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.
Tax 2.65(3)(e)
(e) Failure to act. If the designated agent is unable or unwilling to fulfill its obligations with respect to the combined return, is unresponsive, or has not been identified to the department, the department may appoint a new designated agent, or it may deal directly with any member of the combined group in respect to its share of the combined return items in which case each member shall have full authority to act for itself.
Tax 2.65(3)(f)
(f) Joint and several liability. Under s.
71.255 (1) (n), Stats., the members of a combined group shall be jointly and severally liable for the combined tax, penalty, and interest attributable to the combined unitary income, net of any loss carryforwards and credits applied. This paragraph does not apply to any tax, interest, or penalty attributable to separate entity items. Although the department may send correspondence, notices, refunds, assessments, or other documents relating to any combined group member's separate entity items to the designated agent, and the designated agent may choose to pay any tax, interest, or penalty on behalf of a combined group member, the tax, interest, or penalty attributable to separate entity items is ultimately the responsibility of the combined group member or members to which the separate entity items are attributable.
Tax 2.65(3)(g)
(g) Confidentiality provisions. The designated agent is an agent under s.
71.78 (4) (e), Stats. Therefore, the department may provide information relating to any member of the combined group to the designated agent, including information relating to the member's separate entity items.
Tax 2.65 Note
Note: This section interprets s.
71.255 (7), Stats.
Tax 2.65 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: am. (3) (c)
Register July 2012 No. 670, eff. 8-1-12.
Tax 2.65 Annotation
Cross References: See s. Tax 2.60 for definitions that relate to this section. See s. Tax 2.66 for more information on combined estimated tax requirements. See s. Tax 2.67 for more information on combined returns.
Tax 2.66
Tax 2.66
Combined estimated tax payments. Tax 2.66(1)(1)
Scope. In general, s.
71.255 (7) (b) 5., Stats., provides that only the designated agent of a combined group may make estimated tax payments applicable to a combined return. This section provides exceptions to the general rule, explains the estimated tax requirements, and provides rules for applying estimated payments and overpayments.
Tax 2.66(2)(a)(a)
When separate estimated payments are allowed. Although the designated agent is always authorized to make estimated payments on behalf of any and all of its combined group members, a combined group member other than the designated agent may make estimated payments on its own behalf if any of the following apply:
Tax 2.66(2)(a)1.
1. For the first taxable year for which a combined group files a combined return, any member of the group may make estimated payments on its own behalf.
Tax 2.66(2)(a)2.
2. For the first taxable year for which a corporation is a member of a combined group, that corporation may make estimated payments on its own behalf.
Tax 2.66(2)(a)3.
3. Any combined group member may make estimated payments on its own behalf to the extent those payments relate to separate entity items.
Tax 2.66(2)(b)
(b) Reporting of separate estimated payments. If a combined group member other than the designated agent makes separate estimated payments and applies those payments to the combined return, the designated agent shall notify the department of those payments on a department-prescribed form filed with the combined return. This notification authorizes the department to apply the separate estimated payments to the combined return.
Tax 2.66(3)
(3) Determination of required estimated payments. Tax 2.66(3)(a)(a) General. If a combined return is filed, the amount of any addition to tax under s.
71.84 (2), Stats., shall be computed as if the combined group were one corporation. “Tax shown on the return" and “tax for the taxable year" as defined in s.
71.29 (1) (b), Stats., have the same meaning with respect to a combined return as to a separate return.
Tax 2.66(3)(b)
(b) Computation of thresholds. Since, as provided in par.
(a), “tax shown on the return" has the same meaning with respect to a combined return as to a separate return, the amounts of the following thresholds are the same regardless of the number of combined group members included in the combined return:
Tax 2.66(3)(b)1.
1. Section
71.29 (7), Stats., which provides that no interest on underpayment is required if the tax shown on the return for the taxable year is less than $500.
Tax 2.66(3)(b)2.
2. Section
71.29 (9), Stats., which provides that for corporations that have Wisconsin net incomes of less than $250,000 and whose preceding taxable year was a 12-month taxable year, estimated payments may be based on the lesser of 90 percent of tax shown on the return for the current taxable year or the tax shown on the return for the preceding year.
Tax 2.66(3)(c)
(c) Effect of separate entity items. The amount of net income and tax shown on a combined return includes net income and tax attributable to separate entity items. If the combined return includes separate entity items of a corporation that would otherwise be a combined group member except that it has no items that are subject to combination under the water's edge rules of s.
Tax 2.61 (4), the corporation is considered a combined group member for purposes of determining required estimated payments.
Tax 2.66 Note
Example: Combined Group AB consists of Member A and Member B. Group AB filed a combined return for calendar year 2010. The 2010 return includes $30,000 of net tax attributable to Member A's items and $20,000 attributable to Member B's items, including $5,000 attributable to B's separate entity items. The 2010 combined return also includes $10,000 of net tax from the separate entity items of Corporation C, which would be a combined group member except that none of its items are subject to combination under the water's edge rules. If Group AB is not eligible to base its estimated taxes on its 2009 net tax under the provisions of par. (b), Group AB's required estimated tax payments for purposes of its 2010 combined return are $54,000 (= ($30,000 + $20,000 + $10,000) x 90%).
