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LRB-1144/1
EKL:amn&kjf
2021 - 2022 LEGISLATURE
January 15, 2021 - Introduced by Representatives Wittke and Macco, cosponsored
by Senators Marklein, Kooyenga and Kapenga. Referred to Committee on
Ways and Means.
AB3,1,4 1An Act to renumber and amend 71.365 (4m) (d) 1.; to amend 71.29 (7) (b) and
271.29 (10) (a); and to create 71.29 (10) (d) and 71.365 (4m) (d) 1. a. and b. of the
3statutes; relating to: modifications to the tax treatment of tax-option
4corporations that elect to pay tax at the entity level.
Analysis by the Legislative Reference Bureau
This bill makes the following changes to the tax treatment of tax-option
corporations that elect to pay income or franchise tax at the entity level:
1. The bill allows these corporations to exclude from tax 30 percent of the gains
realized from the sale of assets held more than one year and the sale of all assets
acquired from a decedent and 60 percent of the gains realized from the sale of farm
assets held more than one year and the sale of all farm assets acquired from a
decedent.
2. The bill limits the excess capital loss deduction for these corporations to
$500. As such, under the bill, an electing tax-option corporation with a net loss after
netting capital gains and losses may use up to $500 of the net loss to offset income.
A loss in excess of $500 may be carried forward to the next taxable year in which the
corporation makes the election to pay tax at the entity level.
3. The bill provides that an exception from the general requirement to pay
interest on the underpayment of estimated taxes for corporations whose Wisconsin
net income is less than $250,000 does not apply to these corporations.
4. The bill provides that these corporations, when making quarterly estimated
tax payments, compute the amount due using the standards applicable to taxpayers

with net income of less than $250,000, regardless of the corporation's actual net
income.
The bill applies to taxable years beginning after December 31, 2019.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB3,1 1Section 1. 71.29 (7) (b) of the statutes is amended to read:
AB3,2,62 71.29 (7) (b) The preceding taxable year was 12 months, the corporation or
3virtually exempt entity had no liability under s. 71.125 or 71.23 (1) or (2) for that year
4and, except for a corporation making an election under s. 71.365 (4m) (a), the
5corporation or virtually exempt entity has a Wisconsin net income of less than
6$250,000 for the current taxable year.
AB3,2 7Section 2 . 71.29 (10) (a) of the statutes is amended to read:
AB3,2,118 71.29 (10) (a) Except as provided in par. pars. (c) and (d), for corporations or
9virtually exempt entities that have Wisconsin net incomes of $250,000 or more, the
10amount of each installment required under sub. (8) is 25 percent of the amount under
11par. (b).
AB3,3 12Section 3 . 71.29 (10) (d) of the statutes is created to read:
AB3,2,1513 71.29 (10) (d) For a corporation making an election under s. 71.365 (4m) (a),
14the amount of the installments required under sub. (8) shall be determined according
15to sub. (9) (a).
AB3,4 16Section 4. 71.365 (4m) (d) 1. of the statutes is renumbered 71.365 (4m) (d) 1.
17(intro.) and amended to read:
AB3,3,3
171.365 (4m) (d) 1. (intro.) The net income of the tax-option corporation is
2computed under s. 71.34 (1k), with the following modifications, and the situs of
3income shall be determined as if the election was not made.:
AB3,5 4Section 5. 71.365 (4m) (d) 1. a. and b. of the statutes are created to read:
AB3,3,105 71.365 (4m) (d) 1. a. An adjustment shall be made so that the net capital loss,
6after netting capital gains and capital losses to arrive at total capital gain or loss, is
7offset against income only to the extent of $500. Losses in excess of $500 shall be
8carried forward to the next taxable year for which an election is made under par. (a)
9and offset against income up to the limit under this subd. 1. a. Losses shall be used
10in the order in which they accrue.
AB3,3,1111 b. The subtraction under s. 71.05 (6) (b) 9. or 9m. shall be allowed.
AB3,6 12Section 6. Initial applicability.
AB3,3,1313 (1) This act first applies to taxable years beginning after December 31, 2019.
AB3,3,1414 (End)
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