AB927: Bill Text

LRB-0641/8

JK:jld&cs:pg

2003 - 2004 LEGISLATURE

2003 Assembly BILL 927

March 4, 2004 - Introduced by Representatives M. Lehman, W. Wood, Gielow, Kreibich, Hahn, Musser, Gronemus and Albers, cosponsored by Senators Lassa and Darling, by request of Department of Revenue. Referred to Committee on Ways and Means.

AB927,2,2 An Act to renumber 72.23; to renumber and amend 77.59 (4) (c); to amend 50.14 (4), 71.03 (6) (a), 71.03 (8) (b), 71.10 (6) (a), 71.10 (6) (b), 71.10 (6m) (a), 71.65 (5) (a) 1., 71.80 (18), 71.88 (2) (b), 73.01 (4) (a), 77.59 (5), 77.61 (14), 78.22 (4), 139.03 (2x) (d), 139.05 (2a), 139.315 (4) and 139.38 (5); and to create 71.01 (7n), 71.10 (6) (e), 71.10 (6m) (c), 71.22 (5m), 71.34 (1m), 71.42 (2m), 72.23 (2), 73.13, 78.39 (5d), 78.39 (5m) and 139.75 (9m) of the statutes; relating to: the liability of married persons filing a joint income tax return, the payment of the alternate fuel tax and the tobacco products tax, estate tax interest, qualified retirement systems, reducing nondelinquent taxes, extending the time for filing a tax reconciliation report, delivering tax-related documents and related payments, appeal of redetermination of earned income tax credits, granting rule-making authority, and providing a penalty.

Analysis by the Legislative Reference Bureau

Reducing taxes

Under current law, any taxpayer may petition the Department of Revenue (DOR) to reduce delinquent taxes, including any applicable costs, penalties, and interest. If DOR determines that the taxpayer is unable to pay in full the amount due, based on an examination of the taxpayer under oath, the taxpayer's financial statements, and any other information required by DOR, DOR determines the amount that the taxpayer is able to pay and then enters an order reducing the taxes, costs, penalties, and interest owed by the taxpayer.

If within three years from either the date on which DOR enters the order that reduces the taxpayer's taxes or the date of the final payment according to a payment schedule determined by DOR, whichever is later, DOR determines that the taxpayer has an income or owns property that is sufficient to enable the taxpayer to pay the remainder of the original delinquent taxes, including costs, penalties, and interest, DOR must reopen the order and order the payment in full of such taxes, costs, penalties, and interest.

This bill expands current law so that DOR is authorized to reduce any taxes, costs, penalties, and interest that are due from a taxpayer, regardless of whether the taxes, costs, penalties, and interest are delinquent.

Income and franchise taxes

Under current law, spouses that file a joint income tax return are both liable for the payment of any tax related to that return. However, DOR may relieve a person of any tax liability related to a joint return, in a manner specified by the Internal Revenue Code and adopted by this state. Generally, DOR may relieve a person of any tax liability related to a joint return if the person's spouse did not notify the person of any tax liability or understatement of taxes related to the joint return. This bill corrects an outdated reference to the sections of the Internal Revenue Code that relate to a spouse's tax liability for a joint income tax return. The bill also requires a spouse to apply for relief from tax liability within two years from the date on which DOR begins collection activities on the spouse's tax liability or within two years from the effective date of the provision, whichever is later.

Under current law, an employer is required to deduct and withhold state income taxes from an employee's pay and to deposit those taxes with DOR on a quarterly basis. An employer must also file a tax reconciliation report with DOR on an annual basis. Under current law, DOR cannot grant an employer an extension for filing such a report. This bill allows DOR to grant a 30-day extension for filing an annual reconciliation report.

This bill clarifies that a qualified retirement fund for federal income tax purposes is a qualified retirement fund for state income tax purposes.

Sales and use taxes

Under current law, if a seller makes a claim for a refund of sales taxes or use taxes and the claim is honored, the seller is required to pass along the refund and related interest to the buyers and to submit to DOR the portion of the refund that could not be passed on, along with a penalty. Under current law, if a seller receives a sales or use tax refund as the result of an audit, the seller is not required to submit the refund and related interest to the buyers. Also, a seller is not required to submit to the buyers sales or use taxes that are collected erroneously.

This bill requires a seller who receives any refund of sales or use taxes, or who collects sales or use taxes erroneously, to submit such a refund or taxes to the buyer, or to DOR if the buyer cannot be located, within 90 days after receiving a refund or after discovering that the seller has collected taxes erroneously. Any portion of a refund or taxes not submitted to the buyer, or to DOR if the buyer cannot be located, within that 90 days must be submitted to DOR, along with a penalty.

Other taxation

Under current law, an estate tax that is not paid on the date on which it is due is subject to interest at the rate of 12% a year from the date of the decedent's death. Under the bill, DOR may waive the interest imposed on any additional estate taxes that arise from the discovery of property omitted in the inventory of the estate's total assets or in the original tax determination, if due diligence was exercised in determining the assets.

Under current law, generally, a tax-related document or payment that DOR must receive by a specified date is timely received, if the document or payment is mailed in a properly addressed envelope; the sender pays the postage; the envelope is postmarked on the day that the document or payment is due; and the document or payment is received within five days from the date on which the document or payment is due.

Under this bill, mailing a tax-related document or payment includes using a delivery service that has been approved by the Internal Revenue Service, for federal tax purposes.

Under current law, a person may appeal DOR's redetermination of various tax credits without paying a $25 filing fee. Under this bill, a person may appeal DOR's redetermination of an earned income tax credit without paying the filing fee.

For further information see the state and local 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:

AB927, s. 1 Section 1. 50.14 (4) of the statutes, as affected by 2003 Wisconsin Act 33, is amended to read:

AB927,4,7 50.14 (4) Sections 77.59 (1) to (5) (5m), (6) (intro.), (a) and (c) and (7) to (10), 77.60 (1) to (7), (9) and (10), 77.61 (9) and (12) to (14) and 77.62, as they apply to the taxes under subch. III of ch. 77, apply to the assessment under this section, except that the amount of any assessment collected under s. 77.59 (7) in excess of $14,300,000 in fiscal year 2003-04, in excess of $13,800,000 in fiscal year 2004-05, and, beginning July 1, 2005, in excess of 45% in each fiscal year shall be deposited in the Medical Assistance trust fund.

AB927, s. 2 Section 2. 71.01 (7n) of the statutes is created to read:

AB927,4,11 71.01 (7n) Notwithstanding sub. (6), a qualified retirement fund for a taxable year for federal income tax purposes is a qualified retirement fund for the taxable year for purposes of this subchapter.

AB927, s. 3 Section 3 . 71.03 (6) (a) of the statutes is amended to read:

AB927,4,24 71.03 (6) (a) Reports required under this section shall be made on or before April 15, or April 30 if the person files an electronic return, following the close of a year referred to in sub. (2) (a), or if such person's fiscal year is other than the calendar year then on or before the 15th day, or the last day if the person files an electronic return, of the 4th month following the close of such fiscal year, or if the return is for less than a full taxable year on the date applicable for federal income taxes under the internal revenue code Internal Revenue Code, to the department of revenue, in the manner and form prescribed by the department of revenue, whether notified to do so or not. Such persons shall be subject to the same penalties for failure to report as those who receive notice. If the taxpayer is unable to make his or her own return, the return shall be made by a duly authorized agent or by the guardian or other person charged with the care of the person or property of such taxpayer.

