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Tax 2.48(3)(c) (c) Leasehold improvements. Leasehold improvements shall, for purposes of the property factor, be treated as property owned by the taxpayer regardless of whether the taxpayer is entitled to remove the improvements or the improvements revert to the lessor upon expiration of the lease. The original cost of leasehold improvements net of amortization shall be included in the factor.
Tax 2.48(3)(d) (d) Construction in progress. Property or equipment under construction during the tax period, except inventoriable goods in process, shall be excluded from the factor until the property is actually used by the taxpayer in the regular course of its trade or business. If the property is partially used by the taxpayer in the regular course of its trade or business while under construction, the value of the property to the extent used shall be included in the property factor.
Tax 2.48(3)(e) (e) Averaging property values. As a general rule the "average value" of property shall be determined by averaging the value at the beginning and ending of the tax period, but the department may require or the taxpayer may utilize the averaging of monthly values during the tax period if monthly averaging is reasonably required to properly reflect the average value of the taxpayer's property. Averaging by monthly values will generally be applied if substantial fluctuations in the values of the property exist during the tax period, or where property is acquired after the beginning of the tax period or disposed of before the end of the tax period.
Tax 2.48(4) (4)Payroll factor.
Tax 2.48(4)(a)(a) Numerator; denominator. The numerator of the payroll factor shall include the total amount paid in Wisconsin during the tax period by the taxpayer for compensation in the production of apportionable income. The denominator shall include the total compensation paid everywhere during the tax period by the taxpayer in the production of apportionable income.
Tax 2.48(4)(b) (b) Compensation paid in Wisconsin. Except as provided in par. (c), compensation is paid in Wisconsin if one of the following applies:
Tax 2.48(4)(b)1. 1. The individual's service is performed entirely within Wisconsin.
Tax 2.48 Note Example: Corporation A has a terminal located in Wisconsin. The compensation of an Illinois resident who works at the Wisconsin terminal is included in the numerator of the payroll factor since the employee's service is performed entirely in Wisconsin.
Tax 2.48(4)(b)2. 2. The individual's service is performed within and without Wisconsin, but the service performed without Wisconsin is incidental to the individual's service within Wisconsin.
Tax 2.48 Note Example: Corporation B has its headquarters and a storage and distribution facility in Wisconsin. Corporation B also has a distribution facility located in Indiana. The manager of the Wisconsin storage and distribution facility spends two weeks during the tax year at the storage and distribution facility located in Indiana training the new facility manager. The compensation of the Wisconsin facility manager is included in the numerator of the payroll factor because the service performed in Indiana is incidental to the service performed in Wisconsin
Tax 2.48(4)(b)3. 3. A portion of the service is performed within Wisconsin and the base of operations of the individual is in Wisconsin.
Tax 2.48 Note Example: Corporation C has a sales office located in Wisconsin. A salesperson working out of the Wisconsin office solicits sales in Wisconsin, Minnesota and Iowa. Since a portion of the salesperson's service is performed in Wisconsin and the salesperson's base of operations is in Wisconsin, the compensation of the salesperson is included in the numerator of the payroll factor.
Tax 2.48(4)(b)4. 4. A portion of the service is performed within Wisconsin and, if there is no base of operations, the place from which the individual's service is directed or controlled is in Wisconsin.
Tax 2.48 Note Example: Corporation D has its regional sales office in Wisconsin. An Iowa resident works out of her home as a salesperson for Corporation D and solicits sales in Iowa, Illinois and Wisconsin. The salesperson is directed from the regional sales office located in Wisconsin. The compensation of the Iowa salesperson is included in the numerator of the payroll factor since a portion of her service is performed in Wisconsin, she has no base of operations and she is directed from Wisconsin.
Tax 2.48(4)(b)5. 5. A portion of the service is performed within Wisconsin and neither the base of operations of the individual nor the place from which the service is directed or controlled is in any state in which some part of the service is performed, but the individual's residence is in Wisconsin.
Tax 2.48 Note Example: Corporation E is headquartered in and has its sales office in Indiana. It has a terminal located in Wisconsin. A Wisconsin resident salesperson solicits sales in Wisconsin and Minnesota. The compensation of the Wisconsin salesperson is included in the numerator of the payroll factor since a portion of the salesperson's service is performed in Wisconsin, the salesperson is a resident of Wisconsin, and the salesperson is directed or controlled from Indiana but performs no service in Indiana.
Tax 2.48(4)(b)6. 6. The individual is neither a resident of nor performs services in Wisconsin, but is directed or controlled from an office in Wisconsin and returns to Wisconsin periodically for business purposes and the state in which the individual resides does not have jurisdiction to impose income or franchise taxes on the employer.
Tax 2.48 Note Example: Corporation F has its sales office in Wisconsin. A salesperson resides in Nebraska and solicits sales in Nebraska and Kansas. Corporation F does not have nexus in Nebraska or Kansas. The salesperson returns to the Wisconsin sales office for two weeks each year for meetings and training. The compensation of the Nebraska salesperson is included in the numerator of the payroll factor since the salesperson is directed from an office in Wisconsin, returns to Wisconsin periodically for business purposes and Corporation F does not have nexus in Nebraska.
Tax 2.48(4)(c) (c) Management fee situs. The situs of management or service fees described in sub. (2) (a) 3. is in Wisconsin to the extent the related corporation's employees performing the services meet one of the requirements in par. (b).
Tax 2.48(4)(d) (d) Services. An individual shall be considered to be performing a service in Wisconsin during the year if the individual performs services for at least 5 days during the year. The compensation of any one employee may not be split between 2 or more states during the year; however, this does not apply if the employee is transferred or changes positions during the year.
Tax 2.48(4)(e) (e) Excluded compensation. Compensation related to the operation, maintenance, protection or supervision of real or tangible and intangible personal property used in the production of nonapportionable income, and amounts paid to retired employees shall be excluded from both the numerator and the denominator of the payroll factor. Except for management or service fees paid to a related corporation, payments made to an independent contractor or any other person not properly classifiable as an employee are also excluded.
Tax 2.48(4)(f) (f) Elimination of factor. In any case in which the company has no employees nor pays management or service fees to a related corporation, or in which the department determines that employees are not a substantial income producing factor, the department may order or permit the elimination of the payroll factor and the use of the arithmetical average of the other 2 factors to arrive at the Wisconsin apportionment percentage.
Tax 2.48(5) (5)Traffic unit factor. The numerator shall be the total number of traffic units in Wisconsin during the tax period. The denominator shall be the total number of traffic units everywhere during the tax period.
Tax 2.48 Note Note: Pipeline companies 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 2.48 Note Note: Section Tax 2.48 interprets s. 71.25 (10) (c), Stats.
Tax 2.48 History History: Cr. Register, November, 1969, No. 167, eff. 12-1-69; am. (intro.), Register, August, 1973, No. 212, eff. 9-1-73; am. (1) (intro.), r. (1) (a), (b) and (c), r. and recr. (2), cr. (3), (4) and (5), Register, June, 1991, No. 426, eff. 7-1-91; reprinted to restore dropped copy in (3) (e), Register, March, 1999, No. 519; EmR0943: eff. 12-31-09 and CR 10-001: am. (title) and (1), cr. (2) (am) Register June 2010 No. 654, eff. 7-1-10.
Tax 2.49 Tax 2.49 Apportionment of apportionable income of interstate financial institutions.
Tax 2.49(1) (1)Scope. A financial institution that is engaged in business both in and outside this state shall apportion its apportionable income as provided in this section, except if the financial institution 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). Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats.
Tax 2.49 Note Note: A financial institution 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 2.49(2) (2)Definitions. In this section:
Tax 2.49(2)(a) (a) "Billing address" means the address indicated in the taxpayer's books and records on the first day of the taxable year, or on a later date in the taxable year when the customer relationship began, to which a taxpayer under this section regularly sends any notice, statement, or bill to the taxpayer's customer. The billing address of a customer who is a natural person means the address of that person's domicile.
Tax 2.49(2)(b) (b) "Borrower located in this state" means either of the following:
Tax 2.49(2)(b)1. 1. A borrower that is engaged in a trade or business and uses the loan proceeds in trade or business activities in this state. If it cannot be determined where the funds are used, "borrower located in this state" means a borrower whose billing address is in this state.
Tax 2.49(2)(b)2. 2. A borrower whose billing address is in this state, but is not engaged in a trade or business.
Tax 2.49(2)(c) (c) "Commercial domicile" means the location from which a trade or business is principally managed and directed. If the taxpayer is organized under the laws of a foreign country, the commonwealth of Puerto Rico, or any territory or possession of the United States, "commercial domicile" shall be deemed for the purposes of this section to be the state of the United States or the District of Columbia from which the taxpayer's trade or business in the United States is principally managed and directed. It shall be rebuttably presumed that the location from which a trade or business is principally managed and directed is the state of the United States or the District of Columbia at which the greatest number of the taxpayer's employees work, have their office or base of operations, or are directed or controlled, as of the last day of the taxable year.
