71.74(15)(15) Payments. All nondelinquent payments of additional amounts owed shall be applied in the following order: penalties, interest, tax principal. 71.74 AnnotationThe investigative power of the Department of Revenue under s. 71.11 (20) (b) [now sub. (2)] is similar to the power of the Internal Revenue Service under 26 USC 7602. A taxpayer subpoenaed by the department has limited discovery rights under Genser, 595 F.2d 146 (1979). State v. Beno, 99 Wis. 2d 77, 298 N.W.2d 405 (Ct. App. 1980). 71.74571.745 Pass-through entity audits, additional assessments and refunds at the entity level. 71.745(1)(1) General applicability. Unless specifically provided in subs. (2) to (9), additional assessments and refunds of pass-through entities and pass-through members shall follow the provisions under this chapter. This section shall not apply for taxable years for which a pass-through entity made an election under s. 71.21 (6) (a) or 71.365 (4m) (a) that the pass-through entity did not revoke under s. 71.21 (6) (c) or 71.365 (4m) (c). The department shall not make additional assessments and refunds under this section to an entity treated as a disregarded entity described under U.S. Treasury Regulation 301.7701-2 or to a grantor trust the income of which is reportable under the Internal Revenue Code by the grantor of the trust or by any person other than the trust. 71.745(2)(2) Audit assessments and refunds. Except as provided in sub. (9), for the purpose of performing audit assessments and issuing refunds, the department may do all of the following: 71.745(2)(a)(a) Assess and collect additional tax from a pass-through entity on income otherwise reportable by its pass-through members. In computing the tax to assess to a pass-through entity under this paragraph, the department shall apply the highest tax rate under s. 71.06 on income otherwise reportable by pass-through members that are individuals, estates, or trusts with a direct interest in the pass-through entity and apply the highest tax rate under s. 71.27 on income otherwise reportable by pass-through members, other than individuals, estates, or trusts, with a direct interest in the pass-through entity. 71.745(2)(b)(b) Direct the secretary of administration to refund to a pass-through entity that part of an overpayment paid by the pass-through entity and not by the entity’s pass-through members. Pass-through members may claim overpayments not paid by the pass-through entity within one year after the date the determination of the overpayment becomes final or before the end of the period specified under s. 71.75, whichever is later. 71.745(3)(3) Adjustment of credits. Except as provided in sub. (9), for the purpose of adjusting credits, the department may do all of the following: 71.745(3)(a)(a) Assess an adjustment to reduce a credit under s. 71.07, 71.28, or 71.47 to a pass-through entity if the pass-through entity previously computed the credit and reported the credit to its pass-through members. An assessment made under this paragraph may be reduced by the tax effect from the modifications described under ss. 71.05 (6) (a) 15. and 25., 71.21 (4), 71.26 (2) (a) 4. and 11., 71.34 (1k) (g) and (m), and 71.45 (2) (a) 10., if the modification occurs in a taxable year under review, except that the modification shall not pass through to nor be claimed by the pass-through members. 71.745(3)(b)(b) Assess an adjustment to increase a credit under s. 71.07, 71.28, or 71.47 to offset additional tax assessed to a pass-through entity under sub. (2). Any excess credit not used to offset additional tax may be claimed by the pass-through members within one year from the date the determination of the adjustment becomes final or before the end of the period specified under s. 71.75, whichever is later. 71.745(4)(4) Adjustments attributable to members. Adjustments to pass-through items under this section are attributable to each pass-through member in a manner, and for the taxable year, that is consistent with the treatment of the pass-through items if a determination was not made under this section. 71.745(5)(5) Statutes of limitations, interest, and penalties. Statutes of limitations, interest, and penalties under ss. 71.77, 71.82, and 71.83 apply to determinations made under this section without regard to the action or inaction of pass-through members. 71.745(6)(a)(a) Except as provided in par. (b), a determination made by the department under this section is final and conclusive upon receipt by the pass-through entity. Pass-through members shall concede to the accuracy of and shall be bound by a determination made under this section. A pass-through entity shall timely notify all pass-through members of any administrative or judicial proceeding regarding the determination of any pass-through item. 71.745(6)(b)(b) A pass-through entity aggrieved by a determination made by the department under this section may, within 60 days after receipt of the determination, petition the department for redetermination. The department shall make a redetermination on the petition within 6 months after the date on which the petition is filed. If no timely petition for redetermination is filed with the department, the department’s determination shall be final and conclusive. 71.745(7)(7) Liability may be assessed to more than one person. If the department determines that a liability exists under this chapter and that the liability may be owed by more than one pass-through member of a pass-through entity, the department may assess any pass-through member of the pass-through entity for their allocated portion of additional tax otherwise due under this chapter. 71.745(8)(8) Election to reduce assessment. Within 60 days after the department’s determination under this section becomes final, a pass-through entity may elect, in a manner prescribed by the department, to have the pass-through entity’s assessment under this section reduced for pass-through items reported and paid by pass-through members within 60 days of the election. A pass-through entity shall furnish to the department and its pass-through members the adjustments to the each pass-through member’s proportionate share of pass-through items for each taxable year. 71.745(9)(9) Election to preclude assessment. Within 60 days after the department’s determination under this section becomes final, a pass-through entity with 25 or fewer pass-through members for all years under review may elect, in a manner prescribed by the department, to require the department to make an assessment to each of its pass-through members. This subsection does not apply to a pass-through entity if one or more of its pass-through members is a pass-through entity for any year under review. The election under this subsection does not relieve a representative designated by the pass-through entity under s. 71.80 (26) (a) of the representative’s duties under s. 71.80 (26) (b) 2., 3., and 6. 71.745 HistoryHistory: 2021 a. 262; s. 35.17 correction in (1), (2) (intro.), (5). 71.7571.75 Claims for refund. 71.75(1)(1) Except as provided in ss. 49.855, 71.77 (5) and (7) (b) and 71.935, the provisions for refunds and credits provided in this section shall be the only method for the filing and review of claims for refund of income and surtaxes, and no person may bring any action or proceeding for the recovery of such taxes other than as provided in this section. 71.75(2)(2) With respect to income taxes and franchise taxes, except as otherwise provided in subs. (5) and (9) and ss. 71.30 (4) and 71.77 (5) and (7) (b), refunds may be made if the claim therefor is filed within 4 years of the unextended date under this section on which the tax return was due. 71.75(3)(3) No refund shall be made on the over-withholding or overpayment of estimated income taxes or franchise taxes with respect to any person for any taxable year in an amount less than $1. 71.75(4)(4) Except as provided in subs. (5) and (5m), no refund shall be made and no credit shall be allowed for any year that has been the subject of a field audit if the audit resulted in a refund or no change to the tax owed or in an assessment that is final under s. 71.88 (1) (a) or (2) (a), 71.89 (2), 73.01 or 73.015 and if the department of revenue notifies the taxpayer that unless the taxpayer appeals the result of the field audit under subch. XIV, the field audit is final. No refund shall be made and no credit shall be allowed on any item of income or deduction, assessed as a result of an office audit, the assessment of which is final under s. 71.88 (1) (a) or (2) (a), 71.89 (2), 73.01 or 73.015. 71.75(5)(5) A claim for refund may be made within 4 years after the assessment of a tax or an assessment to recover all or part of any tax credit, including penalties and interest, under this chapter, assessed by office audit or field audit and paid if the assessment was not protested by the filing of a petition for redetermination. No claim may be allowed under this subsection for any tax, interest or penalty paid with respect to any item of income, credit or deduction self-assessed or determined by the taxpayer or assessed as the result of any assessment made by the department with respect to which all the conditions specified in this subsection are not met. If a claim is filed under this subsection, the department of revenue may make an additional assessment in respect to any item of income or deduction that was a subject of the prior assessment. No claim for refund may be made in respect to items that were not adjusted in the notice of assessment or of refund. A person whose returns for more than one year have been adjusted may make a claim under this subsection whether or not the net result of the adjustments for those years is an assessment. This subsection does not extend the time to file under s. 71.53 (2) or 71.59 (2), and it does not extend the time period during which the department of revenue may assess, or the taxpayer may claim a refund, in respect to any item of income or deduction that was not a subject of the prior assessment. 71.75(5m)(5m) In respect to overpayments attributable to a capital loss carry-back, a corporation may claim a refund within 4 years after the due date, including extensions, for filing the return for the taxable year of the capital loss that is carried back. 71.75(6)(6) Every claim for refund or credit of income taxes, franchise taxes or surtaxes, if any, shall be filed with the department and signed by the person or, in the case of joint returns, by both persons who filed the return on which the claim is based and shall set forth specifically and explain in detail the reasons for and the basis of the claim. After the claim has been filed it shall be considered and acted upon in the same manner as are additional assessments made under s. 71.74 (1) and (2). No marital property agreement or unilateral statement under ch. 766 affects claims for refund or credit under this section. 71.75(7)(7) The department shall act on any claim for refund or credit within one year after receipt and failure to act shall have the effect of allowing the claim and the department shall certify the refund or credit unless the taxpayer has consented in writing to an extension of the one-year time period prior to its expiration. 71.75(7m)(7m) The department shall not issue a refund to an employed individual before March 1 unless both the individual and the individual’s employer have filed all required returns and forms with the department for the taxable year for which the individual claims a refund. 71.75(8)(8) A refund payable on the basis of a separate return shall be issued to the person who filed the return. A refund payable on the basis of a joint return shall be issued jointly to the persons who filed the return, except that, if a judgment of divorce under ch. 767 apportions any refund that may be due the formerly married persons to one of the former spouses, or between the spouses, and if they include with their income tax return a copy of that portion of the judgment of divorce that relates to the apportionment of their tax refund, the department shall issue the refund to the person to whom the refund is awarded under the terms of the judgment of divorce or the department shall issue one check to each of the former spouses according to the apportionment terms of the judgment. 71.75(9)(9) All refunds, overpayments, or refundable credits under this chapter are subject to attachment under ss. 49.855, 71.93 and 71.935, and no taxpayer has any right to, or interest in, any refund, overpayment, or refundable credit under this chapter until setoff under ss. 49.855, 71.93, and 71.935 has been completed. 71.75(10)(10) If an income tax refund or tax credit check is payable to a person who dies, the department shall pay the refund or credit check to the decedent’s personal representative. If there is no personal representative, the department shall pay the refund or credit check either to a surviving relative, giving preference to relatives in the following order: surviving spouse, child, parent, brother or sister, or to a creditor of the decedent, as determined by the department. 71.75 Cross-referenceCross-reference: See also s. Tax 2.085, Wis. adm. code. 71.75 Cross-referenceCross-reference: See also s. Tax 2.12, Wis. adm. code. 71.75 AnnotationA party challenging the administration of taxing statutes must exhaust state administrative remedies before commencing an action in state courts under 42 USC 1983. Hogan v. Musolf, 163 Wis. 2d 1, 471 N.W.2d 216 (1991). 71.7671.76 Internal revenue service and other state adjustments. 71.76(1)(1) If for any year the amount of federal net income tax payable, of a credit claimed or carried forward, of a net operating loss carried forward or of a capital loss carried forward of any taxpayer as reported to the internal revenue service is changed or corrected by the internal revenue service or other officer of the United States, such taxpayer shall report such changes or corrections to the department within 180 days after its final determination and shall concede the accuracy of such determination or state how the determination is erroneous. Such changes or corrections need not be reported unless they affect the amount of net tax payable under this chapter, of a credit calculated under this chapter, of a Wisconsin net operating loss carried forward, of a Wisconsin net business loss carried forward or of a capital loss carried forward under this chapter. Any taxpayer submitting an amended return to the internal revenue service, or to another state if there has been allowed a credit against Wisconsin taxes for taxes paid to that state, shall also file, within 180 days of such filing date, an amended return if any information contained on the amended return affects the amount of net tax payable under this chapter of a credit calculated under this chapter, of a Wisconsin net operating loss carried forward, of a Wisconsin net business loss carried forward or of a capital loss carried forward under this chapter. 71.76(2)(a)(a) Except as approved in par. (b), in the case of any partnership adjustments, as defined under section 6241 of the Internal Revenue Code and including adjustments under section 6225 of the Internal Revenue Code, the partnership and its partners shall report such changes or corrections to the department within 180 days after the final determination by the internal revenue service and shall concede the accuracy of such determination or state how the determination is erroneous. The partnership and its partners are not required to report such changes or corrections unless the changes or corrections affect the amount of net tax payable under this chapter, of a credit calculated under this chapter, of a Wisconsin net operating loss carried forward under this chapter, of a Wisconsin net business loss carried forward under this chapter, or of a capital loss carried forward under this chapter. The partnership and its partners shall submit amended returns, as applicable, for each reviewed year, as defined under section 6225 of the Internal Revenue Code, to which such partnership adjustments relate. 71.76(2)(b)(b) In the case of any partnership adjustments, as defined under section 6241 of the Internal Revenue Code and including adjustments under section 6225 of the Internal Revenue Code, the partnership may submit a request to the department, in a manner prescribed by the department, within 60 days after the final determination by the internal revenue service to amend the partnership returns and pay tax on behalf of the partners at the highest tax rate computed under s. 71.745 (1) (a) [s. 71.745 (2) (a)] for each reviewed year, as defined under section 6225 of the Internal Revenue Code, to which such partnership adjustments relate. The partnership and its partners shall report such changes or corrections to the department within 180 days after the receipt of the notice of approval from the department and shall concede the accuracy of such determination or state how the determination is erroneous. The partnership and its partners shall report changes and corrections as provided under par. (a) within 180 days after the receipt of the notice of denial from the department. The partnership and its partners are not required to report such changes or corrections unless the changes or corrections affect the amount of net tax payable under this chapter, of a credit calculated under this chapter, of a Wisconsin net operating loss carried forward under this chapter, of a Wisconsin net business loss carried forward under this chapter, or of a capital loss carried forward under this chapter. 71.76 NoteNOTE: The correct cross-reference is shown in brackets. Corrective legislation is pending.
71.76 HistoryHistory: 1987 a. 312; 1991 a. 39; 1997 a. 27; 2021 a. 1, 262; s. 35.17 correction in (2) (a), (b). 71.76 Cross-referenceCross-reference: See also s. Tax 2.105, Wis. adm. code. 71.7771.77 Statutes of limitations, assessments and refunds; when permitted. 71.77(1)(1) Additional assessments and corrections of assessments by office audit or field investigation may be made of income of any taxpayer if notice under s. 71.74 (11) is given within the time specified in this section. 71.77(2)(2) With respect to assessments of a tax or an assessment to recover all or part of any tax credit under this chapter in any calendar year or corresponding fiscal year, notice shall be given within 4 years of the date the income tax or franchise tax return was filed. 71.77(2m)(2m) Notwithstanding sub. (2), the department of revenue may assess a deficiency related to a contribution to the capital of the taxpayer, as defined in section 118 (c) of the Internal Revenue Code, within 4 years after the department receives notice by the taxpayer, in the manner that the department prescribes, of any of the following: 71.77(2m)(a)(a) The amount of the expenditure under section 118 (c) (2) (A) of the Internal Revenue Code. 71.77(2m)(b)(b) The intent of the person against whom the deficiency is to be assessed not to make the expenditure under section 118 (c) (2) (A) of the Internal Revenue Code. 71.77(2m)(c)(c) Expiration of the time period under section 118 (c) (2) (B) of the Internal Revenue Code and failure of the person against whom the deficiency is to be assessed to make the expenditure under section 118 (c) (2) (B) of the Internal Revenue Code. 71.77(2n)(2n) Notwithstanding sub. (2), the department may make an assessment within one year of receiving notice of revocation from the Wisconsin Economic Development Corporation to recover all or a part of any tax credit claimed by a taxpayer, but revoked by the corporation. 71.77(3)(3) Irrespective of sub. (2), if any person has filed an incorrect income tax or franchise tax return for any year with intent to defeat or evade the income tax or franchise tax assessment provided by law, or has failed to file any income tax or franchise tax return for any of such years, income of any such year may be assessed when discovered. The department of revenue shall assess the taxes owed for taxable years beginning before January 1, 1990, by using the definition of “Internal Revenue Code” that applied to the year for which the assessment was made, as modified by P.L. 104-188 and P.L. 105-34 if P.L. 104-188 or P.L. 105-34 applied for federal purposes for that year. 71.77(4)(4) Irrespective of sub. (3), if additional assessments are made for any period more than 6 years before the year in which the assessment is made, the burden of proof shall rest with the state to prove its case by a preponderance of the evidence. 71.77(5)(5) The limitation periods provided in this section may be extended by written agreement between the taxpayer and the department prior to the expiration of such limitation periods or any extension of such limitation periods. During any such extension period, the department may issue an assessment or a refund, and the taxpayer may file a claim for a refund, relating to the year which the extension covers. Subsection (4) shall not apply to any assessment made in any such extended period. The department of revenue shall assess the taxes owed or compute the refund due for taxable years beginning before January 1, 1990, by using the definition of “Internal Revenue Code” that applied to the year for which the assessment was made, as modified by P.L. 104-188 and P.L. 105-34 if P.L. 104-188 or P.L. 105-34 applied for federal purposes for that year. 71.77(6)(6) Section 990.06 shall have no application to the provisions of this section. 71.77(7)(7) Notwithstanding any other limitations expressed in this chapter, an assessment or refund may be made: 71.77(7)(a)(a) If notice of assessment is given within 6 years after a return was filed and if on that return the taxpayer reported for taxation, or the taxpayers jointly reported for taxation, less than 75 percent of the net income properly assessable, except that no assessment of additional income may be made under this subsection for any year beyond the period specified in sub. (2) unless the aggregate of the taxes on the additional income of such year is in excess of $100 in the case of a return other than a joint return or $200 in the case of a joint return. 71.77(7)(b)(b) If notice of assessment or refund is given to the taxpayer within 180 days of the date on which the department receives a report from the taxpayer under s. 71.76 or within such other period specified in a written agreement entered into prior to the expiration of such 180 days by the taxpayer and the department. If the taxpayer does not report to the department as required under s. 71.76, the department may make an assessment against the taxpayer or refund to the taxpayer within 4 years after discovery by the department. 71.77(7)(c)(c) When an election is made under s. 71.745 (9), with respect to assessments of a tax or an assessment to recover all or part of any tax credit under this chapter in any calendar year or corresponding fiscal year, if notice of assessment is given to pass-through members within one year from the date of the election. 71.77(8)(8) For purposes of this section, a return filed on or before the last day prescribed by law for the filing of the return shall be considered as filed on such last day, and a return filed after the last day prescribed by law shall be considered as filed on the date that the return is received by the department of revenue. 71.77 Cross-referenceCross-reference: See also s. Tax 2.12, Wis. adm. code. 71.77571.775 Withholding from nonresident members of pass-through entities. 71.775(1)(1) Definition. In this section, “nonresident” includes an individual who is not domiciled in this state; a partnership, limited liability company, or corporation whose commercial domicile is outside the state; and an estate or a trust that is a nonresident under s. 71.14 (1) to (3m). 71.775(2)(a)(a) For the privilege of doing business in this state or deriving income from property located in this state, a pass-through entity that has Wisconsin income for the taxable year that is allocable to a nonresident partner, member, shareholder, or beneficiary shall pay a withholding tax. The amount of the tax imposed under this subsection to be withheld from the income distributable to each nonresident partner, member, shareholder, or beneficiary is equal to the nonresident partner’s, member’s, shareholder’s, or beneficiary’s share of income attributable to this state, multiplied by the following: 71.775(2)(a)1.1. For an individual, an estate, or a trust, the highest tax rate for a single individual for the taxable year under s. 71.06. 71.775(2)(a)2.2. For a partnership, a limited liability company, or a corporation, the highest tax rate for the taxable year under s. 71.27. 71.775(2)(b)(b) A pass-through entity that is also a member of another pass-through entity is subject to withholding under this subsection and shall pay the tax based on the share of income that is distributable to each of the entity’s nonresident partners, members, shareholders, or beneficiaries. 71.775(3)(a)(a) A nonresident partner’s, member’s, shareholder’s, or beneficiary’s share of income from the pass-through entity that is attributable to this state shall not be included in determining the withholding under sub. (2) if any of the following applies: 71.775(3)(a)1.1. The partner, member, shareholder, or beneficiary is exempt from taxation under this chapter. For purposes of this subdivision, the pass-through entity may rely on a written statement from the partner, member, shareholder, or beneficiary claiming to be exempt from taxation under this chapter, if the pass-through entity attaches a copy of the statement to its return for the taxable year and if the statement specifies the name, address, federal employer identification number, and reason for claiming an exemption for each partner, member, shareholder, or beneficiary claiming to be exempt from taxation under this chapter. 71.775(3)(a)2.2. The partner’s, member’s, shareholder’s, or beneficiary’s share of income from the pass-through entity that is attributable to this state is less than $2,000. 71.775(3)(a)3.3. The nonresident partner, member, shareholder, or beneficiary files an affidavit with the department, in the form and manner prescribed by the department, whereby the nonresident partner, member, shareholder, or beneficiary agrees to file a Wisconsin income or franchise tax return and be subject to the personal jurisdiction of the department, the tax appeals commission, and the courts of this state for the purpose of determining and collecting Wisconsin income and franchise taxes, including estimated tax payments, together with any related interest and penalties. 71.775(3)(b)(b) A pass-through entity that is a joint venture is not subject to the withholding under sub. (2), if the pass-through entity has elected not to be treated as a partnership under section 761 of the Internal Revenue Code. 71.775(3)(cm)(cm) A pass-through entity that is a publicly traded partnership, as defined under section 7704 (b) of the Internal Revenue Code, that is treated as a partnership under the Internal Revenue Code is not subject to the withholding under sub. (2), if the entity files with the department an information return that reports the name, address, taxpayer identification number, and any other information requested by the department for each unit holder with an income in this state from the entity in excess of $500. 71.775(4)(a)(a) Each pass-through entity that is subject to the withholding under sub. (2) shall file an annual return that indicates the withholding amount paid to the state during the pass-through entity’s taxable year. The pass-through entity shall file the return with the department on or before the date on which the pass-through entity is required to file for federal income tax purposes, not including any extension, under the Internal Revenue Code. 71.775(4)(bm)1.1. For the return under par. (a), the department shall allow an automatic extension of 7 months or until the corresponding due date of the pass-through entity’s federal income tax return or return of partnership income, whichever is later. Except for payments of estimated taxes, and except as provided in subd. 2., withholding taxes payable upon filing the return are not delinquent during the extension period but shall be subject to interest at the rate of 12 percent per year during that period. 71.775(4)(bm)2.2. For taxable years beginning after December 31, 2008, for persons who qualify for a federal extension of time to file under 26 USC 7508A due to a presidentially declared disaster or terroristic or military action, withholding taxes that are otherwise due from a pass-through entity under sub. (2) are not subject to 12 percent interest as otherwise provided under subd. 1. during the extension period and for 30 days after the end of the federal extension period. 71.775(4)(bn)(bn) If a pass-through entity subject to withholding tax under sub. (2) does not file the return under par. (a) on or before the extension date provided in par. (bm), the pass-through entity is liable for the penalty provided in s. 71.83 (1), in addition to any unpaid tax, interest, and penalty otherwise assessable to a nonresident partner, member, shareholder, or beneficiary on income from the pass-through entity. 71.775(4)(cm)(cm) Except as provided in par. (L), pass-through entities shall make estimated payments of the withholding tax under sub. (2) in 4 installments, on or before the 15th day of each of the following months:
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