SB218: Bill Text

LRB-2029/1

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2005 - 2006 LEGISLATURE

2005 Senate BILL 218

May 25, 2005 - Introduced by Senators Roessler, A. Lasee, Lassa, Miller and Hansen, cosponsored by Representatives Kerkman, Pridemore, Albers, Bies, Hines, Hubler, Kreibich, Lehman, Musser, Townsend and Toles. Referred to Committee on Job Creation, Economic Development and Consumer Affairs.

SB218,2,4 An Act to repeal 71.07 (5d) (c) 3.; to renumber 72.23; to renumber and amend 77.59 (4) (c); to amend 50.14 (4), 70.07 (6), 70.075 (6), 71.03 (6) (a), 71.03 (7) (d), 71.03 (8) (b), 71.10 (6) (a), 71.10 (6) (b), 71.10 (6m) (a), 71.63 (3) (c), 71.65 (5) (a) 1., 71.80 (18), 71.88 (2) (b), 73.01 (4) (a), 77.59 (5), 77.61 (14), 78.22 (4), 110.20 (8) (e), 139.03 (2x) (d), 139.05 (2a), 139.315 (4), 139.38 (5) and 560.205 (3) (d); and to create 71.01 (7n), 71.10 (6) (e), 71.10 (6m) (c), 71.22 (5m), 71.34 (1m), 71.42 (2m), 71.65 (3) (h), 72.23 (2), 73.13, 78.39 (5d), 78.39 (5m) and 139.75 (9m) of the statutes; relating to: appealing a determination by the board of assessors, claiming angel and early stage investment tax credits, employers who must withhold state income taxes, benefits to persons serving in Operation Iraqi Freedom, eliminating the requirement that the Department of Revenue audit the records of contractors who perform emissions inspections, the liability of married persons filing a joint income tax return, the payment of the alternate fuel tax and the tobacco products tax, estate tax interest, qualified retirement systems, reducing nondelinquent taxes, extending the time for filing a tax reconciliation report, delivering tax-related documents and related payments, appeal of redetermination of earned income tax credits, granting rule-making authority, and providing a penalty.

Analysis by the Legislative Reference Bureau

Property taxes

Under current law, a person who owns property in a first class city or in certain second class cities and who wants to appeal his or her property tax assessment, must first appeal the assessment to the city assessor. The city assessor reviews the appeal and makes a recommendation to the board of assessors. The board of assessors considers the city assessor's recommendation and, ultimately, notifies the property owner of the board's determination regarding the property owner's appeal. The property owner may appeal the determination of the board of assessors to the board of review by providing a notice of appeal to the commissioner of assessments within ten days. Current law, however, is not clear as to whether the notice to appeal to the board of review is due within ten days from the date that the board of assessors issues its determination or from the date that the property owner receives the determination of the board of assessors.

This bill specifies that a property owner may appeal the determination of the board of assessors to the board of review by providing a notice of appeal to the commissioner of assessments within 15 days from the date that the board of assessors issues its determination.

Reducing taxes

Under current law, any taxpayer may petition the Department of Revenue (DOR) to reduce delinquent taxes, including any applicable costs, penalties, and interest. If DOR determines that the taxpayer is unable to pay in full the amount due, based on an examination of the taxpayer under oath, the taxpayer's financial statements, and any other information required by DOR, DOR determines the amount that the taxpayer is able to pay and then enters an order reducing the taxes, costs, penalties, and interest owed by the taxpayer.

If within three years from either the date on which DOR enters the order that reduces the taxpayer's taxes or the date of the final payment according to a payment schedule determined by DOR, whichever is later, DOR determines that the taxpayer has an income or owns property that is sufficient to enable the taxpayer to pay the remainder of the original delinquent taxes, including costs, penalties, and interest, DOR must reopen the order and order the payment in full of such taxes, costs, penalties, and interest.

This bill expands current law so that DOR is authorized to reduce any taxes, costs, penalties, and interest that are due from a taxpayer, regardless of whether the taxes, costs, penalties, and interest are delinquent.

Income and franchise taxes

Under current law, spouses that file a joint income tax return are both liable for the payment of any tax related to that return. However, DOR may relieve a person of any tax liability related to a joint return, in a manner specified by the Internal Revenue Code (IRC) and adopted by this state. Generally, DOR may relieve a person of any tax liability related to a joint return if the person's spouse did not notify the person of any tax liability or understatement of taxes related to the joint return. This bill corrects an outdated reference to the sections of the Internal Revenue Code that relate to a spouse's tax liability for a joint income tax return. The bill also requires a spouse to apply for relief from tax liability within two years from the date on which DOR begins collection activities on the spouse's tax liability or within two years from the effective date of the provision, whichever is later.

Under current law, a person may claim an individual income tax credit equal to 12.5 percent of the person's investment in a qualified new business venture, as certified by the Department of Commerce. Current law refers to this investment as a "bona fide angel investment." In addition, a person may claim an income or franchise tax credit equal to 25 percent of the amount that the person pays to a fund manager who invests the amount in a qualified new business venture, as certified by the Department of Commerce. Current law refers to this investment as an "early stage seed investment."

Under current law, a person who claims the bona fide angel investment credit and who is not a resident of this state or who is a part-year resident of this state must prorate the amount of the bona fide angel investment credit based on his or her Wisconsin adjusted gross income as compared to his or her federal adjusted gross income. Nonresidents and part-year residents who claim the early stage seed investment credit, however, are not required to prorate the amount of the credit. This bill eliminates the requirement that nonresidents and part-year residents prorate the bona fide angel investment credit.

Under current law, the Department of Commerce must promulgate rules to limit the aggregate amount of bona fide angel investment credits to $3,000,000 per taxable year and the aggregate amount of early stage seed investment credits to $3,500,000 per taxable year. Under the bill, the Department of Commerce must promulgate rules to limit the aggregate amount of bona fide angel investment credits to $3,000,000 per calendar year and the aggregate amount of early stage seed investment credits to $3,500,000 per calendar year.

Under current law, every employer must withhold state income taxes from the pay of each employee and remit the taxes to DOR. In the case of a single-owner entity that is disregarded as a separate entity under the Internal Revenue Code, the owner of the entity is considered to be the employer for purposes of withholding and remitting state income taxes. In addition, an employer must file a tax reconciliation report with DOR on an annual basis. Under current law, DOR cannot grant an extension for filing the report.

Under this bill, the owner of a single-owner entity that is disregarded as a separate entity under IRC is considered to be the employer for purposes of withholding and remitting state income taxes, unless the entity has elected to be an employer for the purpose of withholding federal income taxes. This bill also allows DOR to grant a 30-day extension for filing an annual reconciliation report.

This bill clarifies that a qualified retirement fund for federal income tax purposes is a qualified retirement fund for state income tax purposes.

Sales and use taxes

Under current law, if a seller makes a claim for a refund of sales taxes or use taxes and the claim is honored, the seller is required to pass along the refund and related interest to the buyers and to submit to DOR the portion of the refund that could not be passed on, along with a penalty. Under current law, if a seller receives a sales or use tax refund as the result of an audit, the seller is not required to submit the refund and related interest to the buyers. Also, a seller is not required to submit to the buyers sales or use taxes that are collected erroneously.

This bill requires a seller who receives any refund of sales or use taxes, or who collects sales or use taxes erroneously, to submit such a refund or taxes to the buyer, or to DOR if the buyer cannot be located, within 90 days after receiving a refund or after discovering that the seller has collected taxes erroneously. Any portion of a refund or taxes not submitted to the buyer, or to DOR if the buyer cannot be located, within that 90 days must be submitted to DOR, along with a penalty.

Other taxation

Under current law, an estate tax that is not paid on the date on which it is due is subject to interest at the rate of 12 percent a year from the date of the decedent's death. Under the bill, DOR may waive the interest imposed on any additional estate taxes that arise from the discovery of property omitted in the inventory of the estate's total assets or in the original tax determination, if due diligence was exercised in determining the assets.

Under current law, generally, a tax-related document or payment that DOR must receive by a specified date is timely received, if the document or payment is mailed in a properly addressed envelope; the sender pays the postage; the envelope is postmarked on the day that the document or payment is due; and the document or payment is received within five days from the date on which the document or payment is due.

Under this bill, mailing a tax-related document or payment includes using a delivery service that has been approved by the Internal Revenue Service, for federal tax purposes.

Under current law, a person may appeal DOR's redetermination of various tax credits without paying a $25 filing fee. Under this bill, a person may appeal DOR's redetermination of an earned income tax credit without paying the filing fee.

This bill eliminates the requirement that the DOR audit the records of persons who perform emissions inspections under a contract with the Department of Transportation.

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:

SB218, s. 1 Section 1. 50.14 (4) of the statutes is amended to read:

SB218,5,8 50.14 (4) Sections 77.59 (1) to (5) (5m), (6) (intro.), (a) and (c) and (7) to (10), 77.60 (1) to (7), (9) and (10), 77.61 (9) and (12) to (14) and 77.62, as they apply to the taxes under subch. III of ch. 77, apply to the assessment under this section, except that the amount of any assessment collected under s. 77.59 (7) in excess of $14,300,000 in fiscal year 2003-04, in excess of $13,800,000 in fiscal year 2004-05, and, beginning July 1, 2005, in excess of 45% 45 percent in each fiscal year shall be deposited in the Medical Assistance trust fund.

SB218, s. 2 Section 2. 70.07 (6) of the statutes is amended to read:

SB218,6,5 70.07 (6) The board of assessors shall remain in session until all corrections and changes have been made, including all those resulting from investigations by committees of objections to valuations filed with the commissioner of assessments as provided in this subsection, after which the commissioner of assessments shall prepare the assessment rolls as corrected by the board of assessors and submit them to the board of review not later than the 2nd Monday in October. The person assessed, having been notified of the determination of the board of assessors as required in sub. (4), shall be deemed to have accepted the determination unless the person notifies the commissioner of assessments in writing, within 10 15 days from the date that the notice of determination was issued under sub. (4), of the desire to present testimony before the board of review. After the board of review has met, the commissioner of assessments may appoint committees of the board of assessors to investigate any objections to the amount or valuation of any real or personal property which have been filed with the commissioner of assessments. The committees may at the direction of the commissioner of assessments report their investigation and recommendations to the board of review and any member of any such committee shall be a competent witness in any hearing before the board of review.

SB218, s. 3 Section 3. 70.075 (6) of the statutes is amended to read:

SB218,6,22 70.075 (6) The board of assessors shall remain in session until all corrections and changes have been made, including all those resulting from investigations by committees of objections to valuations filed with the city assessor as provided in this section, after which the city assessor shall prepare the assessment rolls as corrected by the board of assessors and submit them to the board of review not later than the last Monday in July. A person assessed who has been notified of the determination of the board of assessors as required in sub. (4) is deemed to have accepted such determination unless the person notifies the city assessor in writing, within 10 15 days from the date that the notice of determination was issued under sub. (4), of a desire to present testimony before the board of review. After the board of review meets, the city assessor may appoint committees of the board of assessors to investigate any objections to the amount or valuation of any real or personal property which are referred to the city assessor by the board of review. The committees so appointed may at the city assessor's direction report their investigation and recommendations to the board of review and any member of any such committee shall be a competent witness in any hearing before the board of review.

SB218, s. 4 Section 4. 71.01 (7n) of the statutes is created to read:

SB218,7,3 71.01 (7n) Notwithstanding sub. (6), a qualified retirement fund for a taxable year for federal income tax purposes is a qualified retirement fund for the taxable year for purposes of this subchapter.

SB218, s. 5 Section 5 . 71.03 (6) (a) of the statutes is amended to read:

SB218,7,16 71.03 (6) (a) Reports required under this section shall be made on or before April 15, or April 30 if the person files an electronic return, following the close of a year referred to in sub. (2) (a), or if such person's fiscal year is other than the calendar year then on or before the 15th day, or the last day if the person files an electronic return, of the 4th month following the close of such fiscal year, or if the return is for less than a full taxable year on the date applicable for federal income taxes under the internal revenue code Internal Revenue Code, to the department of revenue, in the manner and form prescribed by the department of revenue, whether notified to do so or not. Such persons shall be subject to the same penalties for failure to report as those who receive notice. If the taxpayer is unable to make his or her own return, the return shall be made by a duly authorized agent or by the guardian or other person charged with the care of the person or property of such taxpayer.

SB218, s. 6 Section 6. 71.03 (7) (d) of the statutes is amended to read:

SB218,7,24 71.03 (7) (d) For taxable years beginning after December 31, 2002, and before January 1, 2005 2007, for persons who served in support of Operation Iraqi Freedom or an operation that is a successor to Operation Iraqi Freedom in the United States, or for persons who qualify for a federal extension of time to file under 26 USC 7508, who served outside the United States because of their participation in Operation Iraqi Freedom or an operation that is a successor to Operation Iraqi Freedom in the Iraqi Freedom theater of operations.

SB218, s. 7 Section 7 . 71.03 (8) (b) of the statutes is amended to read:

SB218,8,9 71.03 (8) (b) The final payment of taxes on incomes of persons other than corporations who file on a calendar year basis shall be made on or before April 15, or April 30 if the person files an electronic return, following the close of the calendar year, except for persons electing to have the department compute their tax under sub. (4). If the return of a person other than a corporation is made on the basis of a fiscal year, such final payment shall be made on or before the 15th day, or the last day if the person files an electronic return, of the 4th month following the close of such fiscal year, except for persons electing to have the department compute their tax under sub. (4).

SB218, s. 8 Section 8. 71.07 (5d) (c) 3. of the statutes is repealed.

SB218, s. 9 Section 9. 71.10 (6) (a) of the statutes is amended to read:

SB218,8,17 71.10 (6) (a) Joint returns. Persons filing a joint return are jointly and severally liable for the tax, interest, penalties, fees, additions to tax and additional assessments under this chapter applicable to the return. A person shall be relieved of liability in regard to a joint return in the manner specified in section 6013 (e) 6015 (a) to (d) and (f) of the internal revenue code, notwithstanding the amount or percentage of the understatement Internal Revenue Code.

SB218, s. 10 Section 10. 71.10 (6) (b) of the statutes is amended to read:

SB218,9,4 71.10 (6) (b) Separate returns. A spouse filing a separate return may be relieved of liability for the tax, interest, penalties, fees, additions to tax and additional assessments under this chapter with regard to unreported marital property income in the manner specified in section 66 (c) of the internal revenue code Internal Revenue Code. The department may not apply ch. 766 in assessing a taxpayer with respect to marital property income the taxpayer did not report if that taxpayer failed to notify the taxpayer's spouse about the amount and nature of the income before the due date, including extensions, for filing the return for the taxable year in which the income was derived. The department shall include all of that marital property income in the gross income of the taxpayer and exclude all of that marital property income from the gross income of the taxpayer's spouse.

SB218, s. 11 Section 11. 71.10 (6) (e) of the statutes is created to read:

SB218,9,10 71.10 (6) (e) Application for relief. A person who seeks relief from liability under par. (a) or (b) shall apply for relief with the department, on a form prescribed by the department, within 2 years after the date on which the department first begins collection activities after the effective date of this paragraph .... [revisor inserts date].

SB218, s. 12 Section 12. 71.10 (6m) (a) of the statutes is amended to read:

SB218,9,23 71.10 (6m) (a) A formerly married or remarried person filing a return for a period during which the person was married may be relieved of liability for the tax, interest, penalties, fees, additions to tax and additional assessments under this chapter for unreported marital property income from that period as if the person were a spouse under section 66 (c) of the internal revenue code Internal Revenue Code. The department may not apply ch. 766 in assessing the former spouse of the person with respect to marital property income that the former spouse did not report if that former spouse failed to notify the person about the amount and nature of the income before the due date, including extensions, for filing the return for the taxable year during which the income was derived. The department shall include all of that marital property income in the gross income of the former spouse and exclude all of that marital property income from the gross income of the person.

SB218, s. 13 Section 13. 71.10 (6m) (c) of the statutes is created to read:

SB218,10,2 71.10 (6m) (c) A person who seeks relief from liability under par. (a) shall apply for relief with the department as provided under sub. (6) (e).

SB218, s. 14 Section 14. 71.22 (5m) of the statutes is created to read:

SB218,10,6 71.22 (5m) Notwithstanding subs. (4) and (4m), a qualified retirement fund for a taxable year for federal income tax purposes is a qualified retirement fund for the taxable year for purposes of this subchapter.

SB218, s. 15 Section 15. 71.34 (1m) of the statutes is created to read:

SB218,10,10 71.34 (1m) Notwithstanding sub. (1g), a qualified retirement fund for a taxable year for federal income tax purposes is a qualified retirement fund for the taxable year for purposes of this subchapter.

SB218, s. 16 Section 16. 71.42 (2m) of the statutes is created to read:

SB218,10,14 71.42 (2m) Notwithstanding sub. (2), a qualified retirement fund for a taxable year for federal income tax purposes is a qualified retirement fund for the taxable year for purposes of this subchapter.