Tax 2.49(2)(d) (d) "Credit card" includes a credit card, debit card, purchase card, charge card, and a travel or entertainment card.
Tax 2.49(2)(dm) (dm) "Credit card bank" means an institution that is primarily engaged in credit card operations, which does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others, and which does not engage in the business of making commercial loans.
Tax 2.49(2)(e) (e) "Credit card issuer's reimbursement fee" means the fee that a taxpayer receives from a merchant's bank because a person to whom the taxpayer has issued a credit card has paid for merchandise or services sold by the merchant with the credit card.
Tax 2.49(2)(f) (f) "Domicile" means a natural person's true, fixed, and permanent home where that person intends to remain permanently and indefinitely and to which, whenever absent, that person intends to return. A natural person may have only one domicile at any time.
Tax 2.49(2)(fm) (fm) "Engaged in business in and outside this state" has the same meaning as in s. Tax 2.39 (2) (b).
Tax 2.49(2)(g) (g) "Financial institution" means any financial organization whether incorporated or organized under federal law or under the laws of any state or foreign country that is one of the following:
Tax 2.49(2)(g)1. 1. A bank holding company as defined in s. 221.0901 (2) (c), Stats., including a federal bank holding company, an in-state bank holding company, an out-of-state bank holding company, and a foreign bank holding company.
Tax 2.49(2)(g)2. 2. A bank as defined under 12 USC 1841 (c), including a national bank organized and existing as a national bank association pursuant to the provisions of 12 USC ch. 2 and a state bank organized and operating under ch. 221, Stats.
Tax 2.49(2)(g)3. 3. A savings and loan holding company as defined under 12 USC 1467a (1) (D) or s. 215.01 (24m), Stats.
Tax 2.49(2)(g)4. 4. A savings bank holding company as defined in s. 214.01 (1) (tm), Stats.
Tax 2.49(2)(g)5. 5. A savings association or federal savings bank as defined in 12 USC 1813 (b), including a savings and loan association, building and loan association, or cooperative bank, and an association as defined in s. 215.01 (1), Stats., and a savings bank as defined in s. 214.01 (1) (t), Stats.
Tax 2.49(2)(g)6. 6. A trust company operating as a fiduciary under ch. 223, Stats., or a corporation, limited liability company, association, partnership, business trust, or other legal entity authorized to act as a trustee, personal representative, executor, administrator, guardian, conservator, assignee, or agent or in any other fiduciary capacity for individuals and businesses in the administration of trust funds, estates, and custodial arrangements, in stock and bond transfer and registration, in fiduciary investment and estate planning, and other related services.
Tax 2.49(2)(g)7. 7. An industrial bank, industrial loan company, or similar organization as described in 12 USC 1841 (c) (2) (H).
Tax 2.49(2)(g)8. 8. A safe deposit company that maintains vaults for the deposit and safe-keeping of valuables and rents compartments or boxes to customers who have exclusive access to these compartments or boxes, subject to the oversight and under the rules and regulations of the company.
Tax 2.49(2)(g)9. 9. A private banker including an unincorporated entity operated as a partnership that specializes in investing and managing the money of private clients.
Tax 2.49(2)(g)10. 10. Any corporation engaged in international or foreign banking that is organized under the provisions of 12 USC 611 to 633.
Tax 2.49(2)(g)11. 11. Any agency or branch of a foreign depository as defined in 12 USC 3101.
Tax 2.49(2)(g)12. 12. Any credit union to the extent not exempt under s. 71.26 (1) (a), Stats., and s. 186.113 (20), Stats.
Tax 2.49(2)(g)13. 13. A production credit association organized under 12 USC 2071 or a land bank created under the Federal Farm Loan Act.
Tax 2.49(2)(g)14. 14. A consumer finance company, small loan company, or a sales finance company licensed under ch. 218, Stats.
Tax 2.49(2)(g)15. 15. A mortgage banker as defined in s. 224.71 (3), Stats.
Tax 2.49(2)(g)16. 16. A credit card bank.
Tax 2.49(2)(g)17. 17. Any subsidiary of an entity described in subds. 1. to 16., if a significant purpose for the subsidiary is to hold investments or if the subsidiary primarily functions to hold investments, as provided in s. 71.25 (10) (a) 2., Stats.
Tax 2.49(2)(h) (h) "Guarantor of a loan located in this state" means a guarantor whose billing address is in this state.
Tax 2.49(2)(hm) (hm) "Intangible property" has the same meaning as in s. Tax 2.39 (2) (f).
Tax 2.49(2)(i) (i) "Investment banking services" include assisting business customers in obtaining new financing by underwriting and selling new securities issued by the customer to the public.
Tax 2.49(2)(j) (j) "Loan" means any extension of credit resulting from direct negotiations between the taxpayer and its customer, or the purchase, in whole or in part, of an extension of credit from another. "Loans" include participations, syndications, and leases treated as loans for federal income tax purposes. "Loans" do not include properties treated as loans under section 595 of the Internal Revenue Code prior to its repeal by P.L. 104-188; futures or forward contracts; options; notional principal contracts such as swaps; credit card receivables, including purchased credit card relationships; non-interest bearing balances due from depository institutions; cash items in the process of collection; federal funds sold; securities purchased under agreements to resell; assets held in a trading account; securities; interests in a real estate mortgage investment conduit, or other mortgage-backed or asset-backed security; and other similar items.
Tax 2.49(2)(k) (k) "Loan secured by real property" means that any of the collateral used to secure a loan or other obligation at the time the original loan or obligation was incurred or during the current taxable year is real property. A loan secured by real property includes an installment sales contract for real property. An "agricultural lien" as defined in s. 409.102 (1) (b), Stats., or a "fixture filing" as defined in s. 409.102 (1) (js), Stats., does not by itself constitute a loan secured by real property.
Tax 2.49(2)(L) (L) "Loan secured by tangible personal property" means that any of the collateral used to secure a loan or other obligation, other than a loan secured by real property, at the time the original loan or obligation was incurred or during the current taxable year is tangible personal property. A loan secured by tangible personal property includes an installment sales contract for tangible personal property.
Tax 2.49(2)(m) (m) "Loan servicing fees" include fees or charges for originating and processing loan applications, such as prepaid interest and loan discounts, and for collecting, tracking, and accounting for loan payments received. "Loan servicing fees" also include gross receipts from the sale of loan servicing rights.
Tax 2.49(2)(n) (n) "Merchant discount" means the fee or negotiated discount that is charged to a merchant for accepting a credit card as payment for merchandise or services that are sold to the credit card holder.
Tax 2.49(2)(o) (o) "Participation" means an extension of credit in which an undivided ownership interest is held on a pro rata basis in a single loan or pool of loans and related collateral.
Tax 2.49 Note Note: In a loan participation, the credit originator initially makes the loan and subsequently resells all or a portion of it to other lenders. The participation may or may not be known to the borrower.
Tax 2.49(2)(p) (p) "Person" means a natural person, estate, trust, partnership, limited liability company, corporation, or any other business entity.
Tax 2.49(2)(q) (q) "Regular place of business" means an office at which the taxpayer carries on its business in a regular and systematic manner and which is regularly maintained, occupied, or used by employees of the taxpayer.
Tax 2.49(2)(r) (r) "State" means a state of the United States, the District of Columbia, the commonwealth of Puerto Rico, or any territory or possession of the United States.
Tax 2.49(2)(s) (s) "Syndication" means an extension of credit in which 2 or more persons fund and each person is at risk only up to a specified percentage of the total extension of credit or up to a specified dollar amount.
Tax 2.49(2)(t) (t) "Taxpayer" means a financial organization that is subject to apportionment under this section.
Tax 2.49(3) (3)Apportionment formula computation. For taxable years beginning after December 31, 2005, a financial institution that is engaged in business in and outside this state shall determine its net income for state franchise or income tax purposes as provided in this section. The financial institution shall first deduct from its total net income its nonapportionable income, less related expenses. Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats. The financial institution shall apportion its remaining net income to this state as follows:
Tax 2.49(3)(a) (a) For taxable years beginning after December 31, 2005, and before January 1, 2007, apportionable income shall be apportioned using an apportionment fraction composed of a receipts factor under sub. (4) representing 60% of the fraction and a payroll factor under sub. (5) representing 40% of the fraction.
Tax 2.49(3)(b) (b) For taxable years beginning after December 31, 2006, and before January 1, 2008, apportionable income shall be apportioned using an apportionment fraction composed of a receipts factor under sub. (4) representing 80% of the fraction and a payroll factor under sub. (5) representing 20% of the fraction.
Tax 2.49(3)(c) (c) For taxable years beginning before January 1, 2008, in any case in which the financial institution has no employees nor pays management or service fees to a related entity, or in which the department determines that employees are not a substantial income producing factor, the department may order or permit the elimination of the payroll factor.
Tax 2.49(3)(d) (d) For taxable years beginning after December 31, 2007, apportionable income shall be apportioned using an apportionment fraction composed of the receipts factor under sub. (4).
Tax 2.49 Note Note: Financial institutions that are in combined groups use the receipts factor numerator and denominator to compute the modified sales factor, which then determines the financial institution'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 2.49(4) (4)Receipts factor. The receipts factor is the ratio of the taxpayer's receipts in this state to the taxpayer's total receipts everywhere during the taxable year. Interest, dividends, gross receipts or net gains from sales of securities held for investment purposes, and other income from investment assets may not be included in the receipts factor. The receipts factor shall include all of the following items:
Tax 2.49 Note Note: A financial institution that is a combined group member must adjust its receipts factor numerator and denominator as described in s. Tax 2.61 (7).
Tax 2.49(4)(a) (a) Gross receipts from the lease of real property. The numerator of the receipts factor includes gross receipts from the lease, rental, or licensing of real property owned by the taxpayer if the real property is located in this state and gross receipts from the sublease of real property if the real property is located in this state.
Tax 2.49(4)(b) (b) Gross receipts from the lease of tangible personal property.
Tax 2.49(4)(b)1.1. Except as described in subd. 2., the numerator of the receipts factor includes gross receipts from the lease, rental, or licensing of tangible personal property owned by the taxpayer and the sublease of tangible personal property if the property is located in this state during the entire period of lease, rental, licensing, sublease, or other use. If the property is used in and outside this state during the period of lease, rental, licensing, or sublease, gross receipts are included in the numerator of the receipts factor to the extent that the property is used in this state. The proportion of use in this state is determined by multiplying the gross receipts from the lease, rental, licensing, sublease, or other use of the property by a fraction having as a numerator the number of days the property is in this state while leased, rented, licensed, or subleased in the taxable year and having as a denominator the total number of days that the property is leased, rented, licensed, or subleased in all states having jurisdiction to impose an income tax or franchise tax measured by net income on the taxpayer in the taxable year.
Tax 2.49(4)(b)2. 2. Gross receipts from the lease, rental, or licensing of moving property, including motor vehicles, rolling stock, aircraft, vessels, or mobile equipment, owned by the taxpayer and the sublease of moving property are included in the numerator of the receipts factor to the extent that the property is used in this state. The proportion of use of moving property in this state is determined as follows:
Tax 2.49(4)(b)2.a. a. The proportion of use of a motor vehicle or rolling stock in this state is determined by multiplying the gross receipts from the lease, rental, licensing, or sublease of the motor vehicle or rolling stock by a fraction having as a numerator the number of miles traveled within this state by the motor vehicle or rolling stock while leased, rented, licensed, or subleased in the taxable year and having as a denominator the total number of miles traveled by the motor vehicle or rolling stock while leased, rented, licensed, or subleased in the taxable year.
Tax 2.49(4)(b)2.b. b. The proportion of use of an aircraft in this state is determined by multiplying the gross receipts from the lease, rental, licensing, or sublease of the aircraft by a fraction having as a numerator the number of takeoffs and landings of the aircraft in this state while leased, rented, licensed, or subleased in the taxable year and having as a denominator the total number of takeoffs and landings of the aircraft while leased, rented, licensed, or subleased in the taxable year.
Tax 2.49(4)(b)2.c. c. The proportion of use of a vessel or mobile equipment in this state is determined by multiplying the gross receipts from the lease, rental, licensing, or sublease of the vessel or mobile equipment by a fraction having as a numerator the number of days that the vessel or mobile equipment is in this state while leased, rented, licensed, or subleased in the taxable year and having as a denominator the total number of days that the vessel or mobile equipment is leased, rented, licensed, or subleased in the taxable year.
Tax 2.49(4)(b)2.d. d. If the taxpayer is unable to determine the use of moving property under subd. 2. a., b., or c. while the property is leased, rented, licensed, or subleased in the taxable year, the moving property is conclusively deemed to be used in the state in which the property is located at the time that the lessee, renter, licensee, or sublessee takes possession of the property.
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