The service is provided to an individual who is physically present in this state at the time that the service is received.
The service is provided to a person engaged in a trade or business in this state and relates to that person's business in this state.
If the purchaser of a service receives the benefit of a service in more than one state, the gross receipts from the performance of the service are included in the numerator of the sales factor according to the portion of the service received in this state.
If the taxpayer is not subject to income tax in the state in which the benefit of the service is received, the benefit of the service is received in this state to the extent that the taxpayer's employees or representatives performed services from a location in this state. Fifty percent of the taxpayer's receipts that are considered received in this state under this paragraph shall be included in the numerator of the sales factor.
In this subsection, "sales" includes, but is not limited to, the following items related to the production of business income:
Gross receipts from the operation of farms, mines and quarries.
Gross receipts from the sale of scrap or by-products.
Gross receipts from personal and other services.
Gross rents from real property or tangible personal property.
Interest on trade accounts and trade notes receivable.
A partner's share of the partnership's gross receipts or a member's share of the limited liability company's gross receipts.
Gross franchise fees from income-producing activities.
Items that are not sales.
The following items are among those that are not included in "sales" in this subsection:
Gross receipts and gain or loss from the sale of tangible business assets, except those under par. (e) 1.
Gross receipts and gain or loss from the sale of nonbusiness real or tangible personal property.
Gross rents and rental income or loss from real property or tangible personal property if that real property or tangible personal property is not used in the production of business income.
Royalties from nonbusiness real property or nonbusiness tangible personal property.
Proceeds and gain or loss from the redemption of securities.
Gross receipts and gain or loss from the sale of intangible assets, except those under par. (e) 1.
Dividends deductible by corporations in determining net income.
Gross receipts and gain or loss from the sale of securities.
Proceeds and gain or loss from the sale of receivables.
Refunds, rebates and recoveries of amounts previously expended or deducted.
Other items not includable in apportionable income.
(10) Railroads, financial organizations and public utilities. 71.25(10)(a)(a)
In this section, "financial organization" means any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, credit union, cooperative bank, small loan company, sales finance company, investment company, brokerage house, underwriter or any type of insurance company.
In this section, for taxable years beginning before January 1, 2006, "public utility" means any business entity described under subd. 2.
and any business entity which owns or operates any plant, equipment, property, franchise, or license for the transmission of communications or the production, transmission, sale, delivery, or furnishing of electricity, water or steam the rates of charges for goods or services of which have been established or approved by a federal, state or local government or governmental agency.
In this section, for taxable years beginning after December 31, 2005, "public utility" means any business entity providing service to the public and engaged in the transportation of goods and persons for hire, as defined in s. 194.01 (4)
, regardless of whether or not the entity's rates or charges for services have been established or approved by a federal, state or local government or governmental agency.
The net business income of railroads, sleeping car companies, car line companies, pipeline companies, financial organizations, telecommunications companies, air carriers, and public utilities requiring apportionment shall be apportioned pursuant to rules of the department of revenue, but the income taxed is limited to the income derived from business transacted and property located within the state.
(11) Department may waive factor.
Where, in the case of any corporation engaged in business in and outside of this state and required to apportion its income as provided in sub. (6)
, it shall be shown to the satisfaction of the department of revenue that the use of any one of the 3 factors provided in sub. (6)
gives an unreasonable or inequitable final average ratio because of the fact that such corporation does not employ, to any appreciable extent in its trade or business in producing the income taxed, the factors made use of in obtaining such ratio, this factor may, with the approval of the department of revenue, be omitted in obtaining the final average ratio which is to be applied to the remaining net income. This subsection does not apply to taxable years beginning after December 31, 2007.
(12) Department may apportion by rule.
If the income of any such corporation properly assignable to the state of Wisconsin cannot be ascertained with reasonable certainty by the methods under this section, then the same shall be apportioned and allocated under such rules as the department of revenue may prescribe.
See also s. Tax 2.45
, Wis. adm. code.
(13) Unrelated business taxable income.
The unrelated business taxable income of organizations that are subject to tax on that income under s. 71.26 (1) (a)
shall be apportioned under the department of revenue's rules.
Upon request by a corporation on or before January 1, 2000, the department of revenue may authorize a corporation or a subsidiary thereof to use or continue to use a different method of apportioning its income to this state for purposes of this subchapter, and may specify the method of apportionment that the corporation or subsidiary shall use. This paragraph is to be used exclusively in the event of a corporate restructuring that would result in an unfair representation of the degree of business activity in this state. In no instance may the alternative method proposed under the new corporate structure result in less franchise or income tax revenue to the state than the current corporate structure is liable for, given the same overall level of sales, payroll and property.
Before the department of revenue grants permission to any corporation to use an alternative method of allocation under par. (a)
, the department of revenue shall promulgate rules that specify in more detail the circumstances in which that authority may be granted and the kinds of alternative methods that the department may authorize.
At least 14 days before giving final approval to an alternative method of apportionment under par. (a)
, the department of revenue shall submit the proposed alternative method of apportionment to the cochairpersons of the joint committee for review of administrative rules, together with a description of the proposed alternative and the reasons for the proposed alternative. If, within 14 days after receipt of the proposed alternative method, the cochairpersons of the joint committee for review of administrative rules do not notify the department of revenue that the proposed alternative must be promulgated as an administrative rule in order to be used, the department of revenue may give final approval to the proposed method without promulgating an administrative rule. If the cochairpersons of the joint committee for review of administrative rules notify the department of revenue within 14 days after receipt of the proposed alternative that the proposed alternative must be promulgated as an administrative rule, the proposed alternative may not be used until it is promulgated as an administrative rule under ch. 227
See also s. Tax 2.395
, Wis. adm. code.
(15) Partnerships and limited liability companies. 71.25(15)(a)(a)
A general or limited partner's share of the numerator and denominator of a partnership's apportionment factors under this section are included in the numerator and denominator of the general or limited partner's apportionment factors under this section.
If a limited liability company is treated as a partnership, for federal tax purposes, a member's share of the numerator and denominator of a limited liability company's apportionment factors under this section are included in the numerator and denominator of the member's apportionment factors under this section.
See also ss. Tax 2.39
, Wis. adm. code.
Under sub. (6), it is within the department's discretion to decide whether to permit a multistate business to deviate from the apportionment method. Nelson Bros. v. DOR, 152 Wis. 2d 746
, 449 N.W.2d 328
(Ct. App. 1989.)
Subjecting an entity's income to apportionment when the entity's operations constitute a "unitary business" under sub. (6) is discussed. Chilstrom Erecting Corp. v. DOR, 174 Wis. 2d 517
, 497 N.W.2d 785
(Ct. App. 1993).
A corporation's investment income that served an "operational" function and was not unrelated to corporate functions within the state was subject to apportionment. Port Affiliates, Inc. v. DOR, 190 Wis. 2d 271
, 526 N.W.2d 806
(Ct. App. 1994).
Income computation. 71.26(1)(1)
Exempt and excludable income.
There shall be exempt from taxation under this subchapter income as follows:
Income of corporations organized under ch. 185
, except income of a cooperative sickness care association organized under s. 185.981
, or of a service insurance corporation organized under ch. 613
, that is derived from a health maintenance organization as defined in s. 609.01 (2)
or a limited service health organization as defined in s. 609.01 (3)
, or operating under subch. I of ch. 616
which are bona fide cooperatives operated without pecuniary profit to any shareholder or member, or operated on a cooperative plan pursuant to which they determine and distribute their proceeds in substantial compliance with s. 185.45
, and the income, except the unrelated business taxable income as defined in section 512
of the internal revenue code and except income that is derived from a health maintenance organization as defined in s. 609.01 (2)
or a limited service health organization as defined in s. 609.01 (3)
, of all religious, scientific, educational, benevolent or other corporations or associations of individuals not organized or conducted for pecuniary profit. This paragraph does not apply to the income of savings banks, mutual loan corporations or savings and loan associations. This paragraph does not apply to income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state. This paragraph applies to the income of credit unions except to the income of any credit union that is derived from public deposits for any taxable year in which the credit union is approved as a public depository under ch. 34
and acts as a depository of state or local funds under s. 186.113 (20)
. For purposes of this paragraph, the income of a credit union that is derived from public deposits is the product of the credit union's gross annual income for the taxable year multiplied by a fraction, the numerator of which is the average monthly balance of public deposits in the credit union during the taxable year, and the denominator of which is the average monthly balance of all deposits in the credit union during the taxable year.
Veterans service organizations.
Income of a veterans service organization that is chartered under federal law.
Income received by the United States, the state and all counties, cities, villages, towns, school districts, technical college districts, joint local water authorities created under s. 66.0823
, long-term care districts under s. 46.2895
or other political units of this state.
Income of the University of Wisconsin Hospitals and Clinics Authority, of the Health Insurance Risk-Sharing Plan Authority, and of the Fox River Navigational System Authority, and of the Wisconsin Aerospace Authority.
Certain local districts.
Income of a local exposition district created under subch. II of ch. 229
, a local professional baseball park district created under subch. III of ch. 229
, a local professional football stadium district created under subch. IV of ch. 229
, or a local cultural arts district created under subch. V of ch. 229
Cooperative associations or corporations.
Income of cooperative associations or corporations engaged in marketing farm products for producers, which turn back to such producers the net proceeds of the sales of their products; provided that such corporations or associations have at least 25 stockholders or members delivering such products and that their dividends have not, during the preceding 5 years, exceeded 8% per year; also income of associations and corporations engaged solely in processing and marketing farm products for one such cooperative association or corporation and which do not charge for such marketing and processing more than a sufficient amount to pay the cost of such marketing and processing and 8% dividends on their capital stock and to add 5% to their surplus.
(d) Bank in liquidation.
Income of any bank placed in the hands of the division of banking for liquidation under s. 220.08
, if the tax levied, assessed or collected under this chapter on account of such bank diminishes the assets thereof so that full payment of all depositors cannot be made. Whenever the division of banking certifies to the department of revenue that the tax or any part thereof levied and assessed under this chapter against any such bank will so diminish the assets thereof that full payment of all depositors cannot be made, the department of revenue shall cancel and abate such tax or part thereof, together with any penalty thereon. This paragraph shall apply to unpaid taxes which were levied and assessed subsequent to the time the bank was taken over by the division of banking.
(e) Menominee Indian tribe; distribution of assets.
No distribution of assets from the United States to the members of the Menominee Indian tribe as defined in s. 49.385
or their lawful distributees, or to any corporation, or organization, created by the tribe or at its direction pursuant to section 8 of P.L. 83-399
, as amended, and no issuance of stocks, bonds, certificates of indebtedness, voting trust certificates or other securities by any such corporation or organization, or voting trust, to such members of the tribe or their lawful distributees shall be subject to income or franchise taxes under this chapter; provided that so much of any cash distribution made under said P.L. 83-399
as consists of a share of any interest earned on funds deposited in the treasury of the United States pursuant to the supplemental appropriation act, 1952, (65 Stat. 736, 754) shall not by virtue of this paragraph be exempt from the individual income tax of this state in the hands of the recipients for the year in which paid. For the purpose of ascertaining the gain or loss resulting from the sale or other disposition of such assets and stocks, bonds, certificates of indebtedness and other securities under this chapter, the fair market value of such property, on termination date as defined in s. 70.057 (1)
, 1967 stats., shall be the basis for determining the amount of such gain or loss.
Real estate mortgage investment conduits.
The income of a real estate mortgage investment conduit that is exempt for federal income tax purposes under section 860A
of the internal revenue code.
For taxable years beginning after December 31, 2006, the amount of any incentive payment received by an individual under s. 23.33 (5r)
in the taxable year to which the claim relates.
(1m) Exemption from the income tax.
The interest and income from the following obligations are exempt from the tax imposed under s. 71.23 (1)
Those issued under s. 234.65
to fund an economic development loan to finance construction, renovation or development of property that would be exempt under s. 70.11 (36)
Those issued under s. 234.08
, on or after January 1, 2004, if the obligations are issued to fund multifamily affordable housing projects or elderly housing projects.
Those issued under s. 66.0621
by a local professional baseball park district, a local professional football stadium district, or a local cultural arts district.
Those issued under s. 231.03 (6)
, on or after October 27, 2007, if the proceeds from the obligations that are issued are used by a health facility, as defined in s. 231.01 (5)
, to fund the acquisition of information technology hardware or software.
Corporations in general.
The "net income" of a corporation means the gross income as computed under the Internal Revenue Code as modified under sub. (3)
and modified as follows:
Minus, as provided under s. 71.28 (3) (c) 7.
, the amount of the credit under s. 71.28 (3)
that the taxpayer added to income under this paragraph at the time that the taxpayer first claimed the credit.
Plus the amount of the credit computed under s. 71.28 (1dd)
, and (5k)
and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4)
or 71.34 (1k) (g)
Plus the amount of losses from the sale or other disposition of assets the gain from which would be wholly exempt income, as defined in sub. (3) (L)
, if the assets were sold or otherwise disposed of at a gain and minus deductions, as computed under the Internal Revenue Code as modified under sub. (3)
Plus or minus, as appropriate, an amount equal to the difference between the federal basis and Wisconsin basis of any asset sold, exchanged, abandoned, or otherwise disposed of in a taxable transaction during the taxable year, except as provided in par. (b)
and s. 71.45 (2)
Plus the amount deducted or excluded under the Internal Revenue Code for interest expenses and rental expenses that are directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.
Minus the amount added to gross income under subd. 7.
, to the extent that the conditions under s. 71.80 (23)