Tax 2.61 NoteExample: Combined Group QRS consists of Member Q, Member R, and Member S. Q owns all the stock of R, and R owns all the stock of S. Group QRS is on a calendar year. As of the beginning of 2009, Q had an unadjusted basis of $500,000 in R stock, which includes R’s unadjusted basis of $200,000 in S stock under the rules of 26 CFR 1.1502-32. In the group’s 2009 taxable year, R had a total of $80,000 of net income and S had a total of $150,000 of net income. Of S’s net income, $20,000 was attributable to overseas operations, the income from which was not included in combined unitary income under the water’s edge rules. Neither R nor S made any distributions in 2009. At the end of 2009, Q’s basis in R stock is $710,000 (= $500,000 + $80,000 + $150,000 - $20,000). Q’s basis in R stock cannot include any amounts attributed from S that are attributable to separate entity items. Tax 2.61(6)(g)(g) Earnings and profits. A combined group member’s earnings and profits shall be adjusted to reflect the undistributed earnings and profits of any subsidiary that is a member of the same combined group, subject to the following rules and limitations: Tax 2.61(6)(g)1.1. Except as provided in subd. 2. and except to the extent otherwise inconsistent with this section or ss. 71.26 or 71.45, Stats., the provisions of 26 CFR 1.1502-33, and the regulations which it references, shall apply in determining earnings and profits as if the Wisconsin combined group is a federal consolidated group. Tax 2.61(6)(g)2.2. Undistributed earnings and profits attributed to a subsidiary of a combined group member from any lower-tier subsidiary may not be included in the combined group member’s earnings and profits or its subsidiary’s earnings and profits except to the extent the lower-tier subsidiary’s earnings and profits are attributable to net income that was, or in the case of par. (e) 3. would have been, included in the group’s combined unitary income. Tax 2.61 NoteExample: Combined Group EFG consists of Member E, Member F, and Member G. E owns all the stock of F, and F owns all the stock of G. Group EFG is on a calendar year. During the taxable year 2009, E has current year earnings and profits of $300,000 and F has current year earnings and profits of $500,000, both exclusive of any amounts attributed from subsidiaries. Assume these amounts are attributable entirely to items included in Group EFG’s 2009 combined unitary income. G has current year earnings and profits of $400,000. However, $50,000 of this amount is attributable to overseas operations, the income from which was not included in combined unitary income under the water’s edge rules. Assume none of the corporations made distributions in 2009. F’s total current year earnings and profits are $850,000 (= $500,000 + ($400,000 - $50,000 attributed from G)), and E’s current year earnings and profits are $1,150,000 (= $300,000 + $850,000 attributed from F).
Tax 2.61(6)(h)1.1. Combined unitary income shall exclude any expenses or deductions that are directly or indirectly related to income that is not subject to combination. If any expense or amount otherwise deductible is indirectly related both to income subject to combination and income not subject to combination, a reasonable proportion of the expense or amount shall be allocated to each type of income, in light of all the facts and circumstances. Tax 2.61(6)(h)2.2. The allocation in subd. 1. shall be made according to the methods required or allowed for federal income tax purposes under the applicable sections of the Internal Revenue Code, including their corresponding regulations, except that section 265 of the Internal Revenue Code and its corresponding regulations are modified as provided in s. 71.26 (3) (L), Stats. For example, and without limitation, the allocation may be required under section 482 of the Internal Revenue Code or, for an expense related to foreign source income, under sections 861 to 865 of the Internal Revenue Code. Tax 2.61(6)(h)3.3. For purposes of applying this paragraph, a combined group member’s income from outside the unitary business shall be treated as income of an affiliated corporation, and if a combined group member has U.S. source income excluded from the unitary combination under s. Tax 2.61 (4) (f), that U.S. source income shall be treated as foreign source income. Tax 2.61(7)(7) Apportionment of combined unitary income. A combined group is considered to be a single taxpayer for purposes of determining whether it is engaged in business both within and outside Wisconsin. For combined groups engaged in business both within and outside Wisconsin, the combined unitary income is apportioned to the combined group members as provided in s. 71.255 (5), Stats. Under this section, each member’s share of the combined unitary income is the product of the combined unitary income and the member’s modified sales factor ratio. The