State fiscal effect
No state fiscal effect.
Local government fiscal effect
No local government costs.
Anticipated costs incurred by private sector
This proposed rule does not have a significant fiscal effect on the private sector.
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.
Text of Rule
SECTION 1. Tax 2.957 is created to read:
Tax 2.957 Relocated business credit or deduction. (1) Purpose. The purpose of this section is to prescribe the method by which the percentage of the workforce payroll of a business and the dollar amount of wages paid to such workforce moved to this state during a taxable year shall be determined for purposes of ss.
71.05 (6) (b) 47.,
71.28 (9s), and
71.47 (9s), Stats.; provide examples of actions that may indicate a business has relocated to this state from another state or country; and limit the deduction provided for in s.
71.05 (6) (b) 47. am.,
b., and
c., Stats.
(2) Definitions. In this section:
(a) “Business" means any organization or enterprise operated for profit, including a sole proprietorship, partnership, firm, business trust, joint venture, syndicate, corporation, limited liability company, or association.
(b) “Doing business in this state" has the meaning given in s.
71.22 (1r), Stats.
(c) “Employee" has the meaning given in section
3121 (d) of the Internal Revenue Code.
(e) “Wages" has the meaning given in section
3121 (a) of the Internal Revenue Code.
(3) Relocation To This State. For purposes of ss.
71.05 (6) (b) 47.,
71.28 (9s), and
71.47 (9s), Stats., actions that may indicate a business has relocated to this state from another state or country include the following:
(a) Registering with the department, as provided in s.
73.03 (50), Stats.
(b) Registering to do business in Wisconsin with the department of financial institutions.
(4) Doing Business In This State. For purposes of ss.
71.05 (6) (b) 47.,
71.28 (9s), and
71.47 (9s), Stats., doing business in this state for any portion of a taxable year means doing business in this state for the entire taxable year, as provided in s.
71.22 (1r), Stats.
(5) Workforce Payroll
. For purposes of ss.
71.05 (6) (b) 47. a.,
71.28 (9s) (a) 2., and
71.47 (9s) (a) 2., Stats., the determination as to whether 51% or more of the workforce payroll of a business has moved to this state during a taxable year shall be made using a fraction, the numerator of which is the total amount of wages paid by the business during the taxable year to employees of the business who are residents of this state, and the denominator of which is the total amount of wages paid by the business during the taxable year to all employees of the business.
Example: During the taxable year in which Business A begins doing business in Wisconsin, Business A pays $6,000,000 of wages to employees of Business A who are residents of Wisconsin and $10,000,000 of total wages to all employees of Business A. Sixty (60) percent of the workforce payroll of Business A moved to Wisconsin during the taxable year (6,000,000/10,000,000).
(6) Workforce Wages. For purposes of ss.
71.05 (6) (b) 47. a.,
71.28 (9s) (a) 2., and
71.47 (9s) (a) 2., Stats., the determination as to whether at least $200,000 of wages paid to the workforce of a business has moved to this state during a taxable year shall be made using the total amount of wages paid by the business during the taxable year to employees of the business who are residents of this state.
Example: During the taxable year in which Business B begins doing business in Wisconsin, Business B pays $250,000 of wages to employees of Business B who are residents of Wisconsin. Wages of $250,000 paid to the workforce of Business B moved to Wisconsin during the taxable year.
(7) Limitation On Deduction. No modification may be made under s.
71.05 (6) (b) 47. am.,
b., or
c., Stats., if the amount otherwise eligible for the modification is less than zero.
Example: Partner B determines the amount otherwise eligible for the modification under s.
71.05 (6) (b) 47. b., Stats., is a loss of $5,000. Partner B may not make a modification under s.
71.05 (6) (b) 47. b., Stats.
Notice of Hearing
Revenue
NOTICE IS HEREBY GIVEN that, pursuant to sections
71.05 (6) (b) 47m.,
71.26 (1) (h), and
71.45 (1) (c), Stats., the Department of Revenue will hold a public hearing to consider emergency rules and permanent rules creating section
Tax 3.05, relating to
income and franchise tax deductions for job creation.
Hearing Information
The hearing will be held:
Date and Time Location
June 14, 2011 Events Room
Tuesday State Revenue Building
at 1:00 P.M. 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 no later than June 21, 2011, 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 of Revenue
Statute(s) interpreted
Statutory authority
Explanation of agency authority
Related statute or rule
There are no other applicable statutes or rules.
Plain language analysis
This proposed rule clarifies certain terms as they apply to the job creation deduction under ss.
71.05 (6) (b) 47m.,
71.26 (1) (h), and
71.45 (1) (c), Stats., prescribes the methods by which the average employee count is computed for purposes of determining the amount of the deduction, and clarifies how the deduction applies to partnerships, limited liability companies, tax-option corporations, and professional employer organizations.
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 similar rules in adjacent states
The department has researched provisions in adjacent states and is not aware of the existence of a similar rule.
Summary of factual data and analytical methodologies
2011 Wisconsin Act 5 created income and franchise tax deductions for job creation. Among the provisions created is a requirement for the department to promulgate rules to administer these deductions. The department has created this proposed rule order to comply with this statutory requirement.
Analysis and supporting documents used to determine effect on small business
As explained above, this proposed rule is created to administer changes in Wisconsin's income and franchise tax laws. As the rule itself does not impose any significant financial or other compliance burden, the department has determined that it does not have a significant effect on small business.
Effect on Small Business
This proposed rule does not have a significant effect on small business.
Fiscal Estimate
Assumptions used in arriving at fiscal estimate
The proposed rule order does all of the following:
2) Prescribes the methods by which the average employee count is computed for purposes of determining the amount of the deduction.
3) Clarifies how the deduction applies to partnerships, limited liability companies, tax-option corporations, and professional employer organizations.
The fiscal effect of the job creation deduction was included in the fiscal estimate for
2011 Act 5. As such, the proposed rule has no fiscal effect.
State fiscal effect
No state fiscal effect.
Local government fiscal effect
No local government costs.
Anticipated costs incurred by private sector
This proposed rule does not have a significant fiscal effect on the private sector.
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.
Text of Rule
SECTION 1. Tax 3.05 is created to read:
Tax 3.05 Job creation deduction. (1) Purpose. The purpose of this section is to clarify certain terms as they apply to the job creation deduction under ss.
71.05 (6) (b) 47m.,
71.26 (1) (h), and
71.45 (1) (c), Stats.; define “employee," “full-time equivalent employee," and “gross receipts"; prescribe the methods by which the average employee count is computed for purposes of determining the amount of the deduction; and clarify how the deduction applies to partnerships, limited liability companies, tax-option corporations, and professional employer organizations.
(a) “Commonly controlled group" has the meaning given in s.
71.255 (1) (c), Stats.
(b) “Employee" has the meaning given in section
3121 (d) of the Internal Revenue Code.
(c) “Full-time equivalent employee" means an employee who is a resident of this state, is employed in a regular, nonseasonal job, and who, as a condition of employment, is required to work at least 2,080 hours per year, including paid leave and holidays.
