SB1063: Bill Text

SB1063,,1 2023 SENATE BILL 1063

February 21, 2024 - Introduced by Senators Smith, Larson and Spreitzer, cosponsored by Representatives Shankland, Conley, Considine, Joers, Moore Omokunde, Ohnstad, Ratcliff, Sinicki, Stubbs and Subeck. Referred to Committee on Financial Institutions and Sporting Heritage.

SB1063,,2 An Act 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 (5p), 71.10 (4) (ct), 71.28 (5p), 71.30 (3) (dr), 71.47 (5p), 71.49 (1) (dr) and 76.634 of the statutes; relating to: a tax credit for investments in a community development financial institution.

SB1063,,3 Analysis by the Legislative Reference Bureau

Under this bill, a person who makes a qualified investment in a registered community development financial institution (CDFI) may receive a credit against state income and franchise taxes for taxable years beginning after December 31, 2022, and before January 1, 2025, and against license fees paid by insurers for that same period. The bill defines a CDFI as an entity that is organized under the laws of this state, uses qualified investments for projects that are based in this state, and has been certified by the Community Development Financial Institutions Fund established under federal law as meeting certain eligibility requirements. The bill defines a “qualified investment” as a loan or deposit that has a value of at least $10,000, pays no interest to the person making the loan or deposit, and is made for a minimum of 60 months. The CDFI retains complete control of the loan or deposit for the duration of the investment period.

A person may claim 10 percent of the person’s qualified investment, if the investment is at least $10,000 but not more than $150,000, or 12 percent of the person’s qualified investment, if the investment is more than $150,000 but not more than $500,000. If the person withdraws the qualified investment from the CDFI before the end of the investment period and does not reinvest the qualified investment in another CDFI, the person must repay a portion of the credit amounts that the person received by adding the portion to the person’s tax or fee liability in a subsequent year. However, the portion that the person must repay depends on when the person withdraws the investment during the investment period. The portion that the person must repay decreases the longer the person holds the investment during the investment period.

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

SB1063,,4 The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB1063,1 Section 1. 71.05 (6) (a) 15. of the statutes is amended to read:

SB1063,,6 71.05 (6) (a) 15. 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), (5p), (5r), (5rm), (6n), 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).

SB1063,2 Section 2. 71.07 (5p) of the statutes is created to read:

SB1063,,8 71.07 (5p) Steve Hilgenberg community development credit. (a) Definitions. In this subsection:

SB1063,,9 1. “Claimant” means a person who files a claim under this subsection.

SB1063,,10 2. “Community development financial institution” means an entity that satisfies all of the following:

SB1063,,11 a. The entity is certified by the fund under 12 CFR 1805.201 as meeting the eligibility requirements for a community development financial institution under 12 CFR 1805.200 and 1805.201 (b).

SB1063,,12 b. The entity is organized under the laws of this state.

SB1063,,13 c. The entity uses qualified investments for projects that are based in this state.

SB1063,,14 3. “Fund” means the Community Development Financial Institutions Fund established under 12 USC 4703 (a).

SB1063,,15 4. “Qualified investment” means a deposit or loan that satisfies all of the following:

SB1063,,16 a. The deposit or loan pays no interest to the person who made the deposit or loan.

SB1063,,17 b. The deposit or loan has a value of at least $10,000.

SB1063,,18 c. The deposit or loan is made for a period of at least 60 months.

SB1063,,19 d. The community development financial institution that receives the deposit or loan has complete control over the entire deposit or loan amount, including any interest earned on the deposit or loan, for the duration of the investment period, but the deposit or loan may be subject to any additional terms and conditions of the investment agreement between the community development financial institution and the investor that are not inconsistent with the requirements of this subsection.

SB1063,,20 (b) Filing claims. For taxable years beginning after December 31, 2022, and before January 1, 2025, a claimant may claim as a credit against the tax imposed under s. 71.02, up to the amount of the tax, for the taxable year in which the investment is made, an amount equal to 10 percent of the claimant’s qualified investment in a community development financial institution, if the investment is at least $10,000 but not more than $150,000, or 12 percent of the claimant’s qualified investment in a community development financial institution, if the investment is more than $150,000 but not more than $500,000.

SB1063,,21 (c) Limitations. 1. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their investment of amounts under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

SB1063,,22 2. A person who makes an investment in a community development financial institution in a taxable year, withdraws the investment in that taxable year, and immediately reinvests the proceeds into another community development financial institution may claim only one credit under this subsection for that taxable year, based on the lesser of all such investments in that taxable year. Investments in a community development financial institution made before the effective date of this subdivision .... [LRB inserts date], may not be withdrawn prior to the end of their contractual term and reinvested in a community development financial institution in order to claim a credit under this subsection.

SB1063,,23 3. A claimant who withdraws a qualified investment from a community development financial institution prior to the first day of the 61st month after the qualified investment was made and who does not, within 60 days, reinvest the proceeds of the qualified investment as a qualified investment in another community development financial institution shall, in the taxable year in which the investment is withdrawn, add to the claimant’s liability for taxes imposed under s. 71.02 one of the following percentages of the amount of the credits received under this subsection:

SB1063,,24 a. If the withdrawal occurs within one year after the date on which the claimant made the qualified investment, 100 percent.

SB1063,,25 b. If the withdrawal occurs within 2 years after the date on which the claimant made the qualified investment, 75 percent.

SB1063,,26 c. If the withdrawal occurs within 3 years after the date on which the claimant made the qualified investment, 50 percent.

SB1063,,27 d. If the withdrawal occurs within 4 years after the date on which the claimant made the qualified investment, 25 percent.

SB1063,,28 e. If the withdrawal occurs within 5 years after the date on which the claimant made the qualified investment, 10 percent.

SB1063,,29 (d) 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.

SB1063,3 Section 3. 71.10 (4) (ct) of the statutes is created to read:

SB1063,,31 71.10 (4) (ct) Steve Hilgenberg community development credit under s. 71.07 (5p).

SB1063,4 Section 4. 71.21 (4) (a) of the statutes is amended to read:

SB1063,,33 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), (5p), (5r), (5rm), (6n), and (10) and passed through to partners shall be added to the partnership’s income.

SB1063,5 Section 5. 71.26 (2) (a) 4. of the statutes is amended to read:

SB1063,,35 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), (5p), (5r), (5rm), (6n), 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).

SB1063,6 Section 6. 71.28 (5p) of the statutes is created to read:

SB1063,,37 71.28 (5p) Steve Hilgenberg community development credit. (a) Definitions. In this subsection:

SB1063,,38 1. “Claimant” means a person who files a claim under this subsection.

SB1063,,39 2. “Community development financial institution” means an entity that satisfies all of the following:

SB1063,,40 a. The entity is certified by the fund under 12 CFR 1805.201 as meeting the eligibility requirements for a community development financial institution under 12 CFR 1805.200 and 1805.201 (b).

SB1063,,41 b. The entity is organized under the laws of this state.

SB1063,,42 c. The entity uses qualified investments for projects that are based in this state.

SB1063,,43 3. “Fund” means the Community Development Financial Institutions Fund established under 12 USC 4703 (a).

SB1063,,44 4. “Qualified investment” means a deposit or loan that satisfies all of the following:

SB1063,,45 a. The deposit or loan pays no interest to the person who made the deposit or loan.

SB1063,,46 b. The deposit or loan has a value of at least $10,000.

SB1063,,47 c. The deposit or loan is made for a period of at least 60 months.

SB1063,,48 d. The community development financial institution that receives the deposit or loan has complete control over the entire deposit or loan amount, including any interest earned on the deposit or loan, for the duration of the investment period, but the deposit or loan may be subject to any additional terms and conditions of the investment agreement between the community development financial institution and the investor that are not inconsistent with the requirements of this subsection.

SB1063,,49 (b) Filing claims. For taxable years beginning after December 31, 2022, and before January 1, 2025, a claimant may claim as a credit against the tax imposed under s. 71.23, up to the amount of the tax, for the taxable year in which the investment is made, an amount equal to 10 percent of the claimant’s qualified investment in a community development financial institution, if the investment is at least $10,000 but not more than $150,000, or 12 percent of the claimant’s qualified investment in a community development financial institution, if the investment is more than $150,000 but not more than $500,000.

SB1063,,50 (c) Limitations. 1. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their investment of amounts under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

SB1063,,51 2. A person who makes an investment in a community development financial institution in a taxable year, withdraws the investment in that taxable year, and immediately reinvests the proceeds into another community development financial institution may claim only one credit under this subsection for that taxable year, based on the lesser of all such investments in that taxable year. Investments in a community development financial institution made before the effective date of this subdivision .... [LRB inserts date], may not be withdrawn prior to the end of their contractual term and reinvested in a community development financial institution in order to claim a credit under this subsection.

SB1063,,52 3. A claimant who withdraws a qualified investment from a community development financial institution prior to the first day of the 61st month after the qualified investment was made and who does not, within 60 days, reinvest the proceeds of the qualified investment as a qualified investment in another community development financial institution shall, in the taxable year in which the investment is withdrawn, add to the claimant’s liability for taxes imposed under s. 71.23 one of the following percentages of the amount of the credits received under this subsection:

SB1063,,53 a. If the withdrawal occurs within one year after the date on which the claimant made the qualified investment, 100 percent.

