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).
Tax 2.61(9)(dm)2.2. Except as provided in par. (g), relating to insurance companies, the sharable pre-2009 net business loss carryforward under subd. 1. 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. An amount may not be assigned to a combined group member whose share of combined unitary income is zero or less. Any remaining sharable amount becomes part of the combined group’s pre-2009 net business loss carryforward that may be shared by all combined group members in subsequent years. Tax 2.61 NoteExample: Member D of Combined Group DEF has a pre-2009 net business loss carry-forward of $2 million as of January 1, 2012. The 5% sharable amount allowed to members E and F in each year for taxable years 2012 through 2031 is $100,000 ($2 million net business loss carryforward multiplied by 5%). Member E’s proportional share of the $100,000 sharable net business loss in 2012 is $30,000. After using all other allowable losses, Member E has $20,000 in income remaining to offset against its share of the pre-2009 net business loss carryforward. The remaining $10,000 net business loss carryforward not used by Member E in 2012 becomes part of the combined group’s pre-2009 net business loss carryforward that may be shared by all combined group members in 2013 and is in addition to the 5% net business loss carryforward previously computed. As a result, the net business loss carryforward available in 2013 is $110,000 ($100,000 combined group yearly sharable loss plus Member E’s $10,000 proportional share of the $100,000 loss in 2012 that was not fully utilized by Member E in 2012).
Tax 2.61 NoteExample: As of December 31, 2008, Member G of Combined Group GHI has a loss carryforward of $30,000 that is in the 14th year of the 15 year carryforward period under s. 71.26 (4) (a), Stats. Member G does not have any income to offset the $30,000 loss carryforward in its taxable years beginning in 2009, 2010, or 2011. For taxable years beginning on or after January 1, 2012, Member G is allowed to use the $30,000 pre-2009 net business loss carryforward to offset any of its own income first, then offset its proportional share of Combined Group GHI’s income, and finally, any remaining loss may be shared proportionately among the other members of Combined Group GHI. Under s. 71.26 (4) (b), Stats., Member G’s pre-2009 net business loss carryforward of $30,000 begins a new carryforward period of 20 years from its taxable year beginning in 2012. Tax 2.61(9)(e)(e) Departing combined group members. Except as provided in subds. 1. and 2., if a corporation leaves a combined group or is no longer eligible to be a combined group member, the corporation’s remaining net business loss carryforward may not be shared with any other combined groups but shall be available only to that corporation. The following exceptions apply: Tax 2.61(9)(e)1.1. If a subgroup of two or more corporations leaves a combined group on the same date and immediately thereafter the corporations become a separate combined group or together become members of a new combined group, those corporations may share their remaining sharable net business loss carryforwards attributable to the former combined group with one another. For purposes of the computations in par. (d), the new combined group’s combined unitary income shall be used in place of the former combined group’s combined unitary income. This subdivision also applies to combined groups that merge to become a new combined group by operation of the controlled group election as described in s. Tax 2.63 (2) (c). Tax 2.61(9)(e)2.2. If a corporation leaves a combined group or is no longer eligible to be a combined group member, but subsequently rejoins the combined group, the corporation may share its net business loss carryforward with that combined group to the extent the carryforward otherwise qualifies as a sharable loss carryforward under par. (a). Tax 2.61(9)(f)(f) New combined group members. If a new member joins the combined group or is formed within the combined group, the member may use the net business loss carryforwards shared by other combined group members in the same manner as described in this subsection, even if those losses originated before the new member was part of the group. Tax 2.61(9)(g)(g) Special rules for insurance companies. Under s. 71.45 (4), Stats., the net business loss of an insurance company cannot include the dividends received deduction provided in s. 71.26 (3) (j), Stats. Further, an insurance company may not use net business loss carryforwards in cases where its franchise or income tax liability is limited by two percent of its gross premiums as provided in s. 71.46 (3), Stats. Therefore, the following rules apply: Tax 2.61(9)(g)1.1. For purposes of applying s. 71.45 (4), Stats., if a dividend qualified for both the dividends received deduction under s. 71.26 (3) (j), Stats., and the elimination of dividends under sub. (6) (e), the dividend is considered to be eliminated under sub. (6) (e) rather than deducted under s. 71.26 (3) (j), Stats. Tax 2.61(9)(g)2.2. If an insurance company is a member of a combined group that is engaged in business both within and outside Wisconsin and has a net business loss, the dividends received deduction that shall be added back to that loss includes the insurance company’s apportioned share of the total dividends received deduction which was deducted from the combined unitary income under s. 71.26 (3) (j), Stats., regardless of whether the insurance company was the combined group member which received the dividend. Tax 2.61(9)(g)3.3. If an insurance company is a combined group member and its tax liability measured by its total Wisconsin net income as provided in sub. (5), including any net business loss carryforwards available from other combined group members, exceeds two percent of its gross premiums as defined in s. 76.62, Stats., plus 7.9 percent of the income described in sub. (5) (f), its tax liability shall be limited to two percent of the gross premiums plus 7.9 percent of the income described in sub. (5) (f). If the insurance company’s tax liability is limited in this manner, its business loss carryforwards may not be shared with any other combined group members, and if the group is otherwise sharing loss carryforwards, loss carryforwards may not be assigned to the insurance company. Tax 2.61(9)(h)1.1. Although a combined group member is entitled to the benefit of a net business loss carryforward, the member may elect not to use a portion or any of the available net business loss carryforward for a taxable year. This election does not reduce the amount of carryforward available for the following taxable year nor suspend the carryforward period provided in ss. 71.26 (4) and 71.45 (4), Stats. Tax 2.61(9)(h)2.2. A combined group member may also elect not to share a portion or any of its sharable net business loss carryforward with other combined group members. However, if the corporation shares any part of its sharable net business loss carryforward, the shared amount shall be divided among all members in the manner prescribed in this subsection, except as otherwise provided in pars. (d), (e) 1., and (g) 3. A combined group member’s election under this subdivision is effective only for the taxable year in which the election is made and shall have no effect on the member’s ability to share net business loss carryforwards in future taxable years. Tax 2.61(9)(i)1.1. Notwithstanding the provisions of this subsection, the total amount of net business loss carryforward that may be used by a combined group member or shared with other combined group members for a taxable year is limited by section 382 of the Internal Revenue Code as provided in s. 71.26 (3) (n), Stats. Section 382 of the Internal Revenue Code shall be applied without regard to the federal consolidated return regulations under section 1502 of the Internal Revenue Code. Tax 2.61(9)(i)2.2. If a combined group member is acquired by another combined group member, section 381 of the Internal Revenue Code controls whether the acquiring corporation may succeed to the target corporation’s net business loss carryforwards. Wisconsin follows section 381 of the Internal Revenue Code, but modifies it in s. 71.26 (3) (n), Stats., so that it applies to Wisconsin net business loss carryforwards instead of federal net operating loss carryovers. If the acquirer succeeds to the target corporation’s net business loss carryforwards, the target corporation’s carryforwards shall be treated as originally incurred by the acquiring corporation and shall maintain their character as sharable or non-sharable. Tax 2.61(9)(i)3.3. The separate return limitation year provisions of the federal regulations under section 1502 of the Internal Revenue Code do not apply to net business loss carryforwards. The provisions of this subsection apply in place of these limitations. Tax 2.61(10)(10) Credits. A credit is an attribute of the separate corporation rather than of the combined group, and credits are computed for each corporation separately. However, s. 71.255 (6) (c), Stats., provides that a combined group member may share all or a portion of its research credits with the other members of the combined group. For purposes of this subsection, the term “research credit” means only the research expense credit under ss. 71.28 (4) or 71.47 (4), Stats., and the research facilities credit under ss. 71.28 (5) or 71.47 (5), Stats. This subsection explains how credits are computed and applied as well as the special rules that apply to research credits. Tax 2.61(10)(a)(a) Nonrefundable credits other than research credits. A combined group member’s nonrefundable credits other than research credits, including carryforwards of those credits, may only be used by that combined group member to offset the tax liability attributable to its own taxable income as computed under sub. (5). Tax 2.61(10)(b)(b) Refundable credits. Any refundable credits computed by a combined group member shall be claimed on the combined return and refunded to the designated agent to the extent not used to offset the total tax liability reported on the combined return. Tax 2.61(10)(c)(c) Sharing of research credits. If a combined group member computes a research credit, or has a carryforward of a research credit, the member may share a portion or all of the credit with the other members. For purposes of determining the sharable amount, the provisions of sub. (9) (e) and (f) apply to available research credits in the same manner as they apply to net business loss carryforwards. Research credit carryforwards incurred in taxable years beginning before January 1, 2009 are sharable to the extent the corporation with the credits would have been a member of the combined group had s. 71.255, Stats., been in effect and required combined reporting in those years. The method of sharing these credits is as follows: Tax 2.61(10)(c)1.1. Each combined group member shall first apply its total available credits, including its research credits, against its gross tax liability, if any, including its tax liability attributable to separate entity items. A combined group member’s available credits shall be considered used against its tax liability from separate entity items before its tax liability from its share of combined unitary income. Available credits shall be used in the order specified in s. 71.30 (3), Stats. A combined group member may elect to apply a carryforward of a research credit before applying the research credit computed for the current taxable year. Tax 2.61(10)(c)2.2. Each member shall then separate any remaining available research credit into the sharable and non-sharable amount, as applicable. The ordering rules provided in sub. (9) (c), relating to net business loss carryforwards, also apply to research credit carryforwards. The sharable research credits for each combined group member shall then be aggregated, except that any combined group member that elects not to share its sharable amount may exclude some or all of its sharable amount from the aggregate sharable amount. Tax 2.61(10)(c)3.3. The sharable amount shall be assigned to each combined group member in proportion to its tax liability from its share of combined unitary income. The sharable amount may only be assigned to a member to the extent the member’s tax liability from combined unitary income has not already been offset by other credits and carryforwards applied by that member under subd. 1. An amount may not be assigned to a combined group member whose tax liability from combined unitary income has been fully offset by other credits. Tax 2.61(10)(c)4.4. Any remaining sharable amount remains an attribute of the corporation that originally generated the credit. The aggregate sharable amount used under subd. 3. shall be considered used proportionately from the sharable research credits of the corporations which contributed to the aggregate sharable amount. Tax 2.61 NoteExample: Combined Group FGH consists of Member F, Member G, and Member H. F, G, and H have the following amounts in 2010:
Tax 2.61 NoteAssume all of the research expense credit carryforward is sharable. The aggregate sharable amount is $25,000 (= $15,000 + $10,000). This amount may be assigned to H to the extent of its tax liability from its share of the combined unitary income after applying its own credits. After H applies its own credits, the remaining tax liability from combined unitary income is $5,000 (= ($17,000) + $2,000 + $20,000; its $17,000 economic development credit is applied against tax liability from separate entity items before tax liability from combined unitary items). Since this amount is less than the aggregate sharable amount, the entire remainder of H’s tax liability from combined unitary income ($5,000) is offset by the aggregate sharable amount.
Tax 2.61 NoteAfter the aggregate sharable amount is applied, the remaining aggregate sharable amount is $20,000 (= $25,000 - $5,000). Since the remaining sharable amount remains an attribute of the corporation that originally generated the credit, at the end of 2010, F would have $12,000 (= $20,000 x ($15,000 / $25,000)) in remaining research credit carryforward, and G would have $8,000 (= $20,000 x ($10,000 / $25,000)) in remaining research credit carryforward.
Tax 2.61(10)(c)5.5. The provisions of sub. (9) (h), as they relate to elections applicable to net business loss carryforwards, apply also to available research credits under this paragraph. Tax 2.61(10)(d)(d) Exception for funded research. If a combined group member incurs expenses that are otherwise qualified research expenses under section 41(d) of the Internal Revenue Code but for the fact that the research is funded by another combined group member, the expenses shall be considered qualified research expenses of the combined group member performing the research, and the reimbursement from the combined group member funding the research may not be considered a qualified research expense of the funding member. Regardless of where the funding member is located, the research must be performed in this state to qualify for the research credit for Wisconsin purposes. Tax 2.61 NoteExample: Combined Group AB consists of Member A and Member B. In Year 1, B performs research that would be “qualified research” under section 41(d) of the Internal Revenue Code, except for the fact that A and B have entered into a contract where A provides funding for all of B’s research at a markup of 10%. Neither A nor B perform any other research. During Year 1, A paid B $220,000 for research services, all of which would be “qualified research” for B if the research were not funded by A. On AB’s Year 1 combined return, B may include $200,000 of qualified research expenses (= $220,000 - $20,000 markup) in its computation of the research credit. However, A may not compute any research credit. Since A and B are members of the same combined group, the funding arrangement between A and B is ignored for purposes of computing the research credit. Tax 2.61(10)(e)(e) Applicability of Internal Revenue Code. The provisions of sub. (9) (i), as they relate to net business loss carryforwards, also apply to carryforwards of credits under this subsection. Tax 2.61 HistoryHistory: EmR1001: emerg. cr. eff. 1-15-10; CR 09-064: cr. Register April 2010 No. 652, eff. 5-1-10; CR 12-006: am. (9) (intro.), (a) (intro.), 1., (b) (intro.), r. (9) (b) 1., r. and recr. (9) (c) Register July 2012 No. 679, eff. 8-1-12; CR 13-078: am. (7) (a) 4., (b) 4., (g) (intro.), 1. Register April 2014 No. 700, eff. 5-1-14; CR 16-046: am. (9) (c) 3. (Example) Register January 2018 No. 745, eff. 2-1-18; CR 19-141: am. (4) (b) 1., 4., (6) (a) 3., r. and recr. (7) (h) Register September 2020 No. 777, eff. 10-1-20; correction in (6) (a) 3. made under s. 35.17, Stats., Register September 2020 No. 777. Tax 2.61 AnnotationCross Reference: See s. Tax 2.60 for definitions that relate to this section.
Tax 2.62(1)(1) Scope. Section 71.255 (2) (a), Stats., provides that a corporation engaged in a unitary business with one or more other corporations in the same commonly controlled group is generally required to determine its share of income from that unitary business using a combined report. Section 71.255 (1) (n), Stats., defines “unitary business.” The purpose of this section is to provide further interpretation of the meaning of “unitary business.” Tax 2.62(2)(2) General. A unitary business is a single, commonly controlled economic enterprise for which the components of the enterprise are sufficiently interdependent, integrated, and interrelated through their activities to such a degree that if the enterprise is doing business both within and outside a state, the state is permitted under the U. S. Constitution to tax a fairly apportioned share of the total net income of the enterprise. Tax 2.62(2)(a)(a) Commonly controlled. A unitary business may consist of a single entity or a group of two or more related entities, including corporations, tax-option corporations, partnerships, limited liability companies, sole proprietorships, estates, and trusts. A group of related entities may satisfy the commonly controlled requirement of a unitary business if they are related in any of the following ways: Tax 2.62(2)(a)1.1. The entities are related under the provisions of section 267 of the Internal Revenue Code which disallow losses on sales between related persons. By reference, this includes the rules in section 707(b) of the Internal Revenue Code, relating to partnerships. Tax 2.62(2)(a)2.2. The entities are related under section 1563 of the Internal Revenue Code, which defines a “controlled group of corporations” for federal income tax purposes. Tax 2.62(2)(a)3.3. The entities are corporations in the same “commonly controlled group” for Wisconsin purposes. “Commonly controlled group” has the meaning given in s. 71.255 (1) (c), Stats., as further interpreted by s. Tax 2.61 (3). Tax 2.62(2)(b)(b) Components of enterprise. The components of a commonly controlled economic enterprise may consist either of divisions of a single entity or of multiple entities, or both. For purposes of this section, the term “participants” is used to describe these components of an economic enterprise. Tax 2.62(2)(c)(c) Sufficiently interdependent, integrated, and interrelated. Tax 2.62(2)(c)1.1. In general, the participants in a commonly controlled economic enterprise are considered a unitary business if their activities generate a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts. Subsection (3) presents indicators that sharing or exchange and flow of value are present. Tax 2.62(2)(c)2.2. The participants in a commonly controlled economic enterprise may also be considered a unitary business if there is unity of operation and use, as further explained in sub. (4). Tax 2.62(2)(c)3.3. Under s. 71.255 (1) (n), Stats., the definition of “unitary business” shall be construed to the broadest extent permitted by the U.S. Constitution. Thus, case law provides additional guidance to determine whether a unitary business exists. Subsection (5) presents factors that have been considered by the U.S. Supreme Court to be determinative of a unitary business. Tax 2.62(2)(d)(d) Fairly apportioned. If a unitary business has nexus in Wisconsin and is doing business both within and outside Wisconsin, an apportioned share of the unitary business’s net income is taxable by Wisconsin under the rules of this paragraph. If a unitary business is doing business only in Wisconsin, no apportionment applies and all of the unitary business’s income is taxable by Wisconsin unless specifically exempt. The following rules apply to the apportionment of income of a unitary business: Tax 2.62(2)(d)1.1. For any participant in the unitary business that is not a member of a commonly controlled group of corporations as provided in s. Tax 2.61 (3), the participant’s income from the unitary business is generally apportioned in the manner provided by ss. Tax 2.39, 2.45, 2.46, 2.465, 2.47, 2.475, 2.48, 2.49, 2.495, 2.50, or 2.502, as applicable. However, the participant may be required to apportion its income under the combined reporting rules provided in s. Tax 2.61 if certain conditions apply, as further explained in s. Tax 2.61 (2) (f). Tax 2.62(2)(d)2.2. For any participant in the unitary business that is a member of a commonly controlled group of corporations as provided in s. Tax 2.61 (3), the participant’s income from the unitary business shall be apportioned under the combined reporting rules provided in s. Tax 2.61. Tax 2.62(2)(d)3.3. A corporation that is engaged in the unitary business may have both apportionable income and nonapportionable income, as provided in s. 71.25 (5), Stats. Tax 2.62(2)(e)(e) Members of unitary business that are not in combined group. It is possible that one or more members of a unitary business may not be members of a combined group. Members of a unitary business that may not be members of a combined group include the following: Tax 2.62(2)(e)1.1. Individuals or entities that are considered “pass-through entities” for purposes of combined reporting under s. 71.255 (1) (m), Stats. This includes partnerships, limited liability companies treated as partnerships, tax-option corporations, estates, trusts, real estate investment trusts, regulated investment companies, real estate mortgage investment conduits, and financial asset securitization investment trusts. Tax 2.62(2)(e)2.2. Corporations whose net income and apportionment factors are not subject to combination under the water’s edge rules of s. Tax 2.61 (4). Tax 2.62(2)(e)3.3. Corporations that are related under the rules of sections 267 or 1563 of the Internal Revenue Code but are not in a “commonly controlled group” as provided under s. Tax 2.61 (3). Tax 2.62(2)(f)(f) Members of combined group that are not in unitary business. A combined group may include corporations that are not engaged in a unitary business if the combined group’s designated agent has properly made the controlled group election as provided in s. Tax 2.63. Tax 2.62(3)(a)(a) General. Participants in a commonly controlled economic enterprise have sharing or exchange of value among them and a significant flow of value to the separate parts, and thus are a unitary business, if any of the following are true:
