Chapter 71

71.05(1)(c)12. 12. The Wisconsin Housing and Economic Development Authority, if the bonds or notes are issued to provide loans to a public affairs network under s. 234.75 (4).

71.05(1)(c)13. 13. An entity described under, or an entity whose bonds are issued under, s. 66.1201, 66.1333, or 66.1335.

71.05(1)(c)14. 14. The Wisconsin Health and Educational Facilities Authority under s. 231.03 (6), if the bonds or notes are issued in an amount totaling $35,000,000 or less, and to the extent that the interest income received is not otherwise exempt under this subsection.

71.05(1)(f) (f) Income from the sales of certain insurance policies. Income received by the original policyholder or original certificate holder who has a catastrophic or life-threatening illness or condition from the sale of a life insurance policy or certificate, or the sale of the death benefit under a life insurance policy or certificate, under a life settlement contract, as defined in s. 632.69 (1) (k). In this paragraph, “catastrophic or life-threatening illness or condition” includes AIDS, as defined in s. 49.686 (1) (a), and HIV infection, as defined in s. 49.686 (1) (d).

71.05(1)(g) (g) Income from work performed during a declared state of emergency. Income of an out-of-state business, as defined in s. 323.12 (5) (a) 6., and an out-of-state employee, as defined in s. 323.12 (5) (a) 7., from disaster relief work, as defined under s. 323.12 (5) (a) 3.

71.05(1)(h) (h) Wisconsin allocations from the federal coronavirus relief fund. Income received in the form of allocations issued by this state with moneys received from the coronavirus relief fund authorized under 42 USC 801 to be used for any of the following purposes:

71.05(1)(h)1. 1. Broadband expansion.

71.05(1)(h)2. 2. Privately owned movie theater grants.

71.05(1)(h)3. 3. A nonprofit grant program.

71.05(1)(h)4. 4. A tourism grants program.

71.05(1)(h)5. 5. A cultural organization grant program.

71.05(1)(h)6. 6. Music and performance venue grants.

71.05(1)(h)7. 7. Lodging industry grants.

71.05(1)(h)8. 8. Low-income home energy assistance.

71.05(1)(h)9. 9. A rental assistance program.

71.05(1)(h)10. 10. Supplemental child care grants.

71.05(1)(h)11. 11. A food insecurity initiative.

71.05(1)(h)12. 12. A farm support program.

71.05(1)(h)13. 13. Grants to small businesses.

71.05(1)(h)14. 14. Ethanol industry assistance.

71.05(1)(h)15. 15. Wisconsin Eye.

71.05(1)(hn) (hn) Wisconsin grants awarded during and related to the pandemic. Income received in the form of a grant issued by the Wisconsin Economic Development Corporation during and related to the COVID-19 pandemic under the ethnic minority emergency grant program. Amounts otherwise deductible under this chapter that are paid directly or indirectly with the grant money are deductible.

71.05(1)(hp) (hp) Grants from the federal restaurant revitalization fund. Income received in the form of a grant from the restaurant revitalization fund under section 5003 of the federal American Rescue Plan Act of 2021, P.L. 117-2. Amounts otherwise deductible under this chapter that are paid directly or indirectly with the grant money are deductible. Amounts excluded under this paragraph by a tax-option corporation or partnership shall be treated as tax-exempt income for purposes of sections 705 and 1366 of the Internal Revenue Code.

71.05(1)(i) (i) Commercial loans. Income of a tax-option corporation that is a financial institution, as defined in s. 69.30 (1) (b), including interest, fees, and penalties, derived from a commercial loan of five million dollars or less provided to a person residing or located in this state and used primarily for a business or agricultural purpose in this state.

71.05(2) (2) Nonresident reciprocity. All payments received by natural persons domiciled outside Wisconsin who derive income from the performance of personal services in Wisconsin shall be excluded from Wisconsin gross income to the extent that it is subjected to an income tax imposed by the state of domicile; provided that the law of the state of domicile allows a similar exclusion of income from personal services earned in such state by natural persons domiciled in Wisconsin, or a credit against the tax imposed by such state on such income equal to the Wisconsin tax on such income.

71.05 Cross-reference Cross-reference: See also s. Tax 2.02, Wis. adm. code.

71.05(3) (3) Menominee Indian tribe; distribution of assets. No distribution of assets from the United States to the members of the Menominee Indian tribe as defined in s. 49.385 or their lawful distributees, or to any corporation, or organization, created by the tribe or at its direction pursuant to section 8, P.L. 83-399, as amended, and no issuance of stocks, bonds, certificates of indebtedness, voting trust certificates or other securities by any such corporation or organization, or voting trust, to such members of the tribe or their lawful distributees shall be subject to income taxes under this chapter; provided, that so much of any cash distribution made under said P.L. 83-399 as consists of a share of any interest earned on funds deposited in the treasury of the United States pursuant to the supplemental appropriation act, 1952, (65 Stat. 736, 754) shall not by virtue of this subsection be exempt from the individual income tax of this state in the hands of the recipients for the year in which paid. For the purpose of ascertaining the gain or loss resulting from the sale or other disposition of such assets and stocks, bonds, certificates of indebtedness and other securities under this chapter, the fair market value of such property, on termination date as defined in s. 70.057 (1), 1967 stats., shall be the basis for determining the amount of such gain or loss.

71.05(5) (5) Fractional year. When an income tax return is required to be filed for a fractional part of a year under s. 71.03 (3), the Wisconsin taxable income shall be placed on an annual basis using the method applicable for federal income taxes under section 443 (b) (1) of the internal revenue code.

71.05(6) (6) Modifications and transitional adjustments. Some of the modifications referred to in s. 71.01 (13) and (14) are:

71.05(6)(a) (a) Additions. To federal adjusted gross income add:

71.05(6)(a)1. 1. The amount of any interest, except interest under par. (b) 1., less related expenses, which is not included in federal adjusted gross income, and except the amount of any interest or original issue discount derived from bonds issued under subch. IV of ch. 18.

71.05 Cross-reference Cross-reference: See also s. Tax 3.095, Wis. adm. code.

71.05(6)(a)2. 2. Losses not allocable or apportionable to this state under s. 71.04.

71.05(6)(a)3. 3. Any amount deducted as a capital loss carry-over from any taxable year prior to the 1965 taxable year.

71.05(6)(a)4. 4. The amount of any lump sum distribution taxable under section 402 (d) (1) of the internal revenue code (relating to distributions from employee benefit plans).

71.05(6)(a)5. 5. Any amount deducted as a capital loss carry-over from any taxable year prior to the 1975 taxable year if the capital asset which generated the loss had a situs outside of Wisconsin.

71.05(6)(a)6. 6. Any amount received in taxable year 1979 or thereafter by a Wisconsin resident shareholder as a proportionate share of the earnings and profits of a tax-option corporation which was accumulated prior to the beginning of its 1979 taxable year and not considered a dividend when received under section 1375 (d) (1) of the internal revenue code as amended to December 31, 1978.

71.05(6)(a)7. 7. Any amount deducted under section 170 (i) of the internal revenue code (relating to the deduction of charitable contributions by individuals who do not itemize deductions).

71.05(6)(a)8. 8. Wages paid to an entertainer or entertainment corporation unless the taxpayer complies with ss. 71.63 (3) (b), 71.64 (4) and (5) and 71.80 (15) (b).

71.05(6)(a)9. 9. Any amount excluded from adjusted gross income under section 641 (c) (1) of the internal revenue code (relating to gain on the sale of any property by a trust within 2 years of acquisition).

71.05(6)(a)10. 10. For taxable years beginning before January 1, 2014, for a person who is not “actively engaged in farming,” as that term is used in 7 CFR 1400.201, combined net losses, exclusive of net gains from the sale or exchange of capital or business assets and exclusive of net profits, from businesses, from rents, from partnerships, from limited liability companies, from S corporations, from estates, or from trusts, under section 165 of the Internal Revenue Code, except losses allowable under sections 1211 and 1231 of the Internal Revenue Code, otherwise includable in calculating Wisconsin income if those losses are incurred in the operation of a farming business, as defined in section 464 (e) 1. of the Internal Revenue Code to the extent that those combined net losses exceed $20,000 if nonfarm Wisconsin adjusted gross income exceeds $55,000 but does not exceed $75,000, exceed $17,500 if nonfarm Wisconsin adjusted gross income exceeds $75,000 but does not exceed $100,000, exceed $15,000 if nonfarm Wisconsin adjusted gross income exceeds $100,000 but does not exceed $150,000, exceed $12,500 if nonfarm Wisconsin adjusted gross income exceeds $150,000 but does not exceed $200,000, exceed $10,000 if nonfarm Wisconsin adjusted gross income exceeds $200,000 but does not exceed $250,000, exceed $7,500 if nonfarm Wisconsin adjusted gross income exceeds $250,000 but does not exceed $300,000, exceed $5,000 if nonfarm Wisconsin adjusted gross income exceeds $300,000 but does not exceed $600,000, and exceed $0 if nonfarm adjusted gross income exceeds $600,000, except that the amounts applicable to married persons filing separately are 50 percent of the amounts specified in this subdivision.

71.05(6)(a)12. 12. All penalties for early withdrawals from time savings accounts and deposits deducted for federal income tax purposes and paid while the individual charged with the penalty was a nonresident of this state; all reforestation expenses related to property not in this state, deducted for federal income tax purposes and paid while the individual paying the expense was not a resident of this state; all contributions to individual retirement accounts, simplified employee pension plans and self-employment retirement plans and all deductible employee contributions, deducted for federal income tax purposes and in excess of that amount multiplied by a fraction the numerator of which is the individual’s wages and net earnings from a trade or business taxable by this state and the denominator of which is the individual’s total wages and net earnings from a trade or business; the contributions to a Keogh plan deducted for federal income tax purposes and in excess of that amount multiplied by a fraction the numerator of which is the individual’s net earnings from a trade or business, taxable by this state, and the denominator of which is the individual’s total net earnings from a trade or business; the amount of health insurance costs of self-employed individuals deducted under section 162 (L) of the internal revenue code for federal income tax purposes and in excess of that amount multiplied by a fraction the numerator of which is the individual’s net earnings from a trade or business, taxable by this state, and the denominator of which is the individual’s total net earnings from a trade or business; and the amount of self-employment taxes deducted under section 164 (f) of the internal revenue code for federal income tax purposes and in excess of that amount multiplied by a fraction the numerator of which is the individual’s net earnings from a trade or business, taxable by this state, and the denominator of which is the individual’s total net earnings from a trade or a business.

71.05(6)(a)13. 13. The amount claimed by a fiduciary as an itemized deduction under section 164 or 216 (a) (1) of the internal revenue code on the federal fiduciary return.

71.05(6)(a)14. 14. Any amount received as a proportionate share of the earnings and profits of a corporation that is an S corporation for federal income tax purposes if those earnings and profits accumulated during a year for which the shareholders have elected under s. 71.365 (4) (a) not to be a tax-option corporation, to the extent not included in federal adjusted gross income for the current year. This subdivision does not apply to earnings and profits accumulated during a year for which a tax-option corporation has made an election under s. 71.365 (4m) (a) to be taxed at the entity level.

71.05(6)(a)15. 15. The amount of the credits computed under s. 71.07 (2dm), (2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n), (5i), (5j), (5k), (5r), (5rm), (6n), and (10) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership’s, company’s, or tax-option corporation’s income under s. 71.21 (4) or 71.34 (1k) (g).

71.05(6)(a)16. 16. Any amount recognized as a loss under section 1001 (c) of the Internal Revenue Code if a surviving spouse and a distributee exchange their interests in marital property under s. 766.31 (3) (b).

71.05(6)(a)17. 17. The amount received under s. 71.07 (3m) (c) or 71.60, or both, [s. 71.60] that is not included in federal adjusted gross income.

71.05 Note NOTE: The correct cross-reference is shown in brackets. Section 71.07 (3m) (c) was repealed by 2021 Wis. Act 127. Corrective legislation is pending.

71.05(6)(a)18. 18. Any amount deducted as moving expenses under section 217 of the internal revenue code if the expense relates to a move made by an individual who changes his or her domicile from this state as a result of the move or if the expense relates to a move made by an individual who is not domiciled in this state as a result of the move.

71.05(6)(a)20. 20. The amount of any excess distribution, as that term is used in section 1291 (b) of the Internal Revenue Code, from a passive foreign investment company.

71.05(6)(a)21. 21. For taxable years beginning after December 31, 2007, and before January 1, 2009, any amount deducted as income attributable to domestic production activities under section 199 of the Internal Revenue Code if the individual claiming the deduction is a nonresident or part-year resident of this state and if the domestic production activities income is not attributable to a trade or business that is taxable by this state.

71.05(6)(a)22. 22. For taxable years beginning after December 31, 2007, and before January 1, 2009, if an individual is a nonresident or part-year resident of this state and a portion of the amount the individual deducted as income attributable to domestic production activities under section 199 of the Internal Revenue Code is attributable to a trade or business that is taxable by this state, the amount deducted under section 199 for federal income tax purposes and in excess of that amount, multiplied by a fraction, the numerator of which is the individual’s net earnings from the trade or business that is taxable by this state and the denominator of which is the individual’s total net earnings from the trade or business to which the deduction under section 199 of the Internal Revenue Code applies.

71.05(6)(a)23. 23. Any amount deducted by an individual under section 62 (a) (20) of the Internal Revenue Code related to attorney fees or court costs, involving an unlawful discrimination claim, if the individual is a nonresident or part-year resident of this state and if the judgment or settlement resulting from the claim is not taxable by this state.

71.05(6)(a)24. 24. The amount deducted or excluded under the Internal Revenue Code for interest expenses, rental expenses, intangible expenses, and management fees that are directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.

71.05(6)(a)25. 25. The amount computed under s. 71.07 (5n) in the previous taxable year and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership’s, company’s, or tax-option corporation’s income under s. 71.21 (4) (a) or 71.34 (1k) (m) and not included in federal adjusted gross income.

71.05(6)(a)26. 26. For the taxable year in which a distribution is received, all of the following amounts distributed from a college savings account, as described in s. 224.50:

71.05(6)(a)26.a. a. To the extent that the receipt of the amounts by the owner or beneficiary of the account results in a penalty as provided in 26 USC 529 (c) (6), any amount that was not used for qualified higher education expenses, as defined in 26 USC 529 (c) (7), (8), and (9) and (e) (3), and was contributed to the account, except that this subd. 26. a. applies only to amounts for which a subtraction was made under par. (b) 32. or 32m. For purposes of this subd. 26. a., a first in, first out method of accounting shall apply to the account.

71.05(6)(a)26.b. b. Any amount rolled over by an owner into another state’s qualified tuition program, as described in 26 USC 529 (c) (3) (C) (i), to the extent that the amount was previously claimed as a deduction under par. (b) 32. or 32m. For purposes of this subd. 26. b., a first in, first out method of accounting shall apply to the account.

71.05(6)(a)26.c. c. To the extent that an amount is not otherwise added back under this subdivision, any amount withdrawn from the account for any purpose if the withdrawn amount was contributed to the account within 365 days of the day on which the amount was withdrawn from the account and if the withdrawn amount was previously subtracted under par. (b) 32. For purposes of this subd. 26. c., a first in, first out method of accounting shall apply to the account.

71.05(6)(a)27. 27. Except as provided in subd. 28., to the extent that an amount is not included in federal adjusted gross income, any amount withdrawn from a qualified ABLE account described under section 529A (b) (1) of the Internal Revenue Code for any reason other than the payment of qualified disability expenses, as defined in section 529A (e) (5) of the Internal Revenue Code, for the account beneficiary.

71.05(6)(a)28. 28. Upon the termination of an account as described under s. 16.643 or 224.55, any amount in the account that is returned to an account owner’s estate.

71.05(6)(a)29. 29. The amount deducted under the Internal Revenue Code as moving expenses, as defined in s. 71.01 (8j), paid or incurred during the taxable year to move the taxpayer’s Wisconsin business operation, in whole or in part, to a location outside the state or to move the taxpayer’s business operations outside the United States.

71.05(6)(b) (b) Subtractions. From federal adjusted gross income subtract to the extent included in federal taxable or adjusted gross income unless the modification is an item, other than a capital gain deduction under s. 71.36 or interest on U.S. obligations, that is passed through to an individual from a tax-option corporation and would be included in that corporation’s income if it were not a tax-option corporation:

71.05(6)(b)1. 1. The amount of any interest or dividend income which is by federal law exempt from taxation by this state less the related expense in regard to both the distributable and nondistributable interest and dividend income on a fiduciary return.

71.05 Cross-reference Cross-reference: See also ss. Tax 3.095 and 3.096, Wis. adm. code.

71.05(6)(b)2. 2. Net income not allocated or apportioned to this state under s. 71.04.

71.05(6)(b)3. 3. Any other amount not subject to taxation under this chapter, less any amount allocable thereto which has been deducted in the computation of federal taxable or adjusted gross income except amounts used to calculate the credit under s. 71.07 (5).

71.05 Cross-reference Cross-reference: See also s. Tax 3.098, Wis. adm. code.

71.05(6)(b)3m. 3m. As provided under s. 71.07 (3s) (c) 7., the amount of the credit under s. 71.07 (3s) that the taxpayer added back to income under s. 71.05 (6) (a) at the time that the taxpayer first claimed the credit.

71.05(6)(b)4. 4. Disability payments other than disability payments that are paid from a retirement plan, the payments from which are exempt under subd. 54. and sub. (1) (am) and (an), if the individual either is single or is married and files a joint return and is under 65 years of age before the close of the taxable year to which the subtraction relates, retired on disability, and, when the individual retired, was permanently and totally disabled. In this subdivision, “permanently and totally disabled” means an individual who is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered permanently and totally disabled for purposes of this subdivision unless proof is furnished in such form and manner, and at such times, as prescribed by the department. The exclusion under this subdivision shall be determined as follows:

71.05(6)(b)4.a. a. If the individual is single and the individual’s federal adjusted gross income in the year to which the subtraction relates is less than $20,200, the maximum subtraction is $100 for each week that payments are received or the amount of disability pay reported as income, whichever is less.

71.05(6)(b)4.b. b. If the individual is married and filing a joint return and the couple’s federal adjusted gross income in the year to which the subtraction relates is less than $20,200, or $25,400 if both spouses are disabled, the maximum subtraction is $100 for each week that payments are received, per spouse if both spouses are disabled, or the amount of disability pay reported as income, whichever is less.

71.05(6)(b)4.c. c. If the federal adjusted gross income of the individual, or individuals if filing a joint return, for the taxable year, determined without regard to this subdivision, exceeds $15,000, the amount subtracted under this subdivision for the taxable year shall be reduced by an amount equal to the excess of the federal adjusted gross income over $15,000.

71.05(6)(b)5. 5. Any amounts that are recoveries of federal itemized deductions for which no tax benefit was received for Wisconsin purposes.

71.05(6)(b)6. 6. For the original purchaser of small business stock that is purchased at the time that the business is incorporated and before January 1, 2014, and that is sold before January 1, 2014, the amount of net capital gains on small business stock otherwise subject to the tax under s. 71.02 if the taxpayer has not acquired the stock by gift, has not acquired the stock in a stock-for-stock exchange and submits with the taxpayer’s return a copy of the certification under s. 71.01 (10).

71.05(6)(b)8. 8. The difference between the amount included in federal adjusted gross income for the current year and the amount calculated under section 85 of the internal revenue code (relating to unemployment compensation) as that section existed on December 31, 1985.

71.05(6)(b)9. 9. On assets held more than one year and on all assets acquired from a decedent, 30 percent of the capital gain as computed under the internal revenue code, not including capital gains for which the federal tax treatment is determined under section 406 of P.L. 99-514; not including amounts treated as ordinary income for federal income tax purposes because of the recapture of depreciation or any other reason; and not including amounts treated as capital gain for federal income tax purposes from the sale or exchange of a lottery prize. For purposes of this subdivision, the capital gains and capital losses for all assets shall be netted before application of the percentage.

71.05(6)(b)9m. 9m. On farm assets held more than one year and on all farm assets acquired from a decedent, to the extent that they are not subtracted under subd. 9. or 10., 60 percent of the capital gain as computed under the Internal Revenue Code, not including capital gains for which the federal tax treatment is determined under section 406 of P.L. 99-514; not including amounts treated as ordinary income for federal income tax purposes because of the recapture of depreciation or any other reason; and not including amounts treated as capital gain for federal income tax purposes from the sale or exchange of a lottery prize. In this subdivision, “farm assets” means livestock, farm equipment, farm real property, and farm depreciable property. For purposes of this subdivision, the capital gains and capital losses for all assets shall be netted before application of the percentage.

71.05(6)(b)10. 10. Farm losses added to income under par. (a) 10. in any of the 15 preceding years, to the extent that they are not offset against farm income of any year between the loss year and the taxable year for which the modification under this subdivision is claimed and to the extent that they do not exceed the net profits or net gains from the sale or exchange of capital or business assets in the current taxable year from the same farming business or portion of that business to which the limits on deductible farm losses under par. (a) 10. applied in the loss year.

71.05(6)(b)12. 12. Any amount recognized as a gain under section 1001 (c) of the Internal Revenue Code if a surviving spouse and a distributee exchange their interests in marital property under s. 766.31 (3) (b).

71.05(6)(b)13. 13. Any amount of basic, special and incentive pay income or compensation, as those terms are used in 37 USC chapters 3 and 5, received from the federal government by a person who is a member of a reserve component of the U.S. armed forces, as defined in 26 USC 7701 (a) (15), and is below the grade of commissioned officer, for services performed for Operation Desert Shield or Operation Desert Storm. In this subdivision, “services performed for Operation Desert Shield or Operation Desert Storm” means service in a unit of the U.S. armed forces if:

71.05(6)(b)13.a. a. The person is activated for Operation Desert Shield or Operation Desert Storm; and

71.05(6)(b)13.b. b. The service occurs during the period that there is in effect a designation by the president of the United States that the service is part of Operation Desert Shield or Operation Desert Storm.

71.05(6)(b)14. 14. Up to $500 per month of basic, special and incentive pay income or compensation, as those terms are used in 37 USC chapters 3 and 5, received from the federal government by a person who is a member of a reserve component of the U.S. armed forces, as defined in 26 USC 7701 (a) (15), and is a commissioned officer, for services performed for Operation Desert Shield or Operation Desert Storm. In this subdivision, “services performed for Operation Desert Shield or Operation Desert Storm” means service in a unit of the U.S. armed forces if:

71.05(6)(b)14.a. a. The person is activated for Operation Desert Shield or Operation Desert Storm; and

71.05(6)(b)14.b. b. The service occurs during the period that there is in effect a designation by the president of the United States that the service is part of Operation Desert Shield or Operation Desert Storm.

71.05(6)(b)19. 19. For taxable years beginning on or after January 1, 1995, an amount paid by a self-employed person for medical care insurance for the person, his or her spouse and the person’s dependents, calculated as follows:

71.05(6)(b)19.a. a. One hundred percent of the amount paid by the person for medical care insurance, not including any amount that is paid with a premium assistance credit amount under 26 USC 36B. In this subdivision, “medical care insurance” means a medical care insurance policy that covers the person, his or her spouse and the person’s dependents and provides surgical, medical, hospital, major medical or other health service coverage, and includes payments made for medical care benefits under a self-insured plan, but “medical care insurance” does not include hospital indemnity policies or policies with ancillary benefits such as accident benefits or benefits for loss of income resulting from a total or partial inability to work because of illness, sickness or injury.

71.05(6)(b)19.b. b. From the amount calculated under subd. 19. a., subtract the amounts deducted from gross income for medical care insurance in the calculation of federal adjusted gross income.