SB435: Bill Text

November 15, 2005 - Introduced by Senators Kanavas, Plale, Harsdorf, Stepp and Roessler, cosponsored by Representatives Nischke, Hahn, Sheridan, Berceau, Fields, Gunderson, Hines, Travis and Pope-Roberts. Referred to Committee on Job Creation, Economic Development and Consumer Affairs.

SB435,1,7 An Act to amend 71.05 (6) (a) 15., 71.08 (1) (intro.), 71.21 (4), 71.26 (2) (a), 71.34 (1) (g), 71.45 (2) (a) 10. and 77.92 (4); and to create 71.07 (5e), 71.10 (4) (ga), 71.28 (5e), 71.30 (3) (dq), 71.47 (5e) and 71.49 (1) (dq) of the statutes; relating to: creating an income and franchise tax credit for the sales and use taxes paid for tangible personal property that is used in research or manufacturing by a biotechnology business, an institution of higher education, or a governmental unit.

Analysis by the Legislative Reference Bureau

Under this bill, a person may claim an income and franchise tax credit in an amount that is equal to the sales and use taxes that the person paid in the taxable year on the purchase of machines, equipment, animals, and certain other tangible personal property that are sold to a biotechnology business for use exclusively in research. Under the bill, a biotechnology business is a business that is primarily engaged in the application of biotechnologies that use a living organism or parts of an organism to produce or modify products to improve plants or animals, develop microorganisms for specific uses, identify targets for small molecule pharmaceutical development, or transform biological systems into useful processes and products.

Under the bill, a person may also claim an income and franchise tax credit in an amount that is equal to the sales and use taxes that the person paid in the taxable year on the purchase of machines, equipment, and certain other tangible personal property that are used exclusively in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for use by any such entity in research or manufacturing.

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:

SB435, s. 1 Section 1. 71.05 (6) (a) 15. of the statutes is amended to read:

SB435,2,6 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (3g), (3n), (3s), (3t), (5b), and (5d), and (5e) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g).

SB435, s. 2 Section 2. 71.07 (5e) of the statutes is created to read:

SB435,2,8 71.07 (5e) Biotechnology credit. (a) Definitions. In this subsection:

SB435,2,9 1. "Animals" include bacteria, viruses, and other microorganisms.

SB435,2,12 2. "Biotechnologies" include recombinant deoxyribonucleic acid techniques, biochemistry, molecular and cellular biology, genetics, genetic engineering, biological cell fusion, and other bioprocesses.

SB435,2,18 3. "Biotechnology business" means a business, as certified by the department in the manner prescribed by the department, that is primarily engaged in the application of biotechnologies that use a living organism or parts of an organism to produce or modify products to improve plants or animals, develop microorganisms for specific uses, identify targets for small molecule pharmaceutical development, or transform biological systems into useful processes and products.

SB435,2,19 4. "Claimant" means a person who files a claim under this subsection.

SB435,3,1 5. "Manufacturing" has the meaning given in s. 77.54 (6m).

SB435,3,7 6. "Qualified research" means qualified research as defined under section 41 (d) (1) of the Internal Revenue Code, except that research conducted by a public or private institution of higher education or by a governmental unit is "qualified research" if the research is intended to be useful in developing a new or improved product or service and the research satisfies section 41 (d) (1) (B) (i) and (C) of the Internal Revenue Code.

SB435,3,12 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the taxes imposed under s. 71.02 or 71.08, up to the amount of the taxes, an amount that is equal to the amount of the taxes imposed under subchapter III of ch. 77 that the claimant paid in the taxable year on the purchase of any of the following:

SB435,3,17 1. Machines and processing equipment, including accessories, attachments, and parts for the machines or equipment, that are used exclusively and directly by the claimant in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for exclusive and direct use by any such entity in qualified research or manufacturing.

SB435,3,22 2. The items listed in s. 77.54 (3m) (a) to (m), medicines, semen for artificial insemination, fuel, and electricity that are used exclusively and directly by the claimant in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for exclusive and direct use by any such entity in qualified research or manufacturing.

SB435,4,2 3. Machines and processing equipment, including accessories, attachments, and parts for the machines or equipment, that are used exclusively and directly by the claimant in qualified research in biotechnology, if the claimant is a biotechnology business.

SB435,4,5 4. Tangible personal property that is consumed or destroyed or loses its identity while being used exclusively and directly by the claimant in qualified research in biotechnology, if the claimant is a biotechnology business.

SB435,4,7 5. Animals that are used exclusively and directly by the claimant in qualified research in biotechnology, if the claimant is a biotechnology business.

SB435,4,11 (c) Limitations. 1. A claimant who claims a credit under par. (b) 1. and 2. shall obtain written documentation from the claimant's customers related to each customer's use of animals, including the percentage of animals sold to the customer that are used exclusively and directly in qualified research.

SB435,4,19 2. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of amounts under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

SB435,4,21 (d) Administration. 1. The department shall publish on the department's Internet site a list of all biotechnology businesses certified by the department.

SB435,4,23 2. Section 71.28 (4) (e) to (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

SB435, s. 3 Section 3. 71.08 (1) (intro.) of the statutes, as affected by 2005 Wisconsin Act 25, is amended to read:

SB435,5,9 71.08 (1) Imposition. (intro.) If the tax imposed on a natural person, married couple filing jointly, trust, or estate under s. 71.02, not considering the credits under ss. 71.07 (1), (2dd), (2de), (2di), (2dj), (2dL), (2dr), (2ds), (2dx), (2fd), (3m), (3n), (3s), (3t), (5b), (5d), (5e), (6), (6e), and (9e), 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1fd), (2m), (3), (3n), and (3t) and 71.47 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1fd), (2m), (3), (3n), and (3t) and subchs. VIII and IX and payments to other states under s. 71.07 (7), is less than the tax under this section, there is imposed on that natural person, married couple filing jointly, trust, or estate, instead of the tax under s. 71.02, an alternative minimum tax computed as follows:

SB435, s. 4 Section 4. 71.10 (4) (ga) of the statutes is created to read:

SB435,5,11 71.10 (4) (ga) Biotechnology credit under s. 71.07 (5e).

SB435, s. 5 Section 5. 71.21 (4) of the statutes is amended to read:

SB435,5,15 71.21 (4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2ds), (2dx), (3g), (3n), (3s), (3t), and (5b), and (5e) and passed through to partners shall be added to the partnership's income.

SB435, s. 6 Section 6. 71.26 (2) (a) of the statutes is amended to read:

SB435,6,9 71.26 (2) (a) Corporations in general. The "net income" of a corporation means the gross income as computed under the Internal Revenue Code as modified under sub. (3) minus the amount of recapture under s. 71.28 (1di) plus the amount of credit computed under s. 71.28 (1), (3), (4), and (5) minus, as provided under s. 71.28 (3) (c) 7., the amount of the credit under s. 71.28 (3) that the taxpayer added to income under this paragraph at the time that the taxpayer first claimed the credit plus the amount of the credit computed under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (3g), (3n), (3t), and (5b), and (5e) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g) plus the amount of losses from the sale or other disposition of assets the gain from which would be wholly exempt income, as defined in sub. (3) (L), if the assets were sold or otherwise disposed of at a gain and minus deductions, as computed under the Internal Revenue Code as modified under sub. (3), plus or minus, as appropriate, an amount equal to the difference between the federal basis and Wisconsin basis of any asset sold, exchanged, abandoned, or otherwise disposed of in a taxable transaction during the taxable year, except as provided in par. (b) and s. 71.45 (2) and (5).

SB435, s. 7 Section 7. 71.28 (5e) of the statutes is created to read:

SB435,6,11 71.28 (5e) Biotechnology credit. (a) Definitions. In this subsection:

SB435,6,12 1. "Animals" include bacteria, viruses, and other microorganisms.

SB435,6,15 2. "Biotechnologies" include recombinant deoxyribonucleic acid techniques, biochemistry, molecular and cellular biology, genetics, genetic engineering, biological cell fusion, and other bioprocesses.

SB435,6,21 3. "Biotechnology business" means a business, as certified by the department in the manner prescribed by the department, that is primarily engaged in the application of biotechnologies that use a living organism or parts of an organism to produce or modify products to improve plants or animals, develop microorganisms for specific uses, identify targets for small molecule pharmaceutical development, or transform biological systems into useful processes and products.

SB435,6,22 4. "Claimant" means a person who files a claim under this subsection.

SB435,6,23 5. "Manufacturing" has the meaning given in s. 77.54 (6m).

SB435,7,4 6. "Qualified research" means qualified research as defined under section 41 (d) (1) of the Internal Revenue Code, except that research conducted by a public or private institution of higher education or by a governmental unit is "qualified research" if the research is intended to be useful in developing a new or improved product or service and the research satisfies section 41 (d) (1) (B) (i) and (C) of the Internal Revenue Code.

SB435,7,9 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the taxes imposed under s. 71.23, up to the amount of the taxes, an amount that is equal to the amount of the taxes imposed under subchapter III of ch. 77 that the claimant paid in the taxable year on the purchase of any of the following:

SB435,7,14 1. Machines and processing equipment, including accessories, attachments, and parts for the machines or equipment, that are used exclusively and directly by the claimant in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for exclusive and direct use by any such entity in qualified research or manufacturing.

SB435,7,19 2. The items listed in s. 77.54 (3m) (a) to (m), medicines, semen for artificial insemination, fuel, and electricity that are used exclusively and directly by the claimant in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for exclusive and direct use by any such entity in qualified research or manufacturing.

SB435,7,23 3. Machines and processing equipment, including accessories, attachments, and parts for the machines or equipment, that are used exclusively and directly by the claimant in qualified research in biotechnology, if the claimant is a biotechnology business.

SB435,8,3 4. Tangible personal property that is consumed or destroyed or loses its identity while being used exclusively and directly by the claimant in qualified research in biotechnology, if the claimant is a biotechnology business.

SB435,8,5 5. Animals that are used exclusively and directly by the claimant in qualified research in biotechnology, if the claimant is a biotechnology business.

SB435,8,9 (c) Limitations. 1. A claimant who claims a credit under par. (b) 1. and 2. shall obtain written documentation from the claimant's customers related to each customer's use of animals, including the percentage of animals sold to the customer that are used exclusively and directly in qualified research.

SB435,8,17 2. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of amounts under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

SB435,8,19 (d) Administration. 1. The department shall publish on the department's Internet site a list of all biotechnology businesses certified by the department.

SB435,8,21 2. Subsection (4) (e) to (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

SB435, s. 8 Section 8. 71.30 (3) (dq) of the statutes is created to read:

SB435,8,23 71.30 (3) (dq) Biotechnology credit under s. 71.28 (5e).

SB435, s. 9 Section 9. 71.34 (1) (g) of the statutes is amended to read:

SB435,9,3 71.34 (1) (g) An addition shall be made for credits computed by a tax-option corporation under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (3), (3g), (3n), (3t), and (5b), and (5e) and passed through to shareholders.

SB435, s. 10 Section 10. 71.45 (2) (a) 10. of the statutes is amended to read:

SB435,9,10 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit computed under s. 71.47 (1dd) to (1dx), (3n), and (5b), and (5e) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g) and the amount of credit computed under s. 71.47 (1), (3), (3t), (4), and (5).

SB435, s. 11 Section 11. 71.47 (5e) of the statutes is created to read:

SB435,9,12 71.47 (5e) Biotechnology credit. (a) Definitions. In this subsection:

SB435,9,13 1. "Animals" include bacteria, viruses, and other microorganisms.

SB435,9,16 2. "Biotechnologies" include recombinant deoxyribonucleic acid techniques, biochemistry, molecular and cellular biology, genetics, genetic engineering, biological cell fusion, and other bioprocesses.

SB435,9,22 3. "Biotechnology business" means a business, as certified by the department in the manner prescribed by the department, that is primarily engaged in the application of biotechnologies that use a living organism or parts of an organism to produce or modify products to improve plants or animals, develop microorganisms for specific uses, identify targets for small molecule pharmaceutical development, or transform biological systems into useful processes and products.

SB435,9,23 4. "Claimant" means a person who files a claim under this subsection.

SB435,9,24 5. "Manufacturing" has the meaning given in s. 77.54 (6m).

SB435,10,6 6. "Qualified research" means qualified research as defined under section 41 (d) (1) of the Internal Revenue Code, except that research conducted by a public or private institution of higher education or by a governmental unit is "qualified research" if the research is intended to be useful in developing a new or improved product or service and the research satisfies section 41 (d) (1) (B) (i) and (C) of the Internal Revenue Code.

SB435,10,11 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the taxes imposed under s. 71.43, up to the amount of the taxes, an amount that is equal to the amount of the taxes imposed under subchapter III of ch. 77 that the claimant paid in the taxable year on the purchase of any of the following:

SB435,10,16 1. Machines and processing equipment, including accessories, attachments, and parts for the machines or equipment, that are used exclusively and directly by the claimant in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for exclusive and direct use by any such entity in qualified research or manufacturing.

SB435,10,21 2. The items listed in s. 77.54 (3m) (a) to (m), medicines, semen for artificial insemination, fuel, and electricity that are used exclusively and directly by the claimant in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for exclusive and direct use by any such entity in qualified research or manufacturing.

SB435,10,25 3. Machines and processing equipment, including accessories, attachments, and parts for the machines or equipment, that are used exclusively and directly by the claimant in qualified research in biotechnology, if the claimant is a biotechnology business.

SB435,11,3 4. Tangible personal property that is consumed or destroyed or loses its identity while being used exclusively and directly by the claimant in qualified research in biotechnology, if the claimant is a biotechnology business.

SB435,11,5 5. Animals that are used exclusively and directly by the claimant in qualified research in biotechnology, if the claimant is a biotechnology business.

SB435,11,9 (c) Limitations. 1. A claimant who claims a credit under par. (b) 1. and 2. shall obtain written documentation from the claimant's customers related to each customer's use of animals, including the percentage of animals sold to the customer that are used exclusively and directly in qualified research.

SB435,11,17 2. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of amounts under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

SB435,11,19 (d) Administration. 1. The department shall publish on the department's Internet site a list of all biotechnology businesses certified by the department.

SB435,11,21 2. Section 71.28 (4) (e) to (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

SB435, s. 12 Section 12. 71.49 (1) (dq) of the statutes is created to read:

SB435,11,23 71.49 (1) (dq) Biotechnology credit under s. 71.47 (5e).

SB435, s. 13 Section 13. 77.92 (4) of the statutes is amended to read:

SB435,12,15 77.92 (4) "Net business income," with respect to a partnership, means taxable income as calculated under section 703 of the Internal Revenue Code; plus the items of income and gain under section 702 of the Internal Revenue Code, including taxable state and municipal bond interest and excluding nontaxable interest income or dividend income from federal government obligations; minus the items of loss and deduction under section 702 of the Internal Revenue Code, except items that are not deductible under s. 71.21; plus guaranteed payments to partners under section 707 (c) of the Internal Revenue Code; plus the credits claimed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (3g), (3s), (3n), (3t), and (5b), and (5e); and plus or minus, as appropriate, transitional adjustments, depreciation differences, and basis differences under s. 71.05 (13), (15), (16), (17), and (19); but excluding income, gain, loss, and deductions from farming. "Net business income," with respect to a natural person, estate, or trust, means profit from a trade or business for federal income tax purposes and includes net income derived as an employee as defined in section 3121 (d) (3) of the Internal Revenue Code.

SB435, s. 14 Section 14. Initial applicability.

SB435,12,17 (1) This act first applies to taxable years beginning on January 1, 2006.

SB435,12,18 (End)