71.34(1h)
(1h) For purposes of
sub. (1k) (j) and
(L), "management fees" include expenses and costs, not including interest expenses, pertaining to accounts receivable, accounts payable, employee benefit plans, insurance, legal matters, payroll, data processing, purchasing, taxation, financial matters, securities, accounting, or reporting and compliance matters or similar activities, to the extent that the amounts would otherwise be deductible in the computation of Wisconsin adjusted gross income.
71.34(1k)
(1k) "Net income or loss" of a tax-option corporation means net income or loss computed under the internal revenue code, as defined under
sub. (1g), except that:
71.34(1k)(ag)
(ag) Section
164 (a) (3) of the internal revenue code is modified so that state taxes and taxes of the District of Columbia that are value-added taxes, single business taxes or taxes on or measured by all or a portion of net income, gross income, gross receipts or capital stock are not deductible.
71.34(1k)(b)
(b) The items referred to in section
1366 (a) (1) (A) of the internal revenue code shall be included.
71.34(1k)(c)
(c) The deduction referred to in sections
212 and
703 (a) (2) (E) of the internal revenue code shall be allowed.
71.34(1k)(d)
(d) An addition or subtraction, as appropriate, shall be made for the net amount of state and federal differences including differences arising from the different basis of assets disposed of in a transaction in which gain or loss is recognized for state tax purposes, different depreciation methods or difference in basis of depreciable assets, different elections, or transitional adjustments due to differences in the statutes for taxable years 1986 and 1987 pertaining to the computation of net income of a tax-option corporation.
71.34(1k)(e)
(e) An addition shall be made for the amount of credit computed under
s. 71.28 (3) and used by the corporation in the current year.
71.34(1k)(f)
(f) An addition shall be made for the amount of interest, less related expenses, excluded by reason of section
103 of the internal revenue code (relating to interest received on state and municipal obligations and on volunteer fire department and mass transit obligations) or any other federal law.
71.34(1k)(g)
(g) An addition shall be made for credits computed by a tax-option corporation under
s. 71.28 (1dd),
(1de),
(1di),
(1dj),
(1dL),
(1dm),
(1ds),
(1dx),
(1dy),
(3),
(3g),
(3h),
(3n),
(3p),
(3q),
(3r),
(3rm),
(3rn),
(3t),
(3w),
(5e),
(5f),
(5g),
(5h),
(5i),
(5j),
(5k),
(5r),
(5rm),
(6n), and
(8r) and passed through to shareholders.
71.34 Note
NOTE: Par. (g) is shown as affected by
2011 Wis. Acts 212 and
232 and as merged by the legislative reference bureau under s. 13.92 (2) (i).
71.34(1k)(h)
(h) Section
162 of the internal revenue code (relating to trade or business expenses) is modified so that payments for wages, salaries, bonuses, interest or other expenses paid to an entertainer or entertainment corporation may be deducted only if the corporation complies with
ss. 71.63 (3) (b),
71.64 (4) and
(5) and
71.80 (15) (e).
71.34(1k)(i)
(i) In section
1366 (f) of the Internal Revenue Code, the tax under
s. 71.35 is substituted for the taxes under sections
1374 and
1375 of the Internal Revenue Code.
71.34(1k)(j)
(j) An addition shall be made for any amount deducted or excluded under the Internal Revenue Code for interest expenses, rental expenses, intangible expenses, and management fees that are directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.
71.34(1k)(k)
(k) A deduction shall be allowed for the amount added to gross income under
par. (j), to the extent that the conditions under
s. 71.80 (23) are satisfied.
71.34(1k)(L)
(L) A deduction shall be allowed for the amount added, pursuant to
par. (j) or
s. 71.05 (6) (a) 24.,
71.26 (2) (a) 7., or
71.45 (2) (a) 16., to the federal income of a related entity that paid interest expenses, rental expenses, intangible expenses, or management fees to the corporation, to the extent that the related entity could not offset such amount with the deduction allowable under
par. (k) or
s. 71.05 (6) (b) 45.,
71.26 (2) (a) 8., or
71.45 (2) (a) 17.
71.34(1k)(m)
(m) An addition shall be made for the amount computed under
s. 71.28 (5n) in the previous taxable year that is not included in federal ordinary business income.
71.34(1m)(a)(a) 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.
71.34(1m)(b)
(b) Notwithstanding
sub. (1g), section 101 of
P.L. 109-222, related to extending the increased expense deduction under section
179 of the Internal Revenue Code, applies to property used in farming that is acquired and placed in service in taxable years beginning on or after January 1, 2008, and used by a person who is actively engaged in farming. For purposes of this paragraph, "actively engaged in farming" has the meaning given in
7 CFR 1400.201, and "farming" has the meaning given in section
464 (e) (1) of the Internal Revenue Code.
71.34(1p)
(1p) "Related entity" means any person related to a taxpayer as provided under section
267 or
1563 of the Internal Revenue Code during all or a portion of the taxpayer's taxable year and any real estate investment trust under section
856 of the Internal Revenue Code, except a qualified real estate investment trust, if more than 50 percent of any class of the beneficial interests or shares of the real estate investment trust are owned directly, indirectly, or constructively by the taxpayer, or any person related to the taxpayer, during all or a portion of the taxpayer's taxable year. For purposes of this subsection, the constructive ownership rules of section
318 (a) of the Internal Revenue Code, as modified by section
856 (d) (5) of the Internal Revenue Code, shall apply in determining the ownership of stock, assets, or net profits of any person.
71.34(1r)
(1r) For purposes of
sub. (1k) (j) and
(L), "rental expenses" means the gross amounts that would otherwise be deductible in the computation of Wisconsin adjusted gross income for the use of, or the right to use, real property and tangible personal property in connection with real property, including services furnished or rendered in connection with such property, regardless of how reported for financial accounting purposes and regardless of how computed.
71.34(2)
(2) "Tax-option corporation" means a corporation which is treated as an S corporation under subchapter S of the internal revenue code and has not elected out of tax-option corporation status under
s. 71.365 (4) (a) for the current taxable year.
71.34(3)
(3) "Tax-option item" means an item of income, loss or deduction.
71.34(4)
(4) "Wisconsin net income", for tax-option corporations engaged in business wholly within this state, means net income and, for tax-option corporations engaged in business both within and outside this state, means the amount assigned to this state under
s. 71.25.
71.34 History
History: 1987 a. 312;
1987 a. 411 ss.
18,
23,
146;
1989 a. 31,
336;
1991 a. 39,
269;
1993 a. 16,
437;
1995 a. 27,
380,
428;
1997 a. 27,
37,
237;
1999 a. 9,
194;
2001 a. 16,
109;
2003 a. 33,
99,
135,
255,
326;
2005 a. 25,
49,
74,
361,
479,
483;
2007 a. 20,
96,
226;
2009 a. 2,
28,
161,
183,
265,
269,
295,
332;
2011 a. 32,
212,
232;
2011 a. 260 s.
80; s. 13.92 (2) (i).
71.35
71.35
Imposition of additional tax on tax-option corporations. In addition to the other taxes imposed under this chapter, there is imposed on every tax-option corporation, except a corporation that qualifies for the exception under section
1374 (c) (1) of the internal revenue code and that has not elected to change from tax-option status under
s. 71.365 (4) (a) for that taxable year, that has a net recognized built-in gain, as defined in section
1374 (d) (2) of the internal revenue code, during a recognition period, as defined in section
1374 (d) (7) of the internal revenue code as modified by this section, a tax computed under section
1374 of the internal revenue code except that the rate is that under
s. 71.27 (2), the net recognized built-in gain is computed using the Wisconsin basis of the assets and the Wisconsin apportionment percentage for the current taxable year, the taxable income is the Wisconsin taxable income and the credit and net operating losses are those under this chapter rather than the federal credits and net operating losses. The tax under this section does not apply if the return is filed pursuant to a federal S corporation election made before January 1, 1987, and the corporation has not elected to change its status under
s. 71.365 (4) (a) for any intervening year. If a corporation that elected to change from tax-option status under
s. 71.365 (4) (a) subsequently elects to become a tax-option corporation, its recognition period begins with the first day of the first taxable year affected by the subsequent election.
71.35 History
History: 1987 a. 312;
1989 a. 31.
71.36
71.36
Tax-option items. 71.36(1)(1) It is the intent of this section that shareholders of tax-option corporations include in their Wisconsin adjusted gross income their proportionate share of the corporation's tax-option items unless the corporation elects under
s. 71.365 (4) (a) not to be a tax-option corporation.
71.36(1m)(a)(a) A tax-option corporation may deduct from its net income all amounts included in the Wisconsin adjusted gross income of its shareholders, the capital gain deduction under
s. 71.05 (6) (b) 9. and all amounts not taxable to nonresident shareholders under
ss. 71.04 (1) and
(4) to
(9) and
71.362.
71.36(1m)(b)
(b) For purposes of this subsection, interest on any of the following obligations is not included in shareholders' income:
71.36(1m)(b)2.
2. Interest on obligations issued under
s. 66.0304 by a commission if the bonds or notes are used to fund multifamily affordable housing projects or elderly housing projects in this state, and the Wisconsin Housing and Economic Development Authority has the authority to issue its bonds or notes for the project being funded, or if the bonds or notes are used by a health facility, as defined in
s. 231.01 (5), to fund the acquisition of information technology hardware or software, in this state, and the Wisconsin Health and Educational Facilities Authority has the authority to issue its bonds or notes for the project being funded, or if the bonds or notes are issued to fund a redevelopment project in this state or a housing project in this state, and the authority exists for bonds or notes to be issued by an entity described under
s. 66.1201,
66.1333, or
66.1335.
71.36(1m)(b)3.
3. Interest on obligations issued under
s. 66.0621 by a local professional baseball park district, a local professional football stadium district, or a local cultural arts district.
71.36(1m)(b)5.
5. Interest on obligations issued under
s. 234.65 to fund an economic development loan to finance construction, renovation or development of property that would be exempt under
s. 70.11 (36).
71.36(1m)(c)
(c) The proportionate share of the net loss of a tax-option corporation shall be attributed and made available to shareholders on a Wisconsin basis but subject to the limitation and carry-over rules as prescribed by section
1366 (d) of the Internal Revenue Code. Net operating losses of the corporation to the extent attributed or made available to a shareholder may not be used by the corporation for further tax benefit. For purposes of computing the Wisconsin adjusted gross income of shareholders, tax-option items shall be reported by the shareholders and those tax-option items, including capital gains and losses, shall retain the character they would have if attributed to the corporation, including their character as business income. In computing the tax liability of a shareholder, no credit against gross tax that would be available to the tax-option corporation if it were a nontax-option corporation may be claimed.
71.36(2)
(2) A tax-option corporation shall separately state all tax-option items the separate treatment of which may affect the liability of any shareholder for tax under this chapter.
71.36(3)(a)(a) The tax treatment of all tax-option items shall be determined at the corporate level.
71.36(3)(b)
(b) All shareholders of tax-option corporations shall treat tax-option items on their returns under this chapter in a manner consistent with the manner in which those tax-option items are treated on the corporation's Wisconsin income or franchise tax return or shall notify the department of revenue of any inconsistency and the reason for it.
71.36(4)
(4) Every tax-option corporation that is required to file a return under
s. 71.24 (1) shall, on or before the due date of the return, including extensions, provide a schedule to each shareholder whose share of income, deductions, credits, or other items of the tax-option corporation may affect the shareholder's tax liability under this chapter. The schedule shall separately indicate the shareholder's share of each item.
71.362
71.362
Situs of income. 71.362(1)(1) All tax-option items of nonresident individuals, nonresident estates and nonresident trusts derived from a tax-option corporation not requiring apportionment under
sub. (2) shall follow the situs of the business of the corporation from which they are derived, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.
71.362(2)
(2) Nonresident individuals, nonresident estates and nonresident trusts deriving income from a tax-option corporation which is engaged in business within and without this state shall be taxed only on the income of the corporation derived from business transacted and property located in this state and losses and other items of the corporation deductible by such shareholders shall be limited to their proportionate share of the Wisconsin loss or other item, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state. For purposes of this subsection, all intangible income of tax-option corporations passed through to shareholders is business income that follows the situs of the business, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.
71.362 History
History: 1987 a. 312;
1999 a. 9.
71.365
71.365
General provisions. 71.365(1)(1)
Adjusted basis of shareholders' stock in tax-option corporation. For purposes of this chapter, the adjusted basis of a shareholder in the stock and indebtedness of a tax-option corporation shall be determined in the manner prescribed by the internal revenue code for a shareholder of an S corporation, except that the nature and amount of items affecting that basis shall be determined under this chapter. This subsection does not apply to 1978 and earlier taxable years of corporations which were S corporations for federal income tax purposes or to taxable years of corporations for which an election has been made under
sub. (4) (a).
71.365(1m)
(1m) Tax-option corporations; depreciation. 71.365(1m)(a)(a) Except as provided in
par. (b), a tax-option corporation shall compute amortization and depreciation under the federal Internal Revenue Code as amended to December 31, 2000, except that property first placed in service by the taxpayer on or after January 1, 1983, but before January 1, 1987, that, under s.
71.04 (15) (b) and
(br), 1985 stats., is required to be depreciated under the Internal Revenue Code as amended to December 31, 1980, and property first placed in service in taxable year 1981 or thereafter but before January 1, 1987, that, under s.
71.04 (15) (bm), 1985 stats., is required to be depreciated under the Internal Revenue Code as amended to December 31, 1980, shall continue to be depreciated under the Internal Revenue Code as amended to December 31, 1980. Any difference between the adjusted basis for federal income tax purposes and the adjusted basis under this chapter shall be taken into account in determining net income or loss in the year or years for which the gain or loss is reportable under this chapter. If that property was placed in service by the taxpayer during taxable year 1986 and thereafter but before the property is used in the production of income subject to taxation under this chapter, the property's adjusted basis and the depreciation or other deduction schedule are not required to be changed from the amount allowable on the owner's federal income tax returns for any year because the property is used in the production of income subject to taxation under this chapter. If that property was acquired in a transaction in taxable year 1986 or thereafter in which the adjusted basis of the property in the hands of the transferee is the same as the adjusted basis of the property in the hands of the transferor, the Wisconsin adjusted basis of that property on the date of transfer is the adjusted basis allowable under the Internal Revenue Code as defined for Wisconsin purposes for the property in the hands of the transferor.
71.365(1m)(b)
(b) For property acquired and placed in service in taxable years beginning on or after January 1, 2006, a tax-option corporation that is actively engaged in farming may compute amortization and depreciation on property used in farming under any subsequent change to section 101 of
P.L. 107-147 or section 201 of
P.L. 108-27 enacted after December 31, 2005. For purposes of this paragraph, "actively engaged in farming" has the meaning given in
7 CFR 1400.201, and "farming" has the meaning given in section
464 (e) (1) of the Internal Revenue Code. This paragraph does not apply unless a federal law change enacted after December 31, 2005, revises section 101 of
P.L. 107-147 or section 201 of
P.L. 108-27.
71.365(2)
(2) Corporation business loss carry-forward prohibition. The corporation net business loss carry-forward provided by
s. 71.26 (4) may not be claimed by a tax-option corporation.
71.365(3)
(3) Credits not allowed. The credits under
s. 71.28 (4),
(4m), and
(5) may not be claimed by a tax-option corporation or shareholders of a tax-option corporation.
71.365(4)
(4) Election to change from tax-option status. 71.365(4)(a)(a) If persons who hold more than 50% of the shares on the day on which this election is made consent, a corporation that is an S corporation for federal income tax purposes and that does not have a qualified subchapter S subsidiary may elect, on or before the due date or extended due date of its return under this chapter, not to be a tax-option corporation for that taxable year and for later taxable years until its status is again changed.
71.365(4)(b)
(b) If persons who, on the day on which the election occurs, hold more than 50% of the shares of a corporation that has elected out under
par. (a) consent, a corporation that is an S corporation for federal income tax purposes may elect, on or before the due date or extended due date of its return under this chapter, to be a tax-option corporation for that taxable year, except that no corporation electing under
par. (a) and no successor of such a corporation may be a tax-option corporation for any of the next 4 taxable years after the taxable year to which its election under
par. (a) first applies.
71.365(5)
(5) Federal return copy. A tax-option corporation shall file with its state franchise or income tax return an exact copy of its federal income tax return for the same year and shall file any other return or statement filed with or made to, or any document received from, the U.S. internal revenue service, and any form required of that corporation and prescribed by the department of revenue, affecting the taxation of its shareholders.
71.365(6)
(6) Notice to shareholders of appeals and other proceedings. Any notice of determination by the department of any tax-option item may be contested by a tax-option corporation under
subch. XIV. A tax-option corporation shall timely notify all shareholders of any administrative or judicial proceeding about the determination of any tax-option item. Each shareholder may participate in any such proceeding and shall be bound by the final determination in that proceeding.
