SENATE SUBSTITUTE AMENDMENT 2,
TO 2003 SENATE BILL 197
June 24, 2003 - Offered by Senator
Erpenbach.
SB197-SSA2,1,10
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 (4) (f),
671.04 (4m), 71.04 (12), 71.25 (6) (a), 71.25 (6) (b), 71.25 (6) (c), 71.25 (6) (d), 71.25
7(6) (e), 71.25 (6) (f), 71.25 (6m), 71.25 (16), 71.45 (3d), 71.45 (3e) and 71.45 (7)
8of the statutes;
relating to: single sales factor apportionment of income for
9corporate income tax and franchise tax purposes and granting rule-making
10authority.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB197-SSA2, s. 1
11Section
1. 71.04 (4) of the statutes is renumbered 71.04 (4) (intro.) and
12amended to read:
SB197-SSA2,2,19
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-SSA2,2,2421
71.04
(4) (a) Except as provided in par. (f), for taxable years beginning before
22January 1, 2006, an apportionment fraction composed of a sales factor under sub. (7)
23representing 50% of the fraction, a property factor under sub. (5) representing 25%
24of the fraction, and a payroll factor under sub. (6) representing 25% of the fraction.
SB197-SSA2,3,5
171.04
(4) (b) Except as provided in par. (f), for taxable years beginning after
2December 31, 2005, and before January 1, 2007, an apportionment fraction
3composed of a sales factor under sub. (7) representing 60% of the fraction, a property
4factor under sub. (5) representing 20% of the fraction, and a payroll factor under sub.
5(6) representing 20% of the fraction.
SB197-SSA2,3,117
71.04
(4) (c) Except as provided in par. (f), for taxable years beginning after
8December 31, 2006, and before January 1, 2008, an apportionment fraction
9composed of a sales factor under sub. (7) representing 80% of the fraction, a property
10factor under sub. (5) representing 10% of the fraction, and a payroll factor under sub.
11(6) representing 10% of the fraction.
SB197-SSA2,3,1513
71.04
(4) (d) Except as provided in par. (f), for taxable years beginning after
14December 31, 2007, an apportionment fraction composed of the sales factor under
15sub. (7).
SB197-SSA2,3,2317
71.04
(4) (e) Except as provided in par. (f), for taxable years beginning after
18December 31, 2005, and before January 1, 2008, the apportionment fraction for the
19remaining net income of a financial organization shall include a sales factor that
20represents more than 50% of the apportionment fraction, as determined by rule by
21the department. For taxable years beginning after December 31, 2007, the
22apportionment fraction for the remaining net income of a financial organization is
23composed of a sales factor, as determined by rule by the department.
SB197-SSA2,4,10
171.04
(4) (f) If a taxpayer who is subject to apportionment under this subsection
2has a net gain of 100 employees in this state in any taxable year beginning after the
3effective date of this paragraph .... [revisor inserts date], and before January 1, 2008,
4the taxpayer's remaining net income may, at the taxpayer's option, be apportioned
5to this state by an apportionment fraction composed of the sales factor under sub. (7)
6or, for a financial organization, under par. (e) beginning with the taxable year in
7which the employees are hired, except that if the taxpayer does not retain such
8employees in this state for at least 3 consecutive taxable years, the taxpayer shall
9apportion the taxpayer's remaining net income as provided under pars. (a) to (e), as
10appropriate.
SB197-SSA2,4,1612
71.04
(4m) Apportionment formula computation. (a) 1. For taxable years
13beginning before January 1, 2008, if both the numerator and the denominator of the
14sales factor under sub. (7) related to a taxpayer's remaining net income are zero, the
15sales factor under sub. (7) is eliminated from the apportionment formula to
16determine the taxpayer's remaining net income under sub. (4).
SB197-SSA2,4,2017
2. For taxable years beginning after December 31, 2007, if both the numerator
18and the denominator of the sales factor under sub. (7) related to a taxpayer's
19remaining net income are zero, none of the taxpayer's remaining net income is
20apportioned to this state.
SB197-SSA2,4,2521
(b) 1. For taxable years beginning before January 1, 2008, if the numerator of
22the sales factor under sub. (7) related to a taxpayer's remaining net income is a
23negative number and the denominator of the sales factor under sub. (7) related to a
24taxpayer's remaining net income is a positive number, a negative number, or zero,
25the sales factor under sub. (7) is zero.
SB197-SSA2,5,5
12. For taxable years beginning after December 31, 2007, if the numerator of the
2sales factor under sub. (7) related to a taxpayer's remaining net income is a negative
3number and the denominator of the sales factor under sub. (7) related to a taxpayer's
4remaining net income is a positive number, a negative number, or zero, none of the
5taxpayer's remaining net income is apportioned to this state.
SB197-SSA2,5,106
(c) 1. For taxable years beginning before January 1, 2008, if the numerator of
7the sales factor under sub. (7) related to a taxpayer's remaining net income is a
8positive number and the denominator of the sales factor under sub. (7) related to a
9taxpayer's remaining net income is zero or a negative number, the sales factor under
10sub. (7) is one.
SB197-SSA2,5,1511
2. For taxable years beginning after December 31, 2007, if the numerator of the
12sales factor under sub. (7) related to a taxpayer's remaining net income is a positive
13number and the denominator of the sales factor under sub. (7) related to a taxpayer's
14remaining net income is zero or a negative number, all of the taxpayer's remaining
15net income is apportioned to this state.
SB197-SSA2, s. 9
16Section
9. 71.04 (5) (intro.) of the statutes is amended to read:
SB197-SSA2,5,1817
71.04
(5) Property factor. (intro.) For purposes of sub. (4)
and for taxable
18years beginning before January 1, 2008:
SB197-SSA2, s. 10
19Section
10. 71.04 (6) (intro.) of the statutes is amended to read:
SB197-SSA2,5,2120
71.04
(6) Payroll factor. (intro.) For purposes of sub. (4)
and for taxable years
21beginning before January 1, 2008:
SB197-SSA2,6,523
71.04
(7) (d) Sales, other than sales of tangible personal property, are in this
24state if the income-producing activity is performed in this state. If the
25income-producing activity is performed both in and outside this state the sales shall
1be divided between those states having jurisdiction to tax such business in
2proportion to the direct costs of performance incurred in each such state in rendering
3this service. Services performed in states which do not have jurisdiction to tax the
4business shall be deemed to have been performed in the state to which compensation
5is allocated by
sub. s. 71.04 (6)
, 2001 stats.
SB197-SSA2, s. 12
6Section
12. 71.04 (8) (b) of the statutes is renumbered 71.04 (8) (b) 1. and
7amended to read:
SB197-SSA2,6,148
71.04
(8) (b) 1.
"Public For taxable years beginning before January 1, 2006,
9"public utility", as used in this section, means
any business entity described under
10subd. 2. and any business entity which owns or operates any plant, equipment,
11property, franchise, or license for the transmission of communications or the
12production, transmission, sale, delivery, or furnishing of electricity, water or steam,
13the rates of charges for goods or services of which have been established or approved
14by a federal, state or local government or governmental agency.
"
Public
SB197-SSA2,6,20
152. In this section, for taxable years beginning after December 31, 2005, "public 16utility"
also means any business entity providing service to the public and engaged
17in the transportation of goods and persons for hire, as defined in s. 194.01 (4),
18regardless of whether or not the entity's rates or charges for services have been
19established or approved by a federal, state or local government or governmental
20agency.
SB197-SSA2,7,222
71.04
(8) (c) The net business income of railroads, sleeping car companies, car
23line companies,
pipeline companies, financial organizations
, air carriers, and public
24utilities requiring apportionment shall be apportioned pursuant to rules of the
1department of revenue, but the income taxed is limited to the income derived from
2business transacted and property located within the state.
SB197-SSA2,7,144
71.04
(10) Department may waive factor. Where, in the case of any nonresident
5individual or nonresident estate or trust engaged in business
within in and
without
6the outside this state
of Wisconsin and required to apportion its income as provided
7in this section, it shall be shown to the satisfaction of the department of revenue that
8the use of any one of the 3 factors provided under sub. (4) gives an unreasonable or
9inequitable final average ratio because of the fact that such nonresident individual
10or nonresident estate or trust does not employ, to any appreciable extent in its trade
11or business in producing the income taxed, the factors made use of in obtaining such
12ratio, this factor may, with the approval of the department of revenue, be omitted in
13obtaining the final average ratio which is to be applied to the remaining net income.
14This subsection does not apply to taxable years beginning after December 31, 2007.
SB197-SSA2,7,1916
71.04
(12) Subsidies. Notwithstanding any contrary provision of the statutes,
17an entity whose remaining net income is not subject to apportionment under this
18section shall receive priority over any entity that is subject to apportionment under
19this section with regard to the award or distribution of any state subsidy.
SB197-SSA2, s. 16
20Section
16. 71.25 (6) of the statutes is renumbered 71.25 (6) (intro.) and
21amended to read:
SB197-SSA2,8,1622
71.25
(6) Allocation and separate accounting and apportionment formula. 23(intro.) Corporations engaged in business within and without the state shall be taxed
24only on such income as is derived from business transacted and property located
25within the state. The amount of such income attributable to Wisconsin may be
1determined by an allocation and separate accounting thereof, when the business of
2such corporation within the state is not an integral part of a unitary business, but
3the department of revenue may permit an allocation and separate accounting in any
4case in which it is satisfied that the use of such method will properly reflect the
5income taxable by this state. In all cases in which allocation and separate accounting
6is not permissible, the determination shall be made in the following manner: for all
7businesses except
air carriers, financial organizations,
pipeline companies, public
8utilities, railroads, sleeping car companies, car line companies and corporations or
9associations that are subject to a tax on unrelated business income under s. 71.26 (1)
10(a) there shall first be deducted from the total net income of the taxpayer the part
11thereof (less related expenses, if any) that follows the situs of the property or the
12residence of the recipient. The remaining net income shall be apportioned to
13Wisconsin this state by use of
an apportionment fraction composed of a sales factor
14under sub. (9) representing 50% of the fraction, a property factor under sub. (7)
15representing 25% of the fraction and a payroll factor under sub. (8) representing 25%
16of the fraction. the following:
SB197-SSA2,8,2118
71.25
(6) (a) Except as provided in par. (f), for taxable years beginning before
19January 1, 2006, an apportionment fraction composed of a sales factor under sub. (9)
20representing 50% of the fraction, a property factor under sub. (7) representing 25%
21of the fraction, and a payroll factor under sub. (8) representing 25% of the fraction.
SB197-SSA2,9,223
71.25
(6) (b) Except as provided in par. (f), for taxable years beginning after
24December 31, 2005, and before January 1, 2007, an apportionment fraction
25composed of a sales factor under sub. (9) representing 60% of the fraction, a property
1factor under sub. (7) representing 20% of the fraction, and a payroll factor under sub.
2(8) representing 20% of the fraction.
SB197-SSA2,9,84
71.25
(6) (c) Except as provided in par. (f), for taxable years beginning after
5December 31, 2006, and before January 1, 2008, an apportionment fraction
6composed of a sales factor under sub. (9) representing 80% of the fraction, a property
7factor under sub. (7) representing 10% of the fraction, and a payroll factor under sub.
8(8) representing 10% of the fraction.
SB197-SSA2,9,1210
71.25
(6) (d) Except as provided in par. (f), for taxable years beginning after
11December 31, 2007, an apportionment fraction composed of the sales factor under
12sub. (9).
SB197-SSA2,9,2014
71.25
(6) (e) Except as provided in par. (f), for taxable years beginning after
15December 31, 2005, and before January 1, 2008, the apportionment fraction for the
16remaining net income of a financial organization shall include a sales factor that
17represents more than 50% of the apportionment fraction, as determined by rule by
18the department. For taxable years beginning after December 31, 2007, the
19apportionment fraction for the remaining net income of a financial organization is
20composed of a sales factor, as determined by rule by the department.
SB197-SSA2,9,2522
71.25
(6) (f) If a taxpayer who is subject to apportionment under this subsection
23has a net gain of 100 employees in this state in any taxable year beginning after the
24effective date of this paragraph .... [revisor inserts date], and before January 1, 2008,
25the taxpayer's remaining net income may, at the taxpayer's option, be apportioned
1to this state by an apportionment fraction composed of the sales factor under sub. (9)
2or, for a financial organization, under par. (e) beginning with the taxable year in
3which the employees are hired, except that if the taxpayer does not retain such
4employees in this state for at least 3 consecutive taxable years, the taxpayer shall
5apportion the taxpayer's remaining net income as provided under pars. (a) to (e), as
6appropriate.
SB197-SSA2,10,128
71.25
(6m) Apportionment formula computation. (a) 1. For taxable years
9beginning before January 1, 2008, if both the numerator and the denominator of the
10sales factor under sub. (9) related to a taxpayer's remaining net income are zero, the
11sales factor under sub. (9) is eliminated from the apportionment formula to
12determine the taxpayer's remaining net income under sub. (6).
SB197-SSA2,10,1613
2. For taxable years beginning after December 31, 2007, if both the numerator
14and the denominator of the sales factor under sub. (9) related to a taxpayer's
15remaining net income are zero, none of the taxpayer's remaining net income is
16apportioned to this state.
SB197-SSA2,10,2117
(b) 1. For taxable years beginning before January 1, 2008, if the numerator of
18the sales factor under sub. (9) related to a taxpayer's remaining net income is a
19negative number and the denominator of the sales factor under sub. (9) related to a
20taxpayer's remaining net income is a positive number, a negative number, or zero,
21the sales factor under sub. (9) is zero.
SB197-SSA2,11,222
2. For taxable years beginning after December 31, 2007, if the numerator of the
23sales factor under sub. (9) related to a taxpayer's remaining net income is a negative
24number and the denominator of the sales factor under sub. (9) related to a taxpayer's
1remaining net income is a positive number, a negative number, or zero, none of the
2taxpayer's remaining net income is apportioned to this state.
SB197-SSA2,11,73
(c) 1. For taxable years beginning before January 1, 2008, if the numerator of
4the sales factor under sub. (9) related to a taxpayer's remaining net income is a
5positive number and the denominator of the sales factor under sub. (9) related to a
6taxpayer's remaining net income is zero or a negative number, the sales factor under
7sub. (9) is one.
SB197-SSA2,11,128
2. For taxable years beginning after December 31, 2007, if the numerator of the
9sales factor under sub. (9) related to a taxpayer's remaining net income is a positive
10number and the denominator of the sales factor under sub. (9) related to a taxpayer's
11remaining net income is zero or a negative number, all of the taxpayer's remaining
12net income is apportioned to this state.
SB197-SSA2, s. 24
13Section
24. 71.25 (7) (intro.) of the statutes is amended to read:
SB197-SSA2,11,1514
71.25
(7) Property factor. (intro.) For purposes of sub.
(5) (6) and for taxable
15years beginning before January 1, 2008:
SB197-SSA2, s. 25
16Section
25. 71.25 (8) (intro.) of the statutes is amended to read:
SB197-SSA2,11,1817
71.25
(8) Payroll factor. (intro.) For purposes of sub.
(5) (6) and for taxable
18years beginning before January 1, 2008:
SB197-SSA2,12,220
71.25
(9) (d) Sales, other than sales of tangible personal property, are in this
21state if the income-producing activity is performed in this state. If the
22income-producing activity is performed both in and outside this state the sales shall
23be divided between those states having jurisdiction to tax such business in
24proportion to the direct costs of performance incurred in each such state in rendering
25this service. Services performed in states which do not have jurisdiction to tax the
1business shall be deemed to have been performed in the state to which compensation
2is allocated by
sub. s. 71.25 (8)
, 2001 stats.
SB197-SSA2, s. 27
3Section
27. 71.25 (10) (b) of the statutes is renumbered 71.25 (10) (b) 1. and
4amended to read:
SB197-SSA2,12,115
71.25
(10) (b) 1. In this section,
for taxable years beginning before January 1,
62006, "public utility" means
any business entity described under subd. 2. and any
7business entity which owns or operates any plant, equipment, property, franchise,
8or license for the transmission of communications or the production, transmission,
9sale, delivery, or furnishing of electricity, water or steam the rates of charges for
10goods or services of which have been established or approved by a federal, state or
11local government or governmental agency.
"Public
SB197-SSA2,12,17
122. In this section, for taxable years beginning after December 31, 2005, "public 13utility"
also means any business entity providing service to the public and engaged
14in the transportation of goods and persons for hire, as defined in s. 194.01 (4),
15regardless of whether or not the entity's rates or charges for services have been
16established or approved by a federal, state or local government or governmental
17agency.
SB197-SSA2,12,2319
71.25
(10) (c) The net business income of railroads, sleeping car companies, car
20line companies,
pipeline companies, financial organizations
, air carriers, and public
21utilities requiring apportionment shall be apportioned pursuant to rules of the
22department of revenue, but the income taxed is limited to the income derived from
23business transacted and property located within the state.
SB197-SSA2,13,11
171.25
(11) Department may waive factor. Where, in the case of any corporation
2engaged in business
within in and
without the outside this state
of Wisconsin and
3required to apportion its income as provided in sub. (6), it shall be shown to the
4satisfaction of the department of revenue that the use of any one of the 3 factors
5provided in sub. (6) gives an unreasonable or inequitable final average ratio because
6of the fact that such corporation does not employ, to any appreciable extent in its
7trade or business in producing the income taxed, the factors made use of in obtaining
8such ratio, this factor may, with the approval of the department of revenue, be
9omitted in obtaining the final average ratio which is to be applied to the remaining
10net income.
This subsection does not apply to taxable years beginning after
11December 31, 2007.
SB197-SSA2,13,1613
71.25
(16) Subsidies. Notwithstanding any contrary provision of the statutes,
14an entity whose remaining net income is not subject to apportionment under this
15section shall receive priority over any entity that is subject to apportionment under
16this section with regard to the award or distribution of any state subsidy.
SB197-SSA2, s. 31
17Section
31. 71.45 (3) (intro.) of the statutes is amended to read:
SB197-SSA2,14,218
71.45
(3) Apportionment. (intro.)
With respect Except as provided in sub. (3d), 19to
determine Wisconsin income for purposes of the franchise tax, domestic insurers
20not engaged in the sale of life insurance but which
that, in the taxable year, have
21collected received premiums
, other than life insurance premiums, written
on
22subjects of for insurance
on property or risks resident, located or to be performed
23outside this state
, there shall
be subtracted from multiply the net income figure
24derived by application of sub. (2)
(a) to arrive at Wisconsin income constituting the
1measure of the franchise tax an amount calculated by multiplying such adjusted
2federal taxable income by the arithmetic average of the following 2 percentages:
SB197-SSA2,14,194
71.45
(3) (a)
The Subject to sub. (3d), the percentage
of total determined by
5dividing the sum of direct premiums written
on all property and risks for insurance 6other than life insurance,
with respect to all property and risks resident, located, or
7to be performed in this state, and assumed premiums written for reinsurance, other
8than life insurance, with respect to all property and risks resident, located, or to be
9performed in this state, by the sum of direct premiums written for insurance on all
10property and risks, other than life insurance, wherever located
during the taxable
11year, as reflects, and assumed premiums written
on insurance for reinsurance on all
12property and risks, other than life insurance,
where the subject of insurance was
13resident, located or to be performed outside this state wherever located. In this
14paragraph, "direct premiums" means direct premiums as reported for the taxable
15year on an annual statement that is filed by the insurer with the commissioner of
16insurance under s. 601.42 (1g) (a). In this paragraph, "assumed premiums" means
17assumed reinsurance premiums from domestic insurance companies as reported for
18the taxable year on an annual statement that is filed with the commissioner of
19insurance under s. 601.42 (1g) (a).
SB197-SSA2, s. 33
20Section
33. 71.45 (3) (b) of the statutes is renumbered 71.45 (3) (b) 1. and
21amended to read:
SB197-SSA2,15,222
71.45
(3) (b) 1.
The Subject to sub. (3d), the percentage
of determined by
23dividing the payroll, exclusive of life insurance payroll, paid in this state in the
24taxable year by total payroll, exclusive of life insurance payroll, paid everywhere in
1the taxable year
as reflects such compensation paid outside this state.
2Compensation.
SB197-SSA2,15,11
32. Under subd. 1., payroll is paid
outside in this state if the individual's service
4is performed entirely
outside in this state; or the individual's service is performed
5both
within and without in and outside this state, but the service performed
within 6outside this state is incidental to the individual's service
without in this state; or
7some service is performed
without in this state and the base of operations, or if there
8is no base of operations, the place from which the service is directed or controlled is
9without in this state, or the base of operations or the place from which the service is
10directed or controlled is not in any state in which some part of the service is
11performed, but the individual's residence is
outside
in this state.
SB197-SSA2,15,1913
71.45
(3d) Phase in; domestic insurers. (a) Except as provided in par. (d), for
14taxable years beginning after December 31, 2005, and before January 1, 2007, a
15domestic insurer that is subject to apportionment under sub. (3) and this subsection
16shall multiply the net income figure derived by the application of sub. (2) by an
17apportionment fraction composed of the percentage under sub. (3) (a) representing
1860% of the fraction and the percentage under sub. (3) (b) 1. representing 40% of the
19fraction.
SB197-SSA2,15,2520
(b) Except as provided in par. (d), for taxable years beginning after December
2131, 2006, and before January 1, 2008, a domestic insurer that is subject to
22apportionment under sub. (3) and this subsection shall multiply the net income
23figure derived by the application of sub. (2) by an apportionment fraction composed
24of the percentage under sub. (3) (a) representing 80% of the fraction and the
25percentage under sub. (3) (b) 1. representing 20% of the fraction.
SB197-SSA2,16,4
1(c) Except as provided in par. (d), for taxable years beginning after December
231, 2007, a domestic insurer that is subject to apportionment under sub. (3) and this
3subsection shall multiply the net income figure derived by the application of sub. (2)
4by the percentage under sub. (3) (a).