SB1063,,54 b. If the withdrawal occurs within 2 years after the date on which the claimant made the qualified investment, 75 percent.

SB1063,,55 c. If the withdrawal occurs within 3 years after the date on which the claimant made the qualified investment, 50 percent.

SB1063,,56 d. If the withdrawal occurs within 4 years after the date on which the claimant made the qualified investment, 25 percent.

SB1063,,57 e. If the withdrawal occurs within 5 years after the date on which the claimant made the qualified investment, 10 percent.

SB1063,,58 (d) Administration. Subsection (4) (e) to (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

SB1063,7 Section 7. 71.30 (3) (dr) of the statutes is created to read:

SB1063,,60 71.30 (3) (dr) Steve Hilgenberg community development credit under s. 71.28 (5p).

SB1063,8 Section 8. 71.34 (1k) (g) of the statutes is amended to read:

SB1063,,62 71.34 (1k) (g) An addition shall be made for credits computed by a tax-option corporation under s. 71.28 (1dm), (1dx), (1dy), (3), (3g), (3h), (3n), (3q), (3t), (3w), (3wm), (3y), (4), (5), (5e), (5g), (5i), (5j), (5k), (5p), (5r), (5rm), (6n), and (10) and passed through to shareholders.

SB1063,9 Section 9. 71.45 (2) (a) 10. of the statutes is amended to read:

SB1063,,64 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit computed under s. 71.47 (1dm) to (1dy), (3g), (3h), (3n), (3q), (3w), (3y), (5e), (5g), (5i), (5j), (5k), (5p), (5r), (5rm), (6n), 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) and the amount of credit computed under s. 71.47 (3), (3t), (4), (4m), and (5).

SB1063,10 Section 10. 71.47 (5p) of the statutes is created to read:

SB1063,,66 71.47 (5p) Steve Hilgenberg community development credit. (a) Definitions. In this subsection:

SB1063,,67 1. “Claimant” means a person who files a claim under this subsection.

SB1063,,68 2. “Community development financial institution” means an entity that satisfies all of the following:

SB1063,,69 a. The entity is certified by the fund under 12 CFR 1805.201 as meeting the eligibility requirements for a community development financial institution under 12 CFR 1805.200 and 1805.201 (b).

SB1063,,70 b. The entity is organized under the laws of this state.

SB1063,,71 c. The entity uses qualified investments for projects that are based in this state.

SB1063,,72 3. “Fund” means the Community Development Financial Institutions Fund established under 12 USC 4703 (a).

SB1063,,73 4. “Qualified investment” means a deposit or loan that satisfies all of the following:

SB1063,,74 a. The deposit or loan pays no interest to the person who made the deposit or loan.

SB1063,,75 b. The deposit or loan has a value of at least $10,000.

SB1063,,76 c. The deposit or loan is made for a period of at least 60 months.

SB1063,,77 d. The community development financial institution that receives the deposit or loan has complete control over the entire deposit or loan amount, including any interest earned on the deposit or loan, for the duration of the investment period, but the deposit or loan may be subject to any additional terms and conditions of the investment agreement between the community development financial institution and the investor that are not inconsistent with the requirements of this subsection.

SB1063,,78 (b) Filing claims. For taxable years beginning after December 31, 2022, and before January 1, 2025, a claimant may claim as a credit against the tax imposed under s. 71.43, up to the amount of the tax, for the taxable year in which the investment is made, an amount equal to 10 percent of the claimant’s qualified investment in a community development financial institution, if the investment is at least $10,000 but not more than $150,000, or 12 percent of the claimant’s qualified investment in a community development financial institution, if the investment is more than $150,000 but not more than $500,000.

SB1063,,79 (c) Limitations. 1. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their investment of amounts under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

SB1063,,80 2. A person who makes an investment in a community development financial institution in a taxable year, withdraws the investment in that taxable year, and immediately reinvests the proceeds into another community development financial institution may claim only one credit under this subsection for that taxable year, based on the lesser of all such investments in that taxable year. Investments in a community development financial institution made before the effective date of this subdivision .... [LRB inserts date], may not be withdrawn prior to the end of their contractual term and reinvested in a community development financial institution in order to claim a credit under this subsection.

SB1063,,81 3. A claimant who withdraws a qualified investment from a community development financial institution prior to the first day of the 61st month after the qualified investment was made and who does not, within 60 days, reinvest the proceeds of the qualified investment as a qualified investment in another community development financial institution shall, in the taxable year in which the investment is withdrawn, add to the claimant’s liability for taxes imposed under s. 71.43 one of the following percentages of the amount of the credits received under this subsection: