tangible personal
property and taxable services. The county must use the revenue from the taxes for
property tax relief. The bill allows a county to impose, by ordinance, an additional
sales and use tax at the rate of 0.5 percent of the sales price or purchase price on
tangible personal property and taxable services. However, the ordinance does not
take effect unless approved by the majority of the voters of the county at a
referendum. The revenue from those taxes may be used for any purpose designated
by the county board or specified in the ordinance or in the referendum approving the
ordinance.
The bill also allows a municipality with a 2020 population exceeding 30,000 to
enact an ordinance to impose sales and use taxes at the rate of 0.5 percent of the sales
price or purchase price on tangible personal property and taxable services. The
ordinance does not take effect unless approved by the majority of the voters of the
municipality at a referendum. The revenue from those taxes may be used for any
purpose designated by the governing body of the municipality or specified in the
ordinance or in the referendum approving the ordinance.
Sales tax exemption for energy systems
Current law provides a sales and use tax exemption for a product that has as
its power source wind energy, direct radiant energy received from the sun, or gas
generated from anaerobic digestion of animal manure and other agricultural waste,
if the product produces at least 200 watts of alternating current or 600 British
thermal units per day. The sale of electricity or energy produced by the product is
also exempt.
The bill modifies current law so that the exemption applies to solar power
systems and wind energy systems that produce electrical or heat energy directly
from the sun or wind and are capable of continuously producing at least 200 watts
of alternating current or 600 British thermal units. In addition, the exemption
applies to a waste energy system that produces electrical or heat energy directly from
gas generated from anaerobic digestion of animal manure and other agricultural
waste and are capable of continuously producing at least 200 watts of alternating
current or 600 British thermal units. A system for which the exemption applies
includes tangible personal property sold with the system that is used primarily to
store or facilitate the storage of the electrical or heat energy produced by the system.
Vapor products
Current law imposes a tax on vapor products, which are any noncombustible
products that produce vapor or aerosol for inhalation from the application of a
heating element to a liquid or other substance that is depleted as the product is used,
regardless of whether the liquid or other substance contains nicotine. The tax is
imposed at the rate of 5 cents per milliliter of the liquid or other substance based on
the volume as listed by the manufacturer.
The bill taxes vapor products at the rate of 71 percent of the manufacturer's list
price and modifies the definition of “vapor product.” Under the bill, “vapor product”
means a noncombustible product that employs a heating element, power source,
electronic circuit, or other electronic, chemical, or mechanical means that can be used
to produce vapor from a solution or other substance, regardless of whether the
product contains nicotine. A “vapor product” is defined to include an electronic
cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or
device, as well as any container of a solution or other substance that is intended to
be used with these items. The bill specifies that any product regulated by the federal
Food and Drug Administration as a drug or device is not a vapor product.
Little cigars
The bill taxes little cigars at the same rate as the excise tax imposed on
cigarettes. Under current law, all cigars are taxed at the rate of 71 percent of the
manufacturer's established list price, limited to 50 cents per cigar. Under the bill,
little cigars are taxed at the rate of 126 mills per little cigar, regardless of weight.
The bill defines “little cigar” to mean a cigar that has an integrated cellulose acetate
filter and is wrapped in any substance containing tobacco.
Definition of “manufacturer's list price”
Current law imposes a tax on tobacco products based on the “manufacturer's
established list price,” without defining the term. The bill removes the word
“established” and defines “manufacturer's list price” to mean the total price of
tobacco products charged by the manufacturer or other seller to an unrelated
distributor. The bill specifies that the total price must include all charges by the
manufacturer or other seller that are necessary to complete the sale, without
reduction for any cost or expense incurred by the manufacturer or other seller or for
the value or cost of discounts or free promotional or sample products. The bill
provides that a manufacturer or other seller is related to a distributor if they have
significant common purposes and either substantial common membership or
substantial common direction or control.
Sales tax exemption for diapers
The bill creates a sales and use tax exemption for the sale of diapers, not
including adult undergarments for incontinence.
Prairie and wetland counseling services
Under current law, the sale of landscaping and lawn maintenance services is
subject to the sales tax. The bill excludes from taxable landscaping services the
planning and counseling services for the restoration, reclamation, or revitalization
of prairie, savanna, or wetlands if such services are provided for a separate and
optional fee distinct from other services.
Repeal of sales tax exemption for farm-raised deer
The bill repeals the sales and use tax exemption that applies to the sale of
farm-raised deer to a person operating a hunting preserve or game farm in this state.
Repeal of sales tax exemption for game birds and clay pigeons
The bill repeals the sales and use tax exemption that applies to the sale of live
game birds and clay pigeons to qualifying bird hunting preserves and shooting
facilities.
Sales and use tax on candy
Current law imposes the sales and use tax on the sale of candy. For purposes
of the sales and use tax, “candy” is defined, generally, as a preparation of sugar, honey
or other sweetener combined with chocolate, fruit, nuts or other ingredients or
flavorings. “Candy” does not include a preparation that contains flour or that
requires refrigeration. Under the bill, for purposes of the sales and use tax, “candy”
also does not include a preparation that has as its predominant ingredient dried or
partially dried fruit, not including a preparation that has a confectionary coating or
glazing on the dried or partially dried fruit.
Providing notices for public utility taxes
Under current law, public utility companies, including railroads and air
carriers, are exempt from local property taxes and are instead subject to special state
taxes. Current law requires DOR to send certain notices regarding these taxes by
certified mail. Under the bill, DOR must still provide the notices but is no longer
required to send them by certified mail.
shared revenue
Increase in county and municipal aid
The bill increases the amount that each county and municipality annually
receives as a county and municipal aid payment. Currently, a county or municipality
receives a payment equal to the payment it received in 2012. The bill increases that
amount by 2 percent in 2021 and an additional 2 percent beginning in 2022.
Expenditure restraint program
Under current law, generally, a municipality is eligible to receive an
expenditure restraint payment if its property tax levy is greater than five mills and
if the annual increase in its municipal budget is less than the sum of factors based
on inflation and the increased value of property in the municipality as a result of new
construction. Current law excludes certain payments and expenditures from the
municipal budget for purposes of determining eligibility for an expenditure restraint
payment. For example, principal and interest on long-term debt, recycling fee
payments, and unreimbursed expenses related to a declared state of emergency are
excluded from the determination.
The bill excludes from the expenditure restraint program payment
determination additional revenues resulting from a referendum to increase the
municipality's property tax levy limit or the tax rate of the premier resort area tax.
Video service provider fee
Under current law, the state provides an aid payment to municipalities to
compensate the municipalities for a state-mandated reduction in the amount of
video service provider franchise fees that a municipality may impose and collect. The
aid amount is a percentage of the gross receipts reported to the municipality by the
video service provider. In 2020, the amount that a municipality received was equal
to 0.5 percent of the video service provider's gross receipts. In 2021, the municipality
will receive an amount equal to 1 percent of the gross receipts. Annually, beginning
in 2022, the municipality will receive an amount equal to the amount it received in
2021.
The bill changes the appropriation for the aid payment from an annual
appropriation to a sum sufficient appropriation.
transportation
Drivers and motor vehicles
Driver's cards
Under
2007 Wisconsin Act 20, certain provisions specified in the federal REAL
ID Act of 2005 (REAL ID) were incorporated into state law and these provisions
became effective on January 1, 2013. Among these provisions was the requirement
that DOT follow certain procedures in processing applications for driver's licenses
and identification cards. However, under
2011 Wisconsin Acts 23 and
32, DOT may
process applications for driver's licenses and identification cards in a manner other
than that required by REAL ID if the driver's licenses and identification cards are
marked to indicate that they are not REAL ID compliant and DOT processes the
applications in compliance with DOT practices and procedures applicable
immediately prior to implementation of REAL ID.
Under current law, an applicant for a driver's license or identification card,
regardless of whether it is REAL ID compliant or REAL ID noncompliant, must
provide to DOT 1) an identification document that includes either the applicant's
photograph or both the applicant's full legal name and date of birth; 2)
documentation, which may be the same as item 1, above, showing the applicant's
date of birth; 3) proof of the applicant's social security number or verification that the
applicant is not eligible for a social security number; 4) documentation showing the
applicant's name and address of principal residence; and 5) documentary proof that
the applicant is a U.S. citizen or is otherwise lawfully present in the United States.
However, in processing an application for a REAL ID noncompliant driver's license
or identification card, DOT is not required to meet the standards for document
retention and verification that are imposed for REAL ID compliant products.
Under the bill, an applicant for a REAL ID noncompliant driver's license or
identification card (noncompliant REAL ID) is not required to provide documentary
proof that the applicant is a U.S. citizen or is otherwise lawfully present in the United
States. Also, an applicant may, in lieu of item 1, above, provide an individual
taxpayer identification number, a foreign passport, or any other documentation
deemed acceptable to the department and, in lieu of items 2 and 4, above, provide
documentation deemed acceptable to the department. If the applicant does not have
a social security number, the applicant is required to provide verification only that
he or she does not have one, rather than verification that he or she is not eligible for
one. In processing an application for, and issuing or renewing, a noncompliant REAL
ID, DOT may not include any question or require any proof or documentation as to
whether the applicant is a U.S. citizen or is otherwise lawfully present in the United
States. The bill does not change any current law requirements related to driver
qualifications such as minimum age or successful completion of knowledge and
driving skills tests.
Under current law, most driver's licenses issued by DOT are issued for an initial
two-year period and must be renewed every eight years thereafter. In general, an
applicant for renewal of a driver's license must pass an eyesight test and have his
or her photograph taken with each renewal. Most identification cards issued by DOT
are issued for an initial period of eight years and are renewable for eight-year
periods thereafter, and applicants, generally, must have their photograph taken with
each renewal.
Under the bill, an applicant for a noncompliant REAL ID who does not provide
a social security number is issued a noncompliant REAL ID that displays, on its face,
the words “Not valid for voting purposes. Not evidence of citizenship or immigration
status." and that has a four-year renewal period rather than an eight-year renewal
period. With each renewal, DOT has discretion whether or not to take a new
photograph and, for a driver's license, give an eyesight test. However, DOT must
take a new photograph and, for a driver's license, give an eyesight test at least once
every eight years.
With limited exceptions, DOT may not disclose social security numbers
obtained from operator's license or identification card applicants. The bill prohibits
DOT from disclosing the fact that an applicant has verified to DOT that the applicant
does not have a social security number, except that DOT may disclose this
information to the Elections Commission.
The bill also prohibits discrimination on the basis of a person's status as a
holder or a nonholder of a noncompliant REAL ID, adding this license status as a
prohibited basis for discrimination in employment, housing, and the equal
enjoyment of a public place of accommodation or amusement.
Electronic renewal of operator's licenses
Under current law, most operator's licenses issued by DOT must be renewed
every eight years. In general, an applicant for renewal of an operator's license must
pass an eyesight test and have his or her photograph taken.
Under the bill, if an applicant for renewal of an operator's license, other than
a commercial driver license, meets certain requirements, the applicant may apply for
renewal, and DOT may renew the license, by electronic means. The renewal may
occur without an eyesight test and without a photograph. Licenses issued under this
procedure will be marked as REAL-ID noncompliant licenses that are not intended
to be accepted by federal agencies for federal identification or other official purposes.
Among the eligibility requirements for use of the electronic procedure are 1) that the
applicant's most recent previous license transaction was not made by electronic
means; 2) that the applicant's license is not subject to restrictions based on medical
conditions, other than a requirement that the applicant use corrective lenses; 3) that
the applicant is not more than 65 years of age; and 4) that the applicant meets any
additional criteria for eligibility established by DOT.
Driving skills test waiver
Under current law, with limited exceptions, an applicant for an operator's
license authorizing operation of “Class D" vehicles, which are automobiles and most
passenger vehicles, must successfully complete a knowledge test and a driving skills
(road) test. The bill allows DOT to waive the road test for a person if all of the
following are satisfied:
1. The person is under 18 years of age.
2. The person is applying for authorization to operate only “Class D" vehicles.
3. The person has satisfactorily completed a course in driver education.
4. The person has held an instruction permit for not less than six months.
5. The person has not committed a moving violation during the six-month
period immediately preceding application.
6. An adult sponsor of the person consents to a waiver of the driving skills test.
