Tax 2.31(3)(a)
(a) General. The allocation to Wisconsin of income earned by a nonresident employee as total compensation for services rendered as a member of a professional athletic team shall be made on the basis of a fraction, the numerator of which is the number of duty days spent within Wisconsin rendering services for the team in any manner during the taxable year and the denominator of which is the total number of duty days spent both within and outside Wisconsin during the taxable year.
Tax 2.31(3)(b)
(b) Duty days during the taxable year. Duty days shall be included in the fraction described in par.
(a) for the taxable year in which they occur, including where a team's official pre-season training period through the last game in which the team competes, or is scheduled to compete, occurs during more than one taxable year. The following additional provisions apply:
Tax 2.31(3)(b)1.
1. Days during which a member of a professional athletic team is on the disabled list, does not conduct rehabilitation activities at facilities of the team and is not otherwise rendering services for the team in Wisconsin, may not be considered duty days spent in Wisconsin. However, all days on the disabled list shall be included in the total duty days spent both within and outside Wisconsin.
Tax 2.31(3)(b)2.
2. Travel days that do not involve either a game, practice, team meeting, promotional caravan or other similar team event may not be considered duty days spent in Wisconsin but shall be considered in the total duty days spent both within and outside Wisconsin.
Tax 2.31(3)(c)
(c) Bonuses. Bonuses which shall be included for purposes of the allocation described in par.
(a) are:
Tax 2.31(3)(c)1.
1. Performance bonuses earned as a result of play during the season, including bonuses paid for championship, playoff or “bowl" games played by a team or for selection to all-star league or other honorary positions.
Tax 2.31(3)(c)2.
2. Bonuses paid for signing a contract, unless all of the following conditions are met:
Tax 2.31(3)(c)2.a.
a. The payment of the signing bonus is not conditional upon the signee playing any games for the team or performing any subsequent services for the team, or even making the team.
Tax 2.31(3)(c)2.b.
b. The signing bonus is payable separately from the salary and any other compensation.
Tax 2.31 Note
Examples: The following examples illustrate the provisions of this subsection:
Tax 2.31 Note
1) Player A, a member of a professional athletic team, is a nonresident of Wisconsin. Player A's contract for the team requires A to report to the team's training camp and to participate in all exhibition, regular season, and playoff games. Player A has a two-year contract which covers seasons that occur during taxable year 1/taxable year 2, and taxable year 2/taxable year 3. Player A's contract provides that A receive $500,000 for the season which occurs during taxable year 1/taxable year 2, and $600,000 for the season which occurs during taxable year 2/taxable year 3. Player A receives $550,000 from the contract during taxable year 2 ($250,000 for one-half the year 1/year 2 season and $300,000 for one-half the year 2/year 3 season). The portion of the compensation received by Player A for taxable year 2 which is allocable to Wisconsin is determined by multiplying the compensation Player A receives during the taxable year ($550,000) by a fraction, the numerator of which is the total number of duty days Player A spends rendering services for the team in Wisconsin during taxable year 2 (attributable to both the year 1/year 2 season and the year 2/year 3 season) and the denominator of which is the total number of Player A's duty days spent both within and outside Wisconsin for the entire taxable year 2.
Tax 2.31 Note
2) Player B, a member of a professional athletic team, is a nonresident of Wisconsin. During the season, B is injured and is unable to render services for B's team. While B is undergoing medical treatment at a clinic, which is not a facility of the team but is located in Wisconsin, B's team travels to Wisconsin for a game. The days B's team spends in Wisconsin for practice, games, meetings, etc., while B is present at the clinic, are not considered duty days spent in Wisconsin for Player B for that taxable year, but those days are included within total duty days spent both within and outside Wisconsin.
Tax 2.31 Note
3) Player C, a member of a professional athletic team, is a nonresident of Wisconsin. During the season, C is injured and is unable to render services for C's team. C performs rehabilitation exercises at the facilities of C's team in Wisconsin as well as at personal facilities in Wisconsin. The days C performs rehabilitation exercises in the facilities of C's team are considered duty days spent in Wisconsin for Player C for that taxable year. However, days Player C spends at personal facilities in Wisconsin are not considered duty days spent in Wisconsin for Player C for that taxable year, but those days are included within total duty days spent both within and outside Wisconsin.
Tax 2.31 Note
4) Player D, a member of a professional athletic team, is a nonresident of Wisconsin. During the season, D travels to Wisconsin to participate in the annual all-star game as a representative of D's team. The days D spends in Wisconsin for practice, the game, meetings, etc., are considered to be duty days spent in Wisconsin for Player D for that taxable year, as well as included within total duty days spent both within and outside Wisconsin.
Tax 2.31 Note
5) Assume the same facts as in example 4, except that Player D is not participating in the all-star game and is not rendering services for D's team in any manner. Player D is instead traveling to and attending the game solely as a spectator. The days Player D spends in Wisconsin for the game are not considered to be duty days spent in Wisconsin. However, those days are included within total duty days spent both within and outside Wisconsin.
Tax 2.31 Note
6) Player E, a member of a professional athletic team, is a nonresident of Wisconsin. During the pre-season, E travels to Wisconsin to participate in a training camp which E's team conducts in Wisconsin. E performs no further services in Wisconsin. E's team does not play any regular season or playoff games in Wisconsin. The days E spends in Wisconsin at the team's training camp are considered to be duty days spent in Wisconsin for Player E for that taxable year.
Tax 2.31(4)
(4) Alternative methods of allocation. It is presumed that application of the provisions of this section will result in a fair and equitable apportionment of compensation received by nonresident members of professional athletic teams. Where it is demonstrated that the method provided under this section does not fairly and equitably apportion the compensation, the department may require the member of a professional athletic team to apportion and allocate the compensation under a method which the department prescribes, provided the prescribed method results in a fair and equitable apportionment. A nonresident member of a professional athletic team may submit a proposal for an alternative method to apportion compensation where the member demonstrates that the method provided under this section does not fairly and equitably apportion the compensation. The proposed method shall be fully explained on the member's Wisconsin income tax return.
Tax 2.31 History
History: Cr.
Register, May, 1996, No. 485, eff. 6-1-96.
Tax 2.32
Tax 2.32
Economic development surcharge — gross receipts defined. Tax 2.32(1)(1)
Purpose. This section defines “gross receipts" for purposes of the economic development surcharge under subch.
VII of ch. 77, Stats.
Tax 2.32 Note
Note: For taxable years beginning before January 1, 2013, an economic development surcharge is imposed on: (a) individuals, estates, trusts, statutory employees and partnerships that have at least $4,000,000 in gross receipts from a trade or business for the taxable year; (b) corporations and insurers that have at least $4,000,000 in gross receipts from all activities for the taxable year; and (c) individuals, estates, trusts and partnerships engaged in farming that have at least $4,000,000 in gross receipts from farming for the taxable year. For taxable years beginning on or after January 1, 2013, an economic development surcharge is only imposed on corporations and insurers that have at least $4,000,000 in gross receipts from all activities for the taxable year.
Tax 2.32(2)(a)
(a) “Gross receipts from all activities of corporations" means the sum of the following items reportable by corporations other than those listed in pars.
(c) and
(d):
Tax 2.32(2)(a)1.
1. Gross receipts or sales reportable on federal Form 1120, U. S. corporation income tax return.
Tax 2.32(2)(a)6.
6. The gross sales price from the disposition of capital assets and business assets includable in computing the net gain or loss on federal Form 1120.
Tax 2.32(2)(a)7.
7. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes.
Tax 2.32(2)(b)
(b) “Gross receipts from all activities of exempt organizations taxable as corporations" means the sum of the following items reportable by those entities:
Tax 2.32(2)(b)1.
1. Gross receipts or sales reportable on federal Form 990-T, exempt organization business income tax return.
Tax 2.32(2)(b)2.
2. The gross sales price from the disposition of capital assets and business assets includable in computing the gain or loss on federal Form 990-T.
Tax 2.32(2)(b)3.
3. Gross rents includable in computing rent income on federal Form 990-T.
Tax 2.32(2)(b)4.
4. Gross income from unrelated debt-financed property includable in computing unrelated debt-financed income on federal Form 990-T.
Tax 2.32(2)(b)5.
5. Gross interest, annuities, royalties and rents from controlled organizations includable in computing those items of income on federal Form 990-T.
Tax 2.32(2)(b)6.
6. Gross investment income includable in computing investment income on federal Form 990-T.
Tax 2.32(2)(b)7.
7. Gross exploited exempt activity income includable in computing that item of income on federal Form 990-T.
Tax 2.32(2)(b)8.
8. Gross advertising income includable in computing advertising income on federal Form 990-T.
Tax 2.32(2)(b)9.
9. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes.
Tax 2.32(2)(c)
(c) “Gross receipts from all activities of insurance companies" means the sum of the following items reportable by insurance companies:
Tax 2.32(2)(c)1.
1. Gross premiums earned reportable on Schedule A on federal Form 1120-PC, U. S. property and casualty insurance company income tax return.
Tax 2.32(2)(c)2.
2. Gross dividends reportable on Schedule A, or Schedule B if applicable, of federal Form 1120-PC.
Tax 2.32(2)(c)3.
3. Gross interest income reportable on Schedule A, or Schedule B if applicable, of federal Form 1120-PC.
Tax 2.32(2)(c)4.
4. Gross rents reportable on Schedule A, or Schedule B if applicable, of federal Form 1120-PC.
Tax 2.32(2)(c)5.
5. Gross royalties reportable on Schedule A, or Schedule B if applicable, of federal Form 1120-PC.
Tax 2.32(2)(c)6.
6. The gross sales price from the disposition of capital assets and business assets includable in computing the gain or loss on Schedule A, or Schedule B if applicable, of federal Form 1120-PC.
Tax 2.32(2)(c)7.
7. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes.
Tax 2.32(2)(d)
(d) “Gross receipts from all activities of tax-option (S) corporations" means the sum of the following items reportable by S corporations:
Tax 2.32(2)(d)1.
1. Gross receipts or sales reportable on federal Form 1120S, U. S. corporation income tax return for an S corporation.
Tax 2.32(2)(d)2.
2. Gross rents includable in computing the income from real estate and other rental activities reportable on Schedule K of federal Form 1120S.
Tax 2.32(2)(d)3.
3. Gross interest income reportable on Schedule K of federal Form 1120S.
Tax 2.32(2)(d)4.
4. Ordinary dividends reportable on Schedule K of federal Form 1120S.
Tax 2.32(2)(d)5.
5. Gross royalties includable in computing royalty income reportable on Schedule K of federal Form 1120S.
Tax 2.32(2)(d)6.
6. The gross sales price from the disposition of capital assets and business assets includable in computing the gain or loss on federal Form 1120S and Schedule K of federal Form 1120S.
Tax 2.32(2)(d)7.
7. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes.
Tax 2.32(3)
(3) Combined groups. The economic development surcharge applies to each member of a combined group separately. See s.
Tax 2.82 for rules pertaining to the imposition and calculation of the economic development surcharge for combined group members.
Tax 2.32 Note
Note: Subchapter
VII of ch. 77, Stats., was amended by
1999 Wis. Act 9 to replace the expired temporary recycling surcharge with a recycling surcharge, effective for taxable years beginning on or after January 1, 2000, and by
2011 Wis. Act 32 to change the recycling surcharge to the economic development surcharge effective July 1, 2011. This section applies to the economic development surcharge.
Tax 2.32 History
History: Cr.
Register, August, 2000, No. 536, eff. 9-1-00;
CR 10-095: am. (2) (g) (intro.), cr. (3)
Register November 2010 No. 659, eff. 12-1-10;
CR 12-011: am. (title), (1), (2) (a) 1., (d), 1., 3. to 6., (e) 1., (g) 1., 2., (h) 1., (3)
Register July 2012 No. 679, eff. 8-1-12;
CR 14-005: r. (2) (e) to (h)
Register August 2014 No. 704, eff. 9-1-14;
CR 19-141: am. (2) (a) 1. to 6., (b) 1. to 8., (c) 1. to 6., (d) 1. to 6.
Register September 2020 No. 777, eff. 10-1-20.
Tax 2.39(1)(1)
General. Except as provided in sub.
(3), any person, except resident individuals, resident estates, and resident trusts, engaged in business both in and outside this state shall apportion its apportionable income using the statutory apportionment method as provided in s.
71.04 (4) or
71.25 (6), Stats., when the person's business in this state is an integral part of a unitary business unless the department, in writing, allows reporting on a different basis. However, if a corporation is in a combined group, the corporation's Wisconsin share of the combined group's apportionable income is computed as provided in s.
71.255 (5), Stats., and further detailed in s.
Tax 2.61 (7) or
(8), as applicable. Nonapportionable income shall be allocated as provided in s.
71.25 (5) (b), Stats.
Tax 2.39 Note
Note: See s.
Tax 2.62 for rules that apply to determining if a unitary business exists.
Tax 2.39 Note
Note: A corporation may be in a combined group for taxable years beginning on or after January 1, 2009. See s.
Tax 2.61 (2) for a description of corporations required to use combined reporting.
Tax 2.39(2)(b)
(b) “Engaged in business in and outside this state" means having business activity which is sufficient to create nexus in this state and at least one other state or foreign country. For a combined group, the activities of the combined group are taken as a whole in determining if the combined group is engaged in business in and outside this state, as provided in s.
71.255 (5) (a), Stats.
Tax 2.39(2)(c)
(c) “Gross receipts" means gross sales less returns and allowances, plus service charges, freight, carrying charges or time-price differential charges incidental to the sales. Federal and state excise taxes, including sales and use taxes, shall be included as part of the receipts if the taxes are passed on to the purchaser or included as part of the selling price of the product.
Tax 2.39(2)(cm)
(cm) “Intangible property" includes patents, copyrights, trademarks, trade names, service names, franchises, licenses, plans, specifications, blueprints, processes, techniques, formulas, designs, layouts, patterns, drawings, manuals, technical know-how, contracts, and customer lists. Intangible property does not include stocks, bonds, certificates of deposit, or other securities.
Tax 2.39(2)(d)
(d) “Nexus" means that a taxpayer's business activity in a state or foreign country is of such a degree that the state or foreign country has jurisdiction to impose an income tax or franchise tax measured by net income on the taxpayer. For a combined group, the activities of the combined group are taken as a whole in determining if the combined group has nexus in a state or foreign country, as provided in s.
71.255 (5) (a), Stats. Nexus may exist even if a state or foreign country does not impose a tax on the taxpayer. Conversely, voluntary filing and paying income or franchise taxes when not required to do so, or paying a fee for qualification, organization or for the privilege of doing business in that state or foreign country does not, in itself, create nexus.
Tax 2.39 Note
Note: Refer to s.
Tax 2.82 for a description of factors which are recognized in determining whether nexus exists.
Tax 2.39 Note
Examples: 1) State A imposes a corporation franchise tax measured by net income for the privilege of doing business in that state. Corporation X files a return and pays the $50 minimum tax, although it carries on no activities in State A. Corporation X does not have nexus in State A under these circumstances.
Tax 2.39 Note
2) State B requires all nonresident corporations which qualify or register to do business in State B to pay to the secretary of state an annual license fee or tax for the privilege of doing business in the state regardless of whether the privilege is in fact exercised. The amount paid is determined according to the total authorized capital stock of the corporation; the rates are progressively higher by bracketed amounts. The statute sets a minimum fee of $50 and a maximum fee of $500. State B also imposes a corporation income tax. Nonresident Corporation Y is qualified to do business in State B and pays the required fee to the secretary of state but does not carry on any activities in State B. Corporation Y does not have nexus in State B under these circumstances.
Tax 2.39 Note
3) State C requires all nonresident corporations qualified or registered to do business in State C to pay to the secretary of state an annual permit fee or tax for doing business in the state. The base of the fee or tax is the sum of (1) outstanding capital stock, and (2) surplus and undivided profits. The fee or tax base attributable to State C is determined by a three-factor apportionment formula. Nonresident Corporation Z, which operates a plant in State C, pays the required fee or tax to the secretary of state. Corporation Z by virtue of its operation of a plant in State C has nexus in State C.
Tax 2.39 Note
4) State D imposes a corporation franchise tax measured by net income for the privilege of doing business in that state. Corporation W files a return based upon its business activities in the state but the amount of computed liability is less than the minimum tax. Corporation W pays the minimum tax. Corporation W has nexus in State D under these circumstances.
Tax 2.39 Note
5) Corporation U is actively engaged in manufacturing farm equipment in State E. State E imposes a net income tax but exempts corporations engaged in manufacturing farm equipment. Corporation U has nexus in State E under these circumstances.
Tax 2.39 Note
6) Corporation V has a sales office and warehouse located in State F. State F does not impose a corporation franchise or income tax. Corporation V has nexus in State F.
Tax 2.39(2)(f)
(f) “State" means any state of the United States, the District of Columbia, the commonwealth of Puerto Rico, and any territory or possession of the United States. A foreign country is not a state.
Tax 2.39(3)(a)1.1. For taxable years beginning before January 1, 2006, persons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss.
71.04 (8) (a) and
(b) 1. and
71.25 (10) (a) and
(b) 1., Stats., and corporations that are authorized to use an alternative method of apportionment under s.
71.25 (14), Stats., shall use an apportionment fraction as described in s.
71.04 (4) (a) or
71.25 (6) (a), Stats. Property, payroll, or sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of any of the apportionment factors.
Tax 2.39(3)(a)2.
2. If one of the factors described in subd.
1. is omitted pursuant to s.
71.04 (10) or
71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows:
Tax 2.39(3)(a)2.a.
a. If either the property factor or payroll factor is omitted, the other factor shall represent 33.3333 percent of the fraction and the sales factor shall represent 66.6667 percent of the fraction.
Tax 2.39(3)(a)2.b.
b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction.
