2. Division of Gaming – Tribal Gaming Computer System
Section 9101 (17x)
This section would require the Department of Administration (DOA) to first obtain approval from the Joint Committee on Finance regarding the costs of a new tribal gaming computer system to receive and process slot machine accounting data prior to expending funds for this purpose.
I am vetoing this section because it places an unnecessary burden on DOA and would likely result in the delayed implementation of the new tribal gaming computer system. The system will allow the department to receive and process slot machine accounting data off-reservation and reduce the amount of on-site review by field auditors.
3. Division of Gaming – Unclaimed Prizes Retained by Racetrack Licensee
Section 481m, 545, 3023j and 9301 (2g)
These provisions would provide that, effective with the 2000 race year, a pari-mutuel racetrack licensee may retain any winnings on a race that are not claimed within 90 days after the end of the race year. Under current law, unclaimed prizes are paid to the state and deposited into the racing general program operations appropriation in the Department of Administration, and the gaming law enforcement appropriation related to racing in the Department of Justice.
I am vetoing these sections because of the adverse impact they would have on the operating budget for racing enforcement.
ALCOHOL AND TOBACCO TAXES AND REGULATION
4. Changes to the Wisconsin Fair Dealership Law
Sections 2166m, 2166s, 9358 (7c) and 9458 (3c)
These sections would expand the definition of "dealership" to include an oral or written contract or agreement, either expressed or implied, by which a wholesaler is granted the right to sell or distribute intoxicating liquor or use a trademark, service mark, logotype, advertising or other symbol related to intoxicating liquor. These provisions would specify that the expanded portion of the definition of dealership would not apply to dealerships in which the grantor of the dealership has not produced more than 200,000 gallons of intoxicating liquor in any year, nor to dealerships in which the dealer's net revenues from the sale of all of the grantor's brands of liquor and of wine, respectively, constitute less than 5% of the dealer's total net revenues from the sale of liquor and of wine, respectively, for the most recent fiscal year preceding a grantor's cancellation or alteration of the dealership. The sections also provide additional protections to wholesalers if either a successor wholesaler succeeds to the ownership or control of a wholesaler's business, or if any asset or activity of a distiller's intoxicating liquor business is transferred to another person. These provisions also specify a retroactive effective date of October 1, 1998.
I am partially vetoing these provisions so that wine will be excluded from treatment under these changes to the Wisconsin Fair Dealership Law because I object to wine being treated the same as intoxicating liquor. I am vetoing the sections making the changes to the Wisconsin Fair Dealership law effective as of October 1, 1998, because I am concerned about the constitutionality of imposing new standards on preexisting contracts. Finally, I am also vetoing the additional protections to wholesalers if either a successor wholesaler succeeds to the ownership or control of a wholesaler's business, or if any assets or activity of a distiller's intoxicating liquor business is transferred to another person. I am concerned about the extent to which these provisions will unfairly disadvantage liquor distillers in establishing contractual relationships with wholesalers. Common law rules of construction shall continue to apply to definitional matters in this statute.
5. Liquor Tax and Members of the Military
Section 2170t
This provision permits a Wisconsin resident returning from active duty in a foreign country to bring 16 liters of wine or liquor into the state without payment of the state occupational tax on intoxicating liquor. Current law permits these same residents to bring 4 liters of wine or liquor into the state without payment of the state occupational tax on intoxicating liquor.
I am partially vetoing this provision to permit a Wisconsin resident returning from active duty in a foreign country to bring 6 liters of wine or liquor into the state without payment of the state occupational tax on intoxicating liquor. I am reducing the number of allowable liters from 16 to 6 liters to reduce the danger of illegal sales of alcoholic beverages by members of the military to other citizens.
6. Distributor Cigarette Discount
Sections 2171p and 9443 (8d)
These provisions increase the discount cigarette manufacturers receive from 1.6% to 2%.
I am vetoing these provisions to maintain the current discount of 1.6%. The discount was reduced to 1.6% from 2% in 1997 Wisconsin Act 27, when the cigarette tax was raised 15 cents per pack, to prevent cigarette manufacturers and distributors from receiving a windfall as a result of an increase in the cigarette tax rate. I am vetoing these provisions based on the fiscal needs of the state. At this time, we can not afford to make this change. The fiscal effect of this veto is to increase GPR revenue by $950,000 in fiscal year 2000-2001.
7. Native American Tax on Tobacco Products
Sections 2178 and 2179
These sections authorize the Department of Revenue (DOR) to enter into agreements with the tribes to provide refunds of up to 50% for the collection of the tobacco products tax.
I am partially vetoing section 2178 to correct for a technical error in the legislation which inconsistently provides for a 70% refund to tribes or tribal councils responsible for the sale of tobacco products on a reservation or trust land. I am also partially vetoing section 2179 to establish a 50% refund for all tribes, instead of a maximum allowable refund of 50% subject to negotiation between DOR and the tribes, of the tax on tobacco products sold on the tribal reservation to persons who are not enrolled members of the tribe residing on the reservation. Granting the authority to refund the same percentage to all tribes would simplify and provide uniformity in the negotiating process.
CORPORATE FRANCHISE AND INCOME TAX
8. Treatment of Corporate Partners and Limited Liability Company (LLC) Members
Sections 1722cd, 1738s, 1753g and 9343 (22t)
These provisions would make corporate partners and members of Wisconsin partnerships in LLCs, respectively, subject to the corporate income and franchise tax if they were doing business in Wisconsin, regardless of the type of interest in the entity. Under current law, the Wisconsin tax treatment of corporate partners and LLC members depends on whether the partnership or LLC is an extension of the corporation's business. If the partnership or LLC is an extension of the corporation's business, the corporation is considered to be doing business in Wisconsin as a result of that ownership interest. On the other hand, if the partnership or LLC is not an extension of the corporation's business, the corporation is not subject to Wisconsin taxation if its only connection to Wisconsin is that ownership interest.
I am vetoing these sections because they were included as part of the proposal to base income apportionment solely on sales, instead of the current method which considers payroll, property and sales. As the single sales factor apportionment was not adopted, these sections should not be enacted. I would have retained these provisions if the single factor method of apportioning corporate income had been adopted. The fiscal effect of this veto is to reduce GPR revenue by $7,500,000 in fiscal year 1999-2000 and by $5,000,000 in fiscal year 2000-2001.
9. Sourcing of Receipts of Sales of Services
Sections 1682, 1736 and 9343 (22fd)
These provisions allow a taxpayer to elect to attribute the receipts from a service received in the state, in proportion to the direct cost of performing such a service.
I am vetoing these provisions because they were part of the proposal to base income apportionment solely on sales, instead of the current method which considers payroll, property and sales. As the single sales factor apportionment was not adopted, these sections should not be enacted.
10. Dividends Received Deductions
Sections 1740n and 9343 (22t) [as it relates to s. 71.26 (3) (L)]
This section further defines "wholly exempt income" for corporations subject to franchise or income taxes to include interest, dividends or capital gains that are not subject to taxes under this chapter. In an attempt to clarify the intent, the bill removes additional descriptive information from the section regarding the meaning of "wholly exempt income."
I am vetoing this provision to maintain current law to avoid further complications in understanding the intent of the provision.
FINANCIAL INSTITUTIONS
11. Access Fees for Computer Databases
Section 2353
This section authorizes the department to develop an administrative rule that establishes fees for public access or use of the department’s databases or computer systems. This section also requires that the fees be based on the reasonable costs of the services including a reasonable share of the costs of associated development and infrastructure.
I object to the requirement that these fees be developed in administrative rule. The section clearly specifies a detailed recipe for developing the fees. This requirement is sufficient to ensure that fees will be fair and equitable. To also require that these fees be done in administrative rule will delay and add cost to the fee-setting process. This administrative rule requirement may even conflict with the "reasonable cost" requirement because the length of the administrative rules process may prevent the department from adjusting fees when changes in the underlying costs become known. Thus I am vetoing the administrative rule requirement.
12. Required General Fund Balance – Increase to 1.2%
Section 169
This provision increases the required general fund balance from 1% to 2% in increments of 0.2% annually beginning in fiscal year 2001-2002. Under this provision, the required reserve reaches 2% in fiscal year 2005-2006 and remains at that level for all future fiscal years. The provision leaves the current 1% reserve in place for both fiscal years 1999-2000 and 2000-2001. The reserve is calculated as the required percentage of general purpose revenue appropriations for the fiscal year (including any amount from general purpose revenue designated as compensation reserves). Wisconsin’s required balance is smaller than the balance required in most other states.
I am partially vetoing this section to increase the required reserve for fiscal year 2000-2001 from 1% to 1.2%. I am partially vetoing this provision to accelerate the increase to 1.2% because Wisconsin should use the opportunity provided by the current strength in the economy to better position itself for tight budgets in the future. This veto will also help to preserve savings made available from my budget vetoes for future state needs if the economy should falter.
INCOME TAXES
13. Income Tax Exclusion for Mass Transit Fringe Benefits
Sections 1688h and 9343 (7c)
These provisions remove the limit on the amount that a taxpayer may deduct from income for employer-provided transit passes.
I object to the removal of this limit because this removal is unnecessary and because it would increase the complexity of our tax system for very little, if any, benefit. Currently, the cost of a monthly transit pass for any public bus system in the state is less than the $65 limit. Now, the state limit is tied to the federal Internal Revenue Code and that code will increase the limit to $100 in tax year 2002.
14. Individual Income Tax Credit for Military Income
Sections 1719g and 9343 (20ty)
These sections provide that a new income tax credit for certain military income is not to be subtracted from regular tax for purposes of determining if the Wisconsin alternative minimum tax applies.
I object to these sections because they contradict another section of the bill and this contradiction may muffle legislative intent. Section 1719j provides that this new credit is to be subtracted from regular tax before the alternative minimum tax is determined. I do not believe that the Legislature intended for these contradictory provisions to subject individuals who receive this very modest tax credit to the alternative minimum tax. This veto ensures that this new credit will not increase alternative minimum tax payments.
15. Miscellaneous Itemized Deductions
Section 1711
This section generally eliminates miscellaneous deductions from the itemized deduction credit, but specifically retains dues paid to a professional society or a labor union, to travel expenses or to home office expenses as allowable miscellaneous itemized deductions under that credit.
I object to this section because it will greatly complicate the computation of the itemized deduction credit. My budget proposed eliminating miscellaneous deductions from the itemized deduction credit to simplify the tax code and filing process. This veto restores my original proposal.
16. School Property Tax Rent Credit
Section 1716m and 1716p
These sections institute a revised School Property Tax Rent Credit (SPTRC) in tax year 2000 and end the credit after 2000. The current SPTRC is calculated at 10% of property taxes or rent constituting property taxes to a maximum of $2,000 in taxes or rent. The maximum SPTRC is $200. The revised SPTRC would be calculated at 6.4% of property taxes or rent constituting property taxes to a maximum of $2,000 in taxes or rent. Under the revised SPTRC, the maximum credit would be $128.
I am partially vetoing these sections to increase property tax relief. The lottery credit proposal contained in this bill is unconstitutional. To ensure that the money originally allocated to the lottery is still used for targeted property tax relief, as intended, these partial vetoes will increase the tax year 1999 school property tax rent credit to 16.4% and the tax year 2000 credit to 10%. This will dramatically increase property tax relief for homeowners and renters. In tax year 1999, the boost in the credit rate to 16.4% is equivalent to an income tax reduction of 3.1%. Middle-income filers receive the bulk of the tax cuts under this alternative – 63% of the reduction goes to persons whose income is between $25,000 and $75,000. Those with lower incomes receive 19% of the cuts. For those 1.5 million taxpayers receiving the credit, this tax relief will average $136.
INDIAN GAMING
17. Legislative Approval of Tribal Gaming Compacts
Sections 7m, 7n, 7q and 9301 (1d)
These sections would require the Governor, prior to entering into any compact with the tribes, to submit proposed compacts to the Legislature for approval by joint resolution. These sections further provide that the Governor may not concur with the determination of the U.S. Secretary of the Interior that an Indian gaming establishment proposed to be located on trust lands would not be detrimental to the surrounding community unless the Legislature approves the proposed gaming establishment by joint resolution, with the exception of the Indian gaming establishment proposed to be located at Dairyland Greyhound Park.
I am vetoing these provisions because of the extensive delays that could be expected in entering into compact agreements with the tribes if legislative approval is required.
18. Office of Justice Assistance Tribal Law Enforcement Assistance Grant Program
Sections 110k and 544
These sections provides funding under the tribal law enforcement assistance grant program to specific tribes for law enforcement and public safety initiatives on the reservation and trust lands of the tribes, including the Stockbridge-Munsee ($175,000 in each fiscal year), the St. Croix Chippewa ($150,000 in each fiscal year) and the Lac Courte Oreilles Chippewa ($125,000 in each fiscal year).
I am vetoing these sections to allow the Office of Justice Assistance full discretion in making grant awards under the new program. In addition, because of concerns about compliance with compact agreements and lack of progress in negotiations with local governments, I am reluctant to return any Indian gaming compact revenue directly to the tribes.
19. Department of Health and Family Services Grant Program for Tribal Health Centers
Sections 172 [as it relates to s. 20.865 (4) (g)], 2241c and 9123 (6tu)
These sections authorize a new tribal health program that would provide Indian gaming compact revenues to tribal health centers. Funding for this program would be $450,000 in each fiscal year, with funds first placed in the supplemental appropriation of the Joint Committee on Finance for approval of the proposed grant distribution method.
I am vetoing these provisions because tribal health centers are already eligible for $920,000 per year in state health grant programs for tribes only, and tribal health centers also qualify for Medicaid funding as federally qualified health centers. With this veto I am requesting the Department of Administration secretary to not allot $450,000 in fiscal year 1999-2000 or fiscal year 2000-2001.
20. Department of Veterans Affairs Services to American Indian Veterans
Section 172 [as it relates to s. 20.485 (2) (km)]
This section provides funding of $27,500 in each fiscal year to provide per tribe grants of $2,500 to any tribal governing body that enters into an agreement with the Department of Veterans Affairs (DVA) regarding the creation, goals and objectives of a tribal veterans services officer, similar to the county veterans service officer.
I am writing down the funding for these grants to $15,000 in fiscal year 1999-2000 and $10,000 in fiscal year 2000-2001 so that the tribes will have to compete for grant awards. I am also concerned about the prudence of providing funding to ensure a per tribe grant of $2,500 if not all of the tribal governing bodies have agreements with the DVA regarding the creation, goals and objectives of a tribal veterans services officer. Because this veto will reduce the appropriation under s. 20.485 (2) (km), I am requesting the Department of Administration secretary to not allot $12,500 in the appropriation in fiscal year 1999-2000 and $17,500 in fiscal year 2000-2001.
21. Tourism Marketing Grant Program
Sections 343 and 9149 (1to), (2c), (2tw) and (3e)
These sections provide funding to specific entities under the tourism marketing grant program. I object to these provisions because they unnecessarily restrict the use of funds for the tourism marketing grant program and limit the extent to which the Department of Tourism can award grants on a competitive basis.
Section 343 provides funding of $200,000 in each year to the Milwaukee Public Museum for Native American exhibits and activities. Section 9149 (2c) provides $100,000 in each year to the Burnett County Historical Society for educational programming, marketing and advertising costs for Fort Folle Avoine. Section 9149 (2tw) provides $75,000 in each year to both Polk and Burnett counties for tourism promotion in northwestern Wisconsin. I am partially vetoing these provisions so that funding will be provided on a one-time basis. In addition, section 9149 (3e) provides $50,000 in fiscal year 1999-2000 to the St. Croix Valley Tourism Alliance. I am vetoing this provision so more funding will be available to potential grantees of the tourism marketing grant program. The St. Croix Valley Tourism Alliance can apply for funding.
Section 9149 (1to) provides $75,000 in fiscal year 1999-2000 to the Department of Natural Resources (DNR) for completing the upgrading of Aztalan State Park. I am vetoing this provision so that more funding will be available for the purposes intended in the tourism marketing grant program. Through another veto, I am restoring $1,000,000 in revenues to the parks account in the segregated conservation fund that would have otherwise been transferred to the general fund. In light of that veto, I request that DNR provide funding for this purpose under the state parks SEG appropriation.
22. Department of Natural Resources Drinking Water Study
Section 172 [as it relates to s. 20.370 (6) (ck)]
