Amendment MR8 SA1-AB1

AB1-SA1,23,5 1. The jurisdiction has laws or practices that prevent the effective exchange of information, for tax purposes, with other governments on taxpayers benefiting from the tax regime.

AB1-SA1,23,10 2. The details of the legislative, legal, or administrative provisions of the jurisdiction's tax regime are not publicly available and apparent or are not consistently applied to similarly situated taxpayers or the information needed by tax authorities to determine a taxpayer's correct tax liability, including accounting records and underlying documentation, is not adequately available.

AB1-SA1,23,13 3. The jurisdiction facilitates the establishment of foreign-owned entities without requiring a local substantive presence or prohibits such entities from having any commercial impact on the local economy.

AB1-SA1,23,16 4. The tax regime explicitly or implicitly excludes the jurisdiction's resident taxpayers from taking advantage of the tax regime's benefits or prohibits enterprises that benefit from the regime from operating in the jurisdiction's domestic market.

AB1-SA1,23,20 5. The jurisdiction has created a tax regime that is favorable for tax avoidance, based upon an overall assessment of relevant factors, including whether the jurisdiction has a significant untaxed offshore financial or other services sector relative to its overall economy.

AB1-SA1,23,22 (i) "Taxpayer member" means a corporation that is subject to tax under s. 71.23 (1) or (2) and that is a member of a combined group.

AB1-SA1,24,19 (j) "Unitary business" means a single economic enterprise that consists of separate parts of a single business entity or of a commonly controlled group of business entities that are sufficiently interdependent, integrated, and interrelated by their activities so as to provide a synergy and a mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts. For purposes of this section, 2 or more business entities are considered a unitary business if the entities have unity of ownership, operation, and use, as indicated by centralized management or a centralized executive force; centralized purchasing, advertising, or accounting; intercorporate sales or leases; intercorporate services; intercorporate debts; intercorporate use of proprietary materials; interlocking directorates; or interlocking corporate officers. Any business conducted by a pass-through entity that is owned directly or indirectly by a corporation is considered conducted by the corporation, to the extent of the corporation's distributive share of the pass-through entity's income, regardless of the percentage of the corporation's ownership interest. A business conducted directly or indirectly by one corporation is unitary with that portion of a business conducted by another corporation through its direct or indirect interest in a pass-through entity, if the corporations are sufficiently interdependent, integrated, and interrelated by their activities so as to provide a synergy and a mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts and the two corporations are members of the same commonly controlled group.

AB1-SA1,24,24 (2) Corporations required to use combined reporting. (a) A corporation engaged in a unitary business with any other corporation shall file a combined report that includes the income, determined under sub. (3), and apportionment factor, determined under sub. (5) and s. 71.25, of the following members of the unitary business:

AB1-SA1,25,4 1. Any member incorporated in the United States, including the District of Columbia and any territory or possession of the United States, or formed under the laws of any state, the District of Columbia, or any territory or possession of the United States.

AB1-SA1,25,6 2. Any member, regardless of where the entity is incorporated or formed, if the average of the following ratios is 20 percent or more:

AB1-SA1,25,13 a. The value of the member's real property and tangible personal property located in the United States, including the District of Columbia and any territory or possession of the United States, not including property that is used to produce nonapportionable income, divided by the value of all of the member's real property and tangible personal property, not including property that is used to produce nonapportionable income. For purposes of this subd. 2. a., the value of property that the member rents is the net annual rental amount for the property, multiplied by 8.

AB1-SA1,25,21 b. The amount of the member's payroll that is paid in the United States, including the District of Columbia and any territory or possession of the United States, divided by the amount of the member's total payroll. For purposes of this subd. 2. b., payroll includes compensation paid to employees, but does not include payroll used to produce nonapportionable income. The payroll paid in the United States, including the District of Columbia and any territory or possession of the United States, shall be determined in the same manner as payroll is determined for this state under s. 71.25 (8) (b) 1. to 5.

AB1-SA1,26,2 c. The member's sales in the United States, including the District of Columbia and any territory or possession of the United States, divided by the member's total sales. For purposes of this subd. 2. c., sales include items identified in s. 71.25 (9) (e), but not items identified in s. 71.25 (9) (f), and the situs of a sale shall be determined in the same manner as for state sales in s. 71.25 (9) (b), (d), (df), and (dh), not including s. 71.25 (9) (b) 2m. and 3., (c), (df) 3., and (dh) 4.

AB1-SA1,26,6 3. Any member that is a domestic international sales corporation as described in sections 991 to 994 of the Internal Revenue Code, a foreign sales corporation as described in sections 921 to 927 of the Internal Revenue Code, or an export trade corporation as described in sections 970 to 971 of the Internal Revenue Code.

AB1-SA1,26,15 4. Any member that is a controlled foreign corporation as defined in section 957 of the Internal Revenue Code, to the extent of the member's income that is defined in section 952 of of the Internal Revenue Code, including any lower-tier subsidiary's distribution of such income that was previously taxed, determined without regard to federal treaties, and the apportionment factors related to that income. For purposes of this subdivision, any item of income received by a controlled foreign corporation is excluded if the income was subject to an income tax imposed by a foreign country at an effective tax rate greater than 90 percent of the maximum tax rate specified in section 11 of the Internal Revenue Code.

AB1-SA1,26,19 5. Any member that earns more than 20 percent of its income, directly or indirectly, from intangible property or service-related activities that are deductible against the business income of other members of the combined group, to the extent of that income and the apportionment factors related to that income.

AB1-SA1,26,25 6. Any member that is doing business in a tax haven, if the member is engaged in an activity that is sufficient for that tax haven jurisdiction to impose a tax under federal law. If the member's business activity in a tax haven is entirely outside the scope of the laws and practices that cause the jurisdiction to be a tax haven, the member's business activity is not considered to be conducted in a tax haven for purposes of this section.

AB1-SA1,27,5 7. Any member not described in subds. 1. to 6., to the extent that its income is derived from or attributable to sources within the United States, including the District of Columbia and any territory or possession of the United States, as determined under the Internal Revenue Code and by its apportionment factors related to that income.

AB1-SA1,27,11 (b) The department may require that a combined report filed under this section include the income and associated apportionment factors of any persons not described under par. (a) that are members of a unitary business to reflect the proper apportionment of income of the entire unitary business, including persons that are not, or would not be, subject to the taxes imposed under this chapter if doing business in this state.

AB1-SA1,27,14 (3) Components of income subject to tax. Each taxpayer member is responsible for the tax imposed under this chapter based on its taxable income or loss apportioned or allocated to this state, including:

AB1-SA1,27,16 (a) Its share of any business income apportionable to this state of each of the combined groups of which it is a member, as determined under subs. (4) and (5).

AB1-SA1,27,19 (b) Its share of any business income apportionable to this state of a distinct business activity conducted in and outside this state wholly by the taxpayer member, as determined under s. 71.25.

AB1-SA1,27,21 (c) Its income from a business conducted wholly by the taxpayer member entirely in this state.

AB1-SA1,27,23 (d) Its income sourced to this state from the sale or exchange of capital or assets and from involuntary conversions, as determined under sub. (4) (a) 8.

AB1-SA1,27,24 (e) Its nonbusiness income or loss allocable to this state.

AB1-SA1,28,2 (f) Its income or loss allocated or apportioned in an earlier year that is state source income during the income year, other than a net business loss carry-forward.

AB1-SA1,28,9 (g) Its net business loss carry-forward. If the taxable income computed under this subsection and subs. (4) and (5) results in a loss for a taxpayer member of the combined group, the taxpayer member has a net business loss, subject to the net business loss limitations and carry-forward provisions in s. 71.26 (4). The business loss is applied as a deduction in a subsequent year only if the taxpayer member has net income sourced to this state, regardless of whether the taxpayer is a member of a combined group in the subsequent year.

AB1-SA1,28,11 (4) Business income of the combined group. The business income of a combined group is determined as follows:

AB1-SA1,28,15 (a) Compute the sum of the income of each member of the combined group as determined for federal income tax purposes, as if the members were not consolidated for federal purposes, and modified as provided under s. 71.26. Each member of the combined group shall determine its income as follows:

AB1-SA1,28,20 1. For any member incorporated in the United States, including the District of Columbia and any territory or possession of the United States, or included in a consolidated federal corporate income tax return, the income included in the total income of the combined group is the corporation's taxable income as determined under s. 71.26.

AB1-SA1,28,23 2. Except as provided in subd. 3, for any member not included in subd. 1., the income included in the total income of the combined group shall be determined as follows:

AB1-SA1,29,3 a. Each foreign branch or foreign corporation shall prepare a profit and loss statement in the currency in which the branch's or corporation's books of account are regularly maintained.

AB1-SA1,29,6 b. The member shall adjust any statement prepared under subd. 2. a. to conform to the accounting principles generally accepted in the United States for the preparation of profit and loss statements.

AB1-SA1,29,9 c. The member shall adjust any statement prepared under subd. 2. a. to conform to the tax accounting standards required by the department for the administration of this chapter.

AB1-SA1,29,12 d. Each member of the combined group shall translate its profit and loss statements, and the related apportionment factors, into the currency in which the parent corporation maintains its books and records.

AB1-SA1,29,14 e. Each member shall express in U.S. dollars the income apportioned to this state.

AB1-SA1,30,2 3. If the department determines that the income determination under this subsection reasonably approximates income as determined under s. 71.26, any member not included in subd. 1. may determine its income based on a consolidated profit and loss statement that includes the member and that is prepared for the purpose of filing, by related corporations, with the securities and exchange commission. If the member is not required to file with the securities and exchange commission, the department may allow, for purposes of this subdivision, the use of the consolidated profit and loss statement prepared for reporting to shareholders and subject to review by an independent auditor. If a statement described in this subdivision does not reasonably approximate income as determined under s. 71.26, the department may accept the statement if the member makes appropriate adjustments to the statement, as determined by the department, to approximate the income determined under s. 71.26.

AB1-SA1,30,5 4. If a unitary business includes income from a pass-through entity, the total income of the combined group includes the member's direct and indirect distributive share of the pass-through entity's unitary business income.

AB1-SA1,30,10 5. All dividends paid by one member to another are not included in the recipients income, if the dividends are paid out of the earnings and profits of the unitary business in the current taxable year or in an earlier taxable year. This subdivision does not apply to dividends received from members of a unitary business that are not a part of the combined group.

AB1-SA1,30,17 6. Except as provided by the department by rule, business income or loss from an intercompany transaction between members of the same combined group shall be deferred in a manner similar to 26 CFR 1.1502-13. Upon the occurrence of any of the following events, deferred business income or loss resulting from an intercompany transaction between members of a combined group shall be included in the income of the seller and shall be apportioned as business income earned immediately before the event:

AB1-SA1,30,19 a. The object of the deferred intercompany transaction is sold by the buyer to an entity that is not a member of the combined group.

AB1-SA1,30,22 b. The object of the deferred intercompany transaction is sold by the buyer to an entity that is a member of the combined group for use outside the unitary business in which the buyer and seller are engaged.

AB1-SA1,30,24 c. The object of the deferred intercompany transaction is converted by the buyer to a use outside the unitary business in which the buyer and seller are engaged.

AB1-SA1,31,2 d. The buyer and seller are no longer members of the same combined group, regardless of whether the members remain a unitary business.

AB1-SA1,31,14 7. A charitable expense incurred by a member of a combined group, to the extent allowable as a deduction under section 170 of the Internal Revenue Code, shall be subtracted first from the business income of the combined group, subject to the income limitations of section 170 of the Internal Revenue Code as it applies to the entire business income of the group, and any remaining amount shall be treated as a nonbusiness expense allocable to the member that incurred the expense, subject to the income limitations of section 170 of the Internal Revenue Code as it applies to the nonbusiness income of that member. Any charitable deduction described under this subdivision that is allowed as a carryover deduction in a subsequent year is considered to be originally incurred in the subsequent year by the same member, and this section applies in the subsequent year for purposes of determining the allowable deduction in that year.

AB1-SA1,31,18 8. Gain or loss from the sale or exchange of capital assets, property described in section 1231 (a) (3) of the Internal Revenue Code, and property subject to an involuntary conversion, is removed from the total separate net income of each member of a combined group and is apportioned and allocated as follows:

AB1-SA1,31,23 a. For short-term capital gains or losses, long-term capital gains or losses, gains or losses under section 1231 of the Internal Revenue Code, and involuntary conversions, the business gain and loss of all members are combined within each class of net business gain or loss and each such class is separately apportioned to each member using the member's apportionment percentage determined under sub. (5).

AB1-SA1,32,4 b. Each taxpayer member shall net its apportioned business gain or loss for all classes, as determined under subd. 8. a., including any such apportioned business gain and loss from other combined groups, against the taxpayer member's nonbusiness gain and loss for all classes allocated to this state as provided under sections 1231 and 1222 of the Internal Revenue Code, not including nonbusiness items allocated to another state.

AB1-SA1,32,8 c. Any resulting state source income or loss, if the loss is not subject to section 1211 of the Internal Revenue Code, of a taxpayer member produced by the application of subd. 8. a. and b. shall then be applied to all other state source income or loss of that member.

AB1-SA1,32,12 d. Any resulting state source loss of a member that is subject to section 1211 of the Internal Revenue Code shall be carried forward or carried back by that member and shall be treated as state source short-term capital loss incurred by that member for the year for which the carry-forward or carry-back applies.

AB1-SA1,32,16 9. Any expense of one member of the unitary business that is directly or indirectly attributable to the nonbusiness or exempt income of another member of the unitary business shall be allocated to that other member as corresponding nonbusiness or exempt expense, as appropriate.

AB1-SA1,32,19 (b) Subtract any nonbusiness income of the combined group from the amount determined under par. (a) and add any nonbusiness expense or loss of the combined group to the amount determined under par. (a).

AB1-SA1,32,24 (5) Taxpayer's share of business income of a combined group. The taxpayer's share of the business income apportionable to this state of each combined group of which it is a member shall be the product of the business income of the combined group as determined under sub. (4) and the taxpayer member's sales factor percentage, determined under s. 71.25, modified as follows:

AB1-SA1,33,2 (a) Include in the numerator the taxpayer member's sales associated with the combined group's unitary business in this state.

AB1-SA1,33,6 (b) Include in the numerator the taxpayer member's sales associated with the combined group's unitary business to another state in which the taxpayer member is not engaged in business, regardless of whether another member of the combined group is engaged in business in the other state.

AB1-SA1,33,9 (c) Include in the denominator the sales of all members of the combined group, including the taxpayer, that are associated with the combined group's unitary business regardless of where that business is located.

AB1-SA1,33,14 (d) Include sales of a pass-through entity owned directly or indirectly by a corporation in proportion to a ratio the numerator of which is the amount of the corporation's distributive share of the pass-through entity's unitary income included in the income of the combined group in under sub. (4) and the denominator of which is the amount of the pass-through entity's total unitary income.

AB1-SA1,33,15 (e) Exclude sales between members of the combined group.

AB1-SA1,33,18 (f) If a member of a combined group is not subject to the taxes imposed under s. 71.23 because it is not engaged in business in this state, the numerator of the member's sales factor is zero.

AB1-SA1,33,23 (6) Credits and post-apportionment deductions. No tax credit or post-apportionment deduction earned by one member of the combined group, but not completed, used by, or allowed to that member, may be used in whole or in part by another member of the combined group or applied in whole or in part against the total income of the combined group.

AB1-SA1,34,10 (7) Designated agent. (a) For purposes of administering this section, each combined group shall appoint a sole designated agent. The designated agent is the parent corporation of the combined group, if the parent corporation is a taxpayer member of the combined group and the income of the parent corporation is included in the combined report. If there is no such parent corporation, the designated agent may be appointed by the taxpayer members. If there is no such parent corporation and no taxpayer member is appointed, the designated agent is the taxpayer member that has the most significant operations in this state on a recurring basis, as determined by the department. The designated agent may change only when the designated agent is no longer subject to the tax imposed under s. 71.23 (1) or (2), in which case the combined group shall notify the department of such a change in the manner prescribed by the department.

AB1-SA1,34,12 (b) The designated agent is responsible for acting on behalf of the taxpayer members of the combined group and shall do all of the following:

AB1-SA1,34,13 1. File with the department a combined report under sub. (1) (b).

AB1-SA1,34,14 2. File any extensions under s. 71.24.

AB1-SA1,34,15 3. File any amended combined reports and claims for refund or credit.

AB1-SA1,34,17 4. Send and receive all correspondence with the department regarding the combined report.

AB1-SA1,34,21 5. Remit all taxes, including estimated taxes, to the department. For purposes of computing interest on late payments, all payments remitted are considered to be made on a proportionate basis by all taxpayer members of the combined group, unless otherwise specified by the designated agent.

AB1-SA1,35,2 6. Participate on behalf of the combined group members in any investigation or hearing requested by the department regarding a combined report, produce all information requested by the department regarding the combined report, and file any appeal related to a combined report. Any appeal filed by the designated agent is considered filed by all members of the combined group.

AB1-SA1,35,6 7. Execute any waiver, closing agreement, power of attorney, or other document regarding the combined report filed under sub. (1) (b). Any waiver, agreement, or document executed by the designated agent is considered executed by all members of the combined group.

AB1-SA1,35,9 8. Receive notices regarding the combined report. Any such notice the department sends to the designated agent is considered sent to all taxpayer members of the combined group.

AB1-SA1,35,12 9. Receive refunds regarding the combined report. Any such refund shall be paid to and in the name of the designated agent and shall discharge any liability of the state to any member of the combined group regarding the refund.

AB1-SA1,35,17 (c) The department may relieve the designated agent from any of the duties described in par. (b) to the extent that the duties relate to income, expense, or loss that is not includable in the business income of the combined group under sub. (4). Unless the department provides for such relief by rule, a designated agent shall obtain written approval from the department to be relieved of any such duties.

AB1-SA1,36,3 (8) Taxable year of the combined group. (a) Except as provided in par. (b), the combined group's taxable year is the designated agent's taxable year. If a member's taxable year is different from the combined group's taxable year, the designated agent may elect to determine the portion of each member's income to be included in the combined report either from a separate income statement from each member that is prepared by the member's books and records for the months that are included in the combined group's taxable year or by including in the combined report all of the income of each member for the year that ends during the combined group's taxable year. Any election made under this paragraph remains in effect for subsequent years unless the designated agent submits a request to the department to change the election and the department approves in writing.

AB1-SA1,36,6 (b) If 2 or more members of a combined group file a federal consolidated return, the combined group's taxable year is the taxable year that corresponds to the federal consolidated return.

AB1-SA1,36,13 (9) Part-year members of a combined group. If a corporation becomes a member of a combined group, or ceases to be a member of a combined group, after the beginning of the combined group's taxable year, the corporation's income shall be determined as provided under subs. (3), (4), and (5) for that portion of the year in which the corporation was a member of the combined group, and the income shall be included in the combined report. The income for the remaining short period shall be reported on a separate return or separate combined report.

AB1-SA1,36,18 (10) Presumptions and burden of proof. A commonly controlled group is presumed to be engaged in a unitary business and all of the income of the unitary business is presumed to be apportionable business income under this section. A corporation has the burden of proving that it is not a member of a combined group that is subject to this section.

AB1-SA1, s. 9de Section 9de. 71.26 (1m) (j) of the statutes is created to read:

AB1-SA1,36,20 71.26 (1m) (j) Those issued under s. 59.58 (6) (f).

AB1-SA1, s. 9df Section 9df. 71.26 (3) (x) of the statutes is amended to read:

AB1-SA1,36,25 71.26 (3) (x) Sections 1501 to 1505, 1551, 1552, 1563 and 1564 (relating to consolidated returns) are excluded, except as provided under section 1502 of the U.S. treasury regulations as it relates to deferred gain or loss from an intercompany transaction under s. 71.255 (4) (a) 6.

AB1-SA1, s. 9dg Section 9dg. 71.27 (1) of the statutes is amended to read:

AB1-SA1,37,3 71.27 (1) The taxes to be assessed, levied and collected upon Wisconsin net incomes of corporations shall be computed at the rate of 7.9% 7.8 percent.

AB1-SA1, s. 9dh Section 9dh. 71.27 (2) of the statutes is amended to read:

AB1-SA1,37,6 71.27 (2) The corporation franchise tax imposed under s. 71.23 (2) and measured by Wisconsin net income shall be computed at the rate of 7.9% 7.8 percent.

AB1-SA1, s. 9di Section 9di. 71.28 (5e) (b) of the statutes is amended to read:

AB1-SA1,37,15 71.28 (5e) (b) Filing claims. Subject to the limitations provided in this subsection and subject to 2005 Wisconsin Act 479, section 17, beginning in the first taxable year following the taxable year in which the claimant claims an exemption a deduction under s. 77.54 (48) 77.585 (9), a claimant may claim as a credit against the taxes imposed under s. 71.23, up to the amount of those taxes, in each taxable year for 2 years, the amount certified by the department of commerce that resulted from the claimant claimed as an exemption claiming a deduction under s. 77.54 (48) 77.585 (9).

AB1-SA1, s. 9dj Section 9dj. 71.28 (5e) (c) 1. of the statutes is amended to read:

AB1-SA1,37,18 71.28 (5e) (c) 1. No credit may be allowed under this subsection unless the claimant satisfies the requirements under s. 77.54 (48) 77.585 (9).

AB1-SA1, s. 9dk Section 9dk. 71.28 (5e) (c) 3. of the statutes is amended to read: