LRB-1855/2
JK:wlj:pg
2005 - 2006 LEGISLATURE
April 5, 2005 - Introduced by Representatives Jensen, Rhoades, LeMahieu,
Ballweg, Lamb, Vos, F. Lasee, Nass, Moulton, Petrowski, Shilling, Gard,
Vrakas, Strachota, J. Fitzgerald, Hines, Nerison, Seidel, Kleefisch,
Nischke, Ward, Jeskewitz, Townsend, Pettis, Bies, Hahn, Ainsworth,
Musser, Davis, Suder, Kreibich, Mursau and Pridemore, cosponsored by
Senators Darling, Olsen, Harsdorf, Leibham, Stepp, Brown and Kanavas.
Referred to Committee on Colleges and Universities.
AB297,1,4
1An Act to amend 71.05 (6) (a) 15., 71.21 (4), 71.26 (2) (a), 71.34 (1) (g), 71.45 (2)
2(a) 10. and 77.92 (4); and
to create 71.07 (5r), 71.10 (4) (cd), 71.28 (5r), 71.30
3(3) (dm), 71.47 (5r) and 71.49 (1) (dm) of the statutes;
relating to: an education
4tax credit for businesses.
Analysis by the Legislative Reference Bureau
This bill creates an income tax and franchise tax credit for businesses that pay
tuition for an individual to attend a university, college, or technical college. Sole
proprietorships, corporations, and insurers may claim the credit. Partnerships,
limited liability companies, and tax-option corporations compute the credit but pass
it on to the partners, members, and shareholders in proportion to their ownership
interests. The credit is an amount equal to: 1) 50 percent of the tuition paid by a
business for an individual to attend school in a taxable year, if the individual is
enrolled in a degree-granting program; and 2) 75 percent of the tuition paid by a
business for an individual to attend school in a taxable year, if the individual is
enrolled in a degree-granting program and if the individual's taxable income is not
more than 185 percent of the federal poverty line. If the credit claimed by a business
exceeds the business's tax liability, the state will not issue a refund check, but the
business may carry forward any remaining credit to subsequent taxable years.
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:
AB297, s. 1
1Section
1. 71.05 (6) (a) 15. of the statutes is amended to read:
AB297,2,62
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), (3n), (3s), (3t), (5b),
and (5d)
, and (5r) 4and not passed through by a partnership, limited liability company, or tax-option
5corporation that has added that amount to the partnership's, company's, or
6tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g).
AB297, s. 2
7Section
2. 71.07 (5r) of the statutes is created to read:
AB297,2,88
71.07
(5r) E
ducation credit. (a) In this subsection:
AB297,2,119
1. "Claimant" means a sole proprietor, a partner, a member of a limited liability
10company, or a shareholder of a tax-option corporation who files a claim under this
11subsection.
AB297,2,1312
2. "Degree-granting program" means an educational program for which an
13associate, a bachelor's, or a graduate degree is awarded upon successful completion.
AB297,2,1414
3. "Family member" has the meaning given in s. 157.061 (7).
AB297,2,1715
4. "Managing employee" means an individual who wholly or partially exercises
16operational or managerial control over, or who directly or indirectly conducts, the
17operation of the claimant's business.
AB297,2,1818
5. "Poverty line" has the meaning given under s. 49.001 (5).
AB297,2,1919
6. "Qualified postsecondary institution" means all of the following:
AB297,3,3
1a. A University of Wisconsin System institution, a technical college system
2institution, or a regionally accredited 4-year nonprofit college or university having
3its regional headquarters and principal place of business in this state.
AB297,3,54
b. A school approved under s. 45.54 if the delivery of education occurs in this
5state.
AB297,3,86
(b) Subject to the limitations provided in this subsection, a claimant may claim
7as a credit against the tax imposed under ss. 71.02 and 71.08 an amount equal to the
8following:
AB297,3,129
1. Fifty percent of the tuition that the claimant paid or incurred during the
10taxable year for an individual to participate in an education program of a qualified
11postsecondary institution, if the individual was enrolled in a degree-granting
12program.
AB297,3,1813
2. Seventy-five percent of the tuition that the claimant paid or incurred during
14the taxable year for an individual to participate in an education program of a
15qualified postsecondary institution, if the individual was enrolled in a
16degree-granting program and if the individual's taxable income in the year prior to
17commencing participation in the education program in connection with which a
18credit is claimed is not more than 185 percent of the poverty line.
AB297,3,2319
(c) 1. No credit may be allowed under par. (b) unless the claimant obtains
20written certification from a qualified postsecondary institution concerning the
21amount of tuition that the claimant paid or incurred during the taxable year for an
22individual to participate in an education program of the qualified postsecondary
23institution and includes a copy of the certification with the claimant's return.
AB297,4,824
2. No credit may be allowed under par. (b) 2. unless the claimant obtains
25written certification from a qualified postsecondary institution that the taxable
1income of the individual for whom the claimant has paid or incurred tuition during
2the taxable year for the individual to participate in an education program of the
3qualified postsecondary institution is not more than 185 percent of the poverty line
4and includes a copy of the certification with the claimant's return. For purposes of
5this subdivision and par. (b) 2., if an individual for whom the claimant has paid or
6incurred tuition is claimed as a dependent on another person's tax return, the
7individual's taxable income shall be the taxable income of the person on whose return
8the individual is claimed as a dependent.
AB297,4,119
3. No credit may be allowed under par. (b) unless the claimant certifies to the
10department of revenue that the claimant will not be reimbursed for any amount of
11tuition for which the claimant claims a credit under par. (b).
AB297,4,1412
(d) A claimant may not claim the credit under par. (b) for any tuition amounts
13that the claimant excluded under s. 71.05 (6) (b) 28. or under section
127 of the
14Internal Revenue Code.
AB297,4,1715
(e) A claimant may not claim the credit under par. (b) for any tuition amounts
16that the claimant paid or incurred for a family member of the claimant or for a family
17member of a managing employee unless all of the following apply:
AB297,4,2118
1. The family member was employed an average of at least 20 hours a week as
19an employee of the claimant, or the claimant's business, during the one-year period
20prior to commencing participation in the education program in connection with
21which the claimant claims a credit under par. (b).
AB297,4,2322
2. The family member is enrolled in a degree-granting program that is
23substantially related to the claimant's business.
AB297,4,2524
3. The family member is making satisfactory progress towards completing the
25degree-granting program under subd. 2.
AB297,5,2
1(f) The carry-over provisions of s. 71.28 (4) (e) and (f), as they apply to the credit
2under s. 71.28 (4), apply to the credit under this subsection.
AB297,5,103
(g) Partnerships, limited liability companies, and tax-option corporations may
4not claim the credit under this subsection, but the eligibility for, and the amount of,
5the credit are based on their payment of tuition under par. (b). A partnership, limited
6liability company, or tax-option corporation shall compute the amount of credit that
7each of its partners, members, or shareholders may claim and shall provide that
8information to each of them. Partners, members of limited liability companies, and
9shareholders of tax-option corporations may claim the credit in proportion to their
10ownership interest.
AB297,5,1211
(h) Section 71.28 (4) (g) and (h), as it applies to the credit under s. 71.28 (4),
12applies to the credit under this subsection.
AB297,5,1713
(i) The department of revenue shall biennially submit a report to the legislature
14under s. 13.172 (2) that identifies each qualified postsecondary institution for which
15it has received written certification from a claimant under par. (c). The report shall
16specify the total amount of the tuition for each such institution that is claimed as a
17credit under this subsection in the previous biennium.
AB297, s. 3
18Section
3. 71.10 (4) (cd) of the statutes is created to read:
AB297,5,1919
71.10
(4) (cd) The education credit under s. 71.07 (5r).
AB297, s. 4
20Section
4. 71.21 (4) of the statutes is amended to read:
AB297,5,2321
71.21
(4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di),
22(2dj), (2dL), (2dm), (2ds), (2dx), (3g), (3n), (3s), (3t),
and (5b)
, and (5r) and passed
23through to partners shall be added to the partnership's income.
AB297, s. 5
24Section
5. 71.26 (2) (a) of the statutes is amended to read:
AB297,6,18
171.26
(2) (a)
Corporations in general. The "net income" of a corporation means
2the gross income as computed under the Internal Revenue Code as modified under
3sub. (3) minus the amount of recapture under s. 71.28 (1di) plus the amount of credit
4computed under s. 71.28 (1), (3), (4), and (5) minus, as provided under s. 71.28 (3) (c)
57., the amount of the credit under s. 71.28 (3) that the taxpayer added to income
6under this paragraph at the time that the taxpayer first claimed the credit plus the
7amount of the credit computed under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm),
8(1ds), (1dx), (3g), (3n), (3t),
and (5b)
, and (5r) and not passed through by a
9partnership, limited liability company, or tax-option corporation that has added that
10amount to the partnership's, limited liability company's, or tax-option corporation's
11income under s. 71.21 (4) or 71.34 (1) (g) plus the amount of losses from the sale or
12other disposition of assets the gain from which would be wholly exempt income, as
13defined in sub. (3) (L), if the assets were sold or otherwise disposed of at a gain and
14minus deductions, as computed under the Internal Revenue Code as modified under
15sub. (3), plus or minus, as appropriate, an amount equal to the difference between
16the federal basis and Wisconsin basis of any asset sold, exchanged, abandoned, or
17otherwise disposed of in a taxable transaction during the taxable year, except as
18provided in par. (b) and s. 71.45 (2) and (5).
AB297, s. 6
19Section
6. 71.28 (5r) of the statutes is created to read:
AB297,6,2020
71.28
(5r) Education credit. (a) In this subsection:
AB297,6,2121
1. "Claimant" means a corporation that files a claim under this subsection.
AB297,6,2322
2. "Degree-granting program" means an education program for which an
23associate, a bachelor's, or a graduate degree is awarded upon successful completion.
AB297,6,2424
3. "Family member" has the meaning given in s. 157.061 (7).
AB297,7,3
14. "Managing employee" means an individual who wholly or partially exercises
2operational or managerial control over, or who directly or indirectly conducts, the
3operation of the claimant's business.
AB297,7,44
5. "Poverty line" has the meaning given under s. 49.001 (5).
AB297,7,55
6. "Qualified postsecondary institution" means all of the following:
AB297,7,86
a. A University of Wisconsin System institution, a technical college system
7institution, or a regionally accredited 4-year nonprofit college or university having
8its regional headquarters and principal place of business in this state.
AB297,7,109
b. A school approved under s. 45.54 if the delivery of education occurs in this
10state.
AB297,7,1211
(b) Subject to the limitations provided in this subsection, a claimant may claim
12as a credit against the tax imposed under s. 71.23 an amount equal to the following:
AB297,7,1613
1. Fifty percent of the tuition that the claimant paid or incurred during the
14taxable year for an individual to participate in an education program of a qualified
15postsecondary institution, if the individual was enrolled in a degree-granting
16program.
AB297,7,2217
2. Seventy-five percent of the tuition that the claimant paid or incurred during
18the taxable year for an individual to participate in an education program of a
19qualified postsecondary institution, if the individual was enrolled in a
20degree-granting program and if the individual's taxable income in the year prior to
21commencing participation in the education program in connection with which a
22credit is claimed is not more than 185 percent of the poverty line.
AB297,8,223
(c) 1. No credit may be allowed under par. (b) unless the claimant obtains
24written certification from a qualified postsecondary institution concerning the
25amount of tuition that the claimant paid or incurred during the taxable year for an
1individual to participate in an education program of the qualified postsecondary
2institution and includes a copy of the certification with the claimant's return.
AB297,8,123
2. No credit may be allowed under par. (b) 2. unless the claimant obtains
4written certification from a qualified postsecondary institution that the taxable
5income of the individual for whom the claimant has paid or incurred tuition during
6the taxable year for the individual to participate in an education program of the
7qualified postsecondary institution is not more than 185 percent of the poverty line
8and includes a copy of the certification with the claimant's return. For purposes of
9this subdivision and par. (b) 2., if an individual for whom the claimant has paid or
10incurred tuition is claimed as a dependent on another person's tax return, the
11individual's taxable income shall be the taxable income of the person on whose return
12the individual is claimed as a dependent.
AB297,8,1513
3. No credit may be allowed under par. (b) unless the claimant certifies to the
14department of revenue that the claimant will not be reimbursed for any amount of
15tuition for which the claimant claims a credit under par. (b).
AB297,8,1716
(d) A claimant may not claim the credit under par. (b) for any tuition amounts
17that the claimant has excluded under section
127 of the Internal Revenue Code.
AB297,8,2018
(e) A claimant may not claim the credit under par. (b) for any tuition amounts
19that the claimant paid or incurred for a family member of a managing employee
20unless all of the following apply:
AB297,8,2421
1. The family member was employed an average of at least 20 hours a week as
22an employee of the claimant, or the claimant's business, during the one-year period
23prior to commencing participation in the education program in connection with
24which the claimant claims a credit under par. (b).
AB297,9,2
12. The family member is enrolled in a degree-granting program that is
2substantially related to the claimant's business.
AB297,9,43
3. The family member is making satisfactory progress towards completing the
4degree-granting program under subd. 2.
AB297,9,65
(f) The carry-over provisions of sub. (4) (e) and (f), as they apply to the credit
6under sub. (4), apply to the credit under this subsection.
AB297,9,147
(g) Partnerships, limited liability companies, and tax-option corporations may
8not claim the credit under this subsection, but the eligibility for, and the amount of,
9the credit are based on their payment of tuition under par. (b). A partnership, limited
10liability company, or tax-option corporation shall compute the amount of credit that
11each of its partners, members, or shareholders may claim and shall provide that
12information to each of them. Partners, members of limited liability companies, and
13shareholders of tax-option corporations may claim the credit in proportion to their
14ownership interest.
AB297,9,1615
(h) Subsection (4) (g) and (h), as it applies to the credit under sub. (4), applies
16to the credit under this subsection.
AB297,9,2117
(i) The department of revenue shall biennially submit a report to the legislature
18under s. 13.172 (2) that identifies each qualified postsecondary institution for which
19it has received written certification from a claimant under par. (c). The report shall
20specify the total amount of the tuition for each such institution that is claimed as a
21credit under this subsection in the previous biennium.
AB297, s. 7
22Section
7. 71.30 (3) (dm) of the statutes is created to read:
AB297,9,2323
71.30
(3) (dm) The education credit under s. 71.28 (5r).
AB297, s. 8
24Section
8. 71.34 (1) (g) of the statutes is amended to read: