LRBs0228/2
JK/MES/RJM:kg&jd:rs
2003 - 2004 LEGISLATURE
ASSEMBLY SUBSTITUTE AMENDMENT 1,
TO 2003 ASSEMBLY BILL 538
November 5, 2003 - Offered by Representative Nischke.
AB538-ASA1,1,9
1An Act to amend 71.05 (6) (a) 15., 71.08 (1) (intro.), 71.21 (4), 71.26 (2) (a), 71.34
2(1) (g), 71.45 (2) (a) 10. and 77.92 (4); and
to create 71.05 (6) (b) 9m., 71.07 (5d),
371.10 (4) (gx), 71.28 (5d), 71.30 (3) (eop), 71.47 (5d), 71.49 (1) (eop) and 560.03
4(24) to (27) of the statutes;
relating to: creating a qualified new business
5venture tax credit and increasing the capital gains exclusion regarding
6investments in certified venture capital funds and qualified new business
7ventures, requiring a study of new Wisconsin businesses, facilitating the
8development of certain investor networks, and granting rule-making
9authority.
Analysis by the Legislative Reference Bureau
This substitute amendment creates an income and franchise tax credit for
investments in a new business venture that has its headquarters and the majority
of its employees in this state. The substitute amendment requires a business
desiring certification as a new business venture for purposes of this tax credit to
apply to the Department of Commerce. To obtain certification, the business must be
a corporation or limited liability company, must not be engaged in the transportation
or construction business, and must satisfy certain other criteria. The Department
of Commerce may certify only the first 1,000 businesses that apply for any taxable
year and must process applications in the order in which they are received. The
amount of the tax credit is equal to 20 percent of the taxpayer's investment in a new
business venture in the taxable year, except that if the taxpayer's investment
exceeds $100,000 in the taxable year the taxpayer may claim 20 percent of $100,000
plus ten percent of the amount of the investment that exceeds $100,000.
This substitute amendment also requires the Department of Commerce, in
cooperation with the Department of Financial Institutions and the University of
Wisconsin System, to annually conduct and publish the results of a study of
Wisconsin businesses to determine new business formation trends and identify
obstacles faced by new Wisconsin businesses and areas where changes in
governmental policy may satisfy the needs of new Wisconsin businesses. In addition,
the substitute amendment requires the Department of Commerce, in cooperation
with the Department of Financial Institutions and the University of Wisconsin
System, to provide education and other support to facilitate the development of
networks of investors that review new businesses or proposed new businesses for
potential investment (commonly called "angel capital networks").
Under current law, there is an income tax exclusion for individuals and
tax-option corporations for 60 percent of the net capital gains realized from the sale
of assets held for at least one year.
Under this substitute amendment, for assets held more than one year, the
income tax exclusion for capital gains is increased to 100 percent, to the extent that
the gain is not already excluded from taxation, for gains realized on the sale of an
investment in a certified venture capital fund or in a certified new business venture.
Under this substitute amendment, the Department of Commerce must
promulgate rules establishing a procedure for certifying venture capital funds for
purposes of the capital gains tax exemption described above. A venture capital fund
may obtain a certification only if the venture capital fund is a private seed and
venture capital partnership or entity fund, the venture capital fund has its principal
place of business in Wisconsin, and the venture capital fund commits to maintain an
average of 50 percent of its equity investments in businesses located in Wisconsin.
The substitute amendment requires the Department of Commerce, upon request of
any person, to issue a written notice indicating whether a venture capital fund is
certified. Each such notice that indicates a venture capital fund is certified must
include the following statement: "The Wisconsin Department of Commerce has not
recommended or approved an investment in this venture capital fund or assessed
the merits or risks of such an investment. Investors should rely solely on their
own investigation and analysis and seek investment, financial, legal, and tax
advice before making their own decision regarding investment in this enterprise."
The substitute amendment also requires the Department of Commerce, upon issuing
or discontinuing a certification, to notify DOR and give DOR a copy of the
certification or discontinuance.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB538-ASA1, s. 1
1Section
1. 71.05 (6) (a) 15. of the statutes is amended to read:
AB538-ASA1,3,62
71.05
(6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de),
3(2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (3g),
and (3s)
, and (5d) and not passed
4through by a partnership, limited liability company, or tax-option corporation that
5has added that amount to the partnership's, company's, or tax-option corporation's
6income under s. 71.21 (4) or 71.34 (1) (g).
