Compared to current law, there would be no fiscal effect of these provisions, as in the absence of Reliability 2000, the transactions that are the subject of these provisions would not occur.
[Act 9 Sections: 1809b thru 1809zp, 1810gm, 1812Lmr, 1813v and 9343(1zt)]
4. UTILITY TAX ON CAR LINE COMPANIES [LFB Paper 124 ]
Governor: Reduce the gross earnings tax on car line companies from 3% to 2.5% of gross earnings of such companies in this state. A "car line company" is any person, other than a person operating a railroad, that is engaged in the business of leasing or furnishing car line equipment to a railroad. "Car line equipment" includes railroad cars and other equipment used in railroad transportation. Under current law, a 3% gross earnings tax is levied on car line companies in lieu of all property taxes on their car line equipment.
This provision would first apply to taxable years beginning on January 1 of the year in which the bill generally takes effect, unless the bill's general effective date is after July 31. In that case, the tax decrease would first apply to taxable years beginning January 1 of the following year. It is estimated that this provision would reduce general fund revenues by $100,000 in 1999-00 and $200,000 in 2000-01, assuming that the tax reduction would first apply on January 1, 2000. However, these revenues are not accounted for in the bill.
Joint Finance/Legislature: Delete provision.
[Bill Sections: 1809 and 9343(12)]
5. WHOLESALE MERCHANT PLANTS
Senate: Reduce the gross receipts tax rate for a wholesale merchant plant that received a certificate of public convenience and necessity after January 1, 2000, from 3.19% to 1.59%.
Wisconsin statutes specify that a "wholesale merchant plant" means electric generating equipment and associated facilities located in this state that do not provide service to any retail customer and that are owned and operated by: (a) an affiliated interest of a public utility, subject to the approval of the Public Service Commission; or (b) a person that is not a public utility.
Under current law, a license fee on gross revenues is imposed on certain utilities in lieu of local property taxation. A light, heat and power company, including a qualified wholesale electric company, is generally subject to a 3.19% gross revenues license fee on revenues from electricity sales. A wholesale merchant plant, as a qualified wholesale electric company, is subject to the 3.19% gross revenues license fee. These provisions would reduce the rate of the gross revenues license fee for a wholesale merchant plant that received a certificate of public convenience and necessity after January 1, 2000, from 3.19% to 1.59%.
Due to the limitation of these provisions to a wholesale merchant plant that received a certificate of public convenience and necessity after January 1, 2000, it is estimated that there would be no effect on general fund tax collections in the 1999-01 biennium. However, an estimate of the effect on future utility tax collections can be made from projections provided by a company that is considering developing a wholesale merchant plant and that would meet this qualification. It is estimated that, if the company were to receive a certificate after January 1, 2000, and choose to operate a merchant plant in Wisconsin, state utility tax collections would be lower by $3.6 million per year under the proposed gross revenues tax rate of 1.59% than they would be at the current rate of 3.19%. The annual effect on future utility tax collections could be higher or lower, depending on taxable gross revenues of wholesale merchant plants that receive certificates of public convenience and necessity after January 1, 2000.
Conference Committee/Legislature: Delete provision.
6. REAL ESTATE TRANSFER FORM
Senate: Direct the Department of Revenue to: (a) identify non-essential items that can be made optional on the Wisconsin real estate transfer return; (b) develop a simplified form based on that identification; and (c) submit the revised form for review under the Joint Finance Committee 14-day passive review process by January 1, 2000.
Conference Committee/Legislature: Include the Senate provision. In addition, specify that a real estate transfer return would not be required in the case of a conveyance that is executed for nominal, inadequate or no consideration to confirm, correct or reform a conveyance previously recorded. Current law provides an exemption from the real estate transfer fee for such conveyances [s. 77.25(3)]. This provision would provide that, for conveyances exempt from the fee under s. 77.25(3), no return would be required.
7. OCCUPATIONAL TAX ON ATTORNEY FEES
Veto by Governor [F-30]: Delete provisions.
[Act 9 Vetoed Sections: 1810hm and 9143(3b)]
Assembly: Impose an 80% occupational tax on the amount of attorney fees for legal services provided to the state that exceeds $500 per hour, regardless of the basis on which the attorney fees are paid. Specify that the revenue from the occupational tax would be deposited in the property tax relief fund. Require the Department of Revenue to administer the tax and authorize DOR to take any action, conduct any proceeding and impose interest and penalties related to the tax. Specify that certain provisions for the administration of the sales tax would apply to the administration of the attorney fees tax.
According to the Attorney General's office, the state does not have any contracts for outside legal assistance for which the hourly fee exceeds $500 (with the exception of the attorney fees related to the tobacco settlement as described below). In addition, there are no past cases of legal work by outside attorneys for which the hourly rate exceeded $500. Therefore, it appears that these provisions would affect only attorney fees for the three law firms that worked for the state on the lawsuit against the tobacco industry.
The three firms are reported to have stated that they worked approximately 27,000 hours on the case. Based on an agreement with the tobacco companies to pay the firms $75 million for such work, the hourly fee would amount to approximately $2,800. If the hourly fee were $2,800, it is estimated that the proposed occupational tax would amount to $46 million. This figure is net of reduced state income tax collections based on the occupational tax being claimed as a deductible business expense.
It is expected that the firms would be paid over five years. However, the exact starting point and timing of the payments are not known. In addition, the actual number of total hours worked on the case has not been officially released or verified. In the absence of reliable information on the size and timing of installment payments that would be made to the law firms, and the total number of hours worked by attorneys and staff on the tobacco lawsuit on behalf of the state, it is not possible to reliably estimate the fiscal effect of these provisions.
In addition, as outlined in a Legislative Reference Bureau drafter's note, there are a number of constitutional questions regarding these provisions. Given the nature of these questions, it is uncertain as to whether the proposal would withstand legal challenges. If the tax were found unconstitutional, no revenues would be generated.
Conference Committee/Legislature: Delete provision.
[Bill Sections: 1654, 1807, 1808, 1810 and 9443(3)&(4)]
Tax Administration
1. MINNESOTA-WISCONSIN INCOME TAX RECIPROCITY PAYMENTS
GPR $12,500,000
Governor/Legislature: Provide $4,500,000 in 1999-00 and $8,000,000 in 2000-01 to reflect estimated Minnesota-Wisconsin income tax reciprocity payments. Total funding after these adjustments would be $44,500,000 in 1999-00 and $48,000,000 in 2000-01.
2. ILLINOIS-WISCONSIN INCOME TAX RECIPROCITY PAYMENTS
GPR - $2,750,000
Governor/Legislature: Increase funding by $2,750,000 in 1999-00 and decrease funding by $5,500,000 in 2000-01 to reflect Illinois-Wisconsin income tax reciprocity payments. Total funding after these adjustments would be $8,250,000 in 1999-00. Under the current agreement, no payment will be made in 2000-01. However, payments will resume in 2001-02.
3. ILLINOIS-WISCONSIN INCOME TAX RECIPROCITY STUDY
GPR $2,500
Governor/Legislature: Increase funding by $28,400 in 1999-00 and decrease funding by $25,900 in 2000-01 for a study to provide data for determining future income tax reciprocity payments between Wisconsin and Illinois. Total funding of $105,000 in 1999-00 and $50,700 in 2000-01 would be provided under this provision.
4. INTEREST ON OVERPAYMENT OF TAXES
GPR $700,000
Governor/Legislature: Provide $300,000 in 1999-00 and $400,000 in 2000-01 for estimated interest paid on the overpayment of individual income taxes. Total funding would be $800,000 in 1999-00 and $900,000 in 2000-01.
5. SALES TAX LATE FILING FEE [LFB Paper 130]
Governor: Increase the late filing fee for delinquent sales and use tax returns from $10 to $30. The current law exception from paying the fee in cases where there is a reasonable cause would be modified to require a good cause but not due to neglect. The bill would also clarify a provision regarding security that may be required by the Department for retailers. These provisions would first apply to sales and use tax returns that are filed for periods beginning after September 30, 1999. It is estimated that the increase in the late filing fee would result in additional general fund revenues of $1,130,000 in 1999-00 and $1,400,000 in 2000-01.
Under current law, delinquent sales and use tax returns are subject to a $10 late filing fee. However, the fee is not imposed in cases where the person who was required to file the return has died or where the return was not filed because of a reasonable cause and not because of neglect.
Joint Finance/Legislature: Modify provision to increase the late filing fee for delinquent sales and use tax returns from $10 to $20, rather than $30. Compared to current law, this modification would increase general fund tax revenues by an estimated $565,000 in 1999-00 and $700,000 in 2000-01. Compared to the bill, it would reduce revenues by an estimated $565,000 in 1999-00 and $700,000 in 2000-01.
[Act 9 Sections: 1815 and 9343(8)]
[Bill Sections: 1792 and 9343(22)]
Alcohol and Tobacco Regulation
1. CIGARETTE MULTIPLE RETAILER PERMIT
Joint Finance: Eliminate the cigarette multiple retailer permit. Remove all references to the permit in Wisconsin statutes.
Chapter 139 of the statutes specifies that a permit must be obtained from DOR for the following: (a) to manufacture cigarettes in this state; (b) to sell cigarettes in this state as a distributor, jobber, vending machine operator or multiple retailer; and (c) to operate a warehouse to store cigarettes in this state for another person. Section 139.30 (8) defines a "multiple retailer" as a person who acquires stamped cigarettes from manufacturers or permittees, stores them and sells them to consumers through ten or more retail outlets which he or she owns and operates within or without the state. A multiple retailer that also holds a permit as a distributor has the option to acquire unstamped cigarettes from manufacturers and to affix the tax stamps. Multiple retailers are required to keep records and file reports of all purchases and disposition of cigarettes, as are manufacturers, distributors, jobbers and vending machine operators.
Chapter 100 of the statutes, which addresses marketing and trade practices, specifies minimum markups that apply to the sale of cigarettes. The statutes require cigarette wholesalers to mark up the price of cigarettes by 3% of the cost of the merchandise to the wholesaler, in the absence of proof of a lesser cost of doing business, when selling to a retailer. The "cost to the wholesaler," on which the markup is determined, is based on the invoice cost of the merchandise to the wholesaler, adjusted as follows: (a) certain trade discounts are to be deducted from the wholesaler costs; and (b) excise taxes previously imposed are to be included in the wholesaler costs. In a similar manner, retailers are required to mark up the price of cigarettes to the consumer by 6% of the cost to the retailer, excluding specified discounts and including excise taxes.
Chapter 100 defines multiple retailers as wholesalers. A sale at wholesale between wholesalers is exempt from the wholesaler mark-up requirement. Therefore, distributors may sell cigarettes to multiple retailers and any other wholesaler without charging the minimum 3% wholesaler markup. Section 100.30 (2)(f) requires that, in cases in which a merchant acts as both a wholesaler and a retailer, the merchant must add both the wholesaler and retailer markups to the retail sales price. However, unlike the wholesaler markup from a distributor to an individual retail store, which is applied after deducting certain trade discounts, the statutes specify that the wholesaler markup for a multiple retailer is to be determined disregarding any manufacturer's discounts and any discounts related to cigarette tax stamp payments.
These provisions would eliminate the cigarette multiple retailer permit and all statutory references to it. The individual retail stores currently operating under a multiple retailer permit would no longer be able to purchase cigarettes without paying a 3% wholesaler markup.
Assembly/Legislature: Delete provision.
2. LIQUOR LICENSE FOR A COLISEUM SUITE
Joint Finance/Legislature: Provide that a "Class B" license for retail sales of intoxicating liquor authorizes a coliseum or a business servicing a coliseum suite as a concessionaire to furnish a coliseum suite holder with a selection of intoxicating liquor in a coliseum suite that is not part of the "Class B" premises. Define a "coliseum" as a multipurpose facility designated principally for sports events, with a capacity of 18,000 or more. Specify that the conditions that apply to the furnishing of intoxicating liquor to a hotel guest in a guest room that is not part of the "Class B" premises would apply in the case of a coliseum and a coliseum suite, with the following exceptions: (a) provide that a coliseum suite could be locked in lieu of providing a locked storage place to store the liquor within the suite; (b) exclude a coliseum from the requirement for hotels that a key be provided (to a hotel guest) to the locked storage place and that a liquor price list be prominently displayed; and (c) specify that a coliseum suite holder may pay for the liquor in accordance with the terms of the agreement with the owner of the coliseum suite. Specify similar provisions with respect to a Class "B" license for fermented malt beverages.
[Act 9 Sections: 2165e and 2165j]
3. "CLASS C" LICENSE TO SELL WINE
Assembly/Legislature: Provide that a restaurant may obtain a "Class C" license for the retail sale of wine for consumption on the premises where sold whether or not there is a "Class B" license for the sale of liquor and wine available in the community. Specify that a "Class C" license could be issued if: (a) the sale of alcohol beverages accounts for less than 50% of the restaurant's gross receipts; and (b) the restaurant does not have a barroom or has a barroom in which wine is the only intoxicating liquor sold.
Under current law, a municipality may issue a restaurant a "Class C" wine license under the following conditions: (a) the sale of alcohol beverages accounts for less than 50% of gross receipts; (b) the restaurant does not have a barroom; and (c) there is not a "Class B" liquor license available in the municipality. These provisions would authorize a restaurant to obtain a "Class C" license even if a "Class B" license is available and even if the restaurant has a barroom (as long as the only intoxicating liquor sold in the barroom is wine).
[Act 9 Section: 2165L]
4. RESTAURANT-WINERY PERMIT
Assembly: Create a restaurant-winery permit authorizing the retail sale of wine manufactured on the premises for consumption on the premises where sold or in an original unopened package or container for consumption off the premises where sold. Specify that the permit, to be issued by the Department of Revenue, may be issued only for a restaurant in which the sale of alcohol beverages accounts for less than 50% of gross receipts and that manufactures less than 2,500 gallons of wine per year.
Conference Committee/Legislature: Delete provision.
5. "CLASS B" LIQUOR LICENSE FOR A HOTEL