AB927, s. 4 Section 4 . 71.03 (8) (b) of the statutes is amended to read:

AB927,5,9 71.03 (8) (b) The final payment of taxes on incomes of persons other than corporations who file on a calendar year basis shall be made on or before April 15, or April 30 if the person files an electronic return, following the close of the calendar year, except for persons electing to have the department compute their tax under sub. (4). If the return of a person other than a corporation is made on the basis of a fiscal year, such final payment shall be made on or before the 15th day, or the last day if the person files an electronic return, of the 4th month following the close of such fiscal year, except for persons electing to have the department compute their tax under sub. (4).

AB927, s. 5 Section 5. 71.10 (6) (a) of the statutes is amended to read:

AB927,5,16 71.10 (6) (a) Joint returns. Persons filing a joint return are jointly and severally liable for the tax, interest, penalties, fees, additions to tax and additional assessments under this chapter applicable to the return. A person shall be relieved of liability in regard to a joint return in the manner specified in section 6013 (e) 6015 (a) to (d) and (f) of the internal revenue code, notwithstanding the amount or percentage of the understatement Internal Revenue Code.

AB927, s. 6 Section 6. 71.10 (6) (b) of the statutes is amended to read:

AB927,6,3 71.10 (6) (b) Separate returns. A spouse filing a separate return may be relieved of liability for the tax, interest, penalties, fees, additions to tax and additional assessments under this chapter with regard to unreported marital property income in the manner specified in section 66 (c) of the internal revenue code Internal Revenue Code. The department may not apply ch. 766 in assessing a taxpayer with respect to marital property income the taxpayer did not report if that taxpayer failed to notify the taxpayer's spouse about the amount and nature of the income before the due date, including extensions, for filing the return for the taxable year in which the income was derived. The department shall include all of that marital property income in the gross income of the taxpayer and exclude all of that marital property income from the gross income of the taxpayer's spouse.

AB927, s. 7 Section 7. 71.10 (6) (e) of the statutes is created to read:

AB927,6,9 71.10 (6) (e) Application for relief. A person who seeks relief from liability under par. (a) or (b) shall apply for relief with the department, on a form prescribed by the department, within 2 years after the date on which the department first begins collection activities after the effective date of this paragraph .... [revisor inserts date].

AB927, s. 8 Section 8. 71.10 (6m) (a) of the statutes is amended to read:

AB927,6,22 71.10 (6m) (a) A formerly married or remarried person filing a return for a period during which the person was married may be relieved of liability for the tax, interest, penalties, fees, additions to tax and additional assessments under this chapter for unreported marital property income from that period as if the person were a spouse under section 66 (c) of the internal revenue code Internal Revenue Code. The department may not apply ch. 766 in assessing the former spouse of the person with respect to marital property income that the former spouse did not report if that former spouse failed to notify the person about the amount and nature of the income before the due date, including extensions, for filing the return for the taxable year during which the income was derived. The department shall include all of that marital property income in the gross income of the former spouse and exclude all of that marital property income from the gross income of the person.

AB927, s. 9 Section 9. 71.10 (6m) (c) of the statutes is created to read:

AB927,6,25 71.10 (6m) (c) A person who seeks relief from liability under par. (a) shall apply for relief with the department as provided under sub. (6) (e).

AB927, s. 10 Section 10. 71.22 (5m) of the statutes is created to read:

AB927,7,4 71.22 (5m) Notwithstanding subs. (4) and (4m), a qualified retirement fund for a taxable year for federal income tax purposes is a qualified retirement fund for the taxable year for purposes of this subchapter.

AB927, s. 11 Section 11. 71.34 (1m) of the statutes is created to read:

AB927,7,8 71.34 (1m) Notwithstanding sub. (1g), a qualified retirement fund for a taxable year for federal income tax purposes is a qualified retirement fund for the taxable year for purposes of this subchapter.

AB927, s. 12 Section 12. 71.42 (2m) of the statutes is created to read:

AB927,7,12 71.42 (2m) Notwithstanding sub. (2), a qualified retirement fund for a taxable year for federal income tax purposes is a qualified retirement fund for the taxable year for purposes of this subchapter.