2021 - 2022 LEGISLATURE
December 17, 2021 - Introduced by Senators Marklein and Kooyenga,
cosponsored by Representatives
Wittke, Armstrong and Brooks. Referred to
Committee on Financial Institutions and Revenue.
SB794,1,5
1An Act to repeal 71.775 (1) (b);
to renumber and amend 71.76 (2);
to
2consolidate, renumber and amend 71.775 (1) (intro.) and (a);
to amend
371.365 (6), 71.78 (1), 71.88 and 73.16 (4); and
to create 71.738 (3d), 71.738 (3e),
471.738 (3f), 71.745, 71.76 (2) (b), 71.77 (7) (c), 71.78 (11), 71.80 (26) and 71.83
5(1) (a) 12. of the statutes;
relating to: pass-through entity audits.
Analysis by the Legislative Reference Bureau
This bill makes various changes related to conducting tax audits of
pass-through entities such as partnerships, limited liability companies, and
tax-option corporations. Under the bill, the Department of Revenue may do all of
the following with regard to an audit of a pass-through entity:
1. Assess and collect additional tax from a pass-through entity on income
otherwise reportable by its pass-through members. Under the bill, a “pass-through
member” is, generally, a partner in a partnership, member of a limited liability
company, shareholder in a tax-option corporation, a beneficiary of an estate or a
trust, or any other person who derives a tax benefit from a pass-through entity.
2. Direct the secretary of the Department 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.
3. Assess an adjustment to reduce a tax credit to a pass-through entity if the
pass-through entity previously computed the credit and reported the credit to its
pass-through members.
4. Assess an adjustment to increase a tax credit to offset additional tax assessed
to a pass-through entity.
5. Assess any pass-through member of a pass-through entity for additional tax
otherwise owed by one or more of the pass-through members.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB794,1
1Section
1. 71.365 (6) of the statutes is amended to read:
SB794,2,82
71.365
(6) Notice to shareholders of appeals and other proceedings. Any 3Except as provided in s. 71.745, any notice of determination by the department of any
4tax-option item may be contested by a tax-option corporation under subch. XIV. A
5tax-option corporation shall timely notify all shareholders of any administrative or
6judicial proceeding about the determination of any tax-option item. Each
7shareholder may participate in any such proceeding and shall be bound by the final
8determination in that proceeding.
SB794,2
9Section
2. 71.738 (3d) of the statutes is created to read:
SB794,2,1210
71.738
(3d) “Pass-through entity” means a partnership, a limited liability
11company, a tax-option corporation, an estate, or a trust that is treated as a
12pass-through entity for federal income tax purposes.
SB794,3
13Section
3. 71.738 (3e) of the statutes is created to read:
SB794,2,1714
71.738
(3e) “Pass-through item” means a tax-option item under s. 71.34 (3)
15or an item of income, gain, loss, deduction, credit, or any other item that originates
16with a pass-through entity and is required to be reported by one or more
17pass-through members under this chapter.
SB794,4
18Section
4. 71.738 (3f) of the statutes is created to read: