Wisconsin Legislature: 2,160

6. No credit may be allowed under this subsection unless the claimant submits with the claimant's return a copy of the claimant's credit certification and allocation under s. 560.208.

(d) Administration. 1. Subsection (4) (e), (g), and (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

2. If the allowable amount of the claim under par. (b) exceeds the tax otherwise due under s. 71.23, the amount of the claim not used to offset the tax due shall be certified by the department of revenue to the department of administration for payment by check, share draft, or other draft drawn from the appropriation account under s. 20.835 (2) (bd).

2,148 Section 148. 71.28 (4) (ad) 1. of the statutes is amended to read:

71.28 (4) (ad) 1. Except as provided in subds. 2. and 3., any corporation may credit against taxes otherwise due under this chapter an amount equal to 5 percent of the amount obtained by subtracting from the corporation's qualified research expenses, as defined in section 41 of the Internal Revenue Code, except that "qualified research expenses" includes only expenses incurred by the claimant, incurred for research conducted in this state for the taxable year, except that a taxpayer may elect the alternative computation under section 41 (c) (4) of the Internal Revenue Code and that election applies until the department permits its revocation, except as provided in par. (af), and except that "qualified research expenses" does not include compensation used in computing the credit under subs. (1dj) and (1dx), the corporation's base amount, as defined in section 41 (c) of the Internal Revenue Code, except that gross receipts used in calculating the base amount means gross receipts from sales attributable to Wisconsin under s. 71.25 (9) (b) 1. and 2., (d), (df) 1. and 2., and (dh)1., 2., and 3., (dj) 1., and (dk) 1. Section 41 (h) of the Internal Revenue Code does not apply to the credit under this paragraph.

2,149 Section 149. 71.28 (4) (ad) 2. of the statutes is amended to read:

71.28 (4) (ad) 2. For taxable years beginning after June 30, 2007, any corporation may credit against taxes otherwise due under this chapter an amount equal to 10 percent of the amount obtained by subtracting from the corporation's qualified research expenses, as defined in section 41 of the Internal Revenue Code, except that "qualified research expenses" includes only expenses incurred by the claimant for research related to designing internal combustion engines for vehicles, including expenses related to designing vehicles that are powered by such engines and improving production processes for such engines and vehicles, incurred for research conducted in this state for the taxable year, except that a taxpayer may elect the alternative computation under section 41 (c) (4) of the Internal Revenue Code and that election applies until the department permits its revocation, except as provided in par. (af), and except that "qualified research expenses" does not include compensation used in computing the credit under subs. (1dj) and (1dx), the corporation's base amount, as defined in section 41 (c) of the Internal Revenue Code, except that gross receipts used in calculating the base amount means gross receipts from sales attributable to Wisconsin under s. 71.25 (9) (b) 1. and 2. and (d), (df) 1. and 2., (dh) 1., 2., and 3., (dj) 1., and (dk) 1. Section 41 (h) of the Internal Revenue Code does not apply to the credit under this paragraph.

2,150 Section 150. 71.28 (4) (ad) 3. of the statutes is amended to read:

71.28 (4) (ad) 3. For taxable years beginning after June 30, 2007, any corporation may credit against taxes otherwise due under this chapter an amount equal to 10 percent of the amount obtained by subtracting from the corporation's qualified research expenses, as defined in section 41 of the Internal Revenue Code, except that "qualified research expenses" includes only expenses incurred by the claimant for research related to the design and manufacturing of energy efficient lighting systems, building automation and control systems, or automotive batteries for use in hybrid-electric vehicles, that reduce the demand for natural gas or electricity or improve the efficiency of its use, incurred for research conducted in this state for the taxable year, except that a taxpayer may elect the alternative computation under section 41 (c) (4) of the Internal Revenue Code and that election applies until the department permits its revocation, except as provided in par. (af), and except that "qualified research expenses" does not include compensation used in computing the credit under subs. (1dj) and (1dx), the corporation's base amount, as defined in section 41 (c) of the Internal Revenue Code, except that gross receipts used in calculating the base amount means gross receipts from sales attributable to Wisconsin under s. 71.25 (9) (b) 1. and 2. and (d), (df), 1. and 2., (dh) 1., 2., and 3., (dj) 1., and (dk) 1. Section 41 (h) of the Internal Revenue Code does not apply to the credit under this paragraph.

