AB522: Bill Text

LRB-2692/1

JK&RJM:kmg:pg

2003 - 2004 LEGISLATURE

2003 Assembly BILL 522

September 18, 2003 - Introduced by Representatives McCormick, Nischke, Staskunas, Hahn, Krawczyk, Gronemus, Weber, Gielow and Ott, cosponsored by Senators Kanavas, Stepp, Lassa, Reynolds and Roessler. Referred to Committee on Economic Development.

AB522,1,5 An Act to amend 71.05 (6) (a) 15., 71.21 (4), 71.26 (2) (a), 71.34 (1) (g), 71.45 (2) (a) 10., 77.92 (4), 560.30 (3), 560.37 (4) and 560.37 (5); and to create 71.07 (7m), 71.10 (4) (cp), 71.28 (7m), 71.30 (3) (dm), 71.47 (7m) and 71.49 (1) (dm) of the statutes; relating to: creating a certified capital company income and franchise tax credit.

Analysis by the Legislative Reference Bureau

Under current law, the department of commerce (department) is authorized to certify investments (certified capital investments) made by investors (certified investors) in companies that have been certified by the department (certified capital companies). A certified capital company in which a certified capital investment is made must then invest the certified capital investment, according to a specified schedule, in a business in this state that fulfills certain requirements, including having no more than 100 employees and a net worth of no more than $5,000,000 (qualified businesses). The investment in the qualified business must satisfy certain requirements, and the qualified business must agree to comply with certain requirements as a condition of the investment.

If a certified investor is a certain type of insurer, including a life insurer or an out-of-state insurer doing a fire or marine insurance business or a casualty or surety business, the certified investor may claim a tax credit for the certified capital investment against license fees that are based on gross premiums and that are owed to the state instead of income or franchise taxes. The credit must be claimed over a ten-year period, with ten percent of the investment used to offset the license fee that is due each year.

This bill creates an income and franchise tax credit for certified capital investments similar to the credit that certain insurers may claim to offset license fees. The following public utilities may claim the credit against the amount of their income or franchise tax liability in the taxable year: railroads; light, heat, and power companies; air carrier companies; pipeline companies; electric cooperative associations; and telephone companies. The following financial institutions organized under state law may also claim the credit against the amount of their income or franchise tax liability in the taxable year: credit unions; savings banks; savings and loan associations; and banks. The limitations and conditions that apply to the certified capital investment credit for certain insurers apply to the income and franchise tax credit.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB522, s. 1 Section 1. 71.05 (6) (a) 15. of the statutes is amended to read:

AB522,2,6 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (3g), and (3s), and (7m) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g).

AB522, s. 2 Section 2. 71.07 (7m) of the statutes is created to read:

AB522,2,8 71.07 (7m) Certified capital company credit. (a) In this subsection:

AB522,2,9 1. "Certified capital company" has the meaning given in s. 560.30 (2).

AB522,2,10 2. "Certified capital investment" has the meaning given in s. 560.30 (4).

AB522,2,14 3. "Claimant" means a person who is subject to taxation under subchs. I, II, and IV of ch. 76, a credit union organized under ch. 186, a savings bank organized under ch. 214, a savings and loan association organized under ch. 215, or a bank organized under ch. 221.

AB522,3,1 4. "Investment date" has the meaning given in s. 560.30 (6).

AB522,3,2 5. "Investment pool" has the meaning given in s. 560.30 (7).

AB522,3,3 6. "Qualified investment" has the meaning given in s. 560.30 (11).

AB522,3,10 (b) A claimant who makes a certified capital investment may claim as a credit against the tax imposed under s. 71.02, up to the amount of those taxes, for 10 years beginning with the year of the investment, an amount equal to either 10 percent of that investment or the amount by which the sum of the claimant's certified capital investments and the claimant's qualified investments exceeds the claimant's qualified investments in the taxable year before the claimant first claimed the credit under this subsection, whichever is less.

AB522,3,12 (c) Subsection 71.28 (4) (e), (f), (g), and (h), as it applies to the credit under 71.28 (4), applies to the credit under this subsection.

AB522,3,20 (d) Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of a certified capital investment. A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interest.

AB522,4,2 (e) 1. If a certified capital company is decertified, or an investment pool is disqualified, under s. 560.37 before the certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 1. with respect to the investment pool, any claimant that has received a credit under this subsection with respect to that investment pool shall repay that credit to the department of revenue and may not claim more credit in respect to that investment pool.

AB522,4,12 2. If a certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 1. with respect to an investment pool but the certified capital company is decertified, or an investment pool is disqualified, under s. 560.37 before the certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 2. for that investment pool, any claimant that has received a credit under this subsection with respect to that investment pool shall repay all credits that were claimed for taxable years after the taxable year that includes the 3rd anniversary of the investment date of the investment pool and may claim no more credits for taxable years after the taxable year that includes the 3rd anniversary of the investment date of the investment pool.

AB522, s. 3 Section 3. 71.10 (4) (cp) of the statutes is created to read:

AB522,4,14 71.10 (4) (cp) The certified capital company credit under s. 71.07 (7m).

AB522, s. 4 Section 4. 71.21 (4) of the statutes is amended to read:

AB522,4,18 71.21 (4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2ds), (2dx), (3g), and (3s) , and (7m) and passed through to partners shall be added to the partnership's income.

AB522, s. 5 Section 5. 71.26 (2) (a) of the statutes is amended to read:

AB522,5,9 71.26 (2) (a) Corporations in general. The "net income" of a corporation means the gross income as computed under the Internal Revenue Code as modified under sub. (3) minus the amount of recapture under s. 71.28 (1di) plus the amount of credit computed under s. 71.28 (1), (3), (4), and (5) plus the amount of the credit computed under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), and (3g), and (7m) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g) plus the amount of losses from the sale or other disposition of assets the gain from which would be wholly exempt income, as defined in sub. (3) (L), if the assets were sold or otherwise disposed of at a gain and minus deductions, as computed under the Internal Revenue Code as modified under sub. (3), plus or minus, as appropriate, an amount equal to the difference between the federal basis and Wisconsin basis of any asset sold, exchanged, abandoned, or otherwise disposed of in a taxable transaction during the taxable year, except as provided in par. (b) and s. 71.45 (2) and (5).

AB522, s. 6 Section 6. 71.28 (7m) of the statutes is created to read:

AB522,5,11 71.28 (7m) Certified capital company credit. (a) In this subsection:

AB522,5,12 1. "Certified capital company" has the meaning given in s. 560.30 (2).

AB522,5,13 2. "Certified capital investment" has the meaning given in s. 560.30 (4).

AB522,5,17 3. "Claimant" means a person who is subject to taxation under subchs. I, II, and IV of ch. 76, a credit union organized under ch. 186, a savings bank organized under ch. 214, a savings and loan association organized under ch. 215, or a bank organized under ch. 221.

AB522,5,18 4. "Investment date" has the meaning given in s. 560.30 (6).

AB522,5,19 5. "Investment pool" has the meaning given in s. 560.30 (7).

AB522,5,20 6. "Qualified investment" has the meaning given in s. 560.30 (11).

AB522,6,2 (b) A claimant who makes a certified capital investment may claim as a credit against the tax imposed under s. 71.23, up to the amount of those taxes, for 10 years beginning with the year of the investment, an amount equal to either 10 percent of that investment or the amount by which the sum of the claimant's certified capital investments and the claimant's qualified investments exceeds the claimant's qualified investments in the taxable year before the claimant first claimed the credit under this subsection, whichever is less.

AB522,6,4 (c) Subsection (4) (e), (f), (g), and (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

AB522,6,12 (d) Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of a certified capital investment. A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interest.

AB522,6,18 (e) 1. If a certified capital company is decertified, or an investment pool is disqualified, under s. 560.37 before the certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 1. with respect to the investment pool, any claimant that has received a credit under this subsection with respect to that investment pool shall repay that credit to the department of revenue and may not claim more credit in respect to that investment pool.

AB522,7,3 2. If a certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 1. with respect to an investment pool but the certified capital company is decertified, or an investment pool is disqualified, under s. 560.37 before the certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 2. for that investment pool, any claimant that has received a credit under this subsection with respect to that investment pool shall repay all credits that were claimed for taxable years after the taxable year that includes the 3rd anniversary of the investment date of the investment pool and may claim no more credits for taxable years after the taxable year that includes the 3rd anniversary of the investment date of the investment pool.

AB522, s. 7 Section 7. 71.30 (3) (dm) of the statutes is created to read:

AB522,7,5 71.30 (3) (dm) The certified capital company credit under s. 71.28 (7m).

AB522, s. 8 Section 8. 71.34 (1) (g) of the statutes is amended to read:

AB522,7,9 71.34 (1) (g) An addition shall be made for credits computed by a tax-option corporation under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (3), and (3g), and (7m) and passed through to shareholders.

AB522, s. 9 Section 9. 71.45 (2) (a) 10. of the statutes is amended to read:

AB522,7,16 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit computed under s. 71.47 (1dd) to (1dx) and (7m) and not passed through by a partnership, limited liability company or tax-option corporation that has added that amount to the partnership's, limited liability company's or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g) and the amount of credit computed under s. 71.47 (1), (3), (4) and (5).

AB522, s. 10 Section 10. 71.47 (7m) of the statutes is created to read:

AB522,7,18 71.47 (7m) Certified capital company credit. (a) In this subsection:

AB522,7,19 1. "Certified capital company" has the meaning given in s. 560.30 (2).

AB522,7,20 2. "Certified capital investment" has the meaning given in s. 560.30 (4).

AB522,7,24 3. "Claimant" means a person who is subject to taxation under subchs. I, II, and IV of ch. 76, a credit union organized under ch. 186, a savings bank organized under ch. 214, a savings and loan association organized under ch. 215, or a bank organized under ch. 221.

AB522,7,25 4. "Investment date" has the meaning given in s. 560.30 (6).

AB522,8,1 5. "Investment pool" has the meaning given in s. 560.30 (7).

AB522,8,2 6. "Qualified investment" has the meaning given in s. 560.30 (11).

AB522,8,9 (b) A claimant who makes a certified capital investment may claim as a credit against the tax imposed under s. 71.43, up to the amount of those taxes, for 10 years beginning with the year of the investment, an amount equal to either 10 percent of that investment or the amount by which the sum of the claimant's certified capital investments and the claimant's qualified investments exceeds the claimant's qualified investments in the taxable year before the claimant first claimed the credit under this subsection, whichever is less.

AB522,8,11 (c) Subsection 71.28 (4) (e), (f), (g), and (h), as it applies to the credit under 71.28 (4), applies to the credit under this subsection.

AB522,8,19 (d) Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of a certified capital investment. A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interest.

AB522,8,25 (e) 1. If a certified capital company is decertified, or an investment pool is disqualified, under s. 560.37 before the certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 1. with respect to the investment pool, any claimant that has received a credit under this subsection with respect to that investment pool shall repay that credit to the department of revenue and may not claim more credit in respect to that investment pool.

AB522,9,10 2. If a certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 1. with respect to an investment pool but the certified capital company is decertified, or an investment pool is disqualified, under s. 560.37 before the certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 2. for that investment pool, any claimant that has received a credit under this subsection with respect to that investment pool shall repay all credits that were claimed for taxable years after the taxable year that includes the 3rd anniversary of the investment date of the investment pool and may claim no more credits for taxable years after the taxable year that includes the 3rd anniversary of the investment date of the investment pool.