Chapter 71

71.30(2m) (2m) Transactions without economic substance.

71.30(2m)(a) (a) If any person, directly or indirectly, engages in a transaction or series of transactions without economic substance to create a loss or to reduce taxable income or to increase credits allowed in determining Wisconsin tax, the department shall determine the amount of a taxpayer’s taxable income or tax so as to reflect what would have been the taxpayer’s taxable income or tax if not for the transaction or transactions without economic substance causing the reduction in taxable income or tax.

71.30(2m)(b) (b) A transaction has economic substance only if the transaction is treated as having economic substance as determined under section 7701 (o) of the Internal Revenue Code, except that the tax effect shall be determined using federal, state, local, or foreign taxes, rather than only the federal income tax effect.

71.30(2m)(c) (c) With respect to a transaction between members of a controlled group, as defined in section 267 (f) (1) of the Internal Revenue Code, the transaction shall be presumed to lack economic substance, and the taxpayer shall bear the burden of establishing by clear and satisfactory evidence that the transaction or the series of transactions between the taxpayer and one or more members of the controlled group has economic substance.

71.30(3) (3) Computations order. Notwithstanding any other provisions in this chapter, corporations computing liability for the tax under s. 71.23 (1) or (2) shall make computations in the following order:

71.30(3)(a) (a) Tax under s. 71.23 (1) or (2).

71.30(3)(b) (b) Manufacturing sales tax credit under s. 71.28 (3).

71.30(3)(bb) (bb) Manufacturing investment credit under s. 71.28 (3t).

71.30(3)(bm) (bm) Dairy investment credit under s. 71.28 (3n).

71.30(3)(bn) (bn) Community rehabilitation program credit under s. 71.28 (5k).

71.30(3)(c) (c) Research credit under s. 71.28 (4), except as provided under par. (f).

71.30(3)(cd) (cd) Postsecondary education credit under s. 71.28 (5r).

71.30(3)(ce) (ce) Water consumption credit under s. 71.28 (5rm).

71.30(3)(cn) (cn) Biodiesel fuel production credit under s. 71.28 (3h).

71.30(3)(cs) (cs) Low-income housing credit under s. 71.28 (8b).

71.30(3)(d) (d) Research facilities credit under s. 71.28 (5).

71.30(3)(db) (db) Super research and development credit under s. 71.28 (4m).

71.30(3)(dm) (dm) Health Insurance Risk-Sharing Plan assessments credit under s. 71.28 (5g).

71.30(3)(dn) (dn) Manufacturing and agriculture credit under s. 71.28 (5n).

71.30(3)(dp) (dp) Veteran employment credit under s. 71.28 (6n).

71.30(3)(ds) (ds) Ethanol and biodiesel fuel pump credit under s. 71.28 (5j).

71.30(3)(e) (e) Community development finance credit under s. 71.28 (1).

71.30(3)(ei) (ei) Development zone capital investment credit under s. 71.28 (1dm).

71.30(3)(eL) (eL) Development zones credit under s. 71.28 (1dx).

71.30(3)(ema) (ema) Economic development tax credit under s. 71.28 (1dy).

71.30(3)(eon) (eon) Technology zones credit under s. 71.28 (3g).

71.30(3)(eop) (eop) Early stage seed investment credit under s. 71.28 (5b).

71.30(3)(ep) (ep) Supplement to federal historic rehabilitation credit under s. 71.28 (6).

71.30(3)(epa) (epa) Electronic medical records credit under s. 71.28 (5i).

71.30(3)(ey) (ey) Employee college savings account contribution credit under s. 71.28 (10).

71.30(3)(f) (f) The total of farmland preservation credit under subch. IX, jobs credit under s. 71.28 (3q), enterprise zone jobs credit under s. 71.28 (3w), electronics and information technology manufacturing zone credit under s. 71.28 (3wm), business development credit under s. 71.28 (3y), research credit under s. 71.28 (4) (k) 1., and estimated tax payments under s. 71.29.

71.30(4) (4) Defense contract renegotiation. If the renegotiation or price redetermination of any corporation defense contract or subcontract by the government of the United States or any agency thereof or the voluntary adjustment of prices, costs or profits on any such contract or subcontract results in a reduction of income, the amount of any repayment or credit pursuant to such renegotiation, price redetermination or adjustment, including any federal income taxes credited as a part thereof, shall be allowed as a deduction from the corporate taxable income of the year in which said income was reported for taxation. Any federal income tax previously paid upon any income so repaid or credited shall be disallowed as a deduction from income of the year in which such tax was originally deducted, to the extent that such tax constituted an allowable deduction for said year. Any corporate taxpayer affected by such renegotiation, price redetermination or voluntary adjustment may within one year after the final determination thereof file a claim for refund and secure the same without interest, and the department of revenue shall make appropriate adjustments on account of said tax deductions without interest, notwithstanding the limitations of s. 71.75 or other applicable statutes.

71.30(5) (5) Disc income combining. In the case of a parent corporation, its DISC or affiliate, the net income of a DISC derived from business transacted with its parent shall be combined with the income of the parent corporation and the net income of a DISC derived from business transacted with the parent’s affiliated corporation shall be combined with the net income of the affiliated corporation to determine the amount of income subject to taxation under this chapter for the DISC, the parent corporation or the affiliate of the parent corporation as separate taxable entities. The net income of the parent corporation shall not include dividends received from the DISC paid from income previously combined for taxation under this subsection. “DISC” (domestic international sales corporation) has the meaning specified in section 992 of the internal revenue code as amended to December 31, 1979. For purposes of this subsection, a corporation is affiliated if at least 50 percent of its total combined voting stock is owned directly or indirectly by its parent corporation.

71.30(6) (6) Installment method; distributions and final year. A corporation entitled to use the installment method of accounting shall take the unreported balance of gain on all installment obligations into income in the taxable year of their distribution, transfer or acquisition by another person or for the final taxable year for which it files or is required to file a return under this chapter, whichever year occurs first.

71.30(7) (7) Penalties. Unless specifically provided in this subchapter, the penalties under subch. XIII apply for failure to comply with the provisions of this subchapter unless the context requires otherwise.

71.30(8) (8) Pricing effect on taxable income.

71.30(8)(a) (a) When any corporation liable to taxation under this chapter conducts its business in such a manner as either directly or indirectly to benefit the members or stockholders thereof or any person interested in such business, by selling its products or the goods or commodities in which it deals at less than the fair price which might be obtained therefor, or where a corporation, a substantial portion of whose capital stock is owned either directly or indirectly by another corporation, acquires and disposes of the products of the corporation so owning a substantial portion of its stock in such a manner as to create a loss or improper net income, the department may determine the amount of taxable income to such corporation for the calendar or fiscal year, having due regard to the reasonable profits which but for such arrangement or understanding might or could have been obtained from dealing in such products, goods or commodities.

71.30(8)(b) (b) For the purpose of this chapter, if a corporation which is required to file an income or franchise tax return is affiliated with or related to any other corporation through stock ownership by the same interests or as parent or subsidiary corporations or has income that is regulated through contract or other arrangement, the department of revenue may require such consolidated statements as in its opinion are necessary in order to determine the taxable income received by any one of the affiliated or related corporations or to determine whether the corporations are a unitary business.

71.30(9) (9) Reserve account transfer to surplus. If any transfer of a reserve or other account or portion thereof is in effect a transfer to surplus, so much of such transfer as had been accumulated through deductions from the gross or taxable income of the years open to audit under s. 71.74 (1) and (2) shall be included in the gross or taxable income of such years, and so much of such transfer as has been accumulated through deductions from the gross or taxable income of the years following January 1, 1911, and not open to audit under s. 71.74 (1) and (2) shall be included in the gross or taxable income of the year in which such transfer was effected.

71.30(10) (10) Endangered resources.

71.30(10)(a) (a) Definitions. In this subsection:

71.30(10)(a)1. 1. “Conservation fund” means the fund under s. 25.29.

71.30(10)(a)2. 2. “Endangered resources program” means purchasing or improving land or habitats for any native Wisconsin endangered or threatened species, as defined in s. 29.604 (2) (a) or (b), or for any nongame species, as defined in s. 29.001 (60); conducting the natural heritage inventory program under s. 23.27 (3); conducting wildlife and resource research and surveys; providing wildlife management services; providing for wildlife damage control or the payment of claims for damage associated with endangered or threatened species; and the payment of administrative expenses related to the administration of this subsection.

71.30(10)(b) (b) Voluntary payments.

71.30(10)(b)1. 1. ‘Designation on return.’ A corporation filing an income or franchise tax return may designate on the return any amount of additional payment or any amount of a refund that is due the corporation for the endangered resources program.

71.30(10)(b)2. 2. ‘Designation added to tax owed.’ If the corporation owes any tax, the corporation shall remit in full the tax due and the amount designated on the return for the endangered resources program when the corporation files a tax return.

71.30(10)(b)3. 3. ‘Designation deducted from refund.’ Except as provided under par. (d), and subject to ss. 71.75 (9) and 71.80 (3), if the corporation is owed a refund, the department shall deduct the amount designated on the return for the endangered resources program from the amount of the refund.

71.30(10)(c) (c) Errors; failure to remit correct amount.

71.30(10)(c)1. 1. ‘Reduced designation.’ If a corporation remits an amount that exceeds the tax due, after error corrections, but that is less than the total of the tax due, after error corrections, and the amount that is designated by the corporation on the return for the endangered resources program, the department shall reduce the designation for the endangered resources program to reflect the amount remitted that exceeds the tax due, after error corrections.

71.30(10)(c)2. 2. ‘Void designation.’ The designation for the endangered resources program is void if the corporation remits an amount equal to or less than the tax due, after error corrections.

71.30(10)(d) (d) Errors; insufficient refund. If a corporation is owed a refund that is less than the amount designated on the return for the endangered resources program, after attachment and crediting under ss. 71.75 (9) and 71.80 (3) and after error corrections, the department shall reduce the designation for the endangered resources program to reflect the actual amount of the refund the corporation is otherwise owed.

71.30(10)(e) (e) Conditions. If a corporation places any conditions on a designation for the endangered resources program, the designation is void.

71.30(10)(f) (f) Void designation. If a designation for the endangered resources program is void, the department shall disregard the designation and determine the amounts due, owed, refunded and received.

71.30(10)(g) (g) Tax return. The secretary of revenue shall provide a place for the designations under this subsection on the corporate income and franchise tax returns.

71.30(10)(h) (h) Certification of amounts. Annually, on or before September 15, the secretary of revenue shall certify to the department of natural resources and the department of administration:

71.30(10)(h)1. 1. The total amount of the administrative costs, including data processing costs, incurred by the department of revenue in administering this subsection during the previous fiscal year.

71.30(10)(h)2. 2. The total amount received from all designations for the endangered resources program made by corporations during the previous fiscal year.

71.30(10)(h)3. 3. The net amount remaining after the administrative costs under subd. 1. are subtracted from the total received under subd. 2.

71.30(10)(i) (i) Appropriations. From the moneys received from designations for the endangered resources program, an amount equal to the sum of administrative expenses certified under par. (h) 1. shall be deposited into the general fund and credited to the appropriation under s. 20.566 (1) (hp), and the net amount remaining certified under par. (h) 3. shall be deposited into the conservation fund and credited to the appropriation under s. 20.370 (1) (fs).

71.30(10)(j) (j) Refunds. An amount designated for the endangered resources program under this subsection is not subject to refund to a corporation that designates a donation under par. (b) unless the corporation submits information to the satisfaction of the department within 18 months from the date that taxes are due from the corporation or from the date that the corporation filed the return, whichever is later, that the amount designated is clearly in error. A refund granted by the department under this paragraph shall be deducted from the moneys received under this subsection in the fiscal year that the refund is certified under s. 71.75 (7).

71.30(11) (11) Veterans trust fund.

71.30(11)(a) (a) Definitions. In this subsection, “veterans trust fund” means the fund under s. 25.36.

71.30(11)(b) (b) Voluntary payments.

71.30(11)(b)1. 1. ‘Designation on return.’ A corporation filing an income or franchise tax return may designate on the return any amount of additional payment or any amount of a refund that is due the corporation as a donation to the veterans trust fund to be used for veterans programs under s. 25.36 (1).

71.30(11)(b)2. 2. ‘Designation added to tax owed.’ If the corporation owes any tax, the corporation shall remit in full the tax due and the amount designated on the return as a donation to the veterans trust fund when the corporation files a tax return.

71.30(11)(b)3. 3. ‘Designation deducted from refund.’ Except as provided under par. (d), and subject to ss. 71.75 (9) and 71.80 (3), if the corporation is owed a refund, the department shall deduct the amount designated on the return as a donation to the veterans trust fund from the amount of the refund.

71.30(11)(c) (c) Errors; failure to remit correct amount.

