AB873: Bill Text

LRB-3994/1

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2005 - 2006 LEGISLATURE

2005 Assembly BILL 873

December 9, 2005 - Introduced by Representatives Lehman, Seidel, Hahn, Pocan, Black, Boyle, Benedict, Turner, Travis, Berceau, Pope-Roberts, Sheridan, Young, Parisi, Kreuser and Grigsby, cosponsored by Senators Decker, Hansen, Breske, Miller, Carpenter, Risser, Erpenbach, Jauch and Coggs. Referred to Committee on Ways and Means.

AB873,1,8 An Act to repeal 71.46 (3); to amend 71.05 (6) (a) 15., 71.08 (1) (intro.), 71.23 (2), 71.25 (9) (a), 71.26 (3) (x), 71.26 (4), 71.29 (2), 71.44 (1) (a), 71.48 and 71.84 (2) (a); and to create 20.835 (2) (bm), 71.07 (5e), 71.10 (4) (gxx), 71.23 (4), 71.255 and 71.44 (1) (e) of the statutes; relating to: imposing an excess profits tax on integrated oil companies, creating an individual income tax credit for home heating costs, requiring the combined reporting of corporate income and franchise taxes, granting rule-making authority, and making an appropriation.

Analysis by the Legislative Reference Bureau

This bill creates an excess profits tax on integrated oil companies, except those companies that produce or refine less than 150,000 barrels of crude petroleum a day. An integrated oil company is any corporation that itself or including the activities of its subsidiaries engages in exploring for and extracting, producing, and refining crude petroleum and transporting, distributing, and marketing crude petroleum, gasoline, distillate fuels, aviation fuels, kerosene, diesel motor fuel, residual oil, propane, benzol, butane, or other similar petroleum products.

The tax created in the bill has two components. The integrated oil company pays a tax equal to 7.9 percent of its normal taxable income. Normal taxable income is computed by combining the petroleum-related income of the corporation and of all the corporation's subsidiaries and based on the company's taxable income in 2001. The company also pays a tax equal to 50 percent of its excess taxable income. Excess taxable income is the company's total taxable income minus its normal taxable income. Under the bill, generally, the integrated oil company may claim as a credit against the excess profits tax the amount of state corporate franchise taxes that the company paid in the taxable year on its petroleum-related income.

The bill also creates an individual income tax credit for the cost of fuel and electricity used to heat an individual's principal dwelling. The total amount of the credits that may be claimed by all eligible taxpayers each year may not exceed the total amount of revenue from the excess profits tax collected in that year.

Finally, the bill requires that all corporations and their subsidiaries file combined reports and tax returns for state income and franchise tax purposes.

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:

AB873, s. 1 Section 1. 20.835 (2) (bm) of the statutes is created to read:

AB873,2,4 20.835 (2) (bm) Excess profits home heating credit. A sum sufficient to make the payments under s. 71.07 (5e), not to exceed the amount determined under s. 71.07 (5e) (c) 1.

AB873, s. 2 Section 2. 71.05 (6) (a) 15. of the statutes is amended to read:

AB873,2,10 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), (5b), and (5d), and (5e) 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).

AB873, s. 3 Section 3. 71.07 (5e) of the statutes is created to read:

AB873,2,13 71.07 (5e) Excess profits home heating credit. (a) Definitions. In this subsection:

AB873,2,14 1. "Claimant" means an individual who files a claim under this subsection.

AB873,3,1 2. "Household" has the meaning given in s. 71.07 (3m) (a) 5.

AB873,3,2 3. "Household income" has the meaning given in s. 71.52 (5).

AB873,3,3 4. "Principal dwelling" has the meaning given in s. 79.10 (1) (dm).

AB873,3,7 (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 a percentage of the amount the claimant paid in the taxable year for fuel and electricity used to heat the claimant's principal dwelling.

AB873,3,11 (c) Limitations. 1. The department shall, by rule, determine the percentage of the amount that each claimant may claim so that the maximum amount of all credits claimed in any taxable year may not exceed the amount collected under s. 71.23 (4) and credited to the appropriation account under s. 20.835 (2) (bm).

AB873,3,13 2. Only one member of any household may claim the credit under this subsection in a taxable year.

AB873,3,23 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) 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.

AB873,4,4 (d) Administration. 1. If the allowable amount of the credit under this subsection exceeds the taxes imposed under s. 71.02 that are otherwise due on the claimant's income, the amount of the claim that is not used to offset those taxes shall be certified by the department of revenue to the department of administration for payment by check, share draft, or other draft drawn from the appropriation under s. 20.835 (2) (bm).

AB873,4,6 2. Section 71.28 (4) (g) and (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

AB873, s. 4 Section 4. 71.08 (1) (intro.) of the statutes, as affected by 2005 Wisconsin Act 25, is amended to read:

AB873,4,17 71.08 (1) Imposition. (intro.) If the tax imposed on a natural person, married couple filing jointly, trust, or estate under s. 71.02, not considering the credits under ss. 71.07 (1), (2dd), (2de), (2di), (2dj), (2dL), (2dr), (2ds), (2dx), (2fd), (3m), (3n), (3s), (3t), (5b), (5d), (5e), (6), (6e), and (9e), 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1fd), (2m), (3), (3n), and (3t) and 71.47 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1fd), (2m), (3), (3n), and (3t) and subchs. VIII and IX and payments to other states under s. 71.07 (7), is less than the tax under this section, there is imposed on that natural person, married couple filing jointly, trust, or estate, instead of the tax under s. 71.02, an alternative minimum tax computed as follows:

AB873, s. 5 Section 5. 71.10 (4) (gxx) of the statutes is created to read:

AB873,4,19 71.10 (4) (gxx) Excess profits home heat credit under s. 71.07 (5e).

AB873, s. 6 Section 6. 71.23 (2) of the statutes is amended to read:

AB873,5,18 71.23 (2) Franchise tax. For the privilege of exercising its franchise, buying or selling lottery prizes if the winning tickets were originally bought in this state or doing business in this state in a corporate capacity, except as provided under sub. (3), every domestic or foreign corporation, except corporations specified in s. 71.26 (1), and every nuclear decommissioning trust or reserve fund shall annually pay a franchise tax according to or measured by its entire Wisconsin net income of the preceding taxable year at the rate set forth in s. 71.27 (2). In addition, except as provided in sub. (3) and s. 71.26 (1), a corporation that ceases doing business in this state and a nuclear decommissioning trust or reserve fund that is terminated shall pay a special franchise tax according to or measured by its entire Wisconsin net income for the taxable year during which the corporation ceases doing business in this state or the nuclear decommissioning trust or reserve fund is terminated at the rates under s. 71.27 (2). Every corporation organized under the laws of this state shall be deemed to be residing within this state for the purposes of this franchise tax. All provisions of this chapter and ch. 73 relating to income taxation of corporations shall apply to franchise taxes imposed under this subsection, unless the context requires otherwise. The tax imposed by this subsection on national banking associations shall be in lieu of all taxes imposed by this state on national banking associations to the extent it is not permissible to tax such associations under federal law. The tax imposed under this subsection on an integrated oil company or its subsidiaries shall be in addition to the tax on or measured by the income derived from the petroleum business activities that are subject to taxation under sub. (5) (b) and (c).

AB873, s. 7 Section 7. 71.23 (4) of the statutes is created to read:

AB873,5,20 71.23 (4) Integrated oil companies. (a) Definitions. In this subsection:

AB873,5,22 1. "Excess taxable income" means taxable income minus normal taxable income.

AB873,6,2 2. "Income" means income derived from extracting, producing, and refining crude petroleum and transporting, distributing, and marketing crude petroleum, gasoline, distillate fuels, aviation fuels, kerosene, diesel motor fuel, residual oil, propane, benzol, butane, or other similar petroleum products.

AB873,6,4 3. "In-state sales" is the amount that an integrated oil company reports as the numerator of the sales factor under s. 71.25 (9) (a).

AB873,6,9 4. "In-state taxable income" means the taxable income of an integrated oil company apportioned to this state as determined under s. 71.255, except that for taxable years beginning after December 31, 2000, and before January 1, 2002, "in-state taxable income" means the taxable income that the company would have reported for that year if it computed its income under s. 71.255.

AB873,6,18 5. "Integrated oil company" means a corporation that itself or including the activities of its subsidiaries engages in extracting, producing, and refining crude petroleum and transporting, distributing, and marketing crude petroleum, gasoline, distillate fuels, aviation fuels, kerosene, diesel motor fuel, residual oil, propane, benzol, butane, or other similar petroleum products. "Integrated oil company" does not include any company that either has an average net production of less than 150,000 barrels of crude petroleum per day during the taxable year or refines an average of less than 150,000 barrels of crude petroleum per day during the taxable year.

AB873,6,23 6. "Normal taxable income" means the in-state sales of an integrated oil company for the taxable year multiplied by an amount determined by dividing the company's in-state taxable income for taxable years beginning after December 31, 2000, and before January 1, 2002, by the company's in-state sales for taxable years beginning after December 31, 2000, and before January 1, 2002.

AB873,7,3 7. "Subsidiary" means a corporation in which more than 50 percent of the voting stock of the corporation is owned directly or indirectly by an integrated oil company.

AB873,7,5 8 "Taxable income" means taxable income of a corporation as computed under this chapter.

AB873,7,13 (b) Tax on normal taxable income. Each integrated oil company or subsidiary of an integrated oil company that is subject to taxation under this chapter shall pay a tax equal to 7.9 percent of its normal taxable income. For purposes of computing the tax under this paragraph, an integrated oil company's income shall be combined with its subsidiaries, as provided under s. 71.255. If a subsidiary of an integrated oil company does business in this state, the subsidiary's income shall be combined with the income of the integrated oil company's income and the income of each of the integrated oil company's other subsidiaries, as provided under s. 71.255.

AB873,8,2 (c) Tax on excess taxable income. In addition to the tax imposed under par. (b), each integrated oil company or subsidiary of an integrated oil company that is subject to taxation under this chapter shall pay a tax equal to 50 percent of its excess taxable income. If the taxable income of the integrated oil company or subsidiary for taxable years beginning after December 31, 2000, and before January 1, 2002, is less than its taxable income for taxable years beginning after December 31, 1999, and before January 1, 2001; or if the source of the taxable income of the company or subsidiary substantially changed after December 31, 2000; the company or subsidiary may use an adjusted base year, with written approval from the department, for determining the amount of the tax due under this paragraph. For purposes of computing the taxable income for an adjusted base year, the company or subsidiary may recalculate its taxable income for taxable years beginning after December 31, 1999, and before January 1, 2001, by disregarding any extraordinary or nonrecurring expenses, but considering substantial changes in its source of taxable income.

AB873,8,10 (d) Tax credit. A person who is subject to the taxes imposed under this subsection may claim as a credit against those taxes, up to the amount of the taxes, an amount determined by multiplying the amount of the taxes imposed under sub. (2) that the person paid in the taxable year by a fraction, the numerator of which is the person's petroleum-related taxable income computed for purposes of sub. (2) and the denominator of which is the person's total taxable income computed for purposes of sub. (2). Section 71.28 (4) (e) to (i), as it applies to the credit under s. 71.28 (4), applies to the credit under this paragraph.

AB873,8,16 (e) Appropriation and notification. The department shall credit all moneys collected under this subsection to the appropriation account under s. 20.835 (2) (bm). Annually on August 1, the secretary of revenue shall notify the secretary of administration and the state treasurer, in writing, of the total amount of moneys credited to the appropriation account under s. 20.835 (2) (bm) in the preceding fiscal year.