Tax 2.63
Tax 2.63
Controlled group election. Tax 2.63(1)(1)
Scope. Section
71.255 (2m), Stats., allows a commonly controlled group of corporations to elect to include every member of the commonly controlled group in a single combined group for combined reporting purposes. This section provides rules relating to making the election, continuity of the election, and limitations of the election.
Tax 2.63(2)
(2) Making the election. Preapproval by the department is not required to make the election. The designated agent of the combined group shall make the election on behalf of the group as described in this subsection. Paragraph
(c) provides rules relating to identifying the designated agent in cases where a commonly controlled group consists of corporations that previously filed as more than one combined group.
Tax 2.63(2)(a)
(a) Time period for making election. The designated agent shall make the election on an original, timely filed combined return which includes all members of the commonly controlled group. A return shall be considered timely if it is filed by the designated agent on or before the due date of the return, including applicable extensions. If the return is timely filed without an extension, the designated agent may make the election by filing an amended combined return on or before the end of the automatic 7-month extension period provided in s.
71.24 (7) or
71.44 (3), Stats. A return filed after the end of the automatic 7-month extension period, whether an original or amended return, may not constitute a valid controlled group election for the taxable year to which the return applies, although an election may be filed for a subsequent taxable year subject to the limitation in sub.
(3) (c).
Tax 2.63(2)(b)1.1. For the first year the designated agent makes the election, the designated agent shall check a designated line of the combined return to indicate that a controlled group election is in effect.
Tax 2.63(2)(b)2.
2. For the first year the designated agent makes the election, the designated agent shall include a statement with the combined return which lists every corporation that is a member of the commonly controlled group, and indicates that each corporation has agreed to be bound by the election and that the election shall apply to any member that subsequently enters the group.
Tax 2.63(2)(c)1.1. If a commonly controlled group consists of corporations that previously filed as more than one combined group, the controlled group election creates a new combined group. For purposes of application of loss carryforwards and research credits under s.
Tax 2.61, each former combined group included in the new combined group is a subgroup as described in s.
Tax 2.61 (9) (e) 1. and the corporations within each subgroup are eligible to share loss carryforwards and research credits from taxable years prior to the election with all the members of that subgroup, to the extent sharing would otherwise be allowed under s.
Tax 2.61 (6) (c),
(9), and
(10).
Tax 2.63(2)(c)2.
2. A new combined group described in subd.
1. shall appoint the designated agent of one of the former combined groups to be the designated agent, and the provisions of s.
Tax 2.65 apply to that designated agent. The corporation that files the first combined return under the election shall be deemed the appointed designated agent for the new combined group.
Tax 2.63(3)(a)
(a)
Ten-year period. The controlled group election is binding for and applicable to all members of the commonly controlled group for the taxable year for which the election is made and for the next nine taxable years. The election is also binding on any corporations that join the commonly controlled group during the period the election is in effect. Any corporation that departs the commonly controlled group is not bound by the election for the taxable years after its departure from the group, except if par.
(b) applies or if the corporation rejoins the commonly controlled group.
Tax 2.63(3)(b)1.1. When a merger or acquisition occurs between two combined groups where the acquiring group has not made the controlled group election but the target group has made the controlled group election, the controlled group election of the target group terminates on the date of the transaction. However, the designated agent of either the acquiring group or the target group may make the controlled group election with respect to all corporations that are in its commonly controlled group as determined after considering the effect of the merger or acquisition, provided the requirements in sub.
(2) are met and the election is not precluded by par.
(c).
Tax 2.63(3)(b)2.
2. When a merger or acquisition occurs between two combined groups where the acquiring group has made the controlled group election but the target group has not made the controlled group election, all corporations in the commonly controlled group as determined after considering the effect of the merger or acquisition are bound by the acquirer's controlled group election.
Tax 2.63(3)(b)3.
3. When a merger or acquisition occurs between two combined groups that have both made the controlled group election, the expiration date of the controlled group election for the entire commonly controlled group as determined after considering the effect of the merger or acquisition is the expiration date of the acquirer's controlled group election.
Tax 2.63(3)(b)4.
4. When a commonly controlled group that has made the controlled group election divests stock of one or more subgroups of members so that the subgroups are no longer in the commonly controlled group, those subgroups are no longer bound by the controlled group election, except if both the book value of total assets of a subgroup and its total fair market value are greater than those of the divesting group, then the subgroup is bound by the controlled group election and the controlled group election of the divesting group terminates on the date of the transaction.
Tax 2.63(3)(c)1.1. After the ten-year period described in par.
(a), the designated agent may renew the election for another ten taxable years, without prior written approval from the department. The renewal shall be made on an original, timely filed return for the first taxable year after completion of the ten-year period. Except as provided in subd.
3., the requirements for a renewal of an election are the same as for making the original election as described in sub.
(2).
Tax 2.63(3)(c)2.
2. If the election is not timely renewed as provided in subd.
1., the election is considered to be revoked by the designated agent. In the case of a controlled group election that is not timely renewed, a new election may not be permitted in any of the next three taxable years.
Tax 2.63(3)(c)3.
3. The designated agent may renew the election on an amended return filed after the end of the automatic 7-month extension period provided in s.
71.24 (7) or
71.44 (3), Stats., only if the original return was consistent with the controlled group election remaining in place and that the failure to comply with the requirements of sub.
(2) was due to oversight or mistake.
Tax 2.63 History
History: EmR1001: emerg. cr. eff. 1-15-10;
CR 09-064: cr.
Register April 2010 No. 652, eff. 5-1-10;
CR 12-011: r. (4)
Register July 2012 No. 679, eff. 8-1-12; correction in (3) (a), (b) 1. under s.
13.92 (4) (b) 7. Register July 2012 No. 679.
Tax 2.63 Annotation
Cross References: See s. Tax 2.60 for definitions that relate to this section. See s. Tax 2.61 (2) (b) for more information on the effect of the controlled group election. See s. Tax 2.65 for more information on the duties of the designated agent. See s. Tax 2.67 for more information on combined returns.
Tax 2.64
Tax 2.64
Alternative apportionment for combined groups including specialized industries. Tax 2.64(1)(1)
Scope. Section
71.255 (5) (a), Stats., provides that a combined group is generally required to use the modified sales factor method to apportion its combined unitary income. However, s.
71.255 (5) (b), Stats., provides that a qualifying combined group may petition the department to use an alternative apportionment method. This section provides rules relating to the eligibility requirements, continuity, and limitations of this privilege.
Tax 2.64(2)(a)
(a)
Qualifying combined group. A qualifying combined group is a combined group for which 30 percent or more of the combined unitary income would, in the absence of combined reporting, be required to be apportioned using more than one factor under a method described in ss.
Tax 2.46,
2.465,
2.47,
2.475,
2.48,
2.50, or
2.502.
Tax 2.64(2)(b)
(b) Requirements for petition. The designated agent of the combined group requesting an alternative apportionment method shall file a petition no less than 60 days before filing the first original, timely filed return using the alternative method. If a return using the modified sales factor method has already been timely filed without an extension, the designated agent may file an amended return using the alternative method if it files a petition no less than 60 days before the end of the automatic 7-month extension period provided in ss.
71.24 (7) or
71.44 (3), Stats., as applicable, and the petition is approved by the department. The petition shall include the following:
Tax 2.64(2)(b)1.
1. The full name, address, and federal employer identification number of each member of the combined group.
Tax 2.64(2)(b)2.
2. The combined group's taxable year for which the alternative apportionment method as requested would begin to be effective.
Tax 2.64(2)(b)3.
3. A description of the alternative apportionment method requested.
Tax 2.64(2)(b)4.
4. A complete and precise statement of the reasons for the modification requested, including why the modified sales factor method would result in an unfair representation of the degree of unitary business activity in this state. This statement shall provide clear and convincing evidence of its assertions.
Tax 2.64(2)(b)5.
5. A calculation of the combined group's tax liability for the first taxable year to which the petition applies and for the previous taxable year, using the apportionment method prescribed in s.
71.255 (5) (a), Stats., for both years. For the previous taxable year's computation, this amount shall be computed as if a combined report including those same corporations were required in the previous taxable year, even if it was before s.
71.255, Stats., was in effect.
Tax 2.64(2)(b)6.
6. A calculation of the combined group's tax liability for the first taxable year to which the petition applies and for the previous taxable year, similar to the calculation in subd.
5., but using the requested apportionment method instead of the modified sales factor method.
Tax 2.64(2)(b)7.
7. A calculation of each combined group member's tax liability for the first taxable year to which the petition applies and for the previous taxable year, similar to the calculations in subds.
5. and
6., computed as if each corporation were not a member of the combined group and using the method prescribed 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 to each corporation.
Tax 2.64(2)(b)8.
8. A statement as to whether any combined group member is being audited by the department at the time of the petition.
Tax 2.64(2)(c)
(c) Limitation. The department may not grant a taxpayer's petition for an alternative apportionment method if the alternative method would result in a lower tax liability than the sum of the tax liabilities of the combined group members computed as if they were not members of a combined group and using the apportionment method prescribed 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 to each corporation.
Tax 2.64(2)(d)1.1. The petition shall be approved by the department in writing. The department shall approve or reject the petition within 45 days after receiving it. However, failure of the department to act within 45 days or acceptance of a return using the alternative apportionment method does not constitute approval of the petition or method used. The department may, after receipt and review of the petition, require additional information necessary to determine whether the modified sales factor method does not fairly represent the degree of unitary business activity in this state. If the department does not have all the required information to approve the petition, the 45-day period described in this paragraph is suspended until the information is provided. Filing of a petition does not affect the accrual of interest on underpayment of estimated taxes.
Tax 2.64(2)(d)2.
2. If the designated agent timely files a petition as described in par.
(b) but does not receive an order from the department approving or rejecting the petition before the due date of the return, the designated agent must file the return using the modified sales factor method. If the department subsequently approves the petition, the designated agent may amend the return using the approved method, in which case the amended return must contain the attachments described in par.
(e).
Tax 2.64(2)(e)
(e) Attachments to return. For each combined return on which the alternative apportionment method is used, the designated agent shall include the following documentation with the return:
Tax 2.64(2)(e)1.
1. A copy of the department's written approval for the alternative apportionment method.
Tax 2.64(2)(e)2.
2. A calculation of the combined group's tax liability computed as if it used the modified sales factor method instead of the alternative apportionment method.
Tax 2.64(2)(e)3.
3. A calculation of each combined group member's tax liability for the taxable year included in the combined return computed as if each corporation were not a member of the combined group and using the apportionment method prescribed 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 to each corporation.
Tax 2.64(3)(a)1.1. If the department approves the alternative apportionment method, the combined group engaged in that unitary business shall continue to use the alternative apportionment method for six taxable years following the first year for which the alternative method was approved, except as provided in par.
(b).
Tax 2.64(3)(a)2.
2. No later than 60 days before filing the first return for a period subsequent to the expiration of the seven-year period in subd.
1., the designated agent of the combined group shall file a new petition with the department in order to continue using the alternative apportionment method. The new petition is subject to the same requirements as the original petition except that the designated agent shall include the calculations described in sub.
(2) (b) 5. to
7. for
the first year to which the renewed election applies and each of the years to which the previous election applied.
Tax 2.64(3)(b)1.1. If the sum of the tax liabilities of the combined group members for the taxable year computed as if they were not combined group members, as reported in the attachment described in sub.
(2) (e) 3., is greater than the combined group's tax liability using the alternative apportionment method, the combined group may not use the alternative method for the taxable year. Instead, the combined group shall use the modified sales factor method. For each of the remaining taxable years in the seven-year period described in par.
(a) 1., the combined group shall use the alternative apportionment method to the extent the limitations of this paragraph do not apply.
Tax 2.64(3)(b)2.
2. If the combined group is no longer a qualifying combined group as described in sub.
(2) (a), the combined group may no longer use the alternative apportionment method beginning with the year the combined group no longer qualifies. If it subsequently becomes a qualifying combined group in a later taxable year, the designated agent of the group may file a new petition for an alternative apportionment method.
Tax 2.64 Note
Note: Mail petitions for alternative apportionment methods to: Administration Technical Services — Corporations Unit, Wisconsin Department of Revenue, P.O. Box 8933, Mail Stop 6-40 Madison, WI 53708-8933.
Tax 2.64 History
History: EmR1001: emerg. cr. eff. 1-15-10;
CR 09-064: cr.
Register April 2010 No. 652, eff. 5-1-10;
CR 13-078: am. (2) (a), (b) 7., (c), (e) 3.
Register April 2014 No. 700, eff. 5-1-14;
CR 19-141: am. (2) (b) 7., (c), (e) 3.
Register September 2020 No. 777, eff. 10-1-20.
Tax 2.64 Annotation
Cross References: See s. Tax 2.60 for definitions that relate to this section. See s. Tax 2.65 for more information on the duties of the designated agent. See s. Tax 2.67 for more information on combined returns.
Tax 2.65
Tax 2.65
Designated agent of combined group. Tax 2.65(1)(1)
Scope. Section
71.255 (7), Stats., requires every combined group to have a designated agent to act on behalf of the group. This section provides rules relating to identifying the designated agent and describes the scope and limitations of the agency relationship.
Tax 2.65(2)(a)(a)
Eligibility. The combined group may select any member as the designated agent, subject to a limitation that the designated agent's taxable year shall be the same as the combined group's taxable year.
Tax 2.65(2)(b)
(b) Creation of agency. A combined group shall appoint a designated agent. The corporation which files, or will file, the first combined return for the combined group is deemed to be appointed as the designated agent. If no combined return is filed, the department shall appoint the parent corporation of the combined group to be the designated agent, or if there is no parent corporation, the department may appoint any corporation in the combined group to be the designated agent.
Tax 2.65(2)(c)
(c) Continuity of agency into future years. Once a member of the combined group is appointed as the designated agent, it shall remain the designated agent of that group for all future years unless one of the following applies:
Tax 2.65(2)(c)1.
1. The designated agent leaves the combined group, in which case the corporation which files, or will file, the first combined return after the date the designated agent leaves is deemed to be appointed as the new designated agent.
Tax 2.65(2)(c)2.
2. Except as provided in subd.
3., the combined group, or portion of the combined group that includes the designated agent, is acquired by another combined group, in which case the corporation which files, or will file, the first combined return after the date of the acquisition is deemed to be appointed as the new designated agent.
Tax 2.65(2)(c)3.
3. The designated agent ceases to exist, in which case the designated agent shall notify the department in writing that another member of the combined group (or successor corporation of any member of the combined group) will thereafter act as designated agent for that taxable year and any prior taxable years. The member appointed for that taxable year and any prior taxable years need not be the new designated agent for all future taxable years. The substitute designated agent will succeed to the rights and responsibilities of the former designated agent and may in turn appoint another designated agent for future taxable years. If the designated agent fails to notify the department in writing of the new designated agent, the department may select a surviving member of the combined group to act as the designated agent.
Tax 2.65(2)(c)4.
4. Where subd.
2. does not apply, the designated agent is still a member of the combined group but submits a written request to the department for another combined group member to act as designated agent, and the department grants the request.
Tax 2.65 Note
Note: Send requests to change the combined group's designated agent and notifications of successor designated agents to: Corporation Processing Unit, Wisconsin Department of Revenue, P.O. Box 8908, Madison, WI 53708-8908.
Tax 2.65(2)(d)
(d) Continuity of agency for prior years. The designated agent of a combined group for a prior taxable year shall continue to act as the designated agent for that taxable year unless the designated agent ceases to exist, in which case par.
(c) 3. applies, or the designated agent submits a written request to the department for another combined group member to act as designated agent, and the department grants the request.
Tax 2.65 Note
Note: Send requests to change the combined group's designated agent and notifications of successor designated agents to: Corporation Processing Unit, Wisconsin Department of Revenue, P.O. Box 8908, Madison, WI 53708-8908. However, if the request relates to prior taxable years that are under audit, the designated agent may submit the written request to the department's representative that has notified the designated agent of the audit.
Tax 2.65(2)(e)
(e) Designated agent for purposes of resolving disputes over combined group membership. If the department determines that one or more corporations are members of a combined group and no combined return was filed, the group of corporations the department asserts is a combined group may appoint a member of that group as the designated agent solely for purposes of contesting the department's determination. The appointment of a designated agent under this paragraph may not be construed as a concession by either the corporations or the department regarding the existence of a combined group or the proper composition of a combined group.
Tax 2.65(3)(a)(a) Duties of designated agent. The designated agent is generally required to act on behalf of the combined group in its own name in all matters relating to the combined return. This includes performing the following duties:
Tax 2.65(3)(a)1.
1. Filing the combined return, including the reporting of any separate entity items attributable to combined group members.
Tax 2.65(3)(a)3.
3. Filing any amended combined returns or claims for refunds or credits relating to the combined return, including any separate entity items attributable to combined group members.
Tax 2.65(3)(a)4.
4. Sending and receiving all correspondence with the department regarding the combined return, except that if correspondence relates to separate entity items or a payment made by another member of the combined group as provided in s.
Tax 2.66 (2), the department may send the correspondence to that other member or the designated agent, or both.
Tax 2.65(3)(a)5.
5. Remitting taxes applicable to the combined return, including estimated taxes, except as otherwise provided in s.
Tax 2.66.
Tax 2.65(3)(a)6.
6. Participating on behalf of the group in any investigation or hearing by the department regarding the combined return, including producing all information requested and filing any appeal. Unless provided otherwise in writing, any appeal filed by the designated agent relating to the combined return shall be considered filed by all members of the combined group, including any corporations that were not included in the combined return but which the department asserts are members the combined group.
Tax 2.65(3)(a)7.
7. Executing waivers, closing agreements, powers of attorney, and other documents relating to the combined return. Unless the department and taxpayer agree otherwise in writing, any waiver, closing agreement, power of attorney, or other document executed by the designated agent relating to the combined return shall be considered executed by all members of the combined group, including any corporations that were not included in the combined return but which the department asserts are members of the combined group.
Tax 2.65(3)(a)8.
8. Receiving assessment notices regarding the combined return. Subject to par.
(f), a notice received by the designated agent is considered received by all members of the combined group, including any corporations that were not included in the combined return but which the department asserts are members the combined group. If a notice relates to separate entity items that are attributable to a combined group member other than the designated agent, the designated agent may submit a written request to the department to reissue the notice or a portion of the amount of the notice to the combined group member responsible for the separate entity items. The designated agent shall submit the written request on or before the due date shown on the notice.
Tax 2.65 Note
Note: Send written requests to reissue notices relating to separate entity items to: Wisconsin Department of Revenue, Mail Stop 5-257, P.O. Box 8906, Madison, WI 53708-8906.
Tax 2.65(3)(b)
(b) Exclusivity. Except as provided in this paragraph, no person other than the designated agent shall have authority to act for or represent itself or the combined group regarding the duties listed in par.
(a). A combined group member, or a corporation which the taxpayer asserts is a combined group member, may assume any of the duties listed in par.
(a) under any of the following conditions:
Tax 2.65(3)(b)1.
1. By election of the designated agent or the applicable combined group member, a combined group member may perform any of the duties listed in par.
(a) to the extent those duties relate to separate entity items. This may include the filing of a separate return to report the member's separate entity items, subject to the requirements of par.
(c).
Tax 2.65(3)(b)3.
3. If a combined return was filed, the department may allow any corporation which it asserts should be added to or eliminated from the combined group to represent itself after receipt of a written request from the corporation. However, that corporation shall still be bound by any action taken by the designated agent before the corporation's request to represent itself has been accepted by the department.
Tax 2.65 Note
Note: A corporation that wishes to represent itself should submit the written request to the department's representative that has notified the corporation of the department's assertion.
Tax 2.65(3)(c)
(c) Reporting of separate entity items. If a combined group member chooses to file a separate Wisconsin return to report its separate entity items rather than having the designated agent include them in the combined return in the manner described in s.
Tax 2.67 (2) (d) 3., the member shall consider the totality of its share of items from the combined return plus its separate entity items for purposes of applying any limitations, so that its total net tax plus economic development surcharge does not differ from the amount that would have been due if the separate entity items had been included in the combined return. The combined group member shall submit a copy of the combined return with its separate return.
Tax 2.65(3)(d)
(d) Unauthorized acts. The department is not bound by unauthorized acts made with respect to a combined return by a corporation that is not the designated agent. The department may choose to receive the benefits or assume the obligations of unauthorized acts, in which case the department is bound only if it takes affirmative steps to expressly manifest its intent to receive the benefits or assume the obligations of the acts.
