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
Under current law, beginning with the property tax assessments as of January
1, 2018, machinery, tools, and patterns, not including those items used in
manufacturing, are exempt from the personal property tax. However, beginning in
2019, the state pays each taxing jurisdiction an amount equal to the property taxes
levied on those items of personal property for the property tax assessments as of
January 1, 2017.
Under the bill, beginning with the property tax assessments as of January 1,
2024, no items of personal property will be subject to the property tax. Beginning in
2025, the state will pay each taxing jurisdiction an additional amount equal to the
property taxes levied on the items made exempt under the bill for the property tax
assessments as of January 1, 2023. Beginning in 2026, each taxing jurisdiction will
receive a payment to compensate it for its loss in personal property revenue equal
to the payment it received in the previous year, increased by the annual percentage
change in the consumer price index.
Under current law, generally, public utilities, including railroad companies, are
subject to a license fee imposed by the state instead of being subject to local property
taxes. The bill creates a personal property tax exemption for railroad companies in
order to comply with the requirements of the federal Railroad Revitalization and
Regulatory Reform Act.
Finally, the bill makes a number of technical changes related to the repeal of
the personal property tax, such as providing a process whereby manufacturing
establishments located in this state that do not own real property in this state may
continue to claim the manufacturing income tax credit.
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 (2008). 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.
School aid reduction information
The bill requires that a person's property tax bill include information from the
school district where 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.
Property tax exemption for WHEDA headquarters
The bill exempts land and buildings owned by WHEDA and used as its
corporate headquarters, including associated parking facilities, from the property
tax.
Property tax exemption for cranberry research station
The bill exempts from the property tax all property, not exceeding 50 acres of
land, owned or leased by a tax-exempt entity that is used primarily for research and
educational activities associated with commercial cranberry production.
Property tax exemption for baseball park development
The bill exempts from the property tax all baseball park development operated
by a professional baseball team for any legally permissible use. Current law exempts
sports and entertainment home stadiums and any functionally related or auxiliary
facilities from the property tax.
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. If a municipality does not pay by March 31 of the
following year, DOR reduces the municipality's July and November shared revenue
distribution by the amount of the fee. Under the bill, if DOR is unable to collect the
fee from a municipality in this manner, then the fee is directly imposed on the
municipality.
General taxation
Milwaukee County sales and use tax
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 Milwaukee County to impose, by ordinance, an
additional sales and use tax at the rate of 1 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 a majority of the voters of the county at a referendum.
The bill requires 50 percent of the revenue from those taxes to be distributed to the
City of Milwaukee, and the revenue may be used for any purpose designated by the
common council. The revenue retained by Milwaukee County may be used for any
purpose designated by the county board or specified in the ordinance or in the
referendum approving the ordinance.
County and municipality sales and use taxes
The bill allows counties besides Milwaukee 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 a 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, except for the City of Milwaukee, 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 a 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.
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.
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
established 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.
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 and use tax exemption for gun safety items
The bill creates a sales and use tax exemption for sales of gun safes, trigger
locks, and gun barrel locks.
Breastfeeding equipment
The bill creates a sales and use tax exemption for breast pumps, breast pump
kits, and breast pump storage and collection supplies.
Sales tax exemption for diapers and feminine hygiene products
The bill creates a sales and use tax exemption for the sale of diapers and
feminine hygiene products.
Prewritten computer software
The bill imposes the sales tax on the sale of the right to access and use
prewritten computer software that remains in the possession of the seller or third
party, including sales made on a per use, per user, per license, or subscription basis.
Current law defines “prewritten computer software” as computer software that is not
designed and developed by the author to the specifications of a specific purchaser.
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 is 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.
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.
Sales and use tax exemption for professional baseball park districts
The bill exempts from the sales and use tax tangible personal property and
taxable services sold to a local professional baseball park district.
Sales and use tax exemption for improving professional sports and
entertainment home stadiums
The bill exempts from the sales and use tax building materials, supplies, and
equipment sold to owners, contractors, subcontractors, or builders solely for the
improvement, repair, or maintenance of a professional sports and entertainment
home stadium.
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.
Providing notices for public utility taxes
Under current law, public utility companies, including railroads and air
carriers, are exempt from local property taxes and 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.
Other taxation
