Tax 2.61(7)(i)(i) Apportionment factors for dual-sourced income. If a corporation is eligible to exclude foreign source income from combined unitary income under sub. (4) (d) to (f) and the Internal Revenue Code requires the corporation to source a transaction both within the United States and without the United States, the corporation shall exclude from its modified sales factor any amounts attributable to the portion of the transaction that constitutes foreign source income under sub. (4) (c). The amounts excluded from the modified sales factor under this paragraph shall be the amounts includable in the modified sales factor as if the transaction was sourced entirely within the United States, multiplied by the percentage of the transaction’s gross receipts that constitutes foreign source income under sub. (4) (c).

Tax 2.61(8)(8) Income computation for groups doing business solely in Wisconsin. For combined groups that are engaged in business solely in Wisconsin, and therefore not eligible to use apportionment, each member’s net income subject to combination is determined on a separate entity basis and then adjusted to reflect the member’s status as a combined group member. These incomes are added together to arrive at the combined unitary income. Therefore, if some combined group members have net income from the unitary business and others in the same group have net loss from the unitary business, the combined group’s tax liability is based on the total aggregate net income or loss of the unitary business. When each member computes its share of the combined unitary income, the provisions of sub. (6) apply, except that the modifications in pars. (a) to (d) are required:

Tax 2.61(8)(a)(a) Intercompany transactions. To the extent that sub. (6) (b) does not apply, intercompany transactions that consist of interest or other expenses paid, accrued, or incurred by one member to another are disregarded so that they neither increase nor decrease a member’s net income or loss. This paragraph does not apply to intercompany transactions which occurred in taxable years beginning before January 1, 2009 or to intercompany transactions where the income, expense, gain, or loss would not otherwise be subject to combination.

Tax 2.61(8)(b)1.1. The net capital gain or loss, after applying any sharable net capital loss carryover, is first determined for the combined group as a whole in the manner described in sub. (6) (c) 1. to 3. If the result is a net capital gain for the group, the net capital gain is assigned to the members that would have a net capital gain from the unitary business if they were not members of the combined group, in proportion to the amount of that net capital gain. If the result is a net capital loss for the group, the net capital loss is assigned to the members that would have a net capital loss from the unitary business if they were not members of the combined group, in proportion to the amount of that net capital loss.

Tax 2.61(8)(b)2.2. After applying subd. 1., each member computes its net capital gain or loss from separate entity items and applies the provisions of sub. (6) (c) 5. to 7., except that in applying the provisions of sub. (6) (c) 6., the applicable apportionment percentage is one hundred percent.

Tax 2.61(8)(c)(c) Basis adjustments. A combined group member’s basis in stock of a subsidiary that is a member of the same combined group shall be adjusted in the manner prescribed in sub. (6) (f). Intercompany interest and other expenses shall be included in these adjustments, even if those transactions were disregarded in the computation of the member’s income for the taxable year as provided in par. (a).

Tax 2.61(8)(d)(d) Earnings and profits. A combined group member’s earnings and profits shall be adjusted to reflect the undistributed earnings and profits of a subsidiary that is a member of the same combined group in the manner prescribed in sub. (6) (g). Intercompany interest and other expenses shall be included in these adjustments, even if those transactions were disregarded in the computation of the member’s income for the taxable year as provided in par. (a).

Tax 2.61(9)(9) Net business losses. A combined group member may carry forward its net business loss as provided in ss. 71.26 (4) and 71.45 (4), Stats. A net business loss carryforward is an attribute of the separate corporation rather than of the combined group. However, s. 71.255 (6) (b) and (bm), Stats., provides that a combined group member may share all or a portion of its net business loss carryforward with the other members of its combined group if certain conditions are met. This subsection explains which net business loss carryforwards are sharable, how to compute the sharable amount, and how to apply the shared losses. The following rules apply:

Tax 2.61(9)(a)(a) Sharable loss carryforwards. A combined group member may share its net business loss carryforward incurred in a taxable year beginning on or after January 1, 2009 with other combined group members to the extent that all of the following conditions are met:

Tax 2.61(9)(a)2.2. The member originally computed the net business loss in the combined report for the same combined group as the combined group that will use the shared loss carryforward, regardless of whether corporations have joined or left the combined group in the intervening years.

Tax 2.61(9)(b)(b) Non-sharable loss carryforwards. A combined group member’s net business loss carryforward incurred in a taxable year beginning on or after January 1, 2009 that cannot be shared with other combined group members includes amounts attributable to the following:

Tax 2.61(9)(c)1.1. Net business loss carryforwards incurred by that same member in taxable years beginning before January 1, 2009, in the order that the underlying net business losses were incurred.

Tax 2.61(9)(c)2.2. Sharable and non-sharable net business loss carryforwards under par. (d) incurred in taxable years beginning on or after January 1, 2009, in the order that the underlying net business losses were incurred. If the net business loss carryforward to be used consists of both a sharable amount and a non-sharable amount incurred in the same taxable year, the amount of sharable and non-sharable carryforward used shall be determined on a pro rata basis according to the amount of each type of carryforward available from that year.

Tax 2.61 NoteIn 2010, E’s share of combined unitary income plus its separate entity items equal $14,000. After using its carryforwards to offset this income, E has $4,000 of remaining net business loss carryforward (= ($10,000) + ($6,000) + ($2,000) + $14,000). Of this amount, a portion is a sharable carryforward that may be applied against F and G’s shares of combined unitary income in the manner described in par. (d). Since loss carryforwards are applied in the order incurred, the $10,000 carryforward from 2008 is used in its entirety, and $4,000 of the 2009 carryforward is used. The portion of E’s remaining carryforward from 2009 that is sharable is $3,000 (= $4,000 x [$6,000 / $8,000]) and the portion that is non-sharable is $1,000 (= 4,000 x [$2,000 / $8,000]).

Tax 2.61 NoteIn addition, in 2012 E received a pre-2009 net business loss carryforward of $3,000 ($60,000 x 5%) from Member F. E’s share of combined unitary income plus its separate entity items for 2012 equal $16,000. After using its carryforwards to offset this income, E has $1,000 of remaining net business loss carryforward (= ($3,000) + ($1,000) + ($4,000) + ($6,000) + ($3,000) + $16,000). Since the loss carryforwards are first applied to the net business loss carryforwards incurred in 2009 and after, the $4,000 carryforward from 2009 and the $10,000 carryforward from 2011 are used in their entirety. The remaining $2,000 of loss carryforwards are applied to the pre-2009 net business loss carryforward. The remaining pre-2009 net business loss carryforward is $1,000.