AB968: Bill Text

LRB-4358/1

JK&RPN:kjf:rs

2005 - 2006 LEGISLATURE

2005 Assembly BILL 968

February 2, 2006 - Introduced by Representatives Strachota, Gard, J. Fitzgerald, Huebsch, Jensen, Wood, Hundertmark, Nischke, Mursau, Freese, Lothian, Krawczyk, Montgomery, Lamb, Kreibich, Towns, Gunderson, Ballweg, Loeffelholz, Vos, Albers, LeMahieu, Jeskewitz, F. Lasee, Pettis, McCormick and Musser, cosponsored by Senators Kanavas, Darling, Stepp, Grothman, Schultz, Brown, Olsen and Roessler. Referred to Committee on Ways and Means.

AB968,2,2 An Act to repeal 77.59 (3m); to amend 71.82 (1) (a), 71.82 (1) (b), 71.82 (1) (c), 71.82 (2) (a), 71.82 (2) (b), 71.82 (2) (c), 71.82 (2) (d), 71.83 (1) (a) 2., 71.83 (1) (a) 3., 71.84 (1), 71.84 (2) (a), 71.84 (2) (c), 71.90 (1), 71.90 (2), 71.91 (6) (d) 1., 71.91 (6) (e) 3., 71.91 (6) (f) 5., 71.91 (6) (g) 2., 73.01 (4) (e) 2., 73.03 (25), 77.59 (4) (a), 77.59 (8m), 77.60 (1) (a), 77.60 (1) (b), 77.60 (2) (intro.), 77.60 (3), 77.60 (4), 77.60 (5), 77.96 (5), 78.68 (1), 78.68 (2) (intro.), 78.68 (3), 227.12 (3), 227.41 (1), 227.41 (3), 227.41 (4), 227.485 (2) (a), 227.485 (3), 227.485 (5), 227.485 (7), 227.485 (10) (intro.) and 803.08; and to create 73.015 (3), 73.14, 227.12 (4), 227.41 (5) and 227.485 (3m) of the statutes; relating to: various duties of the Department of Revenue, including issuing declaratory judgments, conducting audits and assessments, asserting liability, allowing claims for refunds, awarding the costs of litigation to a prevailing party, imposing penalties related to a taxpayer's negligence, calculating interest on unpaid amounts, and requiring the exercise of rule-making authority.

Analysis by the Legislative Reference Bureau

This bill requires the Department of Revenue (DOR) to take certain actions related to administering taxes and fees. Under the bill, generally, with regard to any audit, assessment, or claim for a refund, DOR may not take a position that is contrary to any rule promulgated by DOR that was in effect during the period related to the audit, assessment, or claim or that is contrary to any guidance published by DOR prior to that period and not subsequently retracted, altered, or amended.

Under the bill, generally, a person who is subject to an assessment or audit determination by DOR is not liable for any amount that DOR asserts that the person owes if the liability asserted is the result of a condition that existed in a prior assessment or audit, a DOR employee involved in the prior assessment or audit knew or should have known that the condition existed, and DOR did not assert the liability at the time of the prior assessment or audit. Furthermore, a person against whom DOR asserts a liability may offset against the liability a refund of any tax or fee administered by DOR that the person may claim regardless of whether the time for claiming the refund has expired and regardless of whether the year and transaction related to the liability is the same as that related to the refund.

Also, under the bill, no agreement or waiver of a taxpayer's right to appeal a determination or to file a claim for a refund with respect to a particular audit or assessment period is valid if the agreement or waiver was executed prior to DOR's issuance of an appealable assessment or audit determination. In addition, the time within which DOR may act on the issuance of any assessment or audit determination may not be extended, except with regard to any action by DOR on a taxpayer's petition for redetermination.

Under the bill, DOR may not impose a penalty on a taxpayer for negligence or for otherwise filing an improper return unless the the taxpayer's action was clearly contradicted by statute, rule, or DOR guidance and the statute, rule, or guidance was enacted, promulgated, or published prior to the period for which the penalty is imposed.

The bill requires that a buyer who paid an incorrect amount of sales tax on the sale of an item at retail apply for a refund of the tax with DOR rather than with the seller. The bill also prohibits class action lawsuits against the state or any other party if the relief sought by the plaintiff includes the refund of any tax administered by the state.

Under current law, DOR may choose not to appeal a ruling by the Tax Appeals Commission and, instead, file a notice of nonacquiescence with the clerk of the commission. The effect of filing the notice is that, although the commission's decision is binding on the parties involved in the ruling, the commission's legal reasoning is not binding on DOR with regard to future cases. Under the bill, although DOR may file a notice of nonacquiescence and, therefore, not be required to follow the commission's legal reasoning, the parties involved in the ruling are bound by the commission's decision and the decision may be cited by the commission and the courts in future cases.

Under current law, a person may file a petition with a state agency to issue a declaratory ruling with respect to how a statute or rule applies to any person, property, or set of facts. The agency must, within a reasonable time after receiving the petition, either deny the petition for failure to complete a proper petition or schedule a hearing for the matter described in the petition. Under the bill, if a person files a petition with DOR to issue a declaratory ruling, DOR must either deny the petition for failure to complete a proper petition or schedule a hearing for the matter described in the petition no later than 30 days after receiving the petition. In addition, if DOR does not deny the petition, DOR must hold a hearing and issue a ruling no later than 90 days after receiving the petition, unless the time for holding a hearing and issuing a ruling is extended by a written agreement with all parties involved.

Under current law, generally, a taxpayer must pay interest on any amount owed to DOR that is past due, but not delinquent, at the rate of 12 percent per year. However, any amount that DOR owes a taxpayer is subject to interest at 9 percent per year. Under the bill, amounts that taxpayers owe to DOR that are not delinquent and amounts that DOR owe to taxpayers are subject to interest at an annual rate that is equal to the two-year U.S. Department of the Treasury rate plus 4 percent.

Under current law, generally, a taxpayer must pay interest on any amount owed to DOR that is delinquent at the rate of 18 percent per year, or 1.5 percent per month. Under the bill, delinquent amounts that taxpayers owe to DOR are subject to interest at a monthly rate that is equal to one-half of the two-year U.S. Department of the Treasury Department rate plus 10 percent.

Under current law, if an individual, a small nonprofit corporation, or small business is the prevailing party in any contested legal matter with a state agency and the prevailing party submits a motion for costs, the hearing examiner must award the prevailing party the costs incurred in the matter, unless the examiner finds that the agency was substantially justified in taking its position related to the matter or that special circumstances exist. However, an individual whose federal adjusted gross income is $150,000 or more is not eligible to recover the costs incurred in any contested legal matter with a state agency in which the individual is the prevailing party.

Under this bill, in any proceeding before the Tax Appeals Commission (commission) in which DOR is not the prevailing party and the prevailing party submits a motion for costs, the commission must award the prevailing party the costs incurred in connection with the proceeding unless the commission determines that DOR was substantially justified in taking its position or that special circumstances exist that would make the award unjust. With regard to proceedings before the commission, an individual who is the prevailing party in a contested legal matter with DOR may be awarded the costs incurred in the matter, regardless of the individual's federal adjusted gross income.

Finally, under current law, certain persons may file a petition with a state agency to have the agency promulgate the rule. Under this bill, if a petition filed with DOR alleges that DOR has established a standard by which it construes a tax statute, but has not promulgated a rule to adopt the standard, DOR must begin the rule-making process no later than 90 days after receiving the petition and submit a rule to the legislature no later than 180 days after receiving the petition. The rule does not have to adhere to the standard established by DOR, but must address the same circumstances as the standard addresses.

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:

AB968, s. 1 Section 1. 71.82 (1) (a) of the statutes is amended to read:

AB968,4,5 71.82 (1) (a) In assessing taxes interest shall be added to such taxes at 12% the rate determined under s. 73.14 (7) (a) per year from the date on which such taxes if originally assessed would have become delinquent if unpaid, to the date on which such taxes when subsequently assessed will become delinquent if unpaid.

AB968, s. 2 Section 2. 71.82 (1) (b) of the statutes is amended to read:

AB968,5,3 71.82 (1) (b) Except as otherwise specifically provided, in crediting overpayments of income and surtaxes against underpayments or against taxes to be subsequently collected and in certifying refunds of such taxes interest shall be added at the rate of 9% determined under s. 73.14 (7) (a) per year from the date on which such taxes when assessed would have become delinquent if unpaid to the date on which such overpayment was certified for refund except that if any overpayment of tax is certified for refund within 90 days after the last date prescribed for filing the return of such tax or 90 days after the date of actual filing of the return of such tax, whichever occurs later, no interest shall be allowed on such overpayment. For purposes of this section the return of such tax shall not be deemed actually filed by an employee unless and until the employee has included the written statement required to be filed under s. 71.65 (1). However when any part of a tax paid on an estimate of income, whether paid in connection with a tentative return or not, is refunded or credited to a taxpayer, such refund or credit shall not draw interest.

AB968, s. 3 Section 3. 71.82 (1) (c) of the statutes is amended to read:

AB968,5,8 71.82 (1) (c) Any assessment made as a result of the adjustment or disallowance of a claim for credit under s. 71.07, 71.28 or 71.47 or subch. VIII or IX, except as provided in sub. (2) (c), shall bear interest at 12% the rate determined under s. 73.14 (7) (a) per year from the due date of the claim.

AB968, s. 4 Section 4. 71.82 (2) (a) of the statutes is amended to read:

AB968,5,14 71.82 (2) (a) Income and franchise taxes. Income and franchise taxes shall become delinquent if not paid when due under ss. 71.03 (8), 71.24 (9) and 71.44 (4), and when delinquent shall be subject to interest at the rate of 1.5% a rate that is equal to one-twelfth of the rate determined under s. 73.14 (7) (b) per month until paid.

AB968, s. 5 Section 5. 71.82 (2) (b) of the statutes is amended to read:

AB968,5,19 71.82 (2) (b) Department may reduce delinquent interest. The department shall provide by rule for reduction of interest under par. (a) to 12% the rate determined under s. 73.14 (7) (a) per year in stated instances wherein the secretary of revenue determines that reduction is fair and equitable.

AB968, s. 6 Section 6. 71.82 (2) (c) of the statutes is amended to read:

AB968,6,2 71.82 (2) (c) Adjustment to credits. Any assessment made as a result of the disallowance of a claim for credit made under s. 71.07, 71.28 or 71.47 or subch. VIII or IX with fraudulent intent, or of a portion of a claim made under said subchapters or sections that was excessive and was negligently prepared, shall bear interest from the due date of the claim, until refunded or paid, at one-twelfth of the rate of 1.5% determined under s. 73.14 (7) (b) per month.

AB968, s. 7 Section 7. 71.82 (2) (d) of the statutes is amended to read:

AB968,6,22 71.82 (2) (d) Withholding tax. Of the amounts required to be withheld any amount not deposited or paid over to the department within the time required shall be deemed delinquent and deposit reports or withholding reports filed after the due date shall be deemed late. Delinquent deposits or payments shall bear interest at one-twelfth of the rate of 1.5% determined under s. 73.14 (7) (b) per month from the date deposits or payments are required under this section until deposited or paid over to the department. The department shall provide by rule for reduction of interest on delinquent deposits to 12% the rate determined under s. 73.14 (7) (a) per year in stated instances wherein the secretary of revenue determines reduction fair and equitable. In the case of a timely filed deposit or withholding report, withheld taxes shall become delinquent if not deposited or paid over on or before the due date of the report. In the case of no report filed or a report filed late, withheld taxes shall become delinquent if not deposited or paid over by the due date of the report. In the case of an assessment under s. 71.83 (1) (b) 2., the amount assessed shall become delinquent if not paid on or before the first day of the calendar month following the calendar month in which the assessment becomes final, but if the assessment is contested before the tax appeals commission or in the courts, it shall become delinquent on the 30th day following the date on which the order or judgment representing final determination becomes final.

AB968, s. 8 Section 8. 71.83 (1) (a) 2. of the statutes is amended to read:

AB968,7,10 71.83 (1) (a) 2. `Incomplete or incorrect return.' If Subject to s. 73.14 (6), if any person required under this chapter to file an income or franchise tax return files an incomplete or incorrect return, unless it is shown that such filing was due to good cause and not due to neglect, there shall be added to such person's tax for the taxable year 25% of the amount otherwise payable on any income subsequently discovered or reported. The amount so added shall be assessed, levied and collected in the same manner as additional normal income or franchise taxes, and shall be in addition to any other penalties imposed by this chapter. In this subdivision, "return" includes a separate return filed by a spouse with respect to a taxable year for which a joint return is filed under s. 71.03 (2) (g) to (L) after the filing of that separate return, and a joint return filed by the spouses with respect to a taxable year for which a separate return is filed under s. 71.03 (2) (m) after the filing of that joint return.

AB968, s. 9 Section 9. 71.83 (1) (a) 3. of the statutes is amended to read:

AB968,7,24 71.83 (1) (a) 3. `Incomplete or incorrect deposit or withholding report.' If Subject to s. 73.14 (6), if any person required under subch. X to file a deposit report or withholding report files an incomplete or incorrect report, or fails to properly withhold or fails to properly deposit or pay over withheld funds, unless it can be shown that the filing or failure was due to good cause and not due to neglect, there shall be added to the tax 25% of the amount not reported or not withheld, deposited or paid over. The amount so added shall be assessed, levied and collected in the same manner as additional income or franchise taxes, and shall be in addition to any other penalties imposed in this subchapter. "Person", in this subdivision, includes an officer or employee of a corporation or other responsible person or a member or employee of a partnership or limited liability company or other responsible person who, as such officer, employee, member or other responsible person, is under a duty to perform the act in respect to which the violation occurs.

AB968, s. 10 Section 10. 71.84 (1) of the statutes is amended to read:

AB968,8,8 71.84 (1) Individuals and fiduciaries. Except as provided in s. 71.09 (11), in the case of any underpayment of estimated tax by an individual, estate or trust, except as provided under s. 71.09, there shall be added to the aggregate tax for the taxable year interest at the rate of 12% determined under s. 73.14 (7) (a) per year on the amount of the underpayment for the period of the underpayment. In this subsection, "the period of the underpayment" means the time period from the due date of the installment until either the 15th day of the 4th month beginning after the end of the taxable year or the date of payment, whichever is earlier.

AB968, s. 11 Section 11. 71.84 (2) (a) of the statutes is amended to read:

AB968,8,20 71.84 (2) (a) Except as provided in s. 71.29 (7), in the case of any underpayment of estimated tax under s. 71.29 or 71.48 there shall be added to the aggregate tax for the taxable year interest at the rate of 12% determined under s. 73.14 (7) (a) per year on the amount of the underpayment for the period of the underpayment. For corporations, except as provided in par. (b), "period of the underpayment" means the time period from the due date of the installment until either the 15th day of the 3rd month beginning after the end of the taxable year or the date of payment, whichever is earlier. If 90% of the tax shown on the return is not paid by the 15th day of the 3rd month following the close of the taxable year, the difference between that amount and the estimated taxes paid, along with any interest due, shall accrue delinquent interest under s. 71.91 (1) (a).

AB968, s. 12 Section 12. 71.84 (2) (c) of the statutes is amended to read:

AB968,9,3 71.84 (2) (c) If a refund under s. 71.29 (3m) results in an income or franchise tax liability that is greater than the amount of estimated taxes paid in reduced by the amount of the refund, the taxpayer shall add to the aggregate tax for the taxable year interest at an annual rate of 12% determined under s. 73.14 (7) (a) on the amount of the unpaid tax liability for the period beginning on the date the refund is issued and ending on the 15th day of the 3rd month beginning after the end of the taxable year, or the date the tax liability is paid, whichever is earlier.

AB968, s. 13 Section 13. 71.90 (1) of the statutes is amended to read:

AB968,9,20 71.90 (1) Deposit. The department shall notify any person who files a petition for redetermination that the person may deposit the amount of an additional assessment, including any interest or penalty, with the department, or with a person that the department prescribes, at any time before the department makes its redetermination. The department shall notify spouses jointly except that, if the spouses have different addresses and if either spouse notifies the department in writing of those addresses, the department shall serve a duplicate of the original notice on the spouse who has the address other than the address to which the original notice was sent. Amounts deposited under this subsection shall be subject to the interest provided by s. 71.82 only to the extent of the interest accrued prior to the first day of the month succeeding the date of deposit. Any deposited amount which is refunded shall bear interest at the rate of 9% determined under s. 73.14 (7) (a) per year during the time the funds were on deposit. A person may also pay any portion of an assessment which is admitted to be correct and the payment shall be considered an admission of the validity of that portion of the assessment and may not be recovered in an appeal or in any other action or proceeding.

AB968, s. 14 Section 14. 71.90 (2) of the statutes is amended to read:

AB968,9,25 71.90 (2) Deposit with the secretary of administration. At any time while the petition is pending before the tax appeals commission or an appeal in regard to that petition is pending in a court, the taxpayer may offer to deposit the entire amount of the additional taxes, together with interest, with the secretary of administration. If an offer to deposit is made, the department of revenue shall issue a certificate to the secretary of administration authorizing the secretary to accept payment of such taxes together with interest to the first day of the succeeding month and to give a receipt. A copy of the certificate shall be mailed to the taxpayer who shall pay the taxes and interest to the secretary of administration within 30 days. A copy of the receipt of the secretary of administration shall be filed with the department. The department shall, upon final determination of the appeal, certify to the secretary of administration the amount of the taxes as finally determined and direct the secretary of administration to refund to the appellant any portion of such payment which has been found to have been improperly assessed, including interest. The secretary of administration shall make the refunds directed by the certificate within 30 days after receipt. Taxes paid to the secretary of administration under this subsection shall be subject to the interest provided by ss. 71.82 and 71.91 (1) (c) only to the extent of the interest accrued on the taxes prior to the first day of the month succeeding the application for hearing. Any portion of the amount deposited with the secretary of administration which is refunded to the taxpayer shall bear interest at the rate of 9% determined under s. 73.14 (7) (a) per year during the time that the funds are on deposit.

AB968, s. 15 Section 15. 71.91 (6) (d) 1. of the statutes is amended to read:

AB968,11,4 71.91 (6) (d) 1. Any person, including an officer or employee, who fails to surrender property that is subject to levy upon demand of the department is liable to the department for a sum equal to the value of the property not surrendered, but not exceeding the amount of taxes for the collection of which that levy was made, together with costs and interest at the rate of 18% determined under s. 73.14 (7) (b) per year from the date of that levy. Any amount, other than costs, recovered under this paragraph shall be credited against the tax liability for the collection of which that levy was made. The liability under this paragraph may be assessed, levied and collected as are additional income or franchise taxes or may be recovered by the department in a civil action.

AB968, s. 16 Section 16. 71.91 (6) (e) 3. of the statutes is amended to read:

AB968,11,11 71.91 (6) (e) 3. For purposes of an adjudication under this paragraph, the assessment of the tax upon which the interest or lien of the department is based is conclusively presumed to be valid. Interest shall be allowed for judgments under this paragraph at the rate of 12% determined under s. 73.14 (7) (a) per year from the date the department receives the money wrongfully levied upon to the date of payment of the judgment or from the date of sale to the date of payment.

AB968, s. 17 Section 17. 71.91 (6) (f) 5. of the statutes is amended to read:

AB968,12,3 71.91 (6) (f) 5. Before the sale, the department shall determine a minimum price for which the property shall be sold. If no person offers for that property at the sale at least the amount of the minimum price, the state shall purchase the property for the minimum price; otherwise, the property shall be sold to the highest bidder. In determining the minimum price, the department shall take into account the expense of making the levy and sale in addition to the value of the property. If payment in full is required at the time of acceptance of a bid and is not paid then, the department shall sell the property in the manner provided under this paragraph. If the conditions of the sale permit part of the payment to be deferred and if that part is not paid within the prescribed period, the department may sue the purchaser in the circuit court for Dane County for the unpaid part of the purchase price and interest at the rate of 12% determined under s. 73.14 (7) (a) per year from the date of the sale or the department may declare the sale void and may sell the property again under this paragraph. If the property is sold again, the 2nd purchaser shall receive it free of any claim of the defaulting purchaser and the amount paid upon the bid price by the defaulting purchaser is forfeited.

AB968, s. 18 Section 18. 71.91 (6) (g) 2. of the statutes is amended to read:

AB968,12,12 71.91 (6) (g) 2. The owners of any real property sold under par. (f), their heirs or personal representatives, or any person having an interest in or a lien on that property, or any person on behalf of a person specified in this subdivision may redeem the property sold, or any part of that property, within 120 days after the sale by payment to the purchaser or, if the purchaser cannot be found in the county in which the property to be redeemed is situated, then to the department, for the use of the purchaser or the purchaser's heirs or assigns, the amount paid by the purchaser and interest at the rate of 18% determined under s. 73.14 (7) (b) per year.

AB968, s. 19 Section 19. 73.01 (4) (e) 2. of the statutes is amended to read:

AB968,12,23 73.01 (4) (e) 2. Except for hearings on ss. 341.405 and 341.45, the department of revenue may choose not to appeal and to nonacquiesce in the decision or order by sending a notice of nonacquiescence to the clerk of the commission, to the revisor of statutes for publication in the Wisconsin administrative register and to the taxpayer or the taxpayer's representative before the time expires for seeking a review of the decision or order under s. 73.015. The effect of this action is that, although the decision or order is binding on the parties for the instant case and the decision or order may be cited by the commission and the courts, the commission's conclusions of law, the rationale and construction of statutes in the instant case are not binding upon or required to be followed by the department of revenue in other cases.

AB968, s. 20 Section 20. 73.015 (3) of the statutes is created to read:

AB968,13,5 73.015 (3) Except for decisions and orders in small claims matters, as defined in s. 73.01 (1) (b), a conclusion of law or other holding in any decision or order of the commission may be cited by the commission or the courts as authority unless that conclusion of law or holding has been reversed, modified, overruled, or vacated on the merits on appeal or by a subsequent decision or order of the commission.

AB968, s. 21 Section 21. 73.03 (25) of the statutes is amended to read:

AB968,13,12 73.03 (25) To settle and dispose of tax cases or issues pending before the tax appeals commission when, in the judgment of the department of revenue, such action is warranted in the best interests of the state; and, with the approval of the attorney general, to settle and dispose of tax cases or issues pending in the courts. Settlements under this subsection may be made on the basis of a taxpayer's ability to pay the liability asserted by the department.