AB208: Bill Text

LRB-1297/4

JK/MES/CTS:wlj:rs

2005 - 2006 LEGISLATURE

2005 Assembly BILL 208

March 14, 2005 - Introduced by Representatives Suder, M. Williams, Pettis, Moulton, Wood, Lamb, Nerison, Ott, Gronemus, Kestell, Davis, Mursau, Owens, Freese, Van Roy, Musser, Kreibich, McCormick, Hines, Hahn, Vruwink, Vos, F. Lasee, Petrowski, Ballweg and Gunderson, cosponsored by Senators Zien, Harsdorf, Roessler, Brown and Darling. Referred to Committee on Rural Development.

AB208,1,8 An Act to amend 71.05 (6) (a) 15., 71.08 (1) (intro.), 71.10 (4) (i), 71.21 (4), 71.26 (2) (a), 71.30 (3) (f), 71.34 (1) (g), 71.45 (2) (a) 10., 71.49 (1) (f) and 77.92 (4); and to create 20.835 (2) (cm), 20.835 (2) (em), 20.835 (2) (eo), 71.07 (3c), 71.07 (3e), 71.07 (3w), 71.28 (3w), 71.47 (3w) and 560.799 of the statutes; relating to: creating rural enterprise development zones and providing tax incentives to qualified businesses in the zones, creating refundable individual income tax credits for income and capital gains derived from the zones, making appropriations, and providing a penalty.

Analysis by the Legislative Reference Bureau

This bill authorizes the Department of Commerce (department) to designate up to ten rural enterprise development zones (zones), upon applications by political subdivisions. A zone may be no larger than 5,000 acres, and may not include any part of a city of the first class or a city with a population greater than 200,000. A political subdivision may apply for designation of a zone that includes land within that political subdivision by submitting a development plan. A development plan must contain certain information, including: 1) a map of the proposed zone; 2) evidence of support in the proposed zone from local government, the public, and business groups; 3) a description of the applicant's goals and methods for increasing economic opportunity and expansion, improving infrastructure, reducing regulatory burdens, and increasing job training opportunities; and 4) anticipated economic activity in the proposed zone.

In selecting areas for zone designation, the department must consider indicators of the areas' economic need and likelihood of success. The department must give preference to applications that propose designation of zones with the lowest population density and greatest economic need. A zone designation may remain in effect for no more than 12 years.

The department may certify a business to receive certain tax benefits if the business begins operations in a zone or relocates to a zone from outside the state. The department may also certify a business that relocates to a zone from elsewhere in the state, but only if the business will increase its full-time employees in the zone by at least 10 percent or will make a capital investment in property in the zone equal to at least 10 percent of the business's gross revenues in the preceding year.

This bill creates two refundable individual income tax credits. If the allowable amount of the credit exceeds the taxpayer's income tax liability, the difference is paid to the claimant by check. Under the rural enterprise development income credit, an individual who owns or operates a trade or business in a rural enterprise development zone may claim a credit equal to an amount obtained by multiplying 20 percent of the income the individual derives from the operation of his or her trade or business in the rural enterprise development zone by 6.5 percent. The credit is prorated if the claimant, or the claimant's spouse, is not a full-year resident of this state.

Under the rural enterprise development capital gains credit, an individual may claim a credit based on capital gains derived from the sale or exchange of property, both real property and property other than real property, that is used by a rural enterprise development business that is certified by the department of commerce. Under current law, there is an income tax exclusion for individuals and shareholders of tax-option corporations for 60 percent of the net long-term capital gains realized from the sale of assets held for at least one year. Under this bill, a claimant of the capital gains credit may claim an amount equal to the amount of capital gains that is not currently excluded, multiplied by 6.5 percent. The credit is prorated if the property is also held by the claimant during a period when the rural development zone was not certified by the department. The credit is also prorated if the claimant, or the claimant's spouse, is not a full-year resident of this state.

The bill also creates refundable income and franchise tax credits for businesses located in a rural enterprise development zone. A taxpayer may claim credits based on the amount that the taxpayer pays to employees in the rural enterprise development zone. In addition, the taxpayer may claim a credit equal to the amount of property taxes the taxpayer paid on his or her personal property located in a rural enterprise development zone, the amount of sales and use taxes the taxpayer paid to purchase tangible personal property or taxable services that are used or consumed primarily in a rural enterprise development zone, or the amount the taxpayer paid in the taxable year to provide certain training to the taxpayer's full-time employees.

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:

AB208, s. 1 Section 1. 20.835 (2) (cm) of the statutes is created to read:

AB208,3,3 20.835 (2) (cm) Rural enterprise development zone jobs credit. A sum sufficient to make the payments under ss. 71.07 (3w) (c) 1., 71.28 (3w) (c) 1., 71.47 (3w) (c) 1.

AB208, s. 2 Section 2. 20.835 (2) (em) of the statutes is created to read:

AB208,3,6 20.835 (2) (em) Rural enterprise development income credit. A sum sufficient to pay the claims approved under s. 71.07 (3c).

AB208, s. 3 Section 3. 20.835 (2) (eo) of the statutes is created to read:

AB208,3,9 20.835 (2) (eo) Rural enterprise development capital gains credit. A sum sufficient to pay the claims approved under s. 71.07 (3e).

