LRBs0108/1
JK:kmg:jf
2003 - 2004 LEGISLATURE
SENATE SUBSTITUTE AMENDMENT 1,
TO 2003 SENATE BILL 197
June 16, 2003 - Offered by Committee on Economic Development, Job Creation
and Housing
.
SB197-SSA1,1,9 1An Act to renumber and amend 71.04 (4), 71.04 (8) (b), 71.25 (6), 71.25 (10)
2(b) and 71.45 (3) (b); to amend 71.04 (5) (intro.), 71.04 (6) (intro.), 71.04 (7) (d),
371.04 (8) (c), 71.04 (10), 71.25 (7) (intro.), 71.25 (8) (intro.), 71.25 (9) (d), 71.25
4(10) (c), 71.25 (11), 71.45 (3) (intro.), 71.45 (3) (a) and 71.45 (3m); and to create
571.04 (4) (a), 71.04 (4) (b), 71.04 (4) (c), 71.04 (4) (d), 71.04 (4) (e), 71.04 (4m),
671.25 (6) (a), 71.25 (6) (b), 71.25 (6) (c), 71.25 (6) (d), 71.25 (6) (e), 71.25 (6m),
771.45 (3d) and 71.45 (3e) of the statutes; relating to: single sales factor
8apportionment of income for corporate income tax and franchise tax purposes
9and granting rule-making authority.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB197-SSA1, s. 1 10Section 1. 71.04 (4) of the statutes is renumbered 71.04 (4) (intro.) and
11amended to read:
SB197-SSA1,2,19
171.04 (4) Nonresident allocation and apportionment formula. (intro.)
2Nonresident individuals and nonresident estates and trusts engaged in business
3within and without the state shall be taxed only on such income as is derived from
4business transacted and property located within the state. The amount of such
5income attributable to Wisconsin may be determined by an allocation and separate
6accounting thereof, when the business of such nonresident individual or nonresident
7estate or trust within the state is not an integral part of a unitary business, but the
8department of revenue may permit an allocation and separate accounting in any case
9in which it is satisfied that the use of such method will properly reflect the income
10taxable by this state. In all cases in which allocation and separate accounting is not
11permissible, the determination shall be made in the following manner: for all
12businesses except air carriers, financial organizations, pipeline companies, public
13utilities, railroads, sleeping car companies and car line companies there shall first
14be deducted from the total net income of the taxpayer the part thereof (less related
15expenses, if any) that follows the situs of the property or the residence of the
16recipient. The remaining net income shall be apportioned to Wisconsin this state by
17use of an apportionment fraction composed of a sales factor representing 50% of the
18fraction, a property factor representing 25% of the fraction and a payroll factor
19representing 25% of the fraction.
the following:
SB197-SSA1, s. 2 20Section 2. 71.04 (4) (a) of the statutes is created to read:
SB197-SSA1,2,2421 71.04 (4) (a) For taxable years beginning before January 1, 2006, an
22apportionment fraction composed of a sales factor under sub. (7) representing 50%
23of the fraction, a property factor under sub. (5) representing 25% of the fraction, and
24a payroll factor under sub. (6) representing 25% of the fraction.
SB197-SSA1, s. 3 25Section 3. 71.04 (4) (b) of the statutes is created to read:
SB197-SSA1,3,4
171.04 (4) (b) For taxable years beginning after December 31, 2005, and before
2January 1, 2007, an apportionment fraction composed of a sales factor under sub. (7)
3representing 60% of the fraction, a property factor under sub. (5) representing 20%
4of the fraction, and a payroll factor under sub. (6) representing 20% of the fraction.
SB197-SSA1, s. 4 5Section 4. 71.04 (4) (c) of the statutes is created to read:
SB197-SSA1,3,96 71.04 (4) (c) For taxable years beginning after December 31, 2006, and before
7January 1, 2008, an apportionment fraction composed of a sales factor under sub. (7)
8representing 80% of the fraction, a property factor under sub. (5) representing 10%
9of the fraction, and a payroll factor under sub. (6) representing 10% of the fraction.
SB197-SSA1, s. 5 10Section 5. 71.04 (4) (d) of the statutes is created to read:
SB197-SSA1,3,1211 71.04 (4) (d) For taxable years beginning after December 31, 2007, an
12apportionment fraction composed of the sales factor under sub. (7).
SB197-SSA1, s. 6 13Section 6. 71.04 (4) (e) of the statutes is created to read:
SB197-SSA1,3,2014 71.04 (4) (e) For taxable years beginning after December 31, 2005, and before
15January 1, 2008, the apportionment fraction for the remaining net income of a
16financial organization shall include a sales factor that represents more than 50% of
17the apportionment fraction, as determined by rule by the department. For taxable
18years beginning after December 31, 2007, the apportionment fraction for the
19remaining net income of a financial organization is composed of a sales factor, as
20determined by rule by the department.
SB197-SSA1, s. 7 21Section 7. 71.04 (4m) of the statutes is created to read:
SB197-SSA1,4,222 71.04 (4m) Apportionment formula computation. (a) 1. For taxable years
23beginning before January 1, 2008, if both the numerator and the denominator of the
24sales factor under sub. (7) related to a taxpayer's remaining net income are zero, the

1sales factor under sub. (7) is eliminated from the apportionment formula to
2determine the taxpayer's remaining net income under sub. (4).
SB197-SSA1,4,63 2. For taxable years beginning after December 31, 2007, if both the numerator
4and the denominator of the sales factor under sub. (7) related to a taxpayer's
5remaining net income are zero, none of the taxpayer's remaining net income is
6apportioned to this state.
SB197-SSA1,4,117 (b) 1. For taxable years beginning before January 1, 2008, if the numerator of
8the sales factor under sub. (7) related to a taxpayer's remaining net income is a
9negative number and the denominator of the sales factor under sub. (7) related to a
10taxpayer's remaining net income is a positive number, a negative number, or zero,
11the sales factor under sub. (7) is zero.
SB197-SSA1,4,1612 2. For taxable years beginning after December 31, 2007, if the numerator of the
13sales factor under sub. (7) related to a taxpayer's remaining net income is a negative
14number and the denominator of the sales factor under sub. (7) related to a taxpayer's
15remaining net income is a positive number, a negative number, or zero, none of the
16taxpayer's remaining net income is apportioned to this state.
SB197-SSA1,4,2117 (c) 1. For taxable years beginning before January 1, 2008, if the numerator of
18the sales factor under sub. (7) related to a taxpayer's remaining net income is a
19positive number and the denominator of the sales factor under sub. (7) related to a
20taxpayer's remaining net income is zero or a negative number, the sales factor under
21sub. (7) is one.
SB197-SSA1,5,222 2. For taxable years beginning after December 31, 2007, if the numerator of the
23sales factor under sub. (7) related to a taxpayer's remaining net income is a positive
24number and the denominator of the sales factor under sub. (7) related to a taxpayer's

1remaining net income is zero or a negative number, all of the taxpayer's remaining
2net income is apportioned to this state.
SB197-SSA1, s. 8 3Section 8. 71.04 (5) (intro.) of the statutes is amended to read:
SB197-SSA1,5,54 71.04 (5) Property factor. (intro.) For purposes of sub. (4) and for taxable
5years beginning before January 1, 2008
:
SB197-SSA1, s. 9 6Section 9. 71.04 (6) (intro.) of the statutes is amended to read:
SB197-SSA1,5,87 71.04 (6) Payroll factor. (intro.) For purposes of sub. (4) and for taxable years
8beginning before January 1, 2008
:
SB197-SSA1, s. 10 9Section 10. 71.04 (7) (d) of the statutes is amended to read:
SB197-SSA1,5,1710 71.04 (7) (d) Sales, other than sales of tangible personal property, are in this
11state if the income-producing activity is performed in this state. If the
12income-producing activity is performed both in and outside this state the sales shall
13be divided between those states having jurisdiction to tax such business in
14proportion to the direct costs of performance incurred in each such state in rendering
15this service. Services performed in states which do not have jurisdiction to tax the
16business shall be deemed to have been performed in the state to which compensation
17is allocated by sub. s. 71.04 (6) , 2001 stats.
SB197-SSA1, s. 11 18Section 11. 71.04 (8) (b) of the statutes is renumbered 71.04 (8) (b) 1. and
19amended to read:
SB197-SSA1,6,220 71.04 (8) (b) 1. "Public For taxable years beginning before January 1, 2006,
21"public
utility", as used in this section, means any business entity described under
22subd. 2. and
any business entity which owns or operates any plant, equipment,
23property, franchise, or license for the transmission of communications or the
24production, transmission, sale, delivery, or furnishing of electricity, water or steam,

1the rates of charges for goods or services of which have been established or approved
2by a federal, state or local government or governmental agency. " Public
SB197-SSA1,6,8 32. In this section, for taxable years beginning after December 31, 2005, "public
4utility" also means any business entity providing service to the public and engaged
5in the transportation of goods and persons for hire, as defined in s. 194.01 (4),
6regardless of whether or not the entity's rates or charges for services have been
7established or approved by a federal, state or local government or governmental
8agency.
SB197-SSA1, s. 12 9Section 12. 71.04 (8) (c) of the statutes is amended to read:
SB197-SSA1,6,1410 71.04 (8) (c) The net business income of railroads, sleeping car companies, car
11line companies, pipeline companies, financial organizations, air carriers, and public
12utilities requiring apportionment shall be apportioned pursuant to rules of the
13department of revenue, but the income taxed is limited to the income derived from
14business transacted and property located within the state.
SB197-SSA1, s. 13 15Section 13. 71.04 (10) of the statutes is amended to read:
SB197-SSA1,7,216 71.04 (10) Department may waive factor. Where, in the case of any nonresident
17individual or nonresident estate or trust engaged in business within in and without
18the
outside of this state of Wisconsin and required to apportion its income as provided
19in this section, it shall be shown to the satisfaction of the department of revenue that
20the use of any one of the 3 factors provided under sub. (4) gives an unreasonable or
21inequitable final average ratio because of the fact that such nonresident individual
22or nonresident estate or trust does not employ, to any appreciable extent in its trade
23or business in producing the income taxed, the factors made use of in obtaining such
24ratio, this factor may, with the approval of the department of revenue, be omitted in

1obtaining the final average ratio which is to be applied to the remaining net income.
2This subsection does not apply to taxable years beginning after December 31, 2007.
SB197-SSA1, s. 14 3Section 14. 71.25 (6) of the statutes is renumbered 71.25 (6) (intro.) and
4amended to read:
SB197-SSA1,7,245 71.25 (6) Allocation and separate accounting and apportionment formula.
6(intro.) Corporations engaged in business within and without the state shall be taxed
7only on such income as is derived from business transacted and property located
8within the state. The amount of such income attributable to Wisconsin may be
9determined by an allocation and separate accounting thereof, when the business of
10such corporation within the state is not an integral part of a unitary business, but
11the department of revenue may permit an allocation and separate accounting in any
12case in which it is satisfied that the use of such method will properly reflect the
13income taxable by this state. In all cases in which allocation and separate accounting
14is not permissible, the determination shall be made in the following manner: for all
15businesses except air carriers, financial organizations, pipeline companies, public
16utilities, railroads, sleeping car companies, car line companies and corporations or
17associations that are subject to a tax on unrelated business income under s. 71.26 (1)
18(a) there shall first be deducted from the total net income of the taxpayer the part
19thereof (less related expenses, if any) that follows the situs of the property or the
20residence of the recipient. The remaining net income shall be apportioned to
21Wisconsin this state by use of an apportionment fraction composed of a sales factor
22under sub. (9) representing 50% of the fraction, a property factor under sub. (7)
23representing 25% of the fraction and a payroll factor under sub. (8) representing 25%
24of the fraction.
the following:
SB197-SSA1, s. 15 25Section 15. 71.25 (6) (a) of the statutes is created to read:
SB197-SSA1,8,4
171.25 (6) (a) For taxable years beginning before January 1, 2006, an
2apportionment fraction composed of a sales factor under sub. (9) representing 50%
3of the fraction, a property factor under sub. (7) representing 25% of the fraction, and
4a payroll factor under sub. (8) representing 25% of the fraction.
SB197-SSA1, s. 16 5Section 16. 71.25 (6) (b) of the statutes is created to read:
SB197-SSA1,8,96 71.25 (6) (b) For taxable years beginning after December 31, 2005, and before
7January 1, 2007, an apportionment fraction composed of a sales factor under sub. (9)
8representing 60% of the fraction, a property factor under sub. (7) representing 20%
9of the fraction, and a payroll factor under sub. (8) representing 20% of the fraction.
SB197-SSA1, s. 17 10Section 17. 71.25 (6) (c) of the statutes is created to read:
SB197-SSA1,8,1411 71.25 (6) (c) For taxable years beginning after December 31, 2006, and before
12January 1, 2008, an apportionment fraction composed of a sales factor under sub. (9)
13representing 80% of the fraction, a property factor under sub. (7) representing 10%
14of the fraction, and a payroll factor under sub. (8) representing 10% of the fraction.
SB197-SSA1, s. 18 15Section 18. 71.25 (6) (d) of the statutes is created to read:
SB197-SSA1,8,1716 71.25 (6) (d) For taxable years beginning after December 31, 2007, an
17apportionment fraction composed of the sales factor under sub. (9).
SB197-SSA1, s. 19 18Section 19. 71.25 (6) (e) of the statutes is created to read:
SB197-SSA1,8,2519 71.25 (6) (e) For taxable years beginning after December 31, 2005, and before
20January 1, 2008, the apportionment fraction for the remaining net income of a
21financial organization shall include a sales factor that represents more than 50% of
22the apportionment fraction, as determined by rule by the department. For taxable
23years beginning after December 31, 2007, the apportionment fraction for the
24remaining net income of a financial organization is composed of a sales factor, as
25determined by rule by the department.
SB197-SSA1, s. 20
1Section 20. 71.25 (6m) of the statutes is created to read:
SB197-SSA1,9,62 71.25 (6m) Apportionment formula computation. (a) 1. For taxable years
3beginning before January 1, 2008, if both the numerator and the denominator of the
4sales factor under sub. (9) related to a taxpayer's remaining net income are zero, the
5sales factor under sub. (9) is eliminated from the apportionment formula to
6determine the taxpayer's remaining net income under sub. (6).
SB197-SSA1,9,107 2. For taxable years beginning after December 31, 2007, if both the numerator
8and the denominator of the sales factor under sub. (9) related to a taxpayer's
9remaining net income are zero, none of the taxpayer's remaining net income is
10apportioned to this state.
SB197-SSA1,9,1511 (b) 1. For taxable years beginning before January 1, 2008, if the numerator of
12the sales factor under sub. (9) related to a taxpayer's remaining net income is a
13negative number and the denominator of the sales factor under sub. (9) related to a
14taxpayer's remaining net income is a positive number, a negative number, or zero,
15the sales factor under sub. (9) is zero.
SB197-SSA1,9,2016 2. For taxable years beginning after December 31, 2007, if the numerator of the
17sales factor under sub. (9) related to a taxpayer's remaining net income is a negative
18number and the denominator of the sales factor under sub. (9) related to a taxpayer's
19remaining net income is a positive number, a negative number, or zero, none of the
20taxpayer's remaining net income is apportioned to this state.
SB197-SSA1,9,2521 (c) 1. For taxable years beginning before January 1, 2008, if the numerator of
22the sales factor under sub. (9) related to a taxpayer's remaining net income is a
23positive number and the denominator of the sales factor under sub. (9) related to a
24taxpayer's remaining net income is zero or a negative number, the sales factor under
25sub. (9) is one.
SB197-SSA1,10,5
12. For taxable years beginning after December 31, 2007, if the numerator of the
2sales factor under sub. (9) related to a taxpayer's remaining net income is a positive
3number and the denominator of the sales factor under sub. (9) related to a taxpayer's
4remaining net income is zero or a negative number, all of the taxpayer's remaining
5net income is apportioned to this state.
SB197-SSA1, s. 21 6Section 21. 71.25 (7) (intro.) of the statutes is amended to read:
SB197-SSA1,10,87 71.25 (7) Property factor. (intro.) For purposes of sub. (5) (6) and for taxable
8years beginning before January 1, 2008
:
SB197-SSA1, s. 22 9Section 22. 71.25 (8) (intro.) of the statutes is amended to read:
SB197-SSA1,10,1110 71.25 (8) Payroll factor. (intro.) For purposes of sub. (5) (6) and for taxable
11years beginning before January 1, 2008
:
SB197-SSA1, s. 23 12Section 23. 71.25 (9) (d) of the statutes is amended to read:
SB197-SSA1,10,2013 71.25 (9) (d) Sales, other than sales of tangible personal property, are in this
14state if the income-producing activity is performed in this state. If the
15income-producing activity is performed both in and outside this state the sales shall
16be divided between those states having jurisdiction to tax such business in
17proportion to the direct costs of performance incurred in each such state in rendering
18this service. Services performed in states which do not have jurisdiction to tax the
19business shall be deemed to have been performed in the state to which compensation
20is allocated by sub. s. 71.25 (8) , 2001 stats.