71.365(7)
(7) Qualified subchapter S subsidiaries. If a tax-option corporation elects to treat a subsidiary as a qualified subchapter S subsidiary for federal purposes, that election also applies for this chapter. If this state has jurisdiction to impose the taxes under this chapter on the qualified subchapter S subsidiary, this state has the jurisdiction to impose the taxes under this chapter on the tax-option corporation.
71.365(9)
(9) Adjustment under rules. A corporation that elects under
sub. (4) (a) not to be a tax-option corporation and a corporation that elects to become a tax-option corporation shall adjust its income, under rules promulgated by the department of revenue, for the taxable year for which that election is first effective to avoid the omission or double inclusion of any item of income, loss or deduction.
71.365 Cross-reference
Cross-reference: See also s.
Tax 2.03, Wis. adm. code.
URBAN TRANSIT COMPANIES
71.37
71.37
Conformity. Unless otherwise provided in this subchapter or the context requires otherwise, urban transit companies are subject to this chapter.
71.37 History
History: 1987 a. 312.
71.38
71.38
Definition. In this subchapter, "urban mass transportation of passengers" means the transportation of passengers by means of vehicles having a passenger-carrying capacity of 10 or more persons including the operator, such capacity to be determined by dividing by 20 the total seating space measured in inches, when such transportation takes place entirely within contiguous cities, villages or towns and in cities, villages or towns contiguous to that in which the carrier has its principal place of business, or within or between cities, villages or towns located within a radius of 10 miles of the city, village or town in which the carrier has its principal place of business, or entirely within one city, village or town contiguous thereto, or within a county having a population of 500,000 or more or within such county and the counties contiguous thereto, or suburban operations classified as such by the department of transportation.
71.38 History
History: 1987 a. 312;
1993 a. 16,
246.
71.385
71.385
Determination of cost. The cost of property used and useful in providing urban mass transportation of passengers and the depreciation accrued on such property shall be determined on the basis of the reports and orders on file with the department of transportation.
71.385 History
History: 1987 a. 312;
1993 a. 16.
71.39
71.39
Imposition of tax. 71.39(1)(1)
Special tax; computation. In lieu of the income and franchise tax rates prescribed in
s. 71.27, there shall be assessed, levied and collected upon the taxable income of every corporation whose principal source (defined for purposes of this subchapter as being 50% or more) of gross income is the urban mass transportation of passengers a special income tax of 50% determined in accordance with this chapter, except that:
71.39(1)(a)
(a) United States income, excess or war profits and defense taxes shall be allowed as a deduction from gross income to the extent of the total payment actually made during the tax year.
71.39(1)(b)
(b) A deduction shall be allowed from such taxable income before the imposition of the special tax levied by this section, in an amount equivalent to 8% of the amount by which the cost of the property of such corporation used and useful in providing its urban mass transportation of passengers exceeds the cumulated amount of the depreciation accrued against such property as of the end of the fiscal year for which the income or franchise tax return is filed.
71.39(1)(c)
(c) An amount shall be added to such taxable income, before imposition of the special tax levied by this section, which amount shall be equivalent to the interest paid during the year in the operation of the business from which its income is derived.
71.39(2)
(2) Determination of net business loss. The addition to and deductions from income of urban transit companies under
sub. (1) shall be used in determining the Wisconsin net business loss of such companies to be offset against the Wisconsin net business income as determined under this section for purposes of
s. 71.26 (4).
71.39 History
History: 1987 a. 312;
1991 a. 39.
71.40
71.40
Filing of returns. The special income tax assessed under this subchapter shall be reported in an income or franchise tax return filed in accordance with this chapter, except as modified by this subchapter. The tax so reported and assessed shall be payable to the department of revenue.
71.40 History
History: 1987 a. 312;
1991 a. 39.
TAXATION OF INSURANCE COMPANIES
71.42
71.42
Definitions. In this subchapter:
71.42(1b)
(1b) "Aggregate effective tax rate" means the sum of the effective tax rates imposed by a state, U.S. possession, foreign country, or any combination thereof, on the person or entity.
71.42(1g)
(1g) "Corporation" means insurance corporations, insurance joint stock companies, insurance associations and insurance common law trusts, unless the context requires otherwise.