2,151 Section 151. 71.28 (4) (am) 1. of the statutes is amended to read:

71.28 (4) (am) 1. In addition to the credit under par. (ad), any corporation may credit against taxes otherwise due under this chapter an amount equal to 5 percent of the amount obtained by subtracting from the corporation's qualified research expenses, as defined in section 41 of the Internal Revenue Code, except that "qualified research expenses" include only expenses incurred by the claimant in a development zone under subch. VI of ch. 560, except that a taxpayer may elect the alternative computation under section 41 (c) (4) of the Internal Revenue Code and that election applies until the department permits its revocation and except that "qualified research expenses" do not include compensation used in computing the credit under sub. (1dj) nor research expenses incurred before the claimant is certified for tax benefits under s. 560.765 (3), the corporation's base amount, as defined in section 41 (c) of the Internal Revenue Code, in a development zone, except that gross receipts used in calculating the base amount means gross receipts from sales attributable to Wisconsin under s. 71.25 (9) (b) 1. and 2., (d), (df) 1. and 2., and (dh) 1., 2., and 3., (dj) 1., and (dk) 1. and research expenses used in calculating the base amount include research expenses incurred before the claimant is certified for tax benefits under s. 560.765 (3), in a development zone, if the claimant submits with the claimant's return a copy of the claimant's certification for tax benefits under s. 560.765 (3) and a statement from the department of commerce verifying the claimant's qualified research expenses for research conducted exclusively in a development zone. The rules under s. 73.03 (35) apply to the credit under this subdivision. The rules under sub. (1di) (f) and (g) as they apply to the credit under that subsection apply to claims under this subdivision. Section 41 (h) of the Internal Revenue Code does not apply to the credit under this subdivision.

2,152 Section 152. 71.28 (5b) (c) 1. of the statutes is repealed.

2,153 Section 153. 71.28 (5b) (c) 2. of the statutes is renumbered 71.28 (5b) (c).

2,154 Section 154. 71.28 (5e) (b) of the statutes is amended to read:

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 of sales and use tax 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).

2,155 Section 155. 71.28 (5e) (c) 1. of the statutes is amended to read:

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).

2,156 Section 156. 71.28 (5e) (c) 3. of the statutes is amended to read:

71.28 (5e) (c) 3. The total amount of the credits and exemptions the sales and use tax resulting from the deductions claimed under s. 77.585 (9) that may be claimed by all claimants under this subsection and ss. 71.07 (5e), 71.47 (5e), and 77.54 (48) 77.585 (9) is $7,500,000, as determined by the department of commerce.

2,157 Section 157. 71.30 (2) of the statutes is amended to read:

71.30 (2) Allocation of gross income, deductions, credits between 2 or more businesses. In any case of 2 or more organizations, trades or businesses (whether or not incorporated, whether or not organized in the United States and, whether or not affiliated , and whether or not unitary) owned or controlled directly or indirectly by the same interests, the secretary or his or her delegate may distribute, apportion or allocate gross income, deductions, credits or allowances between or among such organizations, trades or businesses, if he or she determines that such distribution, apportionment or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any of such organizations, trades or businesses. The authority granted under this subsection is in addition to, and not a limitation of or dependent on, the provisions of ss. 71.05 (6) (a) 24. and (b) 45., 71.26 (2) (a) 7. and 8., 71.34 (1k) (j) and (k), 71.45 (2) (a) 16. and 17., and 71.80 (23).

2,158 Section 158. 71.30 (2m) of the statutes is created to read:

71.30 (2m) Transactions without economic substance. (a) If any person, directly or indirectly, engages in a transaction or series of transactions without economic substance to create a loss or to reduce taxable income or to increase credits allowed in determining Wisconsin tax, the department shall determine the amount of a taxpayer's taxable income or tax so as to reflect what would have been the taxpayer's taxable income or tax if not for the transaction or transactions without economic substance causing the reduction in taxable income or tax.

(b) A transaction has economic substance only if the taxpayer shows both of the following:

1. The transaction changes the taxpayer's economic position in a meaningful way, apart from federal, state, local, and foreign tax effects.

2. The taxpayer has a substantial nontax purpose for entering into the transaction and the transaction is a reasonable means of accomplishing the substantial nontax purpose. A transaction has a substantial nontax purpose if it has substantial potential for profit, disregarding any tax effects.

(c) With respect to transactions between members of a controlled group as defined in section 267 (f) (1) of the Internal Revenue Code, such transactions shall be presumed to lack economic substance and the taxpayer shall bear the burden of establishing by clear and convincing evidence that a transaction or a series of transactions between the taxpayer and one or more members of the controlled group has economic substance.

2,159 Section 159. 71.30 (3) (em) of the statutes is renumbered 71.30 (3) (eh).

2,160 Section 160. 71.30 (3) (ema) of the statutes is created to read:

71.30 (3) (ema) Economic development tax credit under s. 71.28 (1dy).

2,161 Section 161. 71.30 (3) (emb) of the statutes is renumbered 71.30 (3) (ei).

2,162 Section 162. 71.30 (3) (en) of the statutes is renumbered 71.30 (3) (ej).

2,163 Section 163. 71.30 (3) (eo) of the statutes is renumbered 71.30 (3) (ek).

2,164 Section 164. 71.30 (3) (eom) of the statutes is renumbered 71.30 (3) (eL).

2,165 Section 165. 71.30 (3) (f) of the statutes is amended to read:

71.30 (3) (f) The total of farmers' drought property tax credit under s. 71.28 (1fd), farmland preservation credit under subch. IX, farmland tax relief credit under s. 71.28 (2m), dairy manufacturing facility investment credit under s. 71.28 (3p), meat processing facility investment credit under s. 71.28 (3r), enterprise zone jobs credit under s. 71.28 (3w), film production services credit under s. 71.28 (5f) (b) 2., and estimated tax payments under s. 71.29.

2,166 Section 166. 71.34 (1c) of the statutes is created to read:

71.34 (1c) For purposes of sub. (1k) (j) and (L), "intangible expenses" include the following, to the extent that the amounts would otherwise be deductible in computing Wisconsin adjusted gross income:

(a) Expenses, losses, and costs for, related to, or directly or indirectly in connection with the acquisition, use, maintenance, management, ownership, sale, exchange, or any other disposition of intangible property.

(b) Losses related to, or incurred in connection directly or indirectly with, factoring transactions or discounting transactions.

(d) Licensing fees.

(e) Other similar expenses, losses, and costs.

2,167 Section 167. 71.34 (1d) of the statutes is created to read:

71.34 (1d) "Intangible property" includes stocks, bonds, financial instruments, patents, patent applications, trade names, trademarks, service marks, copyrights, mask works, trade secrets, and similar types of intangible assets.

2,168 Section 168. 71.34 (1h) of the statutes is created to read:

71.34 (1h) For purposes of sub. (1k) (j) and (L), "management fees" include expenses and costs, not including interest expenses, pertaining to accounts receivable, accounts payable, employee benefit plans, insurance, legal matters, payroll, data processing, purchasing, taxation, financial matters, securities, accounting, or reporting and compliance matters or similar activities, to the extent that the amounts would otherwise be deductible in the computation of Wisconsin adjusted gross income.

2,169 Section 169. 71.34 (1k) (g) of the statutes is amended to read:

71.34 (1k) (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), (1dy), (3), (3g), (3h), (3n), (3p), (3r), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), and (5k) and passed through to shareholders.

2,170 Section 170. 71.34 (1k) (j) of the statutes is amended to read:

71.34 (1k) (j) An addition shall be made for any amount deducted or excluded under the Internal Revenue Code for interest expenses and, rental expenses, intangible expenses, and management fees that are directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.

2,171 Section 171. 71.34 (1k) (L) of the statutes is amended to read:

71.34 (1k) (L) A deduction shall be allowed for the amount added, pursuant to par. (j) or s. 71.05 (6) (a) 24., 71.26 (2) (a) 7., or 71.45 (2) (a) 16., to the federal income of a related entity that paid interest expenses or, rental expenses, intangible expenses, or management fees to the corporation, to the extent that the related entity could not offset such amount with the deduction allowable under par. (k) or s. 71.05 (6) (b) 45., 71.26 (2) (a) 8., or 71.45 (2) (a) 17.

2,172 Section 172. 71.42 (1sg) of the statutes is created to read:

71.42 (1sg) For purposes of ss. 71.45 (2) (a) 16. and 18. and 71.255 (2) (d) 1., "intangible expenses" include the following, to the extent that the amounts would otherwise be deductible in computing net income under the Internal Revenue Code, as adjusted under s. 71.45 (2):

(b) Losses related to, or incurred in connection directly or indirectly with, factoring transactions or discounting transactions.

(d) Licensing fees.

(e) Other similar expenses, losses, and costs.

2,173 Section 173. 71.42 (1sh) of the statutes is created to read:

71.42 (1sh) "Intangible property" includes stocks, bonds, financial instruments, patents, patent applications, trade names, trademarks, service marks, copyrights, mask works, trade secrets, and similar types of intangible assets.

2,174 Section 174. 71.42 (1t) of the statutes is amended to read:

71.42 (1t) For purposes of s. ss. 71.45 (2) (a) 16. and 18. and 71.255 (2) (d) 1., "interest expenses" means interest that would otherwise be deductible under section 163 of the Internal Revenue Code, as adjusted under s. 71.45 (2).

2,175 Section 175. 71.42 (3c) of the statutes is created to read:

71.42 (3c) For purposes of s. 71.45 (2) (a) 16. and 18., "management fees" include expenses and costs, not including interest expenses, pertaining to accounts receivable, accounts payable, employee benefit plans, insurance, legal matters, payroll, data processing, purchasing, taxation, financial matters, securities, accounting, or reporting and compliance matters or similar activities, to the extent that the amounts would otherwise be deductible in determining net income under the Internal Revenue Code as adjusted under s. 71.45 (2).

2,176 Section 176. 71.43 (2) of the statutes is amended to read:

71.43 (2) Franchise tax on corporations. For the privilege of exercising its franchise, buying or selling lottery prizes if the winning tickets were originally bought in this state or doing business in this state in a corporate capacity, except as provided under s. 71.23 (3), every domestic or foreign corporation, except corporations specified in ss. 71.26 (1) and 71.45 (1) (a), shall annually pay a franchise tax according to or measured by its entire Wisconsin net income of the preceding taxable year at the rates set forth in s. 71.46 (2). In addition, except as provided in ss. 71.23 (3), 71.26 (1) and 71.45 (1) (a), a corporation that ceases doing business in this state shall pay a special franchise tax according to or measured by its entire Wisconsin net income for the taxable year during which the corporation ceases doing business in this state at the rate under s. 71.46 (2). Every corporation organized under the laws of this state shall be deemed to be residing within this state for the purposes of this franchise tax. All provisions of this chapter and ch. 73 relating to income taxation of corporations shall apply to franchise taxes imposed under this subsection, unless the context requires otherwise. The tax imposed by this subsection on insurance companies subject to taxation under this chapter shall be based on Wisconsin net income computed under s. 71.45, and no other provision of this chapter relating to computation of taxable income for other corporations shall apply to such insurance companies, except for s. 71.255. All other provisions of this chapter shall apply to insurance companies subject to taxation under this chapter unless the context clearly requires otherwise.

2,177 Section 177. 71.45 (2) (a) 10. of the statutes is amended to read:

71.45 (2) (a) 10. By adding to federal taxable income the amount of credit computed under s. 71.47 (1dd) to (1dx) (1dy), (3h), (3n), (3p), (3r), (3w), (5e), (5f), (5g), (5h), (5i), (5j), and (5k) 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 (1k) (g) and the amount of credit computed under s. 71.47 (1), (3), (3t), (4), and (5).

2,178 Section 178. 71.45 (2) (a) 16. of the statutes is amended to read:

71.45 (2) (a) 16. By adding to federal taxable income any amount deducted or excluded under the Internal Revenue Code for interest expenses and, rental expenses, intangible expenses, and management fees that are directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.

2,179 Section 179. 71.45 (2) (a) 18. of the statutes is amended to read:

71.45 (2) (a) 18. A deduction shall be allowed for the amount added, pursuant to subd. 16. or s. 71.05 (6) (a) 24., 71.26 (2) (a) 7., or 71.34 (1k) (j), to the federal income of a related entity that paid interest expenses or , rental expenses, intangible expenses, or management fees to the insurer, to the extent that the related entity could not offset such amount with the deduction allowable under subd. 17. or s. 71.05 (6) (b) 45., 71.26 (2) (a) 8., or 71.34 (1k) (k).

2,180 Section 180. 71.47 (1dy) of the statutes is created to read:

71.47 (1dy) Economic development tax credit. (a) Definition. In this subsection, "claimant" means a person who files a claim under this subsection and is certified under s. 560.701 (2) and authorized to claim tax benefits under s. 560.703.

(b) Filing claims. Subject to the limitations under this subsection and ss. 560.701 to 560.706, for taxable years beginning after December 31, 2008, a claimant may claim as a credit against the tax imposed under s. 71.43, up to the amount of the tax, the amount authorized for the claimant under s. 560.703.

(c) Limitations. 1. No credit may be allowed under this subsection unless the claimant includes with the claimant's return a copy of the claimant's certification under s. 560.701 (2) and a copy of the claimant's notice of eligibility to receive tax benefits under s. 560.703 (3).

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 authorization to claim tax benefits under s. 560.703. 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.

(d) Administration. 1. Except as provided in subd. 2., sub. (4) (e) and (f), as it applies to the credit under sub. (4), applies to the credit under this subsection.

2. If a claimant's certification is revoked under s. 560.705, or if a claimant becomes ineligible for tax benefits under s. 560.702, the claimant may not claim credits under this subsection for the taxable year that includes the day on which the certification is revoked; the taxable year that includes the day on which the claimant becomes ineligible for tax benefits; or succeeding taxable years and the claimant may not carry over unused credits from previous years to offset the tax imposed under s. 71.43 for the taxable year that includes the day on which certification is revoked; the taxable year that includes the day on which the claimant becomes ineligible for tax benefits; or succeeding taxable years.

3. Subsection (4) (g) and (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

2,181 Section 181. 71.47 (3p) (a) 1m. of the statutes is created to read:

71.47 (3p) (a) 1m. "Dairy cooperative" means a business organized under ch. 185 or 193 for the purpose of obtaining or processing milk.

2,182 Section 182. 71.47 (3p) (a) 3. (intro.) of the statutes is amended to read:

71.47 (3p) (a) 3. (intro.) "Dairy manufacturing modernization or expansion" means constructing, improving, or acquiring buildings or facilities, or acquiring equipment, for dairy manufacturing, including the following, if used exclusively for dairy manufacturing and if acquired and placed in service in this state during taxable years that begin after December 31, 2006, and before January 1, 2015, or, in the case of dairy cooperatives, if acquired and placed in service in this state during taxable years that begin after December 31, 2008, and before January 1, 2017:

2,183 Section 183. 71.47 (3p) (b) of the statutes is amended to read:

71.47 (3p) (b) Filing claims. Subject to the limitations provided in this subsection and s. 560.207, except as provided in par. (c) 5., for taxable years beginning after December 31, 2006, and before January 1, 2015, a claimant may claim as a credit against the taxes imposed under s. 71.43, up to the amount of the tax, an amount equal to 10 percent of the amount the claimant paid in the taxable year for dairy manufacturing modernization or expansion related to the claimant's dairy manufacturing operation.

2,184 Section 184. 71.47 (3p) (c) 2m. b. of the statutes is amended to read: