Tax 2.82 NoteExamples: 1) Corporation A is incorporated outside Wisconsin and is not a member of a combined group. Corporation A is licensed to do business in Wisconsin, but all of its activities in Wisconsin are protected by P.L. 86-272. Therefore, Corporation A does not have nexus. Corporation A is not subject to the economic development surcharge because it does not have nexus in Wisconsin.
Tax 2.82 Note2) Assume the same facts as Example 1, except that Corporation A is in Combined Group ABCD, which consists of Corporations A, B, C, and D. Corporation D has a warehouse and several stores in Wisconsin that are part of the combined group’s common unitary business. Since Corporation D has nexus in Wisconsin, all corporations in the combined group have nexus in Wisconsin. Corporations A, B, and D have sales to Wisconsin customers but Corporation C does not. The gross receipts, Wisconsin income, gross tax, and resulting economic development surcharge for each corporation in the group are as follows:
Tax 2.82 NoteThe Wisconsin income and gross tax are computed using the method described in s. Tax 2.61. Since the economic development surcharge applies to each member of a combined group separately: Tax 2.82 Note• Corporation A is subject to the economic development surcharge because its gross receipts are at least $4,000,000.
Tax 2.82 Note• Corporation B is not subject to the economic development surcharge because its gross receipts are less than $4,000,000.
Tax 2.82 Note• Corporation C is subject to the minimum $25 economic development surcharge because its gross receipts are at least $4,000,000 and it has no gross tax liability.
Tax 2.82 Note• Corporation D is subject to the maximum $9,800 economic development surcharge because its gross tax of $474,000 multiplied by the economic development surcharge rate of 3% exceeds $9,800. The amount in excess of $9,800 is not imposed even though the other members have economic development surcharge liability of less than $9,800.
Tax 2.82 HistoryHistory: Cr. Register, January, 1979, No. 277, eff. 2-1-79; correction in (3) (b) 1. made under s. 13.93 (2m) (b) 5., Stats., Register, November, 1993, No. 455; EmR0943: emerg. r. and recr. eff. 12-31-09; CR 10-001: r. and recr. Register June 2010 No. 654, eff. 7-1-10; CR 12-011: am. (1) (c), (6) Register July 2012 No. 679, eff. 8-1-12; CR 16-046: am. (1) (a), (4) (c) (Example), (5) (a) (Example) Register January 2018 No. 745, eff. 2-1-18; CR 18-081: cr. (2) (bm), am. (3) (b) 3. a., (4) (a) 3., r. (4) (a) 4., am. (4) (a) 5., cr. (4) (a) 5m., r. (4) (a) 6., am. (4) (a) 7., cr. (4) (a) 7. (example), am. (4) (a) 8., 9., cr. (4) (a) 9m., am. (4) (a) 11., cr. (4) (a) 11 (example), am. (4) (d) Register October 2019 No. 766, eff. 11-1-19; (2) (bm) renum. from (2) (d) under s. 13.92 (4) (b) 1., Stats., and correction in (2) (bm), (3) (b) 1., (4) (a) 3., 9. made under s. 35.17, Stats., Register October 2019 No. 766. Tax 2.85Tax 2.85 Penalty for failure to produce records under s. 71.80 (9m), Stats. Tax 2.85(1)(1) General. A person who fails to produce records or documents, as provided under ss. 71.74 (2) and 73.03 (9), Stats., that were requested by the department may be subject to any of the following penalties under s. 71.80 (9m), Stats.: Tax 2.85(1)(a)(a) The disallowance of deductions, credits, exemptions or income inclusion to which the requested records relate. Tax 2.85(1)(b)(b) In addition to any other penalties that the department may impose, a penalty for each violation that is equal to the greater of $500 or 25% of the amount of the additional tax on any adjustment made by the department that results from the person’s failure to produce the records. Tax 2.85(2)(a)(a) “Disallowance,” “inclusion,” or “adjustment” means that an item is disallowed, included or adjusted through action taken by the department when a proposed assessment or refund or notice of assessment or refund is issued to a taxpayer. Tax 2.85(2)(b)(b) “Records” include both paper and electronic formats. Examples include bills, receipts, invoices, contracts, letters, memos, accounting statements or schedules, general ledgers, journal entries, and board of director’s minutes. “Records” do not include items protected by attorney-client privilege, if the taxpayer provides a brief description or summary of the contents of each record, the date each record was prepared, the person or persons who prepared each record, the person to whom each record was directed, or for whom each record was prepared, the purpose in preparing each record, and how each element of the privilege is met as to each record. Tax 2.85(2)(c)(c) “Records requested were not provided” means that all records requested were not provided to the department within the time specified by the department. Tax 2.85(2)(cm)(cm) “Summons request” means a request for records issued by the department pursuant to s. 73.03 (9), Stats. Tax 2.85(2)(d)(d) “Written request for records” includes requests made by letter, e-mail, fax or any other written form. Tax 2.85(2)(e)(e) “Provided” means the records are provided by electronic means or in paper format to the address specified by the department in its written request for records. If the address specified by the department is the person’s location, the records are considered provided on the date the person notifies the department they are available for review at that location. Tax 2.85(3)(3) Procedures. The penalties in this section may be imposed if the records requested were not provided and the department provided the notifications in pars. (a), (b), and (c) regarding the records requested. The number of days established by the department for the person to respond to the record requests should be reasonable based on the facts of each situation. Tax 2.85(3)(a)(a) A first written request for records where the department allowed the person a minimum of 30 days from the date of request for the records to be provided. Tax 2.85(3)(b)(b) After the time period to respond to the first written request has expired as provided in par. (a), a second written request for records where the department allowed the person a minimum of 30 days from the date of request for the records to be provided. This second written request for records shall include a statement explaining that if the requested records are not provided by the date specified, the penalties provided by s. 71.80 (9m), Stats., may be imposed. Tax 2.85(3)(c)(c) After the time period to respond to the second written request has expired as provided in par. (b), a summons request for records where the department allowed the person a minimum of 30 days from the date of receipt of the request for the records to be provided. This summons request shall be prepared on a form prescribed by the department and shall be served: Tax 2.85(3)(c)1.1. By certified mail, evidenced by a return receipt signed by the taxpayer or an authorized representative. Tax 2.85(3)(c)2.2. By personal service pursuant to sec. 801.11, Stats., if unable to obtain a signature as provided in subd. 1. Tax 2.85 NoteExamples: 1) The department issues a first written request for records to Corporation A on September 1, 2016, allowing Corporation A until October 6, 2016, to provide the records requested. Corporation A does not provide the requested records to the department by October 6, 2016. The department issues a second written request for records to Corporation A on October 21, 2016, allowing Corporation A until November 30, 2016, to provide the records requested. Included in this second written request for records is a notification regarding the penalties provided by s. 71.80 (9m), Stats. Corporation A does not provide the requested records by November 30, 2016. The department mails a summons request for records to Corporation A which is received on December 20, 2016, allowing Corporation A until January 31, 2017, to provide the records requested. Corporation A does not provide the requested records by January 31, 2017. Therefore, the department may disallow the deductions, credits, or exemptions or include in Wisconsin income the additional income to which the requested records relate and impose a penalty equal to the greater of $500 or 25% of the additional tax on the adjustments made resulting from Corporation A not providing the records requested. Tax 2.85 Note2) The department issues a first written request for records to Corporation B on December 21, 2016, allowing Corporation B until January 20, 2017, to provide the records requested. Corporation B does not provide the requested records to the department by January 20, 2017. The department issues a second written request for records to Corporation B on February 8, 2017, allowing Corporation B until March 10, 2017, to provide the records requested. Included in this second written request for records is a notification regarding the penalties provided by s. 71.80 (9m), Stats. Corporation B does not provide the requested records to the department by March 10, 2017. The department personally serves a summons request for records on Corporation B on March 28, 2017, allowing Corporation B until May 10, 2017, to provide the records requested. Corporation B provides records to the department by May 10, 2017, but the department determines that the taxpayer did not provide some of the records requested by May 10, 2017. Therefore, since the taxpayer did not provide all of the records requested by May 10, 2017, the department may disallow the deductions, credits, or exemptions or include in Wisconsin income the additional income to which the requested records that were not provided relate and impose a penalty equal to the greater of $500 or 25% of the additional tax on the adjustments made resulting from the requested records that were not provided. Tax 2.85(4)(a)(a) The penalties in this section may be waived if the person whose records were requested can show that, under all the facts and circumstances, its response to the written request for records or its failure to respond to the written request for records was reasonable or justified by factors beyond the person’s control. In determining whether the penalties will be waived, the department may consider any of the following factors: Tax 2.85(4)(a)1.1. Death of the taxpayer, tax preparer, accountant or other responsible party. Tax 2.85(4)(a)2.2. Onset of debilitating illness or injury of the taxpayer, tax preparer, accountant or other responsible party. Tax 2.85(4)(a)4.4. Records that were destroyed due to events beyond control of the taxpayer or other responsible party and not due to neglect. Tax 2.85(4)(a)5.5. Any other facts and circumstances that the department believes pertinent. Tax 2.85(4)(b)(b) Providing requested records after the time period required for providing the records has expired, as provided in sub. (3), shall result in a reduction of the penalties provided in sub. (1) (a) and (b) if the department determines that these records support a reduction in the disallowance or inclusion previously made by the department. Tax 2.85 NoteExamples: 1) Since Corporation C does not provide the records requested by the date specified in a summons request for records to support interest expense deducted, the department issues a proposed audit report to Corporation C disallowing all the interest expense previously deducted, which represents the penalty provided in s. 71.80 (9m) (a) 1., Stats. Additional tax of $100,000 and the penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $25,000 results in the proposed audit report from disallowing this interest expense. Corporation C provides the records requested 26 days after the department issues the proposed audit report but before the notice of assessment is issued and explains, without any further detail, that they were too busy with other aspects of their business to respond to the three written requests for records by the dates specified. In this situation, the failure to provide the records requested is not reasonable or justified by factors beyond the person’s control. In addition, the records provided do not support a reduction of the interest expense disallowed in the proposed audit report. Therefore, the interest expense adjustment is not modified so the proposed additional tax of $100,000 and the original proposed penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $25,000 remain. Tax 2.85 Note2) Since Mr. Smith does not provide the records requested regarding his business, which primarily receives payments in cash, to support the reported gross receipts by the date specified in a summons request for records, the department issues a notice of assessment to Mr. Smith including an estimated amount into income for unreported receipts, which represents the penalty provided in s. 71.80 (9m) (a) 1., Stats. Additional tax of $60,000, a negligence penalty of $15,000 and the penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $15,000 results in the assessment from including these estimated receipts. Mr. Smith appeals the assessment, provides the records that were requested during the audit, and explains that he forgot to provide the records that were previously requested. In this situation, the failure to provide the records requested is not reasonable or justified by factors beyond the person’s control. However, the records provided show that unreported receipts were only 20% of the amount previously included by the department as estimated unreported receipts. Therefore, the unreported receipts adjustment is modified to reduce the additional tax from $60,000 to $12,000, the negligence penalty is reduced from $15,000 to $3,000 and the original penalty as provided in s. 71.80 (9m) (a) 2., Stats., is reduced from $15,000 to $3,000. Tax 2.85 Note3) Assume the same facts as Example 2, except that Mr. Smith explains that he did not previously