71.30(11)(c)1. 1. ‘Reduced designation.’ If a corporation remits an amount that exceeds the tax due, after error corrections, but that is less than the total of the tax due, after error corrections, and the amount designated by the corporation on the return as a donation to the veterans trust fund, the department shall reduce the designation to reflect the amount remitted that exceeds the tax due, after error corrections.

71.30(11)(c)2. 2. ‘Void designation.’ The designation for a donation to the veterans trust fund is void if the corporation remits an amount equal to or less than the tax due, after error corrections.

71.30(11)(d) (d) Errors; insufficient refund. If a corporation is owed a refund that is less than the amount designated on the return as a donation to the veterans trust fund, after attachment and crediting under ss. 71.75 (9) and 71.80 (3) and after error corrections, the department shall reduce the designation to reflect the actual amount of the refund the corporation is otherwise owed.

71.30(11)(e) (e) Conditions. If a corporation places any conditions on a designation for a donation to the veterans trust fund, the designation is void.

71.30(11)(f) (f) Void designation. If a designation for a donation to the veterans trust fund is void, the department shall disregard the designation and determine the amounts due, owed, refunded, and received.

71.30(11)(g) (g) Tax return. The secretary of revenue shall provide a place for the designations under this subsection on the corporate income and franchise tax returns.

71.30(11)(h) (h) Certification of amounts. Annually, on or before September 15, the secretary of revenue shall certify to the department of veterans affairs and the department of administration:

71.30(11)(h)1. 1. The total amount of the administrative costs, including data processing costs, incurred by the department of revenue in administering this subsection during the previous fiscal year.

71.30(11)(h)2. 2. The total amount received from all designations to the veterans trust fund under this subsection made by corporations during the previous fiscal year.

71.30(11)(h)3. 3. The net amount remaining after the administrative costs under subd. 1. are subtracted from the total received under subd. 2.

71.30(11)(i) (i) Appropriations. From the moneys received from designations to the veterans trust fund under this subsection, an amount equal to the sum of administrative expenses certified under par. (h) 1. shall be deposited into the general fund and credited to the appropriation under s. 20.566 (1) (hp), and the net amount remaining certified under par. (h) 3. shall be deposited into the veterans trust fund and used for the veterans programs under s. 25.36 (1).

71.30(11)(j) (j) Refunds. An amount designated as a donation to the veterans trust fund under this subsection is not subject to refund to a corporation that designates the donation unless the corporation submits information to the satisfaction of the department within 18 months from the date that taxes are due from the corporation or from the date that the corporation filed the return, whichever is later, that the amount designated is clearly in error. A refund granted by the department under this paragraph shall be deducted from the moneys received under this subsection in the fiscal year that the refund is certified under s. 71.75 (7).

71.30 History History: 1987 a. 312; 1987 a. 411 ss. 144, 145, 182 to 185; 1989 a. 31, 56; 1991 a. 39; 1995 a. 27, 209; 1997 a. 27; 1999 a. 9; 2001 a. 16; 2003 a. 33, 99, 135, 255; 2005 a. 25, 74, 361, 479, 483; 2007 a. 20, 226; 2009 a. 2, 28, 265, 269, 295, 332; 2011 a. 3, 32, 212, 222, 232; 2011 a. 260 ss. 26, 80; 2015 a. 55; 2015 a. 197 s. 51; 2015 a. 218; 2017 a. 58, 59, 176, 197, 231, 364; 2019 a. 54; 2021 a. 127; 2023 a. 138.

subch. V of ch. 71 SUBCHAPTER V

TAX-OPTION CORPORATIONS

71.32 71.32 Conformity. Unless specifically provided in this subchapter, tax-option corporations shall be subject to all of the provisions, requirements and liabilities of this chapter, so far as applicable, unless the context requires otherwise.

71.32 History History: 1987 a. 312.

71.33 71.33 Intent. It is the intent of this subchapter and other subchapters relating to the treatment of tax-option corporations and their shareholders to prevent the double inclusion or omission of any item of income, deduction or basis.

71.33 History History: 1987 a. 312.

71.34 71.34 Definitions. In this subchapter:

71.34(1am) (1am) “Aggregate effective tax rate” means the sum of the effective tax rates imposed by a state, U.S. possession, foreign country, or any combination thereof, on the person or entity.

71.34(1b) (1b) “Effective tax rate” means the maximum tax rate imposed by the state, U.S. possession, or foreign country, multiplied by the apportionment percentage, if any, applicable to the person or entity under the laws of that state, U.S. possession, or foreign country.