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Tax 2.395(3)(L) (L) Any other information relevant to the application the department requires or the corporation believes may have a bearing on the department's decision about whether to grant the apportionment method requested.
Tax 2.395(3)(m) (m) Whether the corporation is being audited by the department at the time of the application.
Tax 2.395 Note Note: The application shall be mailed to the following address: Administrator of the Division of Income, Sales and Excise Taxes, Wisconsin Department of Revenue, P.O. Box 8933, Madison, WI 53708-8933.
Tax 2.395(4) (4) Alternative methods of apportionment. The department may authorize any one or a combination of the following alternative methods of apportionment:
Tax 2.395(4)(a) (a) Excluding any one or more of the property, payroll and sales factors.
Tax 2.395(4)(b) (b) Weighting the factors other than 50% sales, 25% property and 25% payroll.
Tax 2.395(4)(c) (c) Allocating sales, other than sales of tangible personal property, to the state in which the corporation's customers are located for purposes of computing the numerator of the sales factor. For purposes of this paragraph:
Tax 2.395(4)(c)1. 1. A sale is allocated to the location where the customer receives the benefit of the service.
Tax 2.395(4)(c)2. 2. If the customer receives the benefit of the service in more than one state, the gross receipts are includable in the numerator of the apportionment factor in proportion to the extent the recipient receives the benefit of the service in each state.
Tax 2.395(4)(d) (d) Including one or more additional factors which will fairly represent the corporation's or the subsidiaries' business activity in this state.
Tax 2.395(4)(e) (e) Allowing one method for apportioning the business income of the corporation and another method for apportioning the business income of a subsidiary.
Tax 2.395(4)(f) (f) Allowing the corporation and one or more subsidiaries to compute their Wisconsin tax liability by adding together their apportionable income and apportionment factors, eliminating any intercompany transactions, computing the Wisconsin tax liability as though the group were one taxpayer and dividing the combined Wisconsin tax liability among the corporations based on their share of the group's Wisconsin business income.
Tax 2.395(4)(g) (g) Allowing any other apportionment method that will fairly represent the corporation's and the subsidiaries' business activity in this state.
Tax 2.395(5) (5)Review of the application. The department shall review the information submitted and follow the procedure specified in s. 71.25 (14) (c), Stats., before issuing a written decision regarding the use of an alternative method of apportionment. The corporation shall receive written approval before using the alternative method.
Tax 2.395(6) (6)Years for which use of alternative method of apportionment applies.
Tax 2.395(6)(a)(a) Except as provided in par. (b), once an alternative method of apportionment has been approved for a taxable year, the corporation shall use it for that taxable year and all subsequent taxable years, unless the department finds the use of the alternative apportionment method is no longer appropriate as determined under sub. (7) (b).
Tax 2.395(6)(b) (b) Notwithstanding par. (a), the aggregate of the corporation's and the subsidiaries' Wisconsin tax liability shall be the greater of the Wisconsin tax liability calculated using the approved alternative apportionment or the Wisconsin tax liability calculated as if the corporate restructuring had not taken place.
Tax 2.395(7) (7)Revocation of use of alternative method of apportionment.
Tax 2.395(7)(a)1.1. If the department upon audit or review finds that the use of the apportionment method prescribed in s. 71.25 (6), Stats., does not result in an unfair representation of the degree of business activity in this state for the first taxable year for which an alternative method of apportionment was approved, the corporation and its subsidiaries shall recalculate their Wisconsin tax liabilities under s. 71.25 (6), Stats.
Tax 2.395(7)(a)2. 2. If the department upon audit or review finds that the use of the alternative apportionment method in subsequent taxable years is no longer appropriate as determined under par. (b), the corporation and its subsidiaries shall recalculate their Wisconsin tax liabilities under s. 71.25 (6), Stats., for each of the subsequent taxable years.
Tax 2.395(7)(b) (b) In determining whether a corporation may continue to use the alternative method of apportionment, the department shall look for a continued substantial amount of difference between the tax liability calculated pursuant to s. 71.25 (6), Stats., and the tax liability had the restructuring not taken place. The department shall also consider any additional information the corporation has submitted pursuant to sub. (8).
Tax 2.395(7)(c) (c) If the department finds for a period of at least three consecutive taxable years that a substantial difference in tax liability as determined in par. (b) no longer exists, the corporation may no longer use the approved alternative apportionment method.
Tax 2.395(7)(d) (d) If the department terminates the approved alternative apportionment method, in a subsequent taxable year the corporation may request a new alternative method of apportionment. The department shall submit the new proposed alternative method of apportionment to the co-chairpersons of the joint committee for review of administrative rules pursuant to s. 71.25 (14) (c), Stats.
Tax 2.395(8) (8)Filing of return. For each taxable year, the corporation and its subsidiaries shall file with their Wisconsin corporate franchise or income tax returns schedules setting forth the calculations required under sub. (6), as well as a calculation of the tax liability of the corporation and its subsidiaries under s. 71.25 (6), Stats. The corporation and its subsidiaries shall attach a copy of the department's approval to use an alternative apportionment method to the front of each return filed. The corporation may also include additional explanatory material relative to its business activity. The returns shall be filed with the department's audit bureau.
Tax 2.395 Note Note: The address for mailing the returns is: Audit Bureau, Wisconsin Department of Revenue, P.O. Box 8906, Madison, WI 53708-8906.
Tax 2.395(9) (9)Confidentiality. All documents related to a request for an alternative method of apportionment shall be subject to the confidentiality provisions of s. 71.78, Stats.
Tax 2.395 Note Note: Section Tax 2.395 interprets s. 71.25 (14), Stats.
Tax 2.395 History History: Emerg. cr. eff. 9-19-98; cr. Register, March, 1999, No. 519, eff. 4-1-99.
Tax 2.41 Tax 2.41 Separate accounting method.
Tax 2.41(1) (1) When the separate accounting method is used, separate records must be kept of sales, cost of sales and expenses for the Wisconsin business as distinct from the remainder of the business. Overhead items of income and expense must then be allocated to the business within and without Wisconsin upon a basis or combination of bases justified by the facts and conditions. For example: the ratio of Wisconsin sales to total sales usually represents a satisfactory basis for a merchandising business, while the ratio of direct cost of material and labor in Wisconsin to the total gives a more accurate result for a construction business.
Tax 2.41(1)(a) (a) Federal income taxes are based upon income and should, therefore, be allocated to Wisconsin business on the basis of income. Federal income taxes are deductible for income years through 1974 only on the cash basis, and the allocation to Wisconsin business for any year, therefore, must be based upon the ratio of income within Wisconsin to the total income of the year on which the federal income taxes are assessed, even though that ratio differs from the ratio of the year in which the taxes are actually paid. Federal income taxes are not deductible for income years 1975 and thereafter.
Tax 2.41(1)(b) (b) The relationship of the general overhead items to Wisconsin operations will determine whether the home office income and expense should be allocated to the Wisconsin business. Miscellaneous income, such as income from intangibles and income from tangible property used in the business, and such overhead items as officers' salaries, office salaries, office rent and sundry office expenses should ordinarily be included in the allocation.
Tax 2.41(2) (2) Net rentals received from real estate held purely for investment purposes and not used in the operation of the business are not subject to allocation but are taxable in full if the property is located in Wisconsin. Gross rentals must be reduced by all expenses related to such investment property.
Tax 2.41 Note Note: Section Tax 2.41 interprets ss. 71.04 (4) and 71.25 (6), Stats.
Tax 2.41 History History: 1-2-56; am. Register, February, 1958, No. 26, eff. 3-1-58; am. Register, November, 1977, No. 263, eff. 12-1-77.
Tax 2.44 Tax 2.44 Permission to change basis of allocation. Except when income must be reported on the apportionment basis, permission to make a change either from separate accounting to apportionment, or vice versa shall be obtained in writing from the department upon written application setting forth in detail the reasons why the desired change will more clearly reflect the taxpayer's Wisconsin income. Such application shall be mailed to the Wisconsin Department of Revenue, P.O. Box 8906, Madison, WI 53708-8906 before the end of the tax year for which the change is desired.
Tax 2.44 Note Note: Section Tax 2.44 interprets ss. 71.04 (4) and 71.25 (6), Stats.
Tax 2.44 History History: 1-2-56, am. Register, September, 1964, No. 105, eff. 10-1-64; am. Register, February, 1975, No. 230, eff. 3-1-75; am. Register, September, 1983, No. 333, eff. 10-1-83; corrections made under s. 13.93 (2m) (b) 6., Stats., Register, March, 1999, No. 519.
Tax 2.45 Tax 2.45 Apportionment in special cases. When the business of any person, other than an interstate professional sports club or "financial organization" or"public utility," as defined in s. 71.25 (10), Stats., within Wisconsin is an integral part of a unitary business conducted within and without Wisconsin, but because of unusual or unique circumstances the portion of the income of the person derived from business transacted in Wisconsin cannot be ascertained with reasonable certainty by use of the apportionment formula provided in s. 71.25 (6), Stats., or by separate accounting in view of the unitary nature of the business, the department will substitute in the place of some or all of the statutory apportionment factors another factor or other factors as will reasonably apportion to Wisconsin the business income properly assignable to Wisconsin. In any case in which an apportionment of business income is made pursuant to this regulation the taxpayer, at the time of the assessment, will be apprised of the factors used in the formula adopted.
Tax 2.45 Note Note: Section Tax 2.45 interprets s. 71.25 (12), Stats.
Tax 2.45 History History: Cr. Register, December, 1956, No. 12, eff. 1-1-57; am. Register, August, 1973, No. 212, eff. 9-1-73; am. Register, September, 1983, No. 333, eff. 10-1-83; am. Register, July, 1989, No. 403, eff. 8-1-89.
Tax 2.46 Tax 2.46 Apportionment of apportionable income of interstate air carriers.
Tax 2.46(1) (1) General. The apportionable income of an air carrier engaged in business in and outside this state shall be apportioned to Wisconsin as described in this section, except if the air carrier is in a combined group, its Wisconsin share of the combined group's apportionable income is computed as provided in s. 71.255 (5), Stats., and further detailed in s. Tax 2.61 (7).
Tax 2.46 Note Note: An air carrier that is a corporation may be in a combined group for taxable years beginning on or after January 1, 2009. See s. Tax 2.61 (2) for a description of corporations required to use combined reporting.
Tax 2.46(2) (2)Definition. In this section, "engaged in business in and outside this state" has the same meaning as in s. Tax 2.39 (2) (b).
Tax 2.46(3) (3)Apportionment formula computation. An air carrier that is engaged in business in and outside this state shall apportion its apportionable income to this state on the basis of the ratio obtained by taking the arithmetical average of the following 3 ratios:
Tax 2.46(3)(a) (a) The ratio which the aircraft arrivals and departures within this state scheduled by such carrier during the calendar or fiscal year bears to the total aircraft arrivals and departures within and without this state scheduled by such carrier during the same period; provided that in the case of nonscheduled operations all arrivals and departures shall be substituted for scheduled arrivals and departures.
Tax 2.46(3)(b) (b) The ratio which the revenue tons handled by such carrier at airports within this state during the calendar or fiscal year bears to the total revenue tons handled at airports within and without this state during the same period.
Tax 2.46(3)(c) (c) The ratio which such air carrier's originating revenue within this state for the calendar or fiscal year bears to the total originating revenue within and without this state for the same period.
Tax 2.46 Note Note: Air carriers that are in combined groups must adjust the numerator and denominator of each of these factors and then convert the arithmetical average of these factors to the modified sales factor. The modified sales factor then determines the company's Wisconsin share of the combined group's apportionable income. See s. 71.255 (5), Stats., and s. Tax 2.61 (7) for details.
Tax 2.46 Note Note: Section Tax 2.46 interprets ss. 71.04 (8) (c) and 71.25 (10) (c), Stats.
Tax 2.46 History History: Cr. Register, December, 1956, No. 12, eff. 1-1-57; am. (intro.). Register, August, 1973, No. 212, eff. 9-1-73; EmR0943: emerg. r. and recr. eff 12-31-09; CR 10-001: r. and recr. Register June 2010 No. 654, eff. 7-1-10; correction to (1) (title) made under s. 13.92 (4) (b) 2., Stats., Register June 2010 No. 654.
Tax 2.465 Tax 2.465 Apportionment of apportionable income of interstate air freight forwarders affiliated with a direct air carrier.
Tax 2.465(1)(1) General. The apportionable income of a qualified air freight forwarder affiliated with a direct air carrier and engaged in business in and outside this state shall be apportioned to Wisconsin as described in this section, except if the qualified air freight forwarder is in a combined group, its Wisconsin share of the combined group's apportionable income is computed as provided in s. 71.255 (5), Stats., and further detailed in s. Tax 2.61 (7).
Tax 2.465 Note Note: A qualified air freight forwarder that is a corporation may be in a combined group for taxable years beginning on or after January 1, 2009. See s. Tax 2.61 (2) for a description of corporations required to use combined reporting.
Tax 2.465(2) (2)Definitions. In this section:
Tax 2.465(2)(a) (a) An air freight forwarder is "affiliated" with a direct air carrier if all of the following apply:
Tax 2.465(2)(a)1. 1. The air freight forwarder owns or controls either directly or indirectly at least 80% of the ownership interests of the direct air carrier, or at least 80% of the ownership interests of the air freight forwarder is owned or controlled either directly or indirectly by the direct air carrier, or at least 80% of the ownership interests of both the air freight forwarder and the direct air carrier is owned or controlled either directly or indirectly by the same interests.
Tax 2.465(2)(a)2. 2. The air freight forwarder is principally engaged in the business of air freight forwarding.
Tax 2.465(2)(a)3. 3. The air freight forwarder's air freight forwarding business is carried on principally with the direct air carrier.
Tax 2.465(2)(b) (b) "Combined group" has the same meaning as in s. Tax 2.60 (2) (a).
Tax 2.465(2)(c) (c) "Direct air carrier" means a business entity principally engaged in air transportation through the direct operation of aircraft under a certificate issued by the federal aviation administration.
Tax 2.465(2)(d) (d) "Engaged in business in and outside this state" has the same meaning as in s. Tax 2.39 (2) (b).
Tax 2.465(2)(e) (e) "Originating revenue in this state" means all revenue derived from shipments that were first physically consigned to a qualified air freight forwarder in this state for transportation, regardless of the method or methods of transportation.
Tax 2.465(2)(f) (f) "Qualified air freight forwarder" means a person to whom all of the following apply:
Tax 2.465(2)(f)1. 1. The person is engaged primarily in the facilitation of the transportation of property by air.
Tax 2.465(2)(f)2. 2. The person does not operate aircraft.
Tax 2.465(2)(f)3. 3. The person is in the same combined group as an affiliated direct air carrier.
Tax 2.465(3) (3)Apportionment formula computation. For taxable years beginning on or after January 1, 2014, a qualified air freight forwarder that is engaged in business in and outside this state shall apportion its apportionable income to this state on the basis of the ratio obtained by taking the arithmetical average of the following 3 ratios:
Tax 2.465(3)(a) (a) The ratio which aircraft arrivals and departures within this state scheduled by the affiliated direct air carrier during the calendar or fiscal year bears to the total aircraft arrivals and departures within and without this state scheduled by such direct air carrier during the same period; provided that if the affiliated direct air carrier conducts nonscheduled operations all arrivals and departures shall be substituted for scheduled arrivals and departures.
Tax 2.465(3)(b) (b) The ratio which the revenue tons handled by the affiliated direct air carrier at airports within this state during the calendar or fiscal year bears to the total revenue tons handled at airports within and without this state during the same period.
Tax 2.465(3)(c) (c) The ratio which such qualified air freight forwarder's originating revenue in this state for the calendar or fiscal year bears to the total revenue of such qualified air freight forwarder within and without this state for the same period.
Tax 2.465 History History: CR 13-078: cr. Register April 2014 No. 700, eff. 5-1-14.
Tax 2.47 Tax 2.47 Apportionment of apportionable income of interstate motor carriers.
Tax 2.47(1) (1) General. The apportionable income of a motor carrier engaged in business in and outside this state shall be apportioned to Wisconsin as described in this section, except if the motor carrier is in a combined group, its Wisconsin share of the combined group's apportionable income is computed as provided in s. 71.255 (5), Stats., and further detailed in s. Tax 2.61 (7).
Tax 2.47 Note Note: A motor carrier that is a corporation may be in a combined group for taxable years beginning on or after January 1, 2009. See s. Tax 2.61 (2) for a description of corporations required to use combined reporting.
Tax 2.47(1m) (1m)Definitions. In this section:
Tax 2.47(1m)(a) (a) "Engaged in business in and outside this state" has the same meaning as in s. Tax 2.39 (2) (b).
Tax 2.47(1m)(b) (b) "Ton mile" means the movement of one ton of persons or property, or both, the distance of one mile. For carriage of persons, each person shall be considered the equivalent of 200 pounds.
Tax 2.47(2) (2)Apportionment formula computation. For taxable years beginning on or after January 1, 1997, a motor carrier that is engaged in business in and outside this state shall apportion its apportionable income to this state on the basis of the arithmetical average of the following 2 factors:
Tax 2.47(2)(a) (a) The ratio of the gross receipts from carriage of persons or property, or both, first acquired for carriage in Wisconsin to the total gross receipts from carriage of persons or property, or both, everywhere.
Tax 2.47(2)(b) (b) The ratio of ton miles of carriage in Wisconsin to ton miles of carriage everywhere.
Tax 2.47 Note Note: Motor carriers that are in combined groups must adjust the numerator and denominator of each of these factors and then convert the arithmetical average of these factors to the modified sales factor. The modified sales factor then determines the company's Wisconsin share of the combined group's apportionable income. See s. 71.255 (5), Stats., and s. Tax 2.61 (7) for details.
Tax 2.47(3) (3)Substitution of factors. Whenever gross receipts data is not available the department may authorize or direct substitution of a similar factor, such as gross tonnage, and whenever ton mile data is not available the department may similarly authorize substitution of a similar factor, such as revenue miles.
Tax 2.47(4) (4)Mercantile and manufacturing businesses. This section does not apply to any mercantile or manufacturing business which engages in some interstate carriage as an incident of the mercantile or manufacturing business.
Tax 2.47 Note Note: Section Tax 2.47 interprets ss. 71.04 (8) (c) and 71.25 (10) (c), Stats.
Tax 2.47 History History: Cr. Register, April, 1966, No. 124, eff. 5-1-66; am. (intro.). Register, August, 1973, No. 212, eff. 9-1-73; r. and recr. Register, October, 1996, No. 490, eff. 1-1-97; EmR0943: emerg. am. (title), (2) (title) and (intro.), cr. (intro.), r. and recr. (1), eff. 12-31-09; CR 10-001: am. (title), (2) (title) and (intro.), r. and recr. (1), cr. (1m) Register June 2010 No. 654, eff. 7-1-10; correction to (1) (title) made under s. 13.92 (4)(b) 7., Stats., Register June 2010 No. 654.
Tax 2.475 Tax 2.475 Apportionment of apportionable income of interstate railroads, sleeping car companies and car line companies.
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