Analysis by the Legislative Reference Bureau
This bill creates an income tax exemption for cash tips received by an employee from the customers of the employee’s employer.
Because this bill relates to an exemption from state or local taxes, it may be referred to the Joint Survey Committee on Tax Exemptions for a report to be printed as an appendix to the bill.
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:
AB38,1
1Section 1. 71.05 (1) (j) of the statutes is created to read: AB38,2,3271.05 (1) (j) Tips. Amounts received as cash tips by an employee from the 3customers of the employee’s employer. AB38,24Section 2. 71.05 (6) (b) 19. cm. of the statutes is amended to read: AB38,2,17571.05 (6) (b) 19. cm. For taxable years beginning after December 31, 2020, for 6a person who is a nonresident or a part-year resident of this state, modify the 7amount calculated under subd. 19. b. by multiplying the amount by a fraction the 8numerator of which is the person’s wages, salary, tips, unearned income, and net 9earnings from a trade or business that are taxable by this state and the 10denominator of which is the person’s total wages, salary, tips, unearned income, 11and net earnings from a trade or business. In this subd. 19. cm., for married 12persons filing separately “wages, salary, tips, unearned income, and net earnings 13from a trade or business” means the separate wages, salary, tips, unearned income, 14and net earnings from a trade or business of each spouse, and for married persons 15filing jointly “wages, salary, tips, unearned income, and net earnings from a trade 16or business” means the total wages, salary, tips, unearned income, and net earnings 17from a trade or business of both spouses. AB38,318Section 3. 71.05 (6) (b) 19. dm. of the statutes is amended to read: AB38,2,221971.05 (6) (b) 19. dm. For taxable years beginning after December 31, 2020, 20reduce the amount calculated under subd. 19. b. or cm. to the person’s aggregate 21wages, salary, tips, unearned income, and net earnings from a trade or business 22that are taxable by this state. AB38,4
1Section 4. 71.05 (6) (b) 28. e. of the statutes is amended to read: AB38,3,13271.05 (6) (b) 28. e. For an individual who is a nonresident or part-year 3resident of this state, multiply the amount calculated under subd. 28. a., am., b., c. 4or d. by a fraction the numerator of which is the individual’s wages, salary, tips, 5unearned income and net earnings from a trade or business that are taxable by this 6state and the denominator of which is the individual’s total wages, salary, tips, 7unearned income and net earnings from a trade or business. In this subd. 28. e., for 8married persons filing separately “wages, salary, tips, unearned income and net 9earnings from a trade or business” means the separate wages, salary, tips, 10unearned income and net earnings from a trade or business of each spouse, and for 11married persons filing jointly “wages, salary, tips, unearned income and net 12earnings from a trade or business” means the total wages, salary, tips, unearned 13income and net earnings from a trade or business of both spouses. AB38,514Section 5. 71.05 (6) (b) 28. f. of the statutes is amended to read: AB38,3,171571.05 (6) (b) 28. f. Reduce the amount calculated under subd. 28. a., am., b., c., 16d. or e. to the individual’s aggregate wages, salary, tips, unearned income and net 17earnings from a trade or business that are taxable by this state. AB38,618Section 6. 71.05 (6) (b) 32. b. of the statutes is amended to read: AB38,4,61971.05 (6) (b) 32. b. For an individual who is a nonresident or part-year 20resident of this state, multiply the amount calculated under subd. 32. a. by a 21fraction the numerator of which is the individual’s wages, salary, tips, unearned 22income and net earnings from a trade or business that are taxable by this state and 23the denominator of which is the individual’s total wages, salary, tips, unearned 24income and net earnings from a trade or business. In this subd. 32. b., for married
1persons filing separately “wages, salary, tips, unearned income and net earnings 2from a trade or business” means the separate wages, salary, tips, unearned income 3and net earnings from a trade or business of each spouse, and for married persons 4filing jointly “wages, salary, tips, unearned income and net earnings from a trade or 5business” means the total wages, salary, tips, unearned income and net earnings 6from a trade or business of both spouses. AB38,77Section 7. 71.05 (6) (b) 32. c. of the statutes is amended to read: AB38,4,10871.05 (6) (b) 32. c. Reduce the amount calculated under subd. 32. a. or b. to the 9individual’s aggregate wages, salary, tips, unearned income and net earnings from 10a trade or business that are taxable by this state. AB38,811Section 8. 71.05 (6) (b) 33. b. of the statutes is amended to read: AB38,4,231271.05 (6) (b) 33. b. For an individual who is a nonresident or part-year 13resident of this state, multiply the amount calculated under subd. 33. a. by a 14fraction the numerator of which is the individual’s wages, salary, tips, unearned 15income and net earnings from a trade or business that are taxable by this state and 16the denominator of which is the individual’s total wages, salary, tips, unearned 17income and net earnings from a trade or business. In this subd. 33. b., for married 18persons filing separately “wages, salary, tips, unearned income and net earnings 19from a trade or business” means the separate wages, salary, tips, unearned income 20and net earnings from a trade or business of each spouse, and for married persons 21filing jointly “wages, salary, tips, unearned income and net earnings from a trade or 22business” means the total wages, salary, tips, unearned income and net earnings 23from a trade or business of both spouses. AB38,924Section 9. 71.05 (6) (b) 33. c. of the statutes is amended to read: AB38,5,3
171.05 (6) (b) 33. c. Reduce the amount calculated under subd. 33. a. or b. to the 2individual’s aggregate wages, salary, tips, unearned income and net earnings from 3a trade or business that are taxable by this state. AB38,104Section 10. 71.05 (6) (b) 35. c. of the statutes is amended to read: AB38,5,16571.05 (6) (b) 35. c. For an individual who is a nonresident or part-year 6resident of this state, multiply the amount calculated under subd. 35. a. or b., by a 7fraction the numerator of which is the individual’s wages, salary, tips, unearned 8income, and net earnings from a trade or business that are taxable by this state and 9the denominator of which is the individual’s total wages, salary, tips, unearned 10income, and net earnings from a trade or business. In this subd. 35. c., for married 11persons filing separately “wages, salary, tips, unearned income, and net earnings 12from a trade or business” means the separate wages, salary, tips, unearned income, 13and net earnings from a trade or business of each spouse, and for married persons 14filing jointly “wages, salary, tips, unearned income, and net earnings from a trade 15or business” means the total wages, salary, tips, unearned income, and net earnings 16from a trade or business of both spouses. AB38,1117Section 11. 71.05 (6) (b) 35. d. of the statutes is amended to read: AB38,5,201871.05 (6) (b) 35. d. Reduce the amount calculated under subd. 35. a., b., or c. to 19the individual’s aggregate wages, salary, tips, unearned income, and net earnings 20from a trade or business that are taxable by this state. AB38,1221Section 12. 71.05 (6) (b) 38. c. of the statutes is amended to read: AB38,6,92271.05 (6) (b) 38. c. For an individual who is a nonresident or part-year 23resident of this state, multiply the amount calculated under subd. 38. a. or b., by a 24fraction the numerator of which is the individual’s wages, salary, tips, unearned
1income, and net earnings from a trade or business that are taxable by this state and 2the denominator of which is the individual’s total wages, salary, tips, unearned 3income, and net earnings from a trade or business. In this subd. 38. c., for married 4persons filing separately “wages, salary, tips, unearned income, and net earnings 5from a trade or business” means the separate wages, salary, tips, unearned income, 6and net earnings from a trade or business of each spouse, and for married persons 7filing jointly “wages, salary, tips, unearned income, and net earnings from a trade 8or business” means the total wages, salary, tips, unearned income, and net earnings 9from a trade or business of both spouses. AB38,1310Section 13. 71.05 (6) (b) 38. d. of the statutes is amended to read: AB38,6,131171.05 (6) (b) 38. d. Reduce the amount calculated under subd. 38. a., b., or c. to 12the individual’s aggregate wages, salary, tips, unearned income, and net earnings 13from a trade or business that are taxable by this state. AB38,1414Section 14. 71.05 (6) (b) 42. c. of the statutes is amended to read: AB38,7,21571.05 (6) (b) 42. c. For an individual who is a nonresident or part-year 16resident of this state, multiply the amount calculated under subd. 42. a. or b., by a 17fraction the numerator of which is the individual’s wages, salary, tips, unearned 18income, and net earnings from a trade or business that are taxable by this state and 19the denominator of which is the individual’s total wages, salary, tips, unearned 20income, and net earnings from a trade or business. In this subd. 42. c., for married 21persons filing separately “wages, salary, tips, unearned income, and net earnings 22from a trade or business” means the separate wages, salary, tips, unearned income, 23and net earnings from a trade or business of each spouse, and for married persons 24filing jointly “wages, salary, tips, unearned income, and net earnings from a trade
1or business” means the total wages, salary, tips, unearned income, and net earnings 2from a trade or business of both spouses. AB38,153Section 15. 71.05 (6) (b) 42. d. of the statutes is amended to read: AB38,7,6471.05 (6) (b) 42. d. Reduce the amount calculated under subd. 42. a., b., or c. to 5the individual’s aggregate wages, salary, tips, unearned income, and net earnings 6from a trade or business that are taxable by this state. AB38,167Section 16. 71.05 (6) (b) 43. f. of the statutes is amended to read: AB38,7,20871.05 (6) (b) 43. f. An individual who is a nonresident or part-year resident of 9this state and who claims the subtraction under this subdivision shall multiply the 10amount calculated under subd. 43. a., b., c., or d. by a fraction the numerator of 11which is the individual’s wages, salary, tips, unearned income, and net earnings 12from a trade or business that are taxable by this state and the denominator of which 13is the individual’s total wages, salary, tips, unearned income, and net earnings from 14a trade or business. In this subd. 43. f., for married persons filing separately 15“wages, salary, tips, unearned income, and net earnings from a trade or business” 16means the separate wages, salary, tips, unearned income, and net earnings from a 17trade or business of each spouse, and for married persons filing jointly “wages, 18salary, tips, unearned income, and net earnings from a trade or business” means 19the total wages, salary, tips, unearned income, and net earnings from a trade or 20business of both spouses. AB38,1721Section 17. 71.63 (6) (n) (intro.) of the statutes is renumbered 71.63 (6) (n) 22and amended to read: AB38,7,232371.63 (6) (n) In the form of tips paid to employees if:. AB38,1824Section 18. 71.63 (6) (n) 1. of the statutes is repealed. AB38,19
1Section 19. 71.63 (6) (n) 2. of the statutes is repealed. AB38,202Section 20. Initial applicability. AB38,8,33(1) This act first applies to taxable years beginning after December 31, 2024.
