LRB-0108/1
JK:cjs:jf
2001 - 2002 LEGISLATURE
January 16, 2001 - Introduced by Representatives Ziegelbauer, M. Lehman, Riley,
Gronemus, La Fave, F. Lasee, Plale, Ryba, Seratti, Sykora
and Pettis,
cosponsored by Senators Plache, Breske, Darling, Farrow, Harsdorf,
Roessler, Rosenzweig, Schultz
and Baumgart. Referred to Committee on
Ways and Means.
AB19,1,5 1An Act to renumber and amend 71.04 (4) and 71.25 (6); to amend 71.04 (5)
2(intro.), 71.04 (6) (intro.), 71.04 (7) (d), 71.04 (10), 71.25 (7) (intro.), 71.25 (8)
3(intro.), 71.25 (9) (d) and 71.25 (11); and to create 71.04 (4) (a), 71.04 (4) (b),
471.25 (6) (a) and 71.25 (6) (b) of the statutes; relating to: single factor
5apportionment of income for corporate income tax and franchise tax purposes.
Analysis by the Legislative Reference Bureau
Under current law, when computing the income tax or franchise tax liability of
a corporation that does business inside and outside of this state, a formula is used
to attribute a portion of the corporation's income to this state. The formula has three
factors: a sales factor, a property factor and a payroll factor. The sales factor
represents 50% of the formula and the property and payroll factors each represent
25% of the formula.
Under this bill, beginning on January 1, 2002, the sales factor will be the only
factor used to attribute a portion of a corporation's income to this state.
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:
AB19, s. 1
1Section 1. 71.04 (4) of the statutes is renumbered 71.04 (4) (intro.) and
2amended to read:
AB19,2,203 71.04 (4) Nonresident allocation and apportionment formula. (intro.)
4Nonresident individuals and nonresident estates and trusts engaged in business
5within and without the state shall be taxed only on such income as is derived from
6business transacted and property located within the state. The amount of such
7income attributable to Wisconsin may be determined by an allocation and separate
8accounting thereof, when the business of such nonresident individual or nonresident
9estate or trust within the state is not an integral part of a unitary business, but the
10department of revenue may permit an allocation and separate accounting in any case
11in which it is satisfied that the use of such method will properly reflect the income
12taxable by this state. In all cases in which allocation and separate accounting is not
13permissible, the determination shall be made in the following manner: for all
14businesses except financial organizations, public utilities, railroads, sleeping car
15companies and car line companies there shall first be deducted from the total net
16income of the taxpayer the part thereof (less related expenses, if any) that follows the
17situs of the property or the residence of the recipient. The remaining net income shall
18be apportioned to Wisconsin this state by use of an apportionment fraction composed
19of a sales factor representing 50% of the fraction, a property factor representing 25%
20of the fraction and a payroll factor representing 25% of the fraction.
the following:
AB19, s. 2 21Section 2. 71.04 (4) (a) of the statutes is created to read:
AB19,2,2522 71.04 (4) (a) For taxable years beginning before January 1, 2002, an
23apportionment fraction composed of a sales factor under sub. (7) representing 50%
24of the fraction, a property factor under sub. (5) representing 25% of the fraction, and
25a payroll factor under sub. (6) representing 25% of the fraction.
AB19, s. 3
1Section 3. 71.04 (4) (b) of the statutes is created to read:
AB19,3,32 71.04 (4) (b) For taxable years beginning after December 31, 2001, an
3apportionment fraction composed of the sales factor under sub. (7).
AB19, s. 4 4Section 4. 71.04 (5) (intro.) of the statutes is amended to read:
AB19,3,65 71.04 (5) Property factor. (intro.) For purposes of sub. (4) and for taxable
6years beginning before January 1, 2002
:
AB19, s. 5 7Section 5. 71.04 (6) (intro.) of the statutes is amended to read:
AB19,3,98 71.04 (6) Payroll factor. (intro.) For purposes of sub. (4) and for taxable years
9beginning before January 1, 2002
:
AB19, s. 6 10Section 6. 71.04 (7) (d) of the statutes is amended to read:
AB19,3,1811 71.04 (7) (d) Sales, other than sales of tangible personal property, are in this
12state if the income-producing activity is performed in this state. If the
13income-producing activity is performed both in and outside this state the sales shall
14be divided between those states having jurisdiction to tax such business in
15proportion to the direct costs of performance incurred in each such state in rendering
16this service. Services performed in states which do not have jurisdiction to tax the
17business shall be deemed to have been performed in the state to which compensation
18is would be allocated by sub. s. 71.04 (6), 1999 stats.
AB19, s. 7 19Section 7. 71.04 (10) of the statutes is amended to read:
AB19,4,520 71.04 (10) Department may waive factor. Where, in the case of any nonresident
21individual or nonresident estate or trust engaged in business within and without the
22this state of Wisconsin and required to apportion its income as provided in this
23section, it shall be shown to the satisfaction of the department of revenue that the
24use of any one of the 3 factors provided under sub. (4) gives an unreasonable or
25inequitable final average ratio because of the fact that such nonresident individual

1or nonresident estate or trust does not employ, to any appreciable extent in its trade
2or business in producing the income taxed, the factors made use of in obtaining such
3ratio, this factor may, with the approval of the department of revenue, be omitted in
4obtaining the final average ratio which is to be applied to the remaining net income.
5This subsection does not apply to taxable years beginning after December 31, 2001.
AB19, s. 8 6Section 8. 71.25 (6) of the statutes is renumbered 71.25 (6) (intro.) and
7amended to read:
AB19,5,28 71.25 (6) Allocation and separate accounting and apportionment formula.
9(intro.) Corporations engaged in business within and without the state shall be taxed
10only on such income as is derived from business transacted and property located
11within the state. The amount of such income attributable to Wisconsin may be
12determined by an allocation and separate accounting thereof, when the business of
13such corporation within the state is not an integral part of a unitary business, but
14the department of revenue may permit an allocation and separate accounting in any
15case in which it is satisfied that the use of such method will properly reflect the
16income taxable by this state. In all cases in which allocation and separate accounting
17is not permissible, the determination shall be made in the following manner: for all
18businesses except financial organizations, public utilities, railroads, sleeping car
19companies, car line companies and corporations or associations that are subject to
20a tax on unrelated business income under s. 71.26 (1) (a) there shall first be deducted
21from the total net income of the taxpayer the part thereof (less related expenses, if
22any) that follows the situs of the property or the residence of the recipient. The
23remaining net income shall be apportioned to Wisconsin this state by use of an
24apportionment fraction composed of a sales factor under sub. (9) representing 50%

1of the fraction, a property factor under sub. (7) representing 25% of the fraction and
2a payroll factor under sub. (8) representing 25% of the fraction.
the following:
AB19, s. 9 3Section 9. 71.25 (6) (a) of the statutes is created to read:
AB19,5,74 71.25 (6) (a) For taxable years beginning before January 1, 2002, an
5apportionment fraction composed of a sales factor under sub. (9) representing 50%
6of the fraction, a property factor under sub. (7) representing 25% of the fraction, and
7a payroll factor under sub. (8) representing 25% of the fraction.
AB19, s. 10 8Section 10. 71.25 (6) (b) of the statutes is created to read:
AB19,5,109 71.25 (6) (b) For taxable years beginning after December 31, 2001, an
10apportionment fraction composed of the sales factor under sub. (9).
AB19, s. 11 11Section 11. 71.25 (7) (intro.) of the statutes is amended to read:
AB19,5,1312 71.25 (7) Property factor. (intro.) For purposes of sub. (5) (6) and for taxable
13years beginning before January 1, 2002
:
AB19, s. 12 14Section 12. 71.25 (8) (intro.) of the statutes is amended to read:
AB19,5,1615 71.25 (8) Payroll factor. (intro.) For purposes of sub. (5) (6) and for taxable
16years beginning before January 1, 2002
:
AB19, s. 13 17Section 13. 71.25 (9) (d) of the statutes is amended to read:
AB19,5,2518 71.25 (9) (d) Sales, other than sales of tangible personal property, are in this
19state if the income-producing activity is performed in this state. If the
20income-producing activity is performed both in and outside this state the sales shall
21be divided between those states having jurisdiction to tax such business in
22proportion to the direct costs of performance incurred in each such state in rendering
23this service. Services performed in states which do not have jurisdiction to tax the
24business shall be deemed to have been performed in the state to which compensation
25is would be allocated by sub. s. 71.25 (8), 1999 stats.
AB19, s. 14
1Section 14. 71.25 (11) of the statutes is amended to read:
AB19,6,112 71.25 (11) Department may waive factor. Where, in the case of any corporation
3engaged in business within and without the this state of Wisconsin and required to
4apportion its income as provided in sub. (6), it shall be shown to the satisfaction of
5the department of revenue that the use of any one of the 3 factors provided in sub.
6(6) gives an unreasonable or inequitable final average ratio because of the fact that
7such corporation does not employ, to any appreciable extent in its trade or business
8in producing the income taxed, the factors made use of in obtaining such ratio, this
9factor may, with the approval of the department of revenue, be omitted in obtaining
10the final average ratio which is to be applied to the remaining net income. This
11subsection does not apply to taxable years beginning after December 31, 2001.
AB19, s. 15 12Section 15. Initial applicability.
AB19,6,1613 (1) This act first applies to taxable years beginning on January 1 of the year
14in which this subsection takes effect, except that if this subsection takes effect after
15July 31 this act first applies to taxable years beginning on January 1 of the year
16following the year in which this subsection takes effect.
AB19,6,1717 (End)
Loading...
Loading...