AB208, s. 4 Section 4. 71.05 (6) (a) 15. of the statutes is amended to read:

AB208,3,15 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (3g), (3n), (3s), (3t), (3w), (5b), and (5d) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g).

AB208, s. 5 Section 5. 71.07 (3c) of the statutes is created to read:

AB208,3,18 71.07 (3c) Rural enterprise development income credit. (a) Definitions. In this subsection:

AB208,3,20 1. "Claimant" means an individual who owns or operates a trade or business in a rural enterprise development zone.

AB208,4,2 2. "Rural enterprise development zone" has the meaning given in s. 71.07 (3w) (a) 4.

AB208,4,11 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.02 an amount obtained by multiplying 20 percent of the income that the individual derives from the operation of his or her trade or business in a rural enterprise development zone by 6.5 percent. If the allowable amount of the claim exceeds the income taxes otherwise due on the claimant's income, the amount of the claim not used as an offset against those taxes shall be certified by the department of revenue to the department of administration for payment to the claimant by check, share draft, or other draft from the appropriation under s. 20.835 (2) (em).

AB208,4,13 (c) Limitations. 1. No credit may be allowed under this subsection unless it is claimed within the time period under s. 71.75 (2).

AB208,4,23 2. For a claimant who is a nonresident or part-year resident of this state and who is a single person or a married person filing a separate return, multiply the credit for which the claimant is eligible under par. (b) by a fraction the numerator of which is the individual's Wisconsin adjusted gross income and the denominator of which is the individual's federal adjusted gross income. If a claimant is married and files a joint return, and if the claimant or the claimant's spouse, or both, are nonresidents or part-year residents of this state, multiply the credit for which the claimant is eligible under par. (b) by a fraction the numerator of which is the couple's joint Wisconsin adjusted gross income and the denominator of which is the couple's joint federal adjusted gross income.

AB208,4,25 (d) Administration. Subsection (9e) (d), to the extent that it applies to the credit under that subsection, applies to the credit under this subsection.

AB208, s. 6 Section 6. 71.07 (3e) of the statutes is created to read:

AB208,5,3 71.07 (3e) Rural enterprise development capital gains credit. (a) Definitions. In this subsection:

AB208,5,4 1. "Claimant" means an individual who files a claim under this subsection.

AB208,5,6 2. "Property gain" means the gain derived from the sale or exchange of property, other than real property, that is used by a certified business under s. 560.799 (5).

AB208,5,9 3. "Real property gain" means the gain derived from the sale or exchange of real property that is located in a rural enterprise development zone and used by a certified business under s. 560.799 (5).

AB208,5,11 4. "Rural enterprise development zone" has the meaning given in s. 71.07 (3w) (a) 4.

AB208,5,14 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.02 all of the following:

AB208,5,16 1. An amount obtained by multiplying the amount of property gain that is not excluded under s. 71.05 (6) (b) 9. by 6.5 percent.

AB208,5,18 2. An amount obtained by multiplying the amount of real property gain that is not excluded under s. 71.05 (6) (b) 9. by 6.5 percent.

AB208,5,23 (bm) Payment. If the allowable amount of the claim under par. (a) exceeds the income taxes otherwise due on the claimant's income, the amount of the claim not used as an offset against those taxes shall be certified by the department of revenue to the department of administration for payment to the claimant by check, share draft, or other draft from the appropriation under s. 20.835 (2) (eo).

AB208,5,25 (c) Limitations. 1. No credit may be allowed under this subsection unless it is claimed within the time period under s. 71.75 (2).

AB208,6,6 2. If the claimant held the property to which the claim relates during a period when the rural enterprise development zone was not designated, the gain subject to the credit under par. (b) must be multiplied by a fraction, the numerator of which is the number of days the claimant held the property during the period the zone designation was in effect and the denominator of which is the total number of days the claimant held the property.

AB208,6,18 3. For a claimant who is a nonresident or part-year resident of this state and who is a single person or a married person filing a separate return, multiply the credit for which the claimant is eligible under par. (b), or the credit for which the claimant is eligible under par. (b) as modified by subd. 2., if applicable, by a fraction the numerator of which is the individual's Wisconsin adjusted gross income and the denominator of which is the individual's federal adjusted gross income. If a claimant is married and files a joint return, and if the claimant or the claimant's spouse, or both, are nonresidents or part-year residents of this state, multiply the credit for which the claimant is eligible under par. (b), or the credit for which the claimant is eligible under par. (b) as modified by subd. 2., if applicable, by a fraction the numerator of which is the couple's joint Wisconsin adjusted gross income and the denominator of which is the couple's joint federal adjusted gross income.

AB208,6,20 (d) Administration. Subsection (9e) (d), to the extent that it applies to the credit under that subsection, applies to the credit under this subsection.

AB208, s. 7 Section 7. 71.07 (3w) of the statutes is created to read:

AB208,6,23 71.07 (3w) Rural enterprise development zone jobs credit. (a) Definitions. In this subsection:

AB208,7,3 1. "Base year" means the taxable year beginning during the calendar year prior to the calendar year in which the rural enterprise development zone in which the claimant is located takes effect.

AB208,7,5 2. "Claimant" means a person who is certified to claim tax benefits under s. 560.799 (5) and who files a claim under this subsection.