SB197-SSA1, s. 24 21Section 24. 71.25 (10) (b) of the statutes is renumbered 71.25 (10) (b) 1. and
22amended to read:
SB197-SSA1,11,423 71.25 (10) (b) 1. In this section, for taxable years beginning before January 1,
242006,
"public utility" means any business entity described under subd. 2. and any
25business entity which owns or operates any plant, equipment, property, franchise,

1or license for the transmission of communications or the production, transmission,
2sale, delivery, or furnishing of electricity, water or steam the rates of charges for
3goods or services of which have been established or approved by a federal, state or
4local government or governmental agency. "Public
SB197-SSA1,11,10 52. In this section, for taxable years beginning after December 31, 2005, "public
6utility" also means any business entity providing service to the public and engaged
7in the transportation of goods and persons for hire, as defined in s. 194.01 (4),
8regardless of whether or not the entity's rates or charges for services have been
9established or approved by a federal, state or local government or governmental
10agency.
SB197-SSA1, s. 25 11Section 25. 71.25 (10) (c) of the statutes is amended to read:
SB197-SSA1,11,1612 71.25 (10) (c) The net business income of railroads, sleeping car companies, car
13line companies, pipeline companies, financial organizations, air carriers, and public
14utilities requiring apportionment shall be apportioned pursuant to rules of the
15department of revenue, but the income taxed is limited to the income derived from
16business transacted and property located within the state.
SB197-SSA1, s. 26 17Section 26. 71.25 (11) of the statutes is amended to read:
SB197-SSA1,12,318 71.25 (11) Department may waive factor. Where, in the case of any corporation
19engaged in business within in and without the outside of this state of Wisconsin and
20required to apportion its income as provided in sub. (6), it shall be shown to the
21satisfaction of the department of revenue that the use of any one of the 3 factors
22provided in sub. (6) gives an unreasonable or inequitable final average ratio because
23of the fact that such corporation does not employ, to any appreciable extent in its
24trade or business in producing the income taxed, the factors made use of in obtaining
25such ratio, this factor may, with the approval of the department of revenue, be

1omitted in obtaining the final average ratio which is to be applied to the remaining
2net income. This subsection does not apply to taxable years beginning after
3December 31, 2007.
SB197-SSA1, s. 27 4Section 27. 71.45 (3) (intro.) of the statutes is amended to read:
SB197-SSA1,12,135 71.45 (3) Apportionment. (intro.) With respect Except as provided in sub. (3d),
6to determine Wisconsin income for purposes of the franchise tax, domestic insurers
7not engaged in the sale of life insurance but which that, in the taxable year, have
8collected received premiums, other than life insurance premiums, written on
9subjects of
for insurance on property or risks resident, located or to be performed
10outside this state, there shall be subtracted from multiply the net income figure
11derived by application of sub. (2) (a) to arrive at Wisconsin income constituting the
12measure of the franchise tax an amount calculated by multiplying such adjusted
13federal taxable income
by the arithmetic average of the following 2 percentages:
SB197-SSA1, s. 28 14Section 28. 71.45 (3) (a) of the statutes is amended to read:
SB197-SSA1,13,515 71.45 (3) (a) The Subject to sub. (3d), the percentage of total determined by
16dividing the sum of direct
premiums written on all property and risks for insurance
17other than life insurance, with respect to all property and risks resident, located, or
18to be performed in this state, and assumed premiums written for reinsurance, other
19than life insurance, with respect to all property and risks resident, located, or to be
20performed in this state, by the sum of direct premiums written for insurance on all
21property and risks, other than life insurance,
wherever located during the taxable
22year, as reflects
, and assumed premiums written on insurance for reinsurance on all
23property and risks
, other than life insurance, where the subject of insurance was
24resident, located or to be performed outside this state
wherever located. In this
25paragraph, "direct premiums" means direct premiums as reported for the taxable

1year on an annual statement that is filed by the insurer with the commissioner of
2insurance under s. 601.42 (1g) (a). In this paragraph, "assumed premiums" means
3assumed reinsurance premiums from domestic insurance companies as reported for
4the taxable year on an annual statement that is filed with the commissioner of
5insurance under s. 601.42 (1g) (a)
.
Loading...
Loading...