following rules apply to this computation: Tax 2.61(7)(a)1.1. For combined group members required to use the sales factor as provided in s. 71.25 (6) and (9), Stats., the numerator of the member’s modified sales factor ratio is the numerator of its sales factor as determined under s. 71.25 (9), Stats., and s. Tax 2.39 as if it were not a member of a combined group, except as provided in subd. 5. and pars. (c) to (e). Tax 2.61(7)(a)2.2. For combined group members that are insurers subject to tax under subch. VII of ch. 71, Stats., the numerator of the member’s modified sales factor is the numerator of its premiums factor as determined under s. 71.45 (3) (a), Stats., as if it were not a member of a combined group, except as provided in subd. 5. and pars. (d) and (e). Tax 2.61(7)(a)3.3. For combined group members that are “financial organizations” as defined in s. 71.25 (10), Stats., the numerator of the member’s modified sales factor is the numerator of its receipts factor as determined under ss. Tax 2.49 or 2.495, as applicable, as if it were not a member of a combined group, except as provided in subd. 5. and pars. (c) to (e). Tax 2.61(7)(a)5.5. The numerator of the modified sales factor may not include sales, premiums, or receipts which are not included in the combined unitary income as computed in sub. (6). Tax 2.61(7)(b)(b) Denominator of modified sales factor. The denominator of a combined group member’s modified sales factor ratio is the sum of the separate company denominators of each combined group member, so that each member of the combined group has the same modified sales factor denominator. Each combined group member’s separate company denominator is determined as follows: Tax 2.61(7)(b)1.1. For combined group members required to use the sales factor as provided in s. 71.25 (6) and (9), Stats., the member’s separate company denominator for purposes of the modified sales factor is the denominator of its sales factor as determined under s. 71.25 (9), Stats., and s. Tax 2.39 as if it were not a member of a combined group, except as provided in subd. 5. and pars. (d) and (e). Tax 2.61(7)(b)2.2. For combined group members that are insurers subject to tax under subch. VII of ch. 71, Stats., the member’s separate company denominator for purposes of the modified sales factor is the denominator of its premiums factor as determined under s. 71.45 (3) (a), Stats., as if it were not a member of a combined group, except as provided in subd. 5. and pars. (d) and (e). Tax 2.61(7)(b)3.3. For combined group members that are “financial organizations” as defined in s. 71.25 (10), Stats., the member’s separate company denominator for purposes of the modified sales factor is the denominator of its receipts factor as determined under ss. Tax 2.49 or 2.495, as applicable, as if it were not a member of a combined group, except as provided in subd. 5. and pars. (d) and (e). Tax 2.61(7)(b)4.4. For combined group members that are required to apportion their income using more than one factor under s. 71.25 (10), Stats., and ss. Tax 2.46, 2.465, 2.47, 2.475, 2.48, 2.50, or 2.502, the member’s separate company denominator for purposes of the modified sales factor is determined as provided in par. (g). Tax 2.61(7)(b)5.5. The separate company denominator for purposes of the modified sales factor may not include sales, premiums, or receipts which are not included in the combined unitary income as computed under sub. (6). Tax 2.61(7)(c)(c) Throwback sales. If a combined group member’s sale of tangible personal property is destined for a state in which any member of the combined group has nexus under the standards set forth in s. Tax 2.82, and that nexus relates to the unitary business, the sale may not be included in the numerator of the member’s modified sales factor. If a combined group member is subject to the controlled group election, that member’s numerator shall not include sales destined for a state in which any member of the combined group has nexus under the standards set forth in s. Tax 2.82. Tax 2.61(7)(d)1.1. Any transaction between members of the same combined group shall be excluded from the numerator and denominator of the modified sales factor. However, if the seller subsequently recognizes income or loss from the intercompany transaction under the provisions of s. 71.255 (4) (g), Stats., and sub. (6) (b), the seller’s modified sales factor shall include any factors corresponding to that income or loss in the year it recognizes the income or loss. Tax 2.61(7)(d)2.2. If a combined group member sells an item or service to another combined group member and the purchaser subsequently resells it to a third party outside of the combined group, the situs of the sale between the combined group members and the sale from the purchasing member to the third party shall both be determined based on the situs of the sale from the purchasing member to the third party, and the purchasing member shall exclude from the numerator and denominator of the modified sales factor the amount the selling member already included under subd. 1. attributable to the item or service that was resold. Tax 2.61 NoteExample: Combined Group YZ consists of Member Y and Member Z. Group YZ is on a calendar year. On December 30, 2009, Y sells a widget with a cost of $400 to Z, for $600. Y ships the widget to Z’s warehouse in Wisconsin. On January 30, 2010, Z resells the widget to Q, an unrelated third party, for $700. Z ships the widget to Q’s headquarters in Illinois. Assume both the sale by Y and the sale by Z are subject to combination, and assume that Z has nexus in Illinois. In 2009, Y did not recognize any gain on the sale to Z because the gain was deferred under the provisions of s. 71.255 (4) (g), Stats., and sub. (6) (b). Since the gain on the sale was not recognized, Y cannot include the $600 sale in its apportionment factors for 2009. In 2010, the year the widget was resold by Z, Y must include its $200 of gain on the sale to Z (= $600 - $400) in combined unitary income. Y must also include the sale amount of $600 in the modified sales factor denominator for 2010. Z must include its $100 gain on the sale to Q (= $700 - $600) in combined unitary income for 2010. However, since $600 of Z’s sales price has already been included in the combined group’s modified sales factor, Z may only include $100 of the sale amount in the modified sales factor denominator. Neither Y nor Z include these amounts in their modified sales factor numerators since both sales have a situs in Illinois where Z has nexus. Under the provisions of par. (c), Z’s nexus in Illinois applies to both itself and Y for purposes of applying the throwback rule. Tax 2.61(7)(d)3.3. If an item or service is sold between more than two combined group members before it is sold to a customer outside of the combined group, the situs of these intercompany sales shall be the situs of the ultimate sale to the customer outside of the combined group, and each purchasing combined group member shall exclude from the numerator and denominator of the modified sales factor the amount its selling member already included under subd. 1. Tax 2.61(7)(e)(e) Pass-through entities. A combined group member’s numerator and denominator for purposes of the modified sales factor generally includes the apportionment factors of pass-through entities owned directly or indirectly by the member, in proportion to the combined group member’s distributive share of the pass-through entity’s net income or loss included in the combined unitary income. However, a combined group member’s modified sales factor may not include apportionment factors of a real estate investment trust, regulated investment company, real estate mortgage investment conduit, or financial asset securitization investment trust. Additionally, subds. 1. and 2. apply in order to avoid duplication. For purposes of subds. 1. and 2., “sale” includes sales as defined in s. 71.25 (9), Stats., premiums under s. 71.45 (3) (a), Stats., or receipts under ss. Tax 2.49 or 2.495, as applicable, which would otherwise be included in a combined group member’s modified sales factor. Tax 2.61(7)(e)1.1. If a sale is made by a combined group member to a pass-through entity which is more than 50 percent owned, directly or indirectly, by members of the combined group as provided in subd. 3., the selling member shall subtract from its modified sales factor numerator and denominator, as applicable, an amount equal to the gross receipts of the sale multiplied by the sum of all combined group members’ interests in the pass-through entity as of the date of the sale. This subdivision applies to the extent the gross receipts of the sale are otherwise includable in combined unitary income. For purposes of this subdivision, a combined group member’s interest in the pass-through entity as of the date of the sale means the percentage of the pass-through entity’s income or loss that is allocable to the member in the taxable year of the sale. Tax 2.61 NoteExamples: 1) Combined Group LM consists of Member L and Member M. L owns a 40% interest in Partnership P. M owns a 60% interest in Partnership P. On March 1, 2010, L sells a widget to Partnership P for $10,000, and this sale is includable in Group LM’s combined unitary income. In its computation of apportionment factors for 2010, L must subtract an amount of $10,000 (= $10,000 x (40% + 60%)) from the modified sales factor denominator and, if applicable, from its numerator.
Tax 2.61 Note2) Assume the same facts as Example 1, except that Member L owns a 25% interest and M owns a 50% interest in Partnership P. In its computation of apportionment factors for 2010, L must subtract an amount of $7,500 (= $10,000 x (25% + 50%)) from the modified sales factor denominator and, if applicable, from its numerator.
Tax 2.61(7)(e)2.2. If a sale is made by a pass-through entity to a combined group member and more than 50 percent of the pass-through entity is directly or indirectly owned by members of the combined group as provided in subd. 3., each member with an interest in the pass-through entity shall subtract from its modified sales factor numerator and denominator, as applicable, any amount attributable to the sale. This subdivision applies to the extent the gross receipts of the sale are otherwise includable in combined unitary income. Tax 2.61 NoteExample: Combined Group ST consists of Member S and Member T. S owns a 20% interest in Partnership R. T owns an 80% interest in Partnership R. On October 1, 2010, Partnership R sells a widget to S for $20,000, and this sale is includable in Group ST’s combined unitary income. In its computation of apportionment factors for 2010, S must subtract an amount of $4,000 (= $20,000 x 20%) from its sales factor denominator and, if applicable, from its numerator. Similarly, T must subtract an amount of $16,000 (= $20,000 x 80%) from its sales factor denominator and, if applicable, from its numerator.
Tax 2.61(7)(e)3.3. For purposes of subds. 1. and 2., a pass-through entity is owned more than 50 percent by combined group members if the aggregate amount of the combined group members’ interests in the pass-through entity, without regard to any agreement to allocate gains or losses on a basis other than their capital interests, is more than 50 percent, or the combined group members taken as a whole have more than 50 percent of the management rights of the pass-through entity, as evidenced by the terms of the agreement under which the pass-through entity was formed, voting rights, provisions of state or federal law, or otherwise. Tax 2.61(7)(f)(f) Special rules for zeroes and negative numbers in factors. This paragraph applies the special rules in ss. 71.25 (6m) and 71.45 (3e), Stats., to combined group members as follows: Tax 2.61(7)(f)1.1. If both the numerator and denominator of a member’s modified sales factor are zero, none of the combined unitary income shall be apportioned to the member. The member’s separate company denominator has no effect on this determination. Tax 2.61(7)(f)2.2. If the numerator of a member’s modified sales factor is a negative number, none of the combined unitary income shall be apportioned to the member. The member’s separate company denominator has no effect on this determination. Tax 2.61(7)(f)3.3. If the numerator of a member’s modified sales factor is a positive number and the denominator is a negative number or zero, all of the combined unitary income shall be apportioned to the member. The member’s separate company denominator has no effect on this determination. If this subdivision would result in apportioning all of the combined unitary income to more than one member, the combined unitary income shall be apportioned to the members having positive modified sales factor numerators in proportion to the amounts of their numerators. Tax 2.61 NoteExample: Combined Group XY consists of Member X and Member Y. In its taxable year 2009, Group XY has combined unitary income of $50,000. X and Y have the following apportionment factors:
Tax 2.61 NoteThe modified sales factor denominator, or sum of the separate company denominators, is ($5,000). The amount of combined unitary income that would be apportioned to X is $12,500 (= $50,000 x ($5,000 / $20,000)). The combined unitary income that would be apportioned to Y is $37,500 (= $50,000 x ($15,000 / $20,000)).
Tax 2.61(7)(g)1.1. The numerator of the modified sales factor is the product of the member’s apportionment percentage computed under ss. Tax 2.46, 2.465, 2.47, 2.475, 2.48, 2.50, or 2.502, as applicable, as if the member were not a member of a combined group except as provided in subds. 3. to 5., and the member’s separate company denominator determined in subd. 2. Tax 2.61(7)(g)2.2. Except as provided in subds. 3. to 5., the member’s separate company denominator for purposes of the modified sales factor is the member’s total company sales that would be includable in the sales factor computed under s. 71.25 (9), Stats., as if the member were required to use the sales factor and were not a member of a combined group. Tax 2.61(7)(g)3.3. Neither the numerator nor denominator shall include amounts that are not included in or directly related to income included in the combined unitary income as computed under sub. (6). Tax 2.61(7)(g)4.4. Intercompany transactions shall be excluded or recognized in the numerator and denominator, as applicable, in the manner described in par. (d). Tax 2.61(7)(g)5.5. To the extent the computation in this paragraph involves the sales factor as provided in s. 71.25 (9), Stats., the provisions of pars. (c) and (e) apply. Tax 2.61(7)(h)(h) Alternative apportionment. A qualifying combined group may petition the department to use an alternative apportionment method, as provided in s. Tax 2.64. Tax 2.61(7)(i)(i) Apportionment factors for dual-sourced income. If a corporation is eligible to exclude foreign source income from combined unitary income under sub. (4) (d) to (f) and the Internal Revenue Code requires the corporation to source a transaction both within the United States and without the United States, the corporation shall exclude from its modified sales factor any amounts attributable to the portion of the transaction that constitutes foreign source income under sub. (4) (c). The amounts excluded from the modified sales factor under this paragraph shall be the amounts includable in the modified sales factor as if the transaction was sourced entirely within the United States, multiplied by the percentage of the transaction’s gross receipts that constitutes foreign source income under sub. (4) (c). Tax 2.61(8)(8) Income computation for groups doing business solely in Wisconsin. For combined groups that are engaged in business solely in Wisconsin, and therefore not eligible to use apportionment, each member’s net income subject to combination is determined on a separate entity basis and then adjusted to reflect the member’s status as a combined group member. These incomes are added together to arrive at the combined unitary income. Therefore, if some combined group members have net income from the unitary business and others in the same group have net loss from the unitary business, the combined group’s tax liability is based on the total aggregate net income or loss of the unitary business. When each member computes its share of the combined unitary income, the provisions of sub. (6) apply, except that the modifications in pars. (a) to (d) are required: Tax 2.61(8)(a)(a) Intercompany transactions. To the extent that sub. (6) (b) does not apply, intercompany transactions that consist of interest or other expenses paid, accrued, or incurred by one member to another are disregarded so that they neither increase nor decrease a member’s net income or loss. This paragraph does not apply to intercompany transactions which occurred in taxable years beginning before January 1, 2009 or to intercompany transactions where the income, expense, gain, or loss would not otherwise be subject to combination. Tax 2.61(8)(b)1.1. The net capital gain or loss, after applying any sharable net capital loss carryover, is first determined for the combined group as a whole in the manner described in sub. (6) (c) 1. to 3. If the result is a net capital gain for the group, the net capital gain is assigned to the members that would have a net capital gain from the unitary business if they were not members of the combined group, in proportion to the amount of that net capital gain. If the result is a net capital loss for the group, the net capital loss is assigned to the members that would have a net capital loss from the unitary business if they were not members of the combined group, in proportion to the amount of that net capital loss. Tax 2.61 NoteNote: See Example 2 under sub. (6) (c) 4. for an example of this assignment method.
Tax 2.61(8)(b)2.2. After applying subd. 1., each member computes its net capital gain or loss from separate entity items and applies the provisions of sub. (6) (c) 5. to 7., except that in applying the provisions of sub. (6) (c) 6., the applicable apportionment percentage is one hundred percent. Tax 2.61(8)(c)(c) Basis adjustments. A combined group member’s basis in stock of a subsidiary that is a member of the same combined group shall be adjusted in the manner prescribed in sub. (6) (f). Intercompany interest and other expenses shall be included in these adjustments, even if those transactions were disregarded in the computation of the member’s income for the taxable year as provided in par. (a). Tax 2.61(8)(d)(d) Earnings and profits. A combined group member’s earnings and profits shall be adjusted to reflect the undistributed earnings and profits of a subsidiary that is a member of the same combined group in the manner prescribed in sub. (6) (g). Intercompany interest and other expenses shall be included in these adjustments, even if those transactions were disregarded in the computation of the member’s income for the taxable year as provided in par. (a). Tax 2.61(9)(9) Net business losses. A combined group member may carry forward its net business loss as provided in ss. 71.26 (4) and 71.45 (4), Stats. A net business loss carryforward is an attribute of the separate corporation rather than of the combined group. However, s. 71.255 (6) (b) and (bm), Stats., provides that a combined group member may share all or a portion of its net business loss carryforward with the other members of its combined group if certain conditions are met. This subsection explains which net business loss carryforwards are sharable, how to compute the sharable amount, and how to apply the shared losses. The following rules apply: Tax 2.61(9)(a)(a) Sharable loss carryforwards. A combined group member may share its net business loss carryforward incurred in a taxable year beginning on or after January 1, 2009 with other combined group members to the extent that all of the following conditions are met: Tax 2.61(9)(a)1.1. The net business loss is attributable to combined unitary income included in a combined report. Tax 2.61(9)(a)2.2. The member originally computed the net business loss in the combined report for the same combined group as the combined group that will use the shared loss carryforward, regardless of whether corporations have joined or left the combined group in the intervening years. Tax 2.61(9)(a)3.3. The member is still a member of the combined group described in subd. 2. for the year the loss carryforward will be shared. Tax 2.61(9)(b)(b) Non-sharable loss carryforwards. A combined group member’s net business loss carryforward incurred in a taxable year beginning on or after January 1, 2009 that cannot be shared with other combined group members includes amounts attributable to the following: Tax 2.61(9)(b)3.3. Net business losses attributable to a different unitary business. Tax 2.61(9)(c)(c) Order of carryforwards. A combined group member shall apply net business loss carryforwards in the following order: Tax 2.61(9)(c)1.1. Net business loss carryforwards incurred by that same member in taxable years beginning before January 1, 2009, in the order that the underlying net business losses were incurred. Tax 2.61(9)(c)2.2. Sharable and non-sharable net business loss carryforwards under par. (d) incurred in taxable years beginning on or after January 1, 2009, in the order that the underlying net business losses were incurred. If the net business loss carryforward to be used consists of both a sharable amount and a non-sharable amount incurred in the same taxable year, the amount of sharable and non-sharable carryforward used shall be determined on a pro rata basis according to the amount of each type of carryforward available from that year. Tax 2.61(9)(c)3.3. For loss carryforwards shared in a taxable year that begins after December 31, 2011, pre-2009 net business loss carryforwards under par. (dm). Tax 2.61 NoteExample: Combined Group EFG consists of Member E, Member F, and Member G. E has the following loss carryforwards:
Tax 2.61 NoteIn 2010, E’s share of combined unitary income plus its separate entity items equal $14,000. After using its carryforwards to offset this income, E has $4,000 of remaining net business loss carryforward (= ($10,000) + ($6,000) + ($2,000) + $14,000). Of this amount, a portion is a sharable carryforward that may be applied against F and G’s shares of combined unitary income in the manner described in par. (d). Since loss carryforwards are applied in the order incurred, the $10,000 carryforward from 2008 is used in its entirety, and $4,000 of the 2009 carryforward is used. The portion of E’s remaining carryforward from 2009 that is sharable is $3,000 (= $4,000 x [$6,000 / $8,000]) and the portion that is non-sharable is $1,000 (= 4,000 x [$2,000 / $8,000]).
Tax 2.61 NoteIn 2012, E has the following loss carryforwards:
Tax 2.61 NoteIn addition, in 2012 E received a pre-2009 net business loss carryforward of $3,000 ($60,000 x 5%) from Member F. E’s share of combined unitary income plus its separate entity items for 2012 equal $16,000. After using its carryforwards to offset this income, E has $1,000 of remaining net business loss carryforward (= ($3,000) + ($1,000) + ($4,000) + ($6,000) + ($3,000) + $16,000). Since the loss carryforwards are first applied to the net business loss carryforwards incurred in 2009 and after, the $4,000 carryforward from 2009 and the $10,000 carryforward from 2011 are used in their entirety. The remaining $2,000 of loss carryforwards are applied to the pre-2009 net business loss carryforward. The remaining pre-2009 net business loss carryforward is $1,000.
Tax 2.61(9)(d)(d) Method of sharing. The amount of net business loss carryforward under par. (c) 2. eligible for sharing shall be computed and assigned as follows: Tax 2.61(9)(d)1.1. Each combined group member shall first apply its total available net business loss carryforward against its total Wisconsin income as computed under sub. (5) (a) to (g), including net income or loss attributable to separate entity items. A combined group member’s net business loss carryforward shall be considered used against its net income from separate entity items before its share of combined unitary income. Tax 2.61(9)(d)2.2. Each member shall then separate any remaining net business loss carryforward into the sharable amount and the non-sharable amount, as applicable, using the ordering rules in par. (c). The sharable net business loss carryforward amounts for each combined group member shall then be aggregated, except that any combined group member that elects not to share its sharable amount as provided in par. (h) may exclude some or all of its sharable amount from the aggregate sharable amount. Tax 2.61(9)(d)3.3. Except as provided in par. (g), relating to insurance companies, the aggregate sharable amount shall be assigned to each combined group member in proportion to its share of combined unitary income as computed in subs. (6) to (8), net of any losses from separate entity items or loss carryforwards already applied. The sharable amount may only be assigned to a member to the extent the member’s share of combined unitary income has not already been offset by losses taken into account under subd. 1. An amount may not be assigned to a combined group member whose share of combined unitary income, net of any losses already applied by the member under subd. 1., is zero or less. Tax 2.61(9)(d)4.4. Any remaining sharable amount remains an attribute of the corporation that originally incurred the loss. The aggregate sharable amount used under subd. 3. shall be considered used proportionately from the sharable net business loss carryforwards of the corporations which contributed to the aggregate sharable amount. Tax 2.61 NoteExample: Combined Group ABCD consists of Member A, Member B, Member C, and Member D. The corporations have the following net business loss carryforwards and net income amounts in 2010:
Tax 2.61 NoteAssume all of A and B’s net business loss carryforwards are sharable. The aggregate sharable amount is $40,000 (= $24,000 + $16,000). This amount may be allocated to C and D based upon their respective shares of combined unitary income after applying any losses from separate entity items. C’s adjusted share of combined unitary income is $20,000 (its $1,000 carryforward is considered used against its $3,000 net income from separate entity items before its share of combined unitary income) and D’s adjusted share of combined unitary income is $5,000 (= $20,000 - $15,000). The aggregate sharable amount exceeds the sum of C and D’s adjusted shares of the combined unitary income, which is $25,000 (= $20,000 + $5,000). Thus, C and D’s adjusted shares of combined unitary income are fully offset by the aggregate sharable amount.
Tax 2.61 NoteAfter the aggregate sharable amount is applied, the remaining aggregate sharable amount is $15,000 (= $40,000 - $25,000). Since the remaining sharable amount remains an attribute of the corporation that originally incurred the loss, at the end of 2010, A would have $9,000 (= $15,000 x ($24,000 / $40,000)) in remaining net business loss carryforward, and B would have $6,000 (= $15,000 x ($16,000 / $40,000)) in remaining net business loss carryforward.
Tax 2.61(9)(dm)1.1. For a combined group member’s first taxable year beginning after December 31, 2011, the member may, after using the pre-2009 net business loss carryforward to offset its own income for the taxable year, and after using sharable losses to offset its own income for the taxable year, use 5 percent of the pre-2009 net business loss carryforward to offset the income of all other members of the combined group for the taxable year and for each of the 19 subsequent taxable years. Tax 2.61 NoteExample: Member A of Wisconsin Combined Group ABC has pre-2009 net business loss carryforwards of $100 million as of December 31, 2008. A’s share of the combined group’s income is $2 million in 2009, $3 million in 2010, and $5 million in 2011. A’s one-time calculation of the annual 5% sharable amount is $4.5 million, computed as follows: [$100 million pre-2009 net business loss carryforward less the taxable income offset by the net business loss carryforward ($2 million in 2009, $3 million in 2010, and $5 million in 2011) multiplied by 5 percent].
Tax 2.61 NoteIn 2012 Member A’s share of the combined group’s Wisconsin income is $1 million. Member A first applies its pre-2009 net business loss carry-forward against its $1 million share of the combined group’s Wisconsin income. The remaining members of the group may use the $4.5 million sharable loss to offset the remaining group income on a proportionate basis. Assuming the combined group has enough income in 2012 to fully use the entire $4.5 million in pre-2009 net business loss carryforward, the pre-2009 net business loss carryforward available in 2013 is $84.5 million ($90 million total sharable loss less $1 million of Member A’s income offset by the net business loss carry-forward, less $4.5 million sharable loss utilized by the corporation in 2012). If Member A’s share of the combined group’s income is $0 for all the remaining years of the pre-2009 carry-forward, and the remaining members of the combined group were eligible to share the full $4.5 million net business loss carry-forward each year, the sharable pre-2009 net business loss available in 2031 will be $3.5 million ($4.5 million annual sharable loss computed in 2012 less $1 million loss used by Member A in 2012).