provide the requested records because his accountant had possession of them and was in the hospital when the records were requested during the audit. In this situation the failure to provide the records requested is reasonable or justified by factors beyond the person’s control. Therefore, the unreported receipts adjustment is modified to reduce the additional tax from $60,000 to $12,000, the negligence penalty is reduced from $15,000 to $3,000 and the original penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $15,000 is waived. Tax 2.85 HistoryHistory: EmR0929: emerg. cr. eff. 10-19-09; CR 09-087: cr. Register June 2010 No. 654, eff. 7-1-10; correction in (3) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register June 2010 No. 654; CR 17-018: cr. (2) (cm), am. (3) (intro.), cr. (3) (c), am. (3) (c) (Examples), (4) (b) (Examples) Register September 2019 No. 765, eff. 10-1-19; correction in (4) (b) (Examples) made under s. 13.92 (4) (b) 7., Stats., Register September 2019 No. 765. Tax 2.87Tax 2.87 Reduction of delinquent interest rate under s. 71.82 (2) (b), Stats. Tax 2.87(1)(1) Procedures. The secretary may reduce the delinquent interest rate from 18% to 12% per year when the secretary determines the reduction fair and equitable, if the person from whom delinquent taxes are owing: Tax 2.87(1)(a)(a) Requests the reduction in writing, addressed to the Wisconsin Department of Revenue, Compliance Bureau, P.O. Box 8901, Madison, WI 53708. Tax 2.87(1)(b)(b) Clearly indicates why it is fair and equitable for the rate of interest to be reduced. Information regarding one or more of the factors under sub. (2) may be indicated. Tax 2.87(1)(c)(c) Is current in all return and report filings and tax payments for all matters other than the delinquencies for which interest reduction is being sought. Tax 2.87(1)(d)(d) Pays the taxes, reduced amount of interest and any penalties associated with them within 30 days of receiving notice from the department of the reduction. Tax 2.87(1)(e)(e) For combined group members, the designated agent is charged with this responsibility. Tax 2.87 NoteNote: See s. Tax 2.65 for rules relating to the designated agent. Tax 2.87(2)(2) Factors for secretary’s consideration. In determining whether an interest rate reduction is fair and equitable, the secretary may consider the following factors: Tax 2.87(2)(a)(a) The taxpayer’s prior record of reporting and payment to the department. Tax 2.87(2)(c)(c) Any circumstances which may have prevented payment such as death, imprisonment, hospitalization or other institutionalization. Tax 2.87(2)(d)(d) Any unusual circumstances which may have caused the taxpayer to incur the delinquency or prevent its payment. Tax 2.87(2)(e)(e) Any other factor which the secretary believes pertinent. Tax 2.87(3)(3) Determination not appealable. The secretary’s determination under this rule is not appealable. Tax 2.87 HistoryHistory: Cr. Register, February, 1979, No. 278, eff. 3-1-79; am. (1) (intro.), Register, September, 1983, No. 333, eff. 10-1-83; CR 10-095: cr. (1) (e) Register November 2010 No. 659, eff. 12-1-10; CR 19-141: am. (1) (a) Register September 2020 No. 777, eff. 10-1-20. Tax 2.88(1)(1) Interest on unpaid taxes which are not delinquent. Unpaid individual income or corporate franchise or income taxes which are not delinquent but which are assessed by the department on or after August 1, 1981 shall bear interest computed at the rate of 12% per year from the due date of the taxes to the date paid or delinquent. Tax 2.88(2)(2) Interest on delinquent taxes. Any individual income or corporate franchise or income tax delinquencies shall include interest at the rate of 1.5% per month from the date on which the taxes became delinquent until the taxes are paid. Tax 2.88(3)(a)(a) Any refund of individual income or corporate franchise or income taxes shall include interest at the rate of 3% per year from the due date of the return to the date paid by the department, except as provided in pars. (b), (c), and (d). Tax 2.88(3)(b)(b) No interest may be allowed on income and franchise taxes if the refund is certified on a refund roll within 90 days of the due date of the return or the date the return was filed, whichever occurs later. This treatment shall apply to a refund of taxes resulting from an overpayment of estimated tax as well as from withheld taxes. Tax 2.88(3)(c)(c) No interest may be allowed on a refund of income taxes that results from the carryback of a net operating loss. Tax 2.88(3)(d)(d) No interest may be allowed on refunds due to a tax credit issued under ss. 71.07 (3q), (3w), (3wm), and (3y), 71.28 (3q), (3w), (3wm), and (3y), and 71.47 (3q), (3w), and (3y), Stats., and subch. VIII of ch. 71, Stats. Tax 2.88(4)(4) Interest on deposit of contested taxes. Any refund of an amount deposited with the department pursuant to s. 71.90 (1), Stats., shall include interest at the rate of 3% per year from the date the funds were deposited to the date refunded. Tax 2.88(5)(5) Extension periods. If an extension of time is granted for filing an individual income or a corporate franchise or income tax return, any taxes owing with the return are subject to interest during the extension period at the rate of 12% per year. However, if the return is not filed or the taxpayer files but fails to pay the tax by the end of the extension period, the taxes owing become delinquent and shall be subject to delinquent interest under sub. (2) from the end of the extension period until paid. Tax 2.88 NoteNote: 2013 Wis. Act 20 reduced the rate of interest on refunds of taxes and refunds of the deposit of contested taxes from 9% to 3%. The 3% rate applies to refunds paid on or after July 2, 2013, regardless of the taxable periods to which the refunds pertain. Tax 2.88 NoteNote: Section Tax 2.88 interprets ss. 71.03 (7), 71.07 (3q), (3w), (3wm), and (3y), 71.24 (7), 71.28 (3q), (3w), (3wm), and (3y), 71.44 (3), 71.47 (3q), (3w), and (3y), 71.55 (4), 71.82 (1) and (2) (a), and 71.90 (1), Stats. Tax 2.88 HistoryHistory: Cr. Register, January, 1979, No. 277, eff. 2-1-79; r. and recr. (1), (3) and (4), Register, September, 1983, No. 333, eff. 10-1-83; renum. (2) to (4) to be (3), (2) and (5) and am., cr. (4), Register, July, 1989, No. 403, eff. 8-1-89; CR 14-005: am. (3) (a), (4) Register August 2014 No. 704, eff. 9-1-14; CR 16-046: am. (3) (a), cr. (3) (c) Register January 2018 No. 745, eff. 2-1-18; CR 19-141: am. (3) (a), cr. (3) (d) Register September 2020 No. 777, eff. 10-1-20; correction in (3) (d) made under s. 35.17, Stats., Register September 2020 No. 777. Tax 2.89Tax 2.89 Estimated tax requirements for short taxable years. Tax 2.89(1)(1) General. Under ss. 71.09 and 71.29, Stats., certain corporations and persons other than corporations shall make estimated tax payments. For short taxable years, estimated tax payments shall be made in accordance with this section. Tax 2.89 NoteNote: For taxable years beginning on or after January 1, 1994, and ending before April 1, 1999, estimated tax includes the temporary recycling surcharge under s. 77.93, Stats. Tax 2.89(2)(a)(a) “Corporation” includes corporations, tax-option (S) corporations, insurance companies, publicly traded partnerships treated as corporations in section 7704 of the Internal Revenue Code, limited liability companies treated as corporations under the Internal Revenue Code, joint stock companies, associations, common law trusts, regulated investment companies, real estate investment trusts, real estate mortgage investment conduits, nuclear decommissioning trust funds and virtually exempt entities as defined in s. 71.29 (1) (c), Stats. Tax 2.89(2)(c)(c) “Persons other than corporations” includes individuals, estates, trusts other than those treated as corporations in par. (a), partnerships except publicly traded partnerships treated as corporations in section 7704 of the Internal Revenue Code and limited liability companies treated as partnerships under the Internal Revenue Code. Tax 2.89(2)(d)(d) “Short taxable year” means a period of less than 12 months. Tax 2.89(3)(3) Number of installment payments required. Tax 2.89(3)(a)(a) For short taxable years, the following number of estimated tax installment payments shall be made: Tax 2.89(3)(b)(b) Except as provided in par. (c), for purposes of determining the required number of estimated tax installment payments under par. (a), a portion of a month shall be treated as a full month. Tax 2.89(3)(c)(c) If a short taxable year terminates before the end of a month and another taxable year begins at that time, for estimated tax installment purposes the first taxable period shall be treated as ending on the last day of that month and the second taxable period shall be treated as beginning on the first day of the following month. Tax 2.89 NoteNote: Refer to the examples of the estimated tax payment requirements for short taxable years involving a portion of a month that follow sub. (7) (b) 4.
Tax 2.89(4)(4) Due dates of installment payments for corporations. For short taxable years, corporations, or the designated agent as provided in s. Tax 2.65 (3) (a) 5., shall make estimated tax installment payments on or before the 15th day of each of the following months:
