NOTICE IS HEREBY GIVEN that, pursuant to ss.
71.04 (8) (c) and
(11) and
71.25 (10) (c) and
(12), Stats., the Department of Revenue will hold a public hearing to consider permanent rules revising Chapter
Tax 2, relating to apportionable income of interstate air freight forwarders affiliated with a direct air carrier.
Hearing Information
The hearing will be held:
Date: Monday, October 28, 2013
Time: 9:00 a.m.
Locations: Events Room
State Revenue Building
2135 Rimrock Road
Madison, WI 53713
Handicap access is available at the hearing location.
Appearances at the Hearing and Submittal of Written Comments
Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person listed below or to adminrules.wisconsin.gov no later than October 28, 2013, and will be given the same consideration as testimony presented at the hearing.
Dale Kleven
Department of Revenue
Mail Stop 6-40
2135 Rimrock Road
P.O. Box 8933
Madison, WI 53708-8933
Telephone: (608) 266-8253
Analysis Prepared by the Department
Statutes interpreted
Statutory authority
Explanation of agency authority
Sections
71.04 (8) (c) and
71.25 (10) (c), Stats., provide “[t]he 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."
Sections
71.04 (11) and
71.25 (12), Stats., provide “[i]f the income
…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."
Related statute or rule
Section
Tax 2.45 interprets s.
71.25 (12), Stats., and provides for apportionment in special cases.
Section
Tax 2.46 prescribes the method of apportionment to be used by interstate air carriers.
Section
Tax 2.47 prescribes the method of apportionment to be used by interstate motor carriers.
Plain language analysis
The proposed rule prescribes the method of apportionment to be used by air freight forwarders.
Summary of, and comparison with, existing or proposed federal regulation
There is no existing or proposed federal regulation that is intended to address the activities to be regulated by the proposed rule.
Comparison with rules in adjacent states
The department is not aware of a similar rule in an adjacent state.
Summary of factual data and analytical methodologies
The department knows of a type of entity, an “air freight forwarder," which is engaged in the facilitation of transportation of property by air, does not itself operate aircraft, and is affiliated with a direct air carrier. The income of this type of entity properly assignable to Wisconsin cannot be determined with reasonable certainty under s.
Tax 2.46, which prescribes the method of apportionment to be used by interstate air carriers, or s.
Tax 2.47, which prescribes the method of apportionment to be used by interstate motor carriers. Therefore, the department finds it necessary to create a rule that prescribes the method of apportionment to be used by this type of entity.
Analysis and supporting documents used to determine effect on small business
Based on the nature and scope of its activities (the facilitation of the transportation of property by air between states), the type of entity this proposed rule affects would not be a small business as defined in s.
227.114 (1), Stats.
Anticipated costs incurred by private sector
This proposed rule order does not have a fiscal effect on the private sector.
Effect on Small Business
This proposed rule order does not affect small business.
Agency Contact Person
Please contact Dale Kleven at (608) 266-8253 or
dale.kleven@revenue.wi.gov if you have any questions regarding this proposed rule order.
Text of Rule
SECTION 1. Tax 2.465 is created to read:
Tax 2.465 Apportionment of apportionable income of interstate air freight forwarders affiliated with a direct air carrier. (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).
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.
(2) Definitions. In this section:
(a) An air freight forwarder is “affiliated" with a direct air carrier if all of the following apply:
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.
2. The air freight forwarder is principally engaged in the business of air freight forwarding.
3. The air freight forwarder's air freight forwarding business is carried on principally with the direct air carrier.
(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.
(d) “Engaged in business in and outside this state" has the same meaning as in s.
Tax 2.39 (2) (b).
(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.
(f) “Qualified air freight forwarder" means a person to whom all of the following apply:
1. The person is engaged primarily in the facilitation of the transportation of property by air.
2. The person does not operate aircraft.
3. The person is in the same combined group as an affiliated direct air carrier.
(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:
(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.
(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.
(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.
SECTION 2. Tax 2.61 (7) (a) 4., (b) 4., and (g) (intro.) and 1. are amended to read:
Tax 2.61 (7) (a) 4. For combined group members that are required to apportion their income using more than one factor under s.
71.25 (10), Stats., and ss.
Tax 2.46,
2.465, 2.47,
2.475,
2.48,
2.50, or
2.502, the numerator of the member's modified sales factor is determined as provided in par. (g).
(b) 4. For combined group members that are required to apportion their income using more than one factor under s.
71.25 (10), Stats., and ss.
Tax 2.46,
2.465, 2.47,
2.475,
2.48,
2.50, or
2.502, the member's separate company denominator for purposes of the modified sales factor is determined as provided in par. (g).
(g) (intro.)
Multiple factor formulas. If a combined group member is required under s.
71.25 (10), Stats., to use an apportionment formula prescribed in ss.
Tax 2.46,
2.465, 2.47,
2.475,
2.48,
2.50, or
2.502, the member's modified sales factor is computed as follows:
1. The numerator of the modified sales factor is the product of the member's apportionment percentage computed under ss.
Tax 2.46,
2.465, 2.47,
2.475,
2.48,
2.50, or
2.502, as applicable, as if the member were not a member of a combined group except as provided in subds. 3. to 5., and the member's separate company denominator determined in subd. 2.
SECTION 3. Tax 2.62 (2) (d) 1. is amended to read:
Tax 2.62 (2) (d) 1. For any participant in the unitary business that is not a member of a commonly controlled group of corporations as provided in s.
Tax 2.61 (3), the participant's income from the unitary business is generally apportioned in the manner provided by ss.
Tax 2.39,
2.395,
2.45,
2.46,
2.465, 2.47,
2.475,
2.48,
2.49,
2.495,
2.50, or
2.502, as applicable. However, the participant may be required to apportion its income under the combined reporting rules provided in s.
Tax 2.61 if certain conditions apply, as further explained in s.
Tax 2.61 (2) (f).
SECTION 4. Tax 2.64 (2) (a), (b) 7., (c), and (e) 3. are amended to read:
Tax 2.64 (2) (a)
Qualifying combined group. A qualifying combined group is a combined group for which 30 percent or more of the combined unitary income would, in the absence of combined reporting, be required to be apportioned using more than one factor under a method described in ss.
Tax 2.46,
2.465, 2.47,
2.475,
2.48,
2.50, or
2.502.
(b) 7. A calculation of each combined group member's tax liability for the first taxable year to which the petition applies and for the previous taxable year, similar to the calculations in subds. 5. and 6., computed as if each corporation were not a member of the combined group and using the method prescribed by ss.
Tax 2.39,
2.395,
2.45,
2.46,
2.465, 2.47,
2.475,
2.48,
2.49,
2.495,
2.50, or
2.502, as applicable to each corporation.
(c)
Limitation. The department may not grant a taxpayer's petition for an alternative apportionment method if the alternative method would result in a lower tax liability than the sum of the tax liabilities of the combined group members computed as if they were not members of a combined group and using the apportionment method prescribed by ss.
Tax 2.39,
2.395,
2.45,
2.46,
2.465, 2.47,
2.475,
2.48,
2.49,
2.495,
2.50, or
2.502, as applicable to each corporation.
(e) 3. A calculation of each combined group member's tax liability for the taxable year included in the combined return computed as if each corporation were not a member of the combined group and using the apportionment method prescribed by ss.
Tax 2.39,
2.395,
2.45,
2.46,
2.465, 2.47,
2.475,
2.48,
2.49,
2.495,
2.50, or
2.502, as applicable to each corporation.
SECTION 5. Effective date. This rule shall take effect on the first day of the month following publication in the Wisconsin Administrative Register as provided in s.
227.22 (2), Stats.
ADMINISTRATIVE RULES
Fiscal Estimate & Economic Impact Analysis
|
Type of Estimate and Analysis
|
X Original ⍽ Updated ⍽ Corrected
|
Administrative Rule Chapter, Title and Number
|
Chapter Tax 2 — Income taxation, returns, records, and gross income
|
Subject
|
Apportionment of apportionable income of interstate air freight forwarders affiliated with a direct air carrier.
|
Fund Sources Affected
|
Chapter 20 , Stats. Appropriations Affected
|
⍽ GPR ⍽ FED ⍽ PRO ⍽ PRS ⍽ SEG ⍽ SEG-S
|
|
Fiscal Effect of Implementing the Rule
|
X No Fiscal Effect
⍽ Indeterminate
|
⍽ Increase Existing Revenues
⍽ Decrease Existing Revenues
|
⍽ Increase Costs
⍽ Could Absorb Within Agency's Budget
⍽ Decrease Costs
|
The Rule Will Impact the Following (Check All That Apply)
|
⍽ State's Economy
⍽ Local Government Units
|
⍽ Specific Businesses/Sectors
⍽ Public Utility Rate Payers
|
Would Implementation and Compliance Costs Be Greater Than $20 million?
⍽ Yes X No
|
Policy Problem Addressed by the Rule
|
The rule does not create or revise policy, other than to reflect current law and department policy.
|
Summary of Rule's Economic and Fiscal Impact on Specific Businesses, Business Sectors, Public Utility Rate Payers, Local Governmental Units and the State's Economy as a Whole (Include Implementation and Compliance Costs Expected to be Incurred)
|
As indicated in the attached fiscal estimate, the proposed rule clarifies the tax treatment of air freight forwarders and provides certainty for taxpayers and the department. The proposed rule is not expected to have a significant fiscal effect.
No comments concerning the economic effect of the rule were submitted in response to the department's solicitation.
|
Benefits of Implementing the Rule and Alternative(s) to Implementing the Rule
|
Clarifications and guidance provided by administrative rules may lower the compliance costs for businesses, local governmental units, and individuals.
If the rule is not implemented, Chapter Tax 2 will be incomplete in that it will not reflect current law or department policy.
|
Long Range Implications of Implementing the Rule
|
No long-range implications are anticipated.
|
Compare With Approaches Being Used by Federal Government
|
N/A
|
Compare With Approaches Being Used by Neighboring States (Illinois, Iowa, Michigan and Minnesota)
|
N/A
|
FISCAL ESTIMATE FORM
|
|
2013 Session
|
X ORIGINAL
⍽ UPDATED
|
LRB #
|
11-
|
|
INTRODUCTION #
|
|
⍽ CORRECTED ⍽ SUPPLEMENTAL
|
Admin. Rule #
|
Tax 2.465
|
Subject
|
|
Fiscal Effect
|
State: X No State Fiscal Effect
Check columns below only if bill makes a direct appropriation or affects a sum sufficient appropriation
⍽ Increase Existing Appropriation
⍽ Increase Existing Revenues
⍽ Decrease Existing Appropriation ⍽ Decrease Existing Revenues
⍽ Create New Appropriation
|
⍽ Increase Costs — May be Possible to Absorb Within Agency's Budget ⍽ Yes
⍽ No
⍽ Decrease Costs
|
Local: X No Local Government Costs
|
1. ⍽ Increase Costs
|
3. ⍽ Increase Revenues
|
5.Types of Local Governmental Units Affected:
|
⍽ Permissive ⍽ Mandatory
|
⍽ Permissive ⍽ Mandatory
|
⍽ Towns ⍽ Villages
⍽ Cities
|
2. ⍽ Decrease Costs
|
4. ⍽ Decrease Revenues
|
⍽ Counties ⍽ Others
|
|
⍽ Permissive ⍽ Mandatory
|
⍽ Permissive ⍽ Mandatory
|
⍽ School Districts ⍽ WTCS Districts
|
Fund Sources Affected
⍽GPR ⍽FED
⍽PRO ⍽PRS
⍽SEG ⍽SEG-S
|
Affected Ch. 20 Appropriations
|
Assumptions Used in Arriving at Fiscal Estimate:
The proposed rule creates Section Tax 2.465, which prescribes the method of apportionment to be used by air freight forwarders that are affiliated with a direct air carrier. The proposed rule also amends certain other rule sections, where appropriate, to incorporate references to the newly created section. The proposed rule would be effective for taxable years beginning on or after January 1, 2014.
The proposed rule clarifies the tax treatment of air freight forwarders and provides certainty for taxpayers and the Department. The proposed rule is not expected to have a significant fiscal effect.
|
|
|
|
Long-Range Fiscal Implications:
|
|
|
Agency/Prepared by:
Wisconsin Department of Revenue
|
Authorized Signature
Wisconsin Department of Revenue
|
Date
|
Michael Oakleaf
|
John Koskinen
|
July 16, 2013
|
(608)261-5173
|
(608)267-8973
|
|
Notice of Hearing
Safety and Professional Services
NOTICE IS HEREBY GIVEN that pursuant to authority vested in the Department of Safety and Professional Services in ss.
440.03 (1),
440.205, and
227.11 (2), Wis. Stats., and interpreting ss.
440.03 (1) and
440.205, Wis. Stats., the Department of Safety and Professional Services will hold a public hearing at the time and place indicated below to consider an order to amend ss.
SPS 1.08 (2),
SPS 2.10 (1), and
SPS 8.03 (3), relating to hearings, injunctions, and warnings.
Hearing Information
Date: Wednesday, October 30, 2013
Time: 9:00 a.m.
Locations: 1400 East Washington Ave.
Room 121C
Madison, WI
Appearances at the Hearing, Copies of Proposed Rule, and Submittal of Written Comments
Interested persons are invited to present information at the hearing. Persons appearing may make an oral presentation but are urged to submit facts, opinions, and arguments in writing as well. Facts, opinions, and arguments may also be submitted in writing without a personal appearance. All submittals must be directed to Katie Paff, Program and Policy Analyst, at
kathleen.paff@wisconsin.gov; or by mail addressed to the Department of Safety and Professional Services, Division of Policy Development, P.O. Box 8935, Madison, Wisconsin 53708. Written comments must be received at or before the public hearing to be included in the record of rule-making proceedings.
Comments may be submitted to Katie Paff, Program and Policy Analyst, Department of Safety and Professional Services, Division of Policy Development, 1400 East Washington Avenue, Room 151, P.O. Box 8935, Madison, WI 53708, or by email to
kathleen.paff@wisconsin.gov. Comments must be received at or before the public hearing to be held on
October 30, 2013, to be included in the record of rule-making proceedings.
Analysis Prepared by the Department
