LRB-0576/1
JK&MES:wlj:jf
2005 - 2006 LEGISLATURE
January 27, 2005 - Introduced by Representatives Black, Boyle, Turner,
Berceau, Zepnick, Pocan, Pope-Roberts, Cullen, Parisi
and Lehman,
cosponsored by Senators Wirch, Carpenter, Coggs and Miller. Referred to
Joint Survey Committee on Tax Exemptions.
AB44,2,3 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), 41.41 (10) (c) 1., 70.11 (39), 71.07 (9) (b) 5., 74.09 (3) (b) 3., 79.10
5(1m) (b), 79.10 (2), 79.10 (5), 79.10 (6m) (a), 79.10 (7m) (b) (title), 79.10 (7m) (b)
61., 79.10 (9) (bm), 79.10 (10) (title), 79.10 (10) (a), 79.10 (10) (bm) 1., 79.10 (10)
7(bm) 2., 79.10 (11) (title), 79.10 (11) (b), 79.10 (11) (c), 79.11 (3) (b) and 565.02
8(7); and to create 20.835 (3) (bm), 71.01 (5p), 71.01 (9b), 71.05 (6) (a) 21., 71.22
9(3m), 71.22 (9b), 71.26 (2) (a) 6., 71.34 (1) (j), 71.42 (1p), 71.42 (4m), 71.45 (2)
10(a) 16., 71.738 (3m), 71.80 (23) and 77.52 (2) (a) 13. of the statutes; relating to:
11creating a homeowner's property tax credit, eliminating the school levy
12property tax credit and the lottery and gaming property tax credit, adding
13payments to related entities to federal taxable income for state income tax and
14franchise tax purposes, increasing the amount of the school property income tax

1credit, imposing the sales tax on the lease of luxury boxes at sports facilities,
2claiming the property tax exemption for computers, and making an
3appropriation.
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 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 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.

This 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 that is two years prior to the year in which the property owner claims the
exemption.
Luxury boxes
Under the bill, the furnishing 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 furnishing 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:
AB44, s. 1 1Section 1. 20.566 (2) (am) of the statutes is repealed.
AB44, s. 2 2Section 2. 20.566 (2) (r) of the statutes is amended to read:
AB44,4,3
120.566 (2) (r) Lottery and gaming Homeowner's tax credit administration.
2From the lottery fund, the amounts in the schedule for the administration of the
3lottery and gaming homeowner's tax credit.
AB44, s. 3 4Section 3. 20.835 (3) (b) of the statutes is repealed.
AB44, s. 4 5Section 4. 20.835 (3) (bm) of the statutes is created to read:
AB44,4,76 20.835 (3) (bm) Homeowner's tax credit; general fund. A sum sufficient to make
7the payments under s. 79.10 (5) and (6m) (c), not to exceed $469,305,000.
AB44, s. 5 8Section 5. 20.835 (3) (q) of the statutes is amended to read:
AB44,4,119 20.835 (3) (q) Lottery and gaming Homeowner's tax credit. From the lottery
10fund, a sum sufficient to make the payments under s. 79.10 (5) and (6m) (c), not
11including the amount paid under par. (bm)
.
AB44, s. 6 12Section 6. 20.835 (3) (s) of the statutes is amended to read:
AB44,4,1513 20.835 (3) (s) Lottery and gaming Homeowner's tax credit; late applications.
14From the lottery fund, a sum sufficient to make payments for the lottery and gaming
15homeowner's tax credit under s. 79.10 (10) (bm) and (bn).
AB44, s. 7 16Section 7. 41.41 (10) (c) 1. of the statutes is amended to read:
AB44,4,2517 41.41 (10) (c) 1. Except as provided in par. (d), on or before each January 31,
18the department shall pay to the treasurer of each taxation district specified in par.
19(b), with respect to all land in the Kickapoo valley reserve and all land acquired by
20the board on or before January 1 of the preceding year, an amount determined by
21multiplying the estimated value of the land equated to the average level of
22assessment in the taxation district by the aggregate gross general property tax rate,
23exclusive of the rate that applies under s. 70.58 and without respect to the school levy
24tax credit under s. 79.10,
that would apply to the land in that taxation district for that
25year if it were taxable.
AB44, s. 8
1Section 8. 70.11 (39) of the statutes is amended to read:
AB44,5,142 70.11 (39) Computers. If the owner of the property fulfills the requirements
3under s. 70.35 and if the property owner is a business that has less than $5,000,000
4in gross receipts, as determined by the department of revenue, in the year that is 2
5years prior to the year in which the owner claims an exemption under this
6subsection
, mainframe computers, minicomputers, personal computers, networked
7personal computers, servers, terminals, monitors, disk drives, electronic peripheral
8equipment, tape drives, printers, basic operational programs, systems software, and
9prewritten software. The exemption under this subsection does not apply to custom
10software, fax machines, copiers, equipment with embedded computerized
11components or telephone systems, including equipment that is used to provide
12telecommunications services, as defined in s. 76.80 (3). For the purposes of s. 79.095,
13the exemption under this subsection does not apply to property that is otherwise
14exempt under this chapter.
AB44, s. 9 15Section 9. 71.01 (5p) of the statutes is created to read:
AB44,5,2516 71.01 (5p) "Intangible expenses and costs" includes expenses, losses, and costs
17for, related to, or directly or indirectly in connection with the direct or indirect
18acquisition of, use of, maintenance or management of, ownership of, sale of, exchange
19of, or any other direct or indirect disposition of intangible property to the extent that
20such expenses, losses, and costs are allowed as deductions or costs to determine
21federal taxable income under the Internal Revenue Code. For purposes of this
22subsection, "expenses, losses, and costs" include losses related to or incurred directly
23or indirectly in connection with factoring transactions and discounting transactions;
24royalty, patent, technical, and copyright fees; licensing fees; and other similar
25expenses and costs.
AB44, s. 10
1Section 10. 71.01 (9b) of the statutes is created to read:
AB44,6,42 71.01 (9b) "Related entity" means any person related to a taxpayer as provided
3under section 267, 318, or 1563 of the Internal Revenue Code during all or a portion
4of the taxpayer's taxable year.
AB44, s. 11 5Section 11. 71.05 (6) (a) 21. of the statutes is created to read:
AB44,6,106 71.05 (6) (a) 21. Any amount deducted or excluded under the Internal Revenue
7Code for management and service fees, interest expenses and costs, intangible
8expenses and costs, and any other expenses and costs directly or indirectly paid,
9accrued, or incurred to, or in connection directly or indirectly with one or more direct
10or indirect transactions with, one or more related entities.
AB44, s. 12 11Section 12. 71.07 (9) (b) 5. of the statutes is amended to read:
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