Rent qualifying for the veterans and surviving spouses property tax credit
Current law does not expressly address the treatment of renters for purposes of claiming the veterans and surviving spouses property tax credit. 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 veterans and surviving spouses property tax 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.
Adding a fifth income tax bracket
The bill adds a fifth income tax bracket having a rate of 9.80 percent for individuals and married joint filers with taxable income exceeding $1,000,000 and for married separate filers with taxable income exceeding $500,000. Under current law, there are four income tax brackets for single individuals, certain fiduciaries, heads of households, and married persons. The brackets are indexed for inflation.
Under the bill, which first applies to taxable year 2025, there are five income tax brackets for single individuals, certain fiduciaries, heads of households, and married persons. The brackets are indexed for inflation. The rate of taxation under the bill for the five brackets for single individuals, certain fiduciaries, and heads of households, before indexing, is as follows:
1. For taxable income not exceeding $7,500, 3.5 percent.
2. For taxable income exceeding $7,500, but not $15,000, 4.40 percent.
3. For taxable income exceeding $15,000, but not $225,000, 5.3 percent.
4. For taxable income exceeding $225,000, but not $1,000,000, 7.65 percent.
5. For taxable income exceeding $1,000,000, 9.80 percent.
The rates that apply to married joint filers under the bill are the same as the rates that apply to single individuals, fiduciaries, and heads of households, but the income limitations are higher. The lowest bracket applies to taxable income not exceeding $10,000; the second bracket applies to taxable income exceeding $10,000, but not $20,000; the third bracket applies to taxable income exceeding $20,000, but not $300,000; the fourth bracket applies to taxable income exceeding $300,000, but not $1,000,000; and the fifth bracket applies to taxable income exceeding $1,000,000.
Increasing the personal exemption
The bill increases from $700 to $1,200 the income tax personal exemption for taxpayers, their spouses, and their dependents.
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 either from 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.
Film production tax credit
The bill creates income and franchise tax credits for film production companies, and the Department of Tourism implements the tax credit. Under the bill, a film production company may claim a credit that is equal to 25 percent of the salary or wages paid to the company’s employees in the taxable year for services rendered in this state to produce a film, video, broadcast advertisement, or television production, as approved by the Department of Tourism, and paid to employees who were residents of this state at the time that they were paid. The total amount of the credits that may be claimed by a taxpayer may not exceed an amount that is equal to the first $250,000 of salary and wages paid to each of the taxpayer’s employees in the taxable year, not including the salary or wages paid to the taxpayer’s two highest-paid employees in the taxable year, for a production with budgeted expenditures of $1,000,000 or more. If the total amount of the credits claimed by a taxpayer exceeds the taxpayer’s tax liability, the state will not issue a refund, but the taxpayer may carry forward any remaining credit to subsequent taxable years.
Under the bill, a film production company may claim an income and franchise tax credit in an amount that is equal to 25 percent of the production expenditures paid by the company in the taxable year to produce a film, video, broadcast advertisement, or television production. If the total amount of the credits claimed by the company exceeds the company’s tax liability, the state will issue a refund.
The bill also allows a film production company to claim an income and franchise tax credit, for the first three taxable years that the company is doing business in this state, in an amount that is equal to 25 percent of the amount that the claimant paid in the taxable year to purchase depreciable tangible personal property or to acquire, construct, rehabilitate, remodel, or repair real property.
Under the bill, a film production company may claim an income and franchise tax credit that is equal to the amount of sales and use taxes that the claimant paid for tangible personal property and taxable services that are used to produce a film, video, broadcast advertisement, or television production in this state.
The bill provides that the Department of Tourism may not allocate more than $10,000,000 in film production and investments tax credits in each fiscal year. The bill also requires the Department of Tourism to annually submit a report to the legislature that specifies the number of persons who submitted credit applications in the previous year and the amount of the credits allocated to each such applicant and to make recommendations on improving the efficiency of the program. Finally, the bill requires the Legislative Audit Bureau to biennially prepare a performance evaluation audit of the program implemented by the Department of Tourism.
Eligibility of nuclear power research for the research credit
Under the bill, beginning in the 2025 tax year, qualified research expenses incurred for research related to nuclear power are eligible for the research income tax 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. Current law allows a person to receive a refund in an amount not exceeding 25 percent of their allowable claim for the research credit.
Changes to state supplement to federal historic rehabilitation credit
The bill makes the following changes to the state supplement to the federal historic rehabilitation credit: 1) eliminates the requirement for claiming the credit of incurring at least $50,000 in qualified rehabilitation expenditures; 2) eliminates the requirement that the state credit be claimed at the same time as the claimant claims the federal historic rehabilitation credit; and 3) allows partnerships, limited liability companies, and tax-option corporations to claim the credit and prohibits partners of a partnership, members of a limited liability company, and shareholders of a tax-option corporation from claiming the credit. Current law authorizes WEDC to certify a person to receive a tax credit equal to 20 percent of the qualified rehabilitation expenses, as defined under federal law, for certified historic structures on property located in this state and for the rehabilitation expenses for qualified rehabilitated buildings, as defined under federal law, that are not certified historic structures.
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.
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.
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 2025, 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.
Subtraction for labor organization dues
Beginning in 2027, the bill provides an individual income tax subtraction for the amount of membership dues and expenses paid by a person to a labor organization.
Increasing the adoption deduction
The bill increases to $15,000 the maximum deduction allowed for adoption expenses for purposes of the state income tax. Under current law, a full-year resident who is an adoptive parent may deduct from taxable income up to $5,000 of the adoption fees, court costs, or legal fees relating to the adoption of a child paid during the tax year during which the final order of adoption has been entered and paid during the prior two tax years.
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, 2024. 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.
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 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 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.
Property taxation
Increasing the school levy property tax credit
The bill increases the appropriation for the school levy property tax credit so that the total amount distributed to claim against property tax liability is $1,400,300,000 in the 2025–26 fiscal year and $1,524,700,000 in the 2026–27 fiscal year. Currently the annual distribution is $1,275,000,000.
Telecom and communication tower exemption
The bill exempts radio, cellular, and telecommunication towers from the property tax. The bill also exempts radio, cellular, and telecommunication towers that are classified as real property from the telephone company tax.
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 or the Racine choice program or as a result of making payments to private schools under the special needs scholarship program.
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. The bill requires the fee to be collected from a reduction in the municipality’s shared revenue distribution, and if DOR is unable to collect the fee in this manner, then the fee is directly imposed on the municipality.
General taxation
Sales tax exemption for electricity and natural gas
Under current law, electricity and natural gas sold during the months of November, December, January, February, March, and April for residential use is exempt from the sales and use tax. The bill exempts from the sales and use tax electricity and natural gas sold for residential use regardless of when it is sold.
Sales tax exemption for over-the-counter drugs
The bill creates a sales and use tax exemption for the sale of over-the-counter drugs.
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. Under the bill, a county may impose that county sales and use tax at the rate of 0.1, 0.2, 0.3, 0.4, or 0.5 percent. The bill also allows a county, except for Milwaukee County, to impose, by ordinance, an additional sales and use tax at the rate of 0.1, 0.2, 0.3, 0.4, or 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 0.1, 0.2, 0.3, 0.4, or 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.
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.
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 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.
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 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.
Elimination of sales tax exemption for farm-raised deer
The bill eliminates 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.
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.
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.
Filing fee increase for petitions to Tax Appeals Commission
The bill increases the filing fee paid by petitioners who file certain petitions for review with the Tax Appeals Commission. Specifically, under the bill, the filing fee increases from $25 to $250 for petitions that do not involve a small claims case. The bill also modifies the definition of “small claims” to a matter in which the amount in controversy is less than or equal to the amount used to determine the applicability of small claims procedure to certain civil actions under current law, which is currently $10,000. Under current law, the definition of “small claims” for cases decided by the Tax Appeals Commission is $2,500, and certain procedures of the Tax Appeals Commission for deciding cases differ between small claims cases and non–small claims cases.
Electronic filing of petitions with Tax Appeals Commission
The bill allows electronic filing of petitions for review to the Tax Appeals Commission and specifies that a petition filed electronically is considered timely filed if submitted by midnight of the last day for filing.
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 are 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 to public utilities subject to ad valorem taxes by certified mail.
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