3. Supervise all expenditures of LHRO.
4. Manage reviews and investigations of the formal complaint process. Upon completion of an investigation, report the findings to the appropriate legislative leader or employee supervisor.
5. On a periodic basis, recommend to JCLO improvements to human resources services and programs.
Records and correspondence of legislators
Under current law, the Public Records Board prescribes policies and standards for the retention and disposition of public records made or received by a state officer or agency. However, for purposes of public records retention, the definition of “public records” does not include the records and correspondence of any legislator. The bill eliminates the exception for a legislator’s records and correspondence.
Passive review by JCF; objections to be public
Current law requires that JCF review certain proposed actions before an agency may execute the action. The review required often takes the form of a passive review. In other words, the agency must submit the proposed action to JCF and, if the cochairpersons of JCF do not notify the agency within a certain period, often 14 days, that a member of JCF has objected to the action, the agency may execute the proposed action. If, however, a member objects, the agency is limited to the action as approved or modified by JCF. The bill specifies that the name of any JCF member who objects to the proposed action, as well as the reason the member objects, must be recorded and made publicly available.
Review of legislation relating to crimes
Under current law, there is a Joint Review Committee on Criminal Penalties. Under current law, if a bill is introduced that creates a crime or revises a penalty for an existing crime, the committee may be requested to prepare a report on the bill. The request must come from the chair of the standing committee to which the bill is referred or, if not referred to a standing committee, from the speaker of the assembly for an assembly bill or the presiding officer of the senate for a senate bill. Upon such a request, the joint review committee must prepare a report concerning the costs incurred or saved if the bill were enacted, the consistency of the penalties proposed with current law penalties, and whether the acts prohibited under the bill are already prohibited under current law.
The bill requires that any introduced bill that creates a crime or revises a penalty for an existing crime must be referred to the Joint Review Committee on Criminal Penalties for such a report and prohibits the legislature from taking further action on the bill until the report is prepared.
Capitol security
Under current law, DOA is required to submit any proposed changes to security at the capitol, including the posting of a firearm restriction, to JCLO for approval under passive review. The bill eliminates that requirement.
Administrative law
Deference to agency interpretations of law
Under current law, courts are prohibited from giving deference to agency interpretations of law and agencies are prohibited from seeking such deference from a court. The bill repeals these prohibitions.
Suspension of administrative rules
Under current law, administrative rules that are in effect may be temporarily suspended by the Joint Committee for Review of Administrative Rules (JCRAR). If JCRAR suspends a rule, JCRAR must introduce bills in each house of the legislature to make the suspension permanent. If neither bill to support the suspension is ultimately enacted, the rule remains in effect. However, current law specifies that JCRAR may suspend a rule multiple times. The bill repeals the provision allowing JCRAR to suspend a rule multiple times.
Agency rule-making authority
Current law provides that a settlement agreement, consent decree, or court order does not confer rule-making authority and cannot be used by an agency as authority to promulgate administrative rules. Additionally, no agency may agree to promulgate a rule as a term in any settlement agreement, consent decree, or stipulated order of a court unless the agency has explicit statutory authority to promulgate the rule at the time the settlement agreement, consent decree, or stipulated order of a court is executed. The bill repeals these limitations on agency rule-making authority.
Advisory committees for rule making
Current law requires that, whenever an agency appoints a committee to advise the agency on rule making, the agency must submit a list of the members of the committee to JCRAR. The bill repeals this requirement.
TAXATION
Income taxation
Family and individual reinvestment credit
The bill creates a new family and individual reinvestment income tax credit for taxable years beginning in 2023. The credit is nonrefundable and may be claimed only up to the amount of the taxpayer’s income tax liability. Under the bill, for a single individual or an individual who files as a head of household whose adjusted gross income (AGI) is less than $100,000, for a married couple filing jointly whose combined AGI is less than $150,000, or for a married individual filing separately whose AGI is less than $75,000, the credit is equal to 10 percent of the claimant’s net tax liability or, for a single individual, head of household, or married couple filing jointly, $100, and for a married individual filing separately, $50, whichever is greater. Net tax liability is a claimant’s income tax liability after the application of most nonrefundable income tax credits. Under the bill, the credit phases out to zero as a single individual or head of household filer’s AGI increases from $100,000 to $120,000. A similar phaseout occurs for a married joint filer whose combined AGI increases from $150,000 to $175,000 and a married separate filer whose AGI increases from $75,000 to $87,500. Also, under the bill, no new claims for the working families tax credit may be filed for a taxable year that begins after December 31, 2022.
Manufacturing and agriculture credit limitation
Currently, a person may claim a tax credit on the basis of the person’s income from manufacturing or agriculture. A taxpayer may claim a credit equal to 7.5 percent of the income derived from either the sale of tangible personal property manufactured in whole or in part on property in this state that is assessed as manufacturing property or from the sale of tangible personal property produced, grown, or extracted in whole or in part from property in this state assessed as agricultural property. If the amount of the credit exceeds the taxpayer’s income tax liability, the taxpayer does not receive a refund, but may apply the balance to the taxpayer’s tax liability in subsequent taxable years.
The bill limits to $300,000 the amount of income from manufacturing that a person may use as the basis for claiming the credit. The bill does not affect the amount of income from agriculture that may be used as a basis for claiming the credit.
Expanding the child and dependent care tax credit
Under current law, an individual who is eligible to claim the federal child and dependent care tax credit may claim a state income tax credit equal to 50 percent of the amount the individual may claim as a federal income tax credit. The bill allows an individual to claim a state income tax credit equal to the full amount claimed for the federal child and dependent care tax credit.
Earned income tax credit
The bill increases the amount that an individual with fewer than three qualifying children may claim as the Wisconsin earned income tax credit (EITC). Under current law, the Wisconsin EITC is equal to a percentage of the federal EITC. The percentage is 4 percent of the federal EITC if the individual has one qualifying child, 11 percent if the individual has two qualifying children, and 34 percent if the individual has three or more qualifying children. The credit is refundable, which means that if the credit exceeds the individual’s tax liability, he or she will receive the excess as a refund check.
Under the bill, the percentage of the federal EITC that an eligible individual may claim for Wisconsin purposes is 16 percent if the individual has one qualifying child, 25 percent if the individual has two qualifying children, and 34 percent if the individual has three or more qualifying children.
Caregiver tax credit
The bill creates an income tax credit for individuals who pay for items that directly relate to the care or support of a family member who requires assistance with one or more daily living activities and is over the age of 18. The credit equals 50 percent of the expenses, limited to a maximum annual credit per family member of $500, or $250 for married spouses filing separately. If more than one individual may claim the credit based on the same family member, the maximum annual credit amount is apportioned among them based on expenses paid. For married couples filing jointly, the credit phases out between federal adjusted gross income of $150,000 and $170,000, and no credit may be claimed if federal AGI exceeds $170,000. For all other taxpayers, the phase out range is between federal AGI of $75,000 and $85,000, and no credit may be claimed if federal AGI exceeds $85,000. Under the bill, expenses that qualify for the credit include amounts spent on improving the claimant’s primary residence to assist the family member, purchasing equipment to help the family member with daily living activities, and obtaining other goods or services to help care for the family member. Expenses that do not qualify for the credit include general food, clothing, transportation, and household repair costs, as well as amounts that are reimbursed by insurance or other means. The credit is nonrefundable, which means it may be claimed only up to the amount of the claimant’s tax liability.
First-time home buyer savings accounts
The bill creates a tax-advantaged first-time home buyer savings account. Under the bill, an individual, known as the account holder, may open an account at a financial institution for the purpose of paying the down payment and closing costs for the purchase of a single-family residence in this state by the account’s designated beneficiary. The beneficiary, who may be the account holder, must be a resident of this state who has not owned a single-family residence during the 36 months prior to the purchase. An individual may be designated the beneficiary of more than one account, but not by the same account holder. The account holder may change the beneficiary at any time. An account may only remain open for 10 years.
The bill provides that an account holder, when calculating his or her income for state tax purposes, may subtract the deposits that he or she made into the account during the year, as well as any interest and other gains on the account that are redeposited into it. The maximum amount of deposits that the account holder may subtract per account each year is $5,000, which is increased to $10,000 if he or she is married and files a joint return. Over all taxable years, the account holder may not subtract more than $50,000 of deposits into any account for each beneficiary. The bill provides that other persons may contribute to the account, but they may not subtract their contributions.
Under the bill, with limited exceptions, if an amount is withdrawn from the account for any reason other than paying the down payment and closing costs, the account holder is subject to a 10 percent penalty tax on the withdrawal and must include the amount of the withdrawal in income for state tax purposes.
The bill requires that the account holder annually submit information about the account to DOR, including a list of the account’s transactions. The bill’s provisions apply to taxable years beginning after December 31, 2022.
Veterans and surviving spouses property tax credit
Under current law, an eligible veteran or surviving spouse may claim a refundable income tax credit that equals the amount of property taxes paid during the year on his or her principal dwelling in this state. Current law does not expressly address the treatment of renters. DOR allows an eligible veteran or surviving spouse who is a renter to claim the credit if he or she is required to pay the property taxes under a written agreement with the landlord and pays the property taxes directly to the municipality.
Under the bill, an eligible veteran or surviving spouse who is a renter may claim the credit in an amount equal to his or her rent constituting property taxes. The bill defines “rent constituting property taxes” to mean 20 percent of the rent paid during the year for the use of a principal dwelling if heat is included in the rent and 25 percent of the rent if heat is not included.
Veterans and surviving spouses property tax credit eligibility expansion
The bill reduces the eligibility threshold for an eligible veteran, the spouse of an eligible veteran, and the unremarried surviving spouse of an eligible veteran to claim the veterans and surviving spouses property tax credit under the individual income tax system. Under the bill, a claimant may claim the credit if the service-connected disability rating of the veteran for whom the claimant is claiming the credit is at least 70 percent. Currently, that rating must be 100 percent.
Under the bill, the maximum credit that a claimant may claim is multiplied by the percentage of the service-connected disability rating. The bill does not affect a claimant who claims the credit based on the individual unemployability rating. Under current law, a claimant may also claim the credit if the disability rating based on individual unemployability of the veteran for whom the claimant is claiming the credit is 100 percent.
Homestead tax credit
Under current law, the homestead tax credit is a refundable income tax credit that may be claimed by homeowners and renters. The credit is based on the claimant’s household income and the amount of property taxes or rent constituting property taxes on his or her Wisconsin homestead. Because the credit is refundable, if the credit exceeds the claimant’s income tax liability, he or she receives the excess as a refund check. Under current law, there are three key dollar amounts used when calculating the credit:
1. If household income is $8,060 or less, the credit is 80 percent of the property taxes or rent constituting property taxes. If household income exceeds $8,060, the property taxes or rent constituting property taxes are reduced by 8.785 percent of the household income exceeding $8,060, and the credit is 80 percent of the reduced property taxes or rent constituting property taxes.
2. The credit may not be claimed if household income exceeds $24,680.
3. The maximum property taxes or rent constituting property taxes used to calculate the credit is $1,460.
Beginning with claims filed for the 2023 tax year, the bill reduces the percentage used for household income over $8,060 from 8.785 to 5.614 percent and increases the maximum income amount from $24,680 to $35,000. The bill also indexes the $8,060, $35,000, and $1,460 amounts for inflation during future tax years.
Increasing retirement income subtraction and expanding eligibility
The bill increases and expands the individual state income tax subtraction, or deduction, for payments or distributions received from qualified retirement plans under the Internal Revenue Code or from certain individual retirement accounts. Under the bill, beginning in tax year 2023, up to $5,500 of payments or distributions received from qualified retirement plans or certain individual retirement accounts may be subtracted annually from an individual’s taxable income. In addition, the bill expands eligibility for claiming the subtraction to individuals at least 65 years old having a federal adjusted gross income under $30,000, or under $60,000 if married.
Under current law, up to $5,000 of payments or distributions received by certain individuals from qualified retirement plans or from certain individual retirement accounts may be subtracted. To be eligible, the individual must be at least 65 years old and have federal adjusted gross income under $15,000, or under $30,000 if married.
Increasing disability income subtraction and expanding eligibility
The bill increases and expands the individual state income tax subtraction, or deduction, for disability payments received by a person under the age of 65 who is retired and who is permanently and totally disabled. Under the bill, beginning in tax year 2023, up to $5,500 of disability payments may be subtracted annually from an individual’s taxable income. In addition, the bill expands eligibility for claiming the subtraction to individuals having a federal adjusted gross income under $30,000 or under $60,000 if married.
Under current law, up to $5,000 of disability payments may be subtracted, and to be eligible, a person must have federal adjusted gross income under $20,200 or under $25,400 if married and both spouses are disabled.
Tax credit for installing universal changing stations
The bill creates an income and franchise tax credit for small businesses that install universal changing stations. Under the bill, a “universal changing station” is a floor-mounted or wall-mounted, powered, and height-adjustable adult changing table with a safety rail that can be used for personal hygiene by an individual with a disability of either sex and the individual’s care provider.
The credit applies for taxable years beginning after December 31, 2022. Under the bill, a small business is any entity that, during the preceding taxable year, either had gross receipts of no more than $1,000,000 or employed no more than 30 full-time employees. The credit is equal to 50 percent of the amount the small business paid to install the universal changing station, up to a maximum credit of $5,125. The credit may be claimed only if the universal changing station meets certain requirements relating to size, maneuverability space, weight load, and adjustability.
Research credit refunds
Under the bill, beginning in the 2024 tax year, if a person claims an amount for the research credit that exceeds the person’s tax liability, the person will receive a refund in an amount not exceeding 50 percent of the allowable claim and may continue to claim the remaining unused portion in subsequent tax years. Current law allows a person to receive a refund in an amount not exceeding 15 percent of their allowable claim for the research credit. Under current law, the research credit is an income and franchise tax credit equal to a specified 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.
Private school tuition deduction
Under current law, an individual, when computing income for income tax purposes, may deduct the tuition paid during the year to send his or her dependent child to private school. The maximum deduction is $4,000 for an elementary school pupil and $10,000 for a secondary school pupil.
Under the bill, only individuals whose Wisconsin adjusted gross income is below a threshold amount may claim the deduction for private school tuition. The threshold amount is $100,000 for single individuals and heads of household, $150,000 for married couples filing jointly, and $75,000 for married individuals filing separately.
Flood insurance premiums
The bill creates a nonrefundable individual income tax credit for flood insurance premiums. The credit is equal to 10 percent of the amount of the premiums that an individual paid in the taxable year for flood insurance, but the amount of the claim may not exceed $60 in any taxable year. Because the credit is nonrefundable, it may be claimed only up to the amount of the individual’s tax liability.
Limitation on capital gains exclusion
Current law allows individuals, when computing their income for state tax purposes, to subtract 30 percent of the net capital gains realized from the sale of assets held more than one year or acquired from a decedent. The subtraction is increased to 60 percent for gains realized from the sale of farm assets held more than one year or acquired from a decedent.
Under the bill, an individual may not make the 30 percent subtraction if his or her federal adjusted gross income (AGI) exceeds $400,000 for a single individual or head of household filer; $533,000 for a married couple who files jointly; or $266,500 for a married individual who files separately. The bill creates an exception for individuals whose federal AGI, after subtracting 30 percent of net capital gains from nonfarm assets, is below the threshold amount. These individuals may make the subtraction, subject to the 30 percent limitation, but must reduce the amount subtracted by the amount that federal AGI exceeds the threshold amount. The bill makes no changes to the 60 percent subtraction. The bill applies to taxable years beginning after December 31, 2022.
Repeal 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.
Dividends received deduction limitation
Current law allows corporations to deduct, for income and franchise tax purposes, the dividends received from related corporations. The dividends must be paid on common stock, and the corporation receiving the dividends must own at least 70 percent of the total combined voting stock of the other corporation. Current law also allows businesses to carry forward net business losses to future taxable years in order to offset income in those years. Under the bill, a business may not take the dividends received deduction into account when determining if it has a net business loss that can be carried forward.
Internal Revenue Code references
The bill adopts, for state income and franchise tax purposes, certain changes made to the Internal Revenue Code by the following federal acts:
1. The American Rescue Plan Act of 2021.
2. The PPP (Paycheck Protection Program) Extension Act of 2021.
3. The Surface Transportation Extension Act of 2021.
4. The Further Transportation Extension Act of 2021.
5. The Infrastructure Investment and Jobs Act.
6. The Consolidated Appropriations Act of 2022.
7. The Supreme Court Security Funding Act of 2022.
8. The Inflation Reduction Act of 2022.
The bill also 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 the limitation on losses for taxpayers other than for corporations; certain special rules for the taxable year of inclusion; the limitation on business-related deduction for interest; the limitation on the deduction by employers of expenses for fringe benefits; the limitation on the deduction for Federal Deposit Insurance Corporation premiums; and the limitation on excessive employee remuneration.
The bill also makes technical changes to the definition of “Internal Revenue Code” for state income and franchise tax purposes so that the same definition is not repeated for each type of taxpayer, as is the case under current law.
Property taxation
Repeal of the personal property tax
