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
Real estate transfer fee
Current law, generally, requires a person who conveys an interest in real property to file a real estate transfer return with the county register of deeds and pay a real estate transfer fee equal to 30 cents for each $100 of the value of the conveyance. Current law provides certain exemptions from paying the fee, including exemptions for conveyances between an entity and the members of the entity who are related to each other as spouses, lineal ascendants, lineal descendants, or siblings.
The bill modifies current law so that the exemptions for conveyances between entities and related members also apply to conveyances to members who are related as an uncle and his nieces or nephews, an aunt and her nieces or nephews, or first cousins.
TRANSPORTATION
Highways and local assistance
Transportation revenue bonds
Under current law, the Building Commission may issue revenue bonds for major highway projects and transportation administrative facilities in a principal amount that may not exceed $4,325,885,700. The bill increases the revenue bond limit to $4,493,600,000, an increase of $167,714,300.
I 94 east-west corridor bonding
Under current law, the state may contract up to $40,000,000 in public debt for the purposes of reconstructing the “I 94 east-west corridor,” which is defined to mean “all freeways, including related interchange ramps, roadways, and shoulders, encompassing I 94 in Milwaukee County from 70th Street to 16th Street, and all adjacent frontage roads and collector road systems.” The bill increases the authorized general obligation bonding limit for these purposes by $140,873,000 to $180,873,000.
Major interstate bridge bonding
Under current law, the state may contract up to $272,000,000 in public debt for DOT to fund major interstate bridge projects, which are projects involving the construction or reconstruction of a bridge on the state trunk highway system that crosses a river forming a boundary of the state and for which this state’s estimated cost share is at least $100,000,000. The bill increases the authorized general obligation bonding limit for this purpose by $47,200,000 to $319,200,000.
General transportation aids
Under current law, DOT administers a general transportation aids program that makes aid payments to a county based on a share-of-costs formula, and to a municipality based on the greater of a share-of-costs formula or an aid rate per mile. The aid rate per mile is $2,734 for 2023. The bill increases the aid rate per mile to $2,843 for 2024 and $2,957 for 2025 and thereafter.
Currently, the maximum annual amount of aid that may be paid to counties under the program is $127,140,200. The bill maintains this amount for 2023 and increases this amount to $132,225,800 for 2024 and $137,514,800 for 2025 and thereafter. Currently, the maximum annual amount of aid that may be paid to municipalities under the program is $398,996,800. The bill maintains this amount for 2023 and increases this amount to $414,956,700 for 2024 and $431,555,000 for 2025 and thereafter.
Local roads improvement program discretionary grants
Under current law, DOT administers the local roads improvement program (LRIP) to assist political subdivisions in improving seriously deteriorating local roads by reimbursing political subdivisions for certain improvements. LRIP has several components, including discretionary grants. Current law specifies dollar amounts that DOT must allocate in each fiscal year to each of three project types that exceed specified cost thresholds: 1) county trunk highway improvements, 2) town road improvements, and 3) municipal street improvement projects.
Under the bill, in fiscal year 2023-24 and each fiscal year thereafter, of the amount appropriated to DOT for LRIP discretionary grants, DOT must allocate 35.6 percent to county trunk highway improvements, 39.0 percent to town road improvements, and 25.4 percent to municipal street improvements.
Transportation projects
Under current law, for certain highway projects for which DOT spends federal money, federal money must make up at least 70 percent of the funding for those projects. DOT is required to notify political subdivisions receiving aid for local projects whether the aid includes federal moneys and how those moneys must be spent. For certain projects that receive no federal money, DOT may not require political subdivisions to comply with any portion of DOT’s facilities development manual other than design standards. Any local project funded with state funds under the surface transportation program or the local bridge program must be let through competitive bidding and by contract to the lowest responsible bidder. The bill repeals all of these requirements.
Electric vehicle infrastructure program
Under the bill, DOT may establish and administer a program to provide funding for electric vehicle infrastructure projects.
Establishment of bikeways and pedestrian ways in highway projects
