January 21, 2004 - Introduced by Representatives Black, Turner, Pocan,
Berceau, Sinicki, Pope-Roberts, Plouff, Zepnick, J. Lehman and Miller,
cosponsored by Senators Carpenter and Chvala. Referred to Committee on
Ways and Means.
AB756,2,2
1An Act to repeal 20.566 (2) (am), 20.835 (3) (b), 79.10 (1) (b), 79.10 (1) (e), 79.10
2(4), 79.10 (7m) (a), 79.10 (9) (b), 79.10 (9) (c) 2. and 79.14;
to renumber and
3amend 71.26 (2) (a) and 79.10 (9) (c) 1.;
to amend 20.566 (2) (r), 20.835 (3) (q),
420.835 (3) (s), 70.11 (39), 71.07 (9) (b) 5., 74.09 (3) (b) 3., 79.10 (1m) (b), 79.10
5(2), 79.10 (5), 79.10 (6m) (a), 79.10 (7m) (b) (title), 79.10 (7m) (b) 1., 79.10 (9)
6(bm), 79.10 (10) (title), 79.10 (10) (a), 79.10 (10) (bm) 1., 79.10 (10) (bm) 2., 79.10
7(11) (title), 79.10 (11) (b), 79.10 (11) (c), 79.11 (3) (b) and 565.02 (7); and
to create
820.835 (3) (bm), 71.01 (5p), 71.01 (9b), 71.05 (6) (a) 21., 71.22 (3m), 71.22 (9b),
971.26 (2) (a) 6., 71.34 (1) (j), 71.42 (1p), 71.42 (4m), 71.45 (2) (a) 16., 71.738 (3m),
1071.80 (23) and 77.52 (2) (a) 13. of the statutes;
relating to: creating a
11homeowner's property tax credit, eliminating the school levy property tax
12credit and the lottery and gaming property tax credit, including payments to
13related entities to compute income tax and franchise tax liability, increasing the
14amount of the school property income tax credit, imposing the sales tax on the
1lease of luxury boxes at sports facilities, claiming the property tax exemption
2for computers, and making an appropriation.
Analysis by the Legislative Reference Bureau
Property tax credits
Under current law, a property owner in this state may claim a school levy
property tax credit from the state based on the fair market value of the property and
the property taxes levied by school districts located in the municipality in which the
the property is located. The amount of the credit is paid from the general fund.
Under current law, a person who owns property in this state that the person
uses as a principal dwelling may claim the lottery and gaming property tax credit as
a credit against the property taxes imposed on his or her principal dwelling. The
amount of the credit is based on the fair market value of the person's principal
dwelling and is paid from the lottery fund.
This bill eliminates the school levy property tax credit and the lottery and
gaming property tax credit and creates a homeowner's property tax credit. Under
the bill, a person who owns property in this state that the person uses as a principal
dwelling may claim the homeowner's credit as a credit against the property taxes
imposed on his or her principal dwelling. The amount of the credit is based on the
fair market value of the person's principal dwelling, up to a fair market value of
$60,000. The credit is paid from both the general fund, in an amount equal to the
amount paid for the school levy property tax credit, and from the lottery fund.
School property tax income tax credit
Under current law, a person may claim an income tax credit based on the
amount of property taxes or rent paid on the person's principal dwelling. The amount
of the credit is equal to 12 percent of the first $2,500 of property taxes or rent paid
on the person's principal dwelling, or, for married persons filing separately, 12
percent of the first $1,250 of property taxes or rent paid on the person's principal
dwelling. Under the bill, with regard to rent paid on a person's principal dwelling
the amount of the credit is equal to 16 percent of the first $2,500 of rent paid on the
person's principal dwelling, or, for married persons filing separately, 16 percent of the
first $1,250 of rent paid on the person's principal dwelling.
Related entities
For purposes of calculating a taxpayer's state income tax or franchise tax
liability, this bill requires a taxpayer to add the following amounts to the taxpayer's
federal taxable income: any amount that the taxpayer deducted or excluded under
the Internal Revenue Code for management and service fees, interest expenses and
costs, intangible expenses and costs, and any other expenses and costs directly or
indirectly paid, accrued, or incurred to, or in connection directly or indirectly with
one or more direct or indirect transactions with, one or more related entities.
The bill also authorizes the Department of Revenue (DOR) to allow the tax
consequences of a transaction, as asserted by a taxpayer, even if DOR initially
disallows the consequences by asserting the sham transaction doctrine or a related
doctrine, if a taxpayer meets certain conditions. The conditions include the
taxpayer's ability to demonstrate that the transaction had a valid, good faith,
business purpose other than tax avoidance; that the business purpose is
commensurate with the transaction's tax benefit; and that the transaction had
economic substance apart from the taxpayer's asserted tax benefit.
Also under the bill, a taxpayer is not required to add to the taxpayer's federal
taxable income certain expenses or costs as specified in the bill if a number of
conditions apply. The conditions include the following:
1. The transaction to which the expenses and costs apply did not have as its
principal purpose tax avoidance.
2. The related entity to whom the taxpayer paid the expenses or costs paid,
accrued, or incurred such amounts to a person who is not a related entity.
3. The related entity was subject to tax on its net income, and a measure of the
tax included the expenses or costs received from the taxpayer.
Computers
Under current law, computers and certain computer-related equipment are
exempt from the property tax imposed on the real and personal property of a
business. Under the bill, no property owner may claim the property tax exemption
for computers and computer-related equipment unless the property owner is a
business that has less than $5,000,000 in gross receipts, as determined by DOR, in
the year in which the property owner claims the exemption.
Luxury boxes
Under the bill, the lease of luxury boxes, sky boxes, and club seats at a sports
facility is subject to a sales tax at the rate of 5 percent of the gross receipts from the
lease of such boxes and seats.
This bill will be referred to the Joint Survey Committee on Tax Exemptions for
a detailed analysis, which will be printed as an appendix to this bill.
For further information see the state and local 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:
AB756, s. 1
1Section
1. 20.566 (2) (am) of the statutes is repealed.
AB756, s. 2
2Section
2. 20.566 (2) (r) of the statutes is amended to read:
AB756,3,53
20.566
(2) (r)
Lottery and gaming Homeowner's tax credit administration. 4From the lottery fund, the amounts in the schedule for the administration of the
5lottery and gaming homeowner's tax credit.
AB756, s. 3
6Section
3. 20.835 (3) (b) of the statutes is repealed.
AB756, s. 4
1Section
4. 20.835 (3) (bm) of the statutes is created to read:
AB756,4,32
20.835
(3) (bm)
Homeowner's tax credit; general fund. A sum sufficient to make
3the payments under s. 79.10 (5) and (6m) (c), not to exceed $469,305,000.
AB756, s. 5
4Section
5. 20.835 (3) (q) of the statutes is amended to read:
AB756,4,75
20.835
(3) (q)
Lottery and gaming Homeowner's tax credit. From the lottery
6fund, a sum sufficient to make the payments under s. 79.10 (5) and (6m) (c)
, not
7including the amount paid under s. 20.835 (3) (bm).
AB756, s. 6
8Section
6. 20.835 (3) (s) of the statutes is amended to read:
AB756,4,119
20.835
(3) (s)
Lottery and gaming Homeowner's tax credit; late applications. 10From the lottery fund, a sum sufficient to make payments for the
lottery and gaming 11homeowner's tax credit under s. 79.10 (10) (bm) and (bn).
AB756, s. 7
12Section
7. 70.11 (39) of the statutes is amended to read:
AB756,4,2513
70.11
(39) Computers. If the owner of the property fulfills the requirements
14under s. 70.35
and if the property owner is a business that has less than $5,000,000
15in gross receipts, as determined by the department of revenue, in the year in which
16the owner claims an exemption under this subsection, mainframe computers,
17minicomputers, personal computers, networked personal computers, servers,
18terminals, monitors, disk drives, electronic peripheral equipment, tape drives,
19printers, basic operational programs, systems software, and prewritten software.
20The exemption under this subsection does not apply to custom software, fax
21machines, copiers, equipment with embedded computerized components or
22telephone systems, including equipment that is used to provide telecommunications
23services, as defined in s. 76.80 (3). For the purposes of s. 79.095, the exemption under
24this subsection does not apply to property that is otherwise exempt under this
25chapter.
AB756, s. 8
1Section
8. 71.01 (5p) of the statutes is created to read:
AB756,5,112
71.01
(5p) "Intangible expenses and costs" includes expenses, losses, and costs
3for, related to, or directly or indirectly in connection with the direct or indirect
4acquisition of, use of, maintenance or management of, ownership of, sale of, exchange
5of, or any other direct or indirect disposition of intangible property to the extent that
6such expenses, losses, and costs are allowed as deductions or costs to determine
7federal taxable income under the Internal Revenue Code. For purposes of this
8subsection, "expenses, losses, and costs" include losses related to or incurred directly
9or indirectly in connection with factoring transactions and discounting transactions;
10royalty, patent, technical, and copyright fees; licensing fees; and other similar
11expenses and costs.
AB756, s. 9
12Section
9. 71.01 (9b) of the statutes is created to read:
AB756,5,1513
71.01
(9b) "Related entity" means any person related to a taxpayer as provided
14under section
267,
318, or
1563 of the Internal Revenue Code during all or a portion
15of the taxpayer's taxable year.
AB756, s. 10
16Section
10. 71.05 (6) (a) 21. of the statutes is created to read:
AB756,5,2117
71.05
(6) (a) 21. Any amount deducted or excluded under the Internal Revenue
18Code for management and service fees, interest expenses and costs, intangible
19expenses and costs, and any other expenses and costs directly or indirectly paid,
20accrued, or incurred to, or in connection directly or indirectly with one or more direct
21or indirect transactions with, one or more related entities.
AB756, s. 11
22Section
11. 71.07 (9) (b) 5. of the statutes is amended to read:
AB756,6,423
71.07
(9) (b) 5. For taxable years beginning after December 31, 1999, subject
24to the limitations under this subsection a claimant may claim as a credit against, but
25not to exceed the amount of, taxes under s. 71.02,
12%
12 percent of the first $2,500
1of property taxes or
16 percent of the first $2,500 of rent constituting property taxes,
2or except that a married person filing separately may claim 12% 12 percent of the
3first $1,250 of property taxes or
16 percent of the first $1,250 of rent constituting
4property taxes
of a married person filing separately.
AB756, s. 12
5Section
12. 71.22 (3m) of the statutes is created to read:
AB756,6,156
71.22
(3m) "Intangible expenses and costs" includes expenses, losses, and costs
7for, related to, or directly or indirectly in connection with the direct or indirect
8acquisition of, use of, maintenance or management of, ownership of, sale of, exchange
9of, or any other direct or indirect disposition of intangible property to the extent that
10such expenses, losses, and costs are allowed as deductions or costs to determine
11federal taxable income under the Internal Revenue Code. For purposes of this
12subsection, "expenses, losses, and costs" include losses related to or incurred directly
13or indirectly in connection with factoring transactions and discounting transactions;
14royalty, patent, technical, and copyright fees; licensing fees; and other similar
15expenses and costs.
AB756, s. 13
16Section
13. 71.22 (9b) of the statutes is created to read:
AB756,6,1917
71.22
(9b) "Related entity" means any person related to a taxpayer as provided
18under section
267,
318, or
1563 of the Internal Revenue Code during all or a portion
19of the taxpayer's taxable year.
AB756, s. 14
20Section
14. 71.26 (2) (a) of the statutes is renumbered 71.26 (2) (a) (intro.) and
21amended to read:
AB756,6,2422
71.26
(2) (a)
Corporations in general. (intro.) The "net income" of a corporation
23means the gross income as computed under the Internal Revenue Code as modified
24under sub. (3)
minus and modified as follows:
AB756,6,25
251. Minus the amount of recapture under s. 71.28 (1di)
plus.
AB756,7,1
12. Plus the amount of credit computed under s. 71.28 (1), (3), (4), and (5)
plus.
AB756,7,6
23. Plus the amount of the credit computed under s. 71.28 (1dd), (1de), (1di),
3(1dj), (1dL), (1dm), (1ds), (1dx), and (3g) and not passed through by a partnership,
4limited liability company, or tax-option corporation that has added that amount to
5the partnership's, limited liability company's, or tax-option corporation's income
6under s. 71.21 (4) or 71.34 (1) (g)
plus.
AB756,7,10
74. Plus the amount of losses from the sale or other disposition of assets the gain
8from which would be wholly exempt income, as defined in sub. (3) (L), if the assets
9were sold or otherwise disposed of at a gain and minus deductions, as computed
10under the Internal Revenue Code as modified under sub. (3)
, plus.
AB756,7,14
115. Plus or minus, as appropriate, an amount equal to the difference between
12the federal basis and Wisconsin basis of any asset sold, exchanged, abandoned, or
13otherwise disposed of in a taxable transaction during the taxable year, except as
14provided in par. (b) and s. 71.45 (2) and (5).
AB756, s. 15
15Section
15. 71.26 (2) (a) 6. of the statutes is created to read:
AB756,7,2016
71.26
(2) (a) 6. Plus any amount deducted or excluded under the Internal
17Revenue Code for management and service fees, interest expenses and costs,
18intangible expenses and costs, and any other expenses and costs directly or indirectly
19paid, accrued, or incurred to, or in connection directly or indirectly with one or more
20direct or indirect transactions with, one or more related entities.
AB756, s. 16
21Section
16. 71.34 (1) (j) of the statutes is created to read:
AB756,8,222
71.34
(1) (j) An addition shall be made for any amount deducted or excluded
23under the Internal Revenue Code for management and service fees, interest
24expenses and costs, intangible expenses and costs, and any other expenses and costs
25directly or indirectly paid, accrued, or incurred to, or in connection directly or
1indirectly with one or more direct or indirect transactions with, one or more related
2entities.
AB756, s. 17
3Section
17. 71.42 (1p) of the statutes is created to read:
AB756,8,134
71.42
(1p) "Intangible expenses and costs" includes expenses, losses, and costs
5for, related to, or directly or indirectly in connection with the direct or indirect
6acquisition of, use of, maintenance or management of, ownership of, sale of, exchange
7of, or any other direct or indirect disposition of intangible property to the extent that
8such expenses, losses, and costs are allowed as deductions or costs to determine
9federal taxable income under the Internal Revenue Code. For purposes of this
10subsection, "expenses, losses, and costs" include losses related to or incurred directly
11or indirectly in connection with factoring transactions and discounting transactions;
12royalty, patent, technical, and copyright fees; licensing fees; and other similar
13expenses and costs.
AB756, s. 18
14Section
18. 71.42 (4m) of the statutes is created to read:
AB756,8,1715
71.42
(4m) "Related entity" means any person related to a taxpayer as provided
16under section
267,
318, or
1563 of the Internal Revenue Code during all or a portion
17of the taxpayer's taxable year.
AB756, s. 19
18Section
19. 71.45 (2) (a) 16. of the statutes is created to read:
AB756,8,2419
71.45
(2) (a) 16. By adding to federal taxable income any amount deducted or
20excluded under the Internal Revenue Code for management and service fees,
21interest expenses and costs, intangible expenses and costs, and any other expenses
22and costs directly or indirectly paid, accrued, or incurred to, or in connection directly
23or indirectly with one or more direct or indirect transactions with, one or more
24related entities.
AB756, s. 20
25Section
20. 71.738 (3m) of the statutes is created to read:
AB756,9,3
171.738
(3m) "Related entity" means any person related to a taxpayer as
2provided under section
267,
318, or
1563 of the Internal Revenue Code during all or
3a portion of the taxpayer's taxable year.
AB756, s. 21
4Section
21. 71.80 (23) of the statutes is created to read:
AB756,9,115
71.80
(23) Transactions. (a) Subject to par. (b), if the department asserts the
6sham transaction doctrine, or any other related tax doctrine, to disallow the tax
7consequences, as asserted by the taxpayer, of a transaction, the department may
8allow the tax consequences, as asserted by the taxpayer, of the transaction, if the
9taxpayer demonstrates by clear and convincing evidence that the transaction had a
10valid, good faith, business purpose other than tax avoidance and had economic
11substance apart from any tax benefit asserted by the taxpayer.
AB756,9,1712
(b) For all instances in which the department disallows the tax consequences,
13as asserted by the taxpayer, of a transaction, the department may allow the tax
14consequences, as asserted by the taxpayer, of the transaction, if the taxpayer
15demonstrates by clear and convincing evidence that the transaction's nontaxable
16business purpose, as asserted by the taxpayer, is commensurate with the
17transaction's tax benefit, as asserted by the taxpayer.
AB756,9,2018
(c) The adjustments under ss. 71.05 (6) (a) 21., 71.26 (2) (a) 6., 71.34 (1) (j), and
1971.45 (2) (a) 16. shall not apply to any expenses or costs if all of the following apply
20to the expenses or costs:
AB756,9,2221
1. The transaction to which the expenses or costs are related did not have tax
22avoidance as its principal purpose.
AB756,9,2523
2. The related entity to whom the taxpayer paid interest expenses or costs,
24intangible expenses, or management or service fees during the taxable year directly
25or indirectly paid, accrued, or incurred such amounts to a person who is not a related
1entity. For purposes of this subdivision, "interest" means interest on a debt for which
2the taxpayer is the guarantor, if the interest rate is the market rate in effect at the
3time of the debt's origination, but excludes interest that is paid in connection with
4any debt that is incurred to acquire the taxpayer's assets or stock under section
368 5of the Internal Revenue Code.
AB756,10,196
3. The related entity was subject to tax on its net income in this state, or any
7state, U.S. possession, or foreign country; a measure of the tax paid included the
8interest income, intangible income, or management or service fees received from the
9taxpayer; and the tax rate applied to the interest income, intangible income, or
10management or service fees was not less than 3 percentage points below the tax rate
11that would have applied under s. 71.27. For purposes of this subdivision, "any state,
12U.S. possession, or foreign country" does not include any state, U.S. possession, or
13foreign country under the laws of which the taxpayer files or could have elected to
14file with the related entity, or the related entity files or could have elected to file with
15another entity, a combined income tax report or return, a consolidated income tax
16report or return, or any other report or return that is due because of the imposition
17of a tax that is measured on or by income, if the report of return results in eliminating
18the tax effects of transactions directly or indirectly between either the taxpayer and
19the related entity or between the related entity and another entity.
AB756, s. 22
20Section
22. 74.09 (3) (b) 3. of the statutes is amended to read:
AB756,10,2421
74.09
(3) (b) 3. The tax levied on the property by the school district where the
22property is located
minus the credit under s. 79.10 (4) allocable to the property, for
23the previous year and the current year, and the percentage change in that net tax
24between those years.
AB756, s. 23
25Section
23. 77.52 (2) (a) 13. of the statutes is created to read:
AB756,11,3
177.52
(2) (a) 13. The lease of luxury boxes, sky boxes, and club seats at a sports
2facility, if the sale of admissions to sporting events at the facility is subject to the tax
3imposed under this section.
AB756, s. 24
4Section
24. 79.10 (1) (b) of the statutes is repealed.
AB756, s. 25
5Section
25. 79.10 (1) (e) of the statutes is repealed.
AB756, s. 26
6Section
26. 79.10 (1m) (b) of the statutes is amended to read:
AB756,11,97
79.10
(1m) (b) Counties and municipalities shall submit to the department of
8revenue all data related to the
lottery and gaming
homeowner's tax credit and
9requested by the department of revenue.