AB538-ASA1, s. 2
7Section
2. 71.05 (6) (b) 9m. of the statutes is created to read:
AB538-ASA1,3,148
71.05
(6) (b) 9m. On assets held more than one year, to the extent that the gains
9are not excluded from taxation under subd. 9., 100 percent of the capital gain as
10computed under the Internal Revenue Code if the gain is realized from the sale of an
11asset that is an investment in a qualified new business venture that is certified under
12s. 560.03 (26) or a venture capital fund that is certified under s. 560.03 (27). For
13purposes of this subdivision, the capital gains and capital losses for all assets shall
14be netted before application of the percentage.
AB538-ASA1,3,1616
71.07
(5d) Qualified new business venture credit. (a) In this subsection:
AB538-ASA1,3,1717
1. "Claimant" means a person who files a claim under this subsection.
AB538-ASA1,3,1918
2. "Qualified new business venture" means a business that is certified under
19s. 560.03 (26).
AB538-ASA1,4,520
(b) Subject to the limitations provided in this subsection and in s. 560.03 (26),
21a claimant may claim as a credit against the tax imposed under s. 71.02 or 71.08, up
1to the amount of those taxes, an amount equal to 20 percent of the claimant's equity
2investment made directly in a qualified new business venture in the taxable year,
3except that if the claimant's investment exceeds $100,000 in the taxable year the
4claimant may claim 20 percent of $100,000 plus 10 percent of the amount of the
5investment that exceeds $100,000.
AB538-ASA1,4,96
(bm) If an investment for which a claimant claims a credit under par. (b) is held
7by the claimant for less than one year, the claimant shall pay to the department, in
8the manner prescribed by the department, the amount of the credit that the claimant
9received related to the investment.
AB538-ASA1,4,1110
(c) The carry-over provisions of s. 71.28 (4) (e) and (f), as they apply to the credit
11under s. 71.28 (4), apply to the credit under this subsection.
AB538-ASA1,4,1912
(d) Partnerships, limited liability companies, and tax-option corporations may
13not claim the credit under this subsection, but the eligibility for, and the amount of,
14the credit are based on the amounts described under par. (b) that are attributable to
15their business operations. A partnership, limited liability company, or tax-option
16corporation shall compute the amount of credit that each of its partners, members,
17or shareholders may claim and shall provide that information to each of them.
18Partners, members of limited liability companies, and shareholders of tax-option
19corporations may claim the credit in proportion to their ownership interest.
AB538-ASA1,4,2120
(e) Section 71.28 (4) (g) and (h), as it applies to the credit under s. 71.28 (4),
21applies to the credit under this subsection.
AB538-ASA1, s. 4
22Section
4. 71.08 (1) (intro.) of the statutes is amended to read:
AB538-ASA1,5,623
71.08
(1) Imposition. (intro.) If the tax imposed on a natural person, married
24couple filing jointly, trust or estate under s. 71.02, not considering the credits under
25ss. 71.07 (1), (2dd), (2de), (2di), (2dj), (2dL), (2dr), (2ds), (2dx), (2fd), (3m), (3s),
(5d),
1(6),
(6s), and (9e), 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1fd), (2m) and
2(3) and 71.47 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1fd), (2m) and (3) and
3subchs. VIII and IX and payments to other states under s. 71.07 (7), is less than the
4tax under this section, there is imposed on that natural person, married couple filing
5jointly, trust or estate, instead of the tax under s. 71.02, an alternative minimum tax
6computed as follows:
AB538-ASA1,5,88
71.10
(4) (gx) Qualified new business venture credit under s. 71.07 (5d).
AB538-ASA1,5,1210
71.21
(4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di),
11(2dj), (2dL), (2dm), (2ds), (2dx), (3g),
and (3s)
, and (5d) and passed through to
12partners shall be added to the partnership's income.
AB538-ASA1,6,314
71.26
(2) (a)
Corporations in general. The "net income" of a corporation means
15the gross income as computed under the Internal Revenue Code as modified under
16sub. (3) minus the amount of recapture under s. 71.28 (1di) plus the amount of credit
17computed under s. 71.28 (1), (3), (4), and (5) plus the amount of the credit computed
18under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx),
and (3g)
, and (5d) 19and not passed through by a partnership, limited liability company, or tax-option
20corporation that has added that amount to the partnership's, limited liability
21company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g) plus
22the amount of losses from the sale or other disposition of assets the gain from which
23would be wholly exempt income, as defined in sub. (3) (L), if the assets were sold or
24otherwise disposed of at a gain and minus deductions, as computed under the
25Internal Revenue Code as modified under sub. (3), plus or minus, as appropriate, an
1amount equal to the difference between the federal basis and Wisconsin basis of any
2asset sold, exchanged, abandoned, or otherwise disposed of in a taxable transaction
3during the taxable year, except as provided in par. (b) and s. 71.45 (2) and (5).
AB538-ASA1,6,55
71.28
(5d) Qualified new business venture credit. (a) In this subsection:
AB538-ASA1,6,66
1. "Claimant" means a person who files a claim under this subsection.
AB538-ASA1,6,87
2. "Qualified new business venture" means a business that is certified under
8s. 560.03 (26).
AB538-ASA1,6,159
(b) Subject to the limitations provided in this subsection and in s. 560.03 (26),
10a claimant may claim as a credit against the tax imposed under s. 71.23, up to the
11amount of those taxes, an amount equal to 20 percent of the claimant's equity
12investment made directly in a qualified new business venture in the taxable year,
13except that if the claimant's investment exceeds $100,000 in the taxable year the
14claimant may claim 20 percent of $100,000 plus 10 percent of the amount of the
15investment that exceeds $100,000.
AB538-ASA1,6,1916
(bm) If an investment for which a claimant claims a credit under par. (b) is held
17by the claimant for less than one year, the claimant shall pay to the department, in
18the manner prescribed by the department, the amount of the credit that the claimant
19received related to the investment.
AB538-ASA1,6,2120
(c) The carry-over provisions of sub. (4) (e) and (f), as they apply to the credit
21under sub. (4), apply to the credit under this subsection.
AB538-ASA1,7,422
(d) Partnerships, limited liability companies, and tax-option corporations may
23not claim the credit under this subsection, but the eligibility for, and the amount of,
24the credit are based on the amounts described under par. (b) that are attributable to
25their business operations. A partnership, limited liability company, or tax-option
1corporation shall compute the amount of credit that each of its partners, members,
2or shareholders may claim and shall provide that information to each of them.
3Partners, members of limited liability companies, and shareholders of tax-option
4corporations may claim the credit in proportion to their ownership interest.
AB538-ASA1,7,65
(e) Subsection (4) (g) and (h), as it applies to the credit under sub. (4), applies
6to the credit under this subsection.
AB538-ASA1, s. 9
7Section
9. 71.30 (3) (eop) of the statutes is created to read:
AB538-ASA1,7,88
71.30
(3) (eop) Qualified new business venture credit under s. 71.28 (5d).
AB538-ASA1,7,1210
71.34
(1) (g) An addition shall be made for credits computed by a tax-option
11corporation under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (3),
and 12(3g)
, and (5d) and passed through to shareholders.
AB538-ASA1, s. 11
13Section
11. 71.45 (2) (a) 10. of the statutes is amended to read:
AB538-ASA1,7,1914
71.45
(2) (a) 10. By adding to federal taxable income the amount of credit
15computed under s. 71.47 (1dd) to (1dx)
and (5d) and not passed through by a
16partnership, limited liability company or tax-option corporation that has added that
17amount to the partnership's, limited liability company's or tax-option corporation's
18income under s. 71.21 (4) or 71.34 (1) (g) and the amount of credit computed under
19s. 71.47 (1), (3), (4) and (5).
AB538-ASA1,7,2121
71.47
(5d) Qualified new business venture credit. (a) In this subsection:
AB538-ASA1,7,2222
1. "Claimant" means a person who files a claim under this subsection.
AB538-ASA1,7,2423
2. "Qualified new business venture" means a business that is certified under
24s. 560.03 (26).
AB538-ASA1,8,7
1(b) Subject to the limitations provided in this subsection and in s. 560.03 (26),
2a claimant may claim as a credit against the tax imposed under s. 71.43, up to the
3amount of those taxes, an amount equal to 20 percent of the claimant's direct
4investment made directly in a qualified new business venture in the taxable year,
5except that if the claimant's investment exceeds $100,000 in the taxable year the
6claimant may claim 20 percent of $100,000 plus 10 percent of the amount of the
7investment that exceeds $100,000.
AB538-ASA1,8,118
(bm) If an investment for which a claimant claims a credit under par. (b) is held
9by the claimant for less than one year, the claimant shall pay to the department, in
10the manner prescribed by the department, the amount of the credit that the claimant
11received related to the investment.
AB538-ASA1,8,1312
(c) The carry-over provisions of s. 71.28 (4) (e) and (f), as they apply to the credit
13under s. 71.28 (4), apply to the credit under this subsection.
AB538-ASA1,8,2114
(d) Partnerships, limited liability companies, and tax-option corporations may
15not claim the credit under this subsection, but the eligibility for, and the amount of,
16the credit are based on the amounts described under par. (b) that are attributable to
17their business operations. A partnership, limited liability company, or tax-option
18corporation shall compute the amount of credit that each of its partners, members,
19or shareholders may claim and shall provide that information to each of them.
20Partners, members of limited liability companies, and shareholders of tax-option
21corporations may claim the credit in proportion to their ownership interest.
AB538-ASA1,8,2322
(e) Section 71.28 (4) (g) and (h), as it applies to the credit under s. 71.28 (4),
23applies to the credit under this subsection.
AB538-ASA1,8,2525
71.49
(1) (eop) Qualified new business venture credit under s. 71.47 (5d).
AB538-ASA1,9,162
77.92
(4) "Net business income", with respect to a partnership, means taxable
3income as calculated under section
703 of the Internal Revenue Code; plus the items
4of income and gain under section
702 of the Internal Revenue Code, including taxable
5state and municipal bond interest and excluding nontaxable interest income or
6dividend income from federal government obligations; minus the items of loss and
7deduction under section
702 of the Internal Revenue Code, except items that are not
8deductible under s. 71.21; plus guaranteed payments to partners under section
707 9(c) of the Internal Revenue Code; plus the credits claimed under s. 71.07 (2dd), (2de),
10(2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx),
and (3g),
and (3s)
, and (5d); and plus or
11minus, as appropriate, transitional adjustments, depreciation differences, and basis
12differences under s. 71.05 (13), (15), (16), (17), and (19); but excluding income, gain,
13loss, and deductions from farming. "Net business income", with respect to a natural
14person, estate, or trust, means profit from a trade or business for federal income tax
15purposes and includes net income derived as an employee as defined in section
3121 16(d) (3) of the Internal Revenue Code.
AB538-ASA1, s. 15
17Section
15. 560.03 (24) to (27) of the statutes are created to read:
AB538-ASA1,9,2418
560.03
(24) In cooperation with the department of financial institutions and
19the Board of Regents of the University of Wisconsin System, annually conduct and
20publish the results of a study of Wisconsin businesses to determine new business
21formation trends and identify obstacles faced by new Wisconsin businesses and areas
22where changes in governmental policy may satisfy the needs of new Wisconsin
23businesses. As part of the study, the department of commerce shall conduct a survey
24of Wisconsin businesses.
AB538-ASA1,10,4
1(25) In cooperation with the department of financial institutions and the Board
2of Regents of the University of Wisconsin System, provide education and other
3support to facilitate the development networks of investors that review new
4businesses or proposed new businesses for potential investment.
AB538-ASA1,10,17
5(26) Certify businesses as qualified new business ventures for purposes of ss.
671.05 (6) (b) 9m., 71.07 (5d), 71.28 (5d), and 71.47 (5d). The department shall
7promulgate rules for the administration of this subsection. The rules shall require
8a business desiring certification to submit an application to the department in each
9taxable year for which the business desires certification. The department shall
10process applications in the order in which they were received and shall certify only
11the first 1,000 eligible businesses that apply for certification for a taxable year. The
12department shall maintain a list of businesses certified under this subsection and
13shall permit public access to the list through the department's Internet website. The
14department shall notify the department of revenue of every business certified under
15this subsection and the date on which any such business is decertified. A business
16may be certified under this subsection, and may maintain such certification, only if
17the business satisfies all of the following conditions:
AB538-ASA1,10,1818
(a) It has its headquarters in this state.
AB538-ASA1,10,2019
(b) At least 51 percent of the employees employed by the business are employed
20in this state.
AB538-ASA1,10,2221
(c) Its average annual net income for each of the 2 taxable years immediately
22preceding the taxable year for which a credit is claimed does not exceed $20,000,000.
AB538-ASA1,10,2423
(d) It's net worth in the taxable year for which a credit is claimed does not
24exceed $40,000,000.