SB461: Bill Text

Analysis by the Legislative Reference Bureau

Under federal law, the New Markets Tax Credit Program permits federal taxpayers to receive a credit against federal income taxes for making investments in qualified community development entities (QCDE). Federal law defines a QCDE as an entity with the primary mission of serving or providing investment capital for low-income communities or low-income persons that has been certified by the secretary of the Internal Revenue Service.

This bill authorizes the Department of Commerce (Commerce) to certify an individual who applies to Commerce, has made an investment in a QCDE, and is eligible to receive the federal New Markets Tax Credit to receive a credit against state income and franchise taxes and against license fees paid by insurers. Prior to certification, Commerce must verify that the person has made an investment in a QCDE with the primary mission of serving or providing investment capital for low-income communities or low-income persons in this state. Commerce must annually verify that the person continues to hold the investment in any year the person seeks to claim the credit.

The credit may be claimed for seven consecutive taxable years beginning with the taxable year in which the taxpayer makes an investment in a QCDE. The amount of the credit that a taxpayer may claim is equal to the amount of the taxpayer's investment multiplied by the following percentages:

1. For the first three taxable years, 5 percent.

2. For the next four taxable years, 6 percent.

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:

SB461, s. 1 Section 1. 71.07 (5n) of the statutes is created to read:

SB461,2,3 71.07 (5n) Supplement to federal new markets credit. (a) Definition. In this subsection, "claimant" means a person who files a claim under this subsection.

SB461,2,9 (b) Filing claims. Subject to the limitations provided under this subsection and s. 560.2065, a claimant may claim as a credit against the taxes imposed under ss. 71.02 and 71.08, up to the amount of the taxes, the amount the claimant paid to a qualified community development entity, as defined under 26 USC 45D (c), for a qualified equity investment, as defined under 26 USC 45D (b), at its original issue, multiplied by the following percentage:

SB461,2,11 1. For the taxable years that correspond to the first 3 credit allowance dates, as defined under 26 USC 45D (a) (3), 5 percent.

SB461,2,14 2. For the taxable years that correspond to the 4 credit allowance dates, as defined under 26 USC 45D (a) (3), following the credit allowance dates described in subd. 1., 6 percent.

SB461,3,16 (c) Limitations. 1. A partnership, limited liability company, or tax-option corporation may not claim the credit under this subsection. The partners of a partnership, members of a limited liability company, or shareholders in a tax-option corporation may claim the credit under this subsection based on eligible costs incurred by the partnership, company, or tax-option corporation. The partnership, limited liability company, or tax-option corporation shall calculate the amount of the credit which may be claimed by each partner, member, or shareholder and shall provide that information to the partner, member, or shareholder. For shareholders of a tax-option corporation, the credit may be allocated in proportion to the ownership interest of each shareholder. Credits computed by a partnership or limited liability company may be claimed in proportion to the ownership interests of the partners or members or allocated to partners or members as provided in a written agreement among the partners or members that is entered into no later than the last day of the taxable year of the partnership or limited liability company, for which the credit is claimed. Any partner or member who claims the credit as provided under this paragraph shall attach a copy of the agreement, if applicable, to the tax return on which the credit is claimed. A person claiming the credit as provided under this paragraph is solely responsible for any tax liability arising from a dispute with the department of revenue related to claiming the credit.

SB461,3,22 2. The tax basis of a claimant's interest in a partnership, limited liability company, or tax-option corporation shall be reduced, but not below zero, by the amount of any credit claimed under this subsection. The credit claimed under this subsection shall not be limited to the amount of the adjusted tax basis for the claimant's interest in a partnership, limited liability company, or tax-option corporation.

SB461,4,4 3. Any claimant who transfers an interest in a partnership, limited liability company, or tax-option corporation after the first credit allowance date, as defined under 26 USC 45D (b), but before the final credit allowance date for the credit allowed under this subsection shall be entitled to claim the credit for the remaining credit allowance dates by filing with the claimant's return a written agreement between the claimant and the transferee of the interest that specifies that the claimant, not the transferee, is the person entitled to claim the credit.

SB461,4,6 4. The limitation under section 469 (a) (1) (B) of the Internal Revenue Code does not apply to the credit under this subsection.

SB461,4,8 (d) Administration. 1. 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.

SB461,4,11 2. No credit may be allowed under this subsection unless the claimant includes with the claimant's return a copy of the claimant's certification for tax benefits under s. 560.2065 (2).

SB461, s. 2 Section 2. 71.08 (1) (intro.) of the statutes, as affected by 2009 Wisconsin Act 28, is amended to read:

SB461,4,23 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), (2dy), (3m), (3n), (3p), (3q), (3r), (3s), (3t), (3w), (5b), (5d), (5e), (5f), (5h), (5i), (5j), (5n), (6), (6e), (8r), and (9e), 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1dy), (2m), (3), (3n), (3t), and (3w), 71.47 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1dy), (2m), (3), (3n), (3t), and (3w), 71.57 to 71.61, and 71.613 and subch. VIII 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:

SB461, s. 3 Section 3. 71.10 (4) (fm) of the statutes is created to read:

SB461,4,25 71.10 (4) (fm) Supplement to federal new markets credit under s. 71.07 (5n).

SB461, s. 4 Section 4. 71.28 (5n) of the statutes is created to read:

SB461,5,3 71.28 (5n) Supplement to federal new markets credit. (a) Definition. In this subsection, "claimant" means a person who files a claim under this subsection.

SB461,5,9 (b) Filing claims. Subject to the limitations provided under this subsection and s. 560.2065, a claimant may claim as a credit against the taxes imposed under s. 71.23, up to the amount of the taxes, the amount the claimant paid to a qualified community development entity, as defined under 26 USC 45D (c), for a qualified equity investment, as defined under 26 USC 45D (b), at its original issue, multiplied by the following percentage:

SB461,5,11 1. For the taxable years that correspond to the first 3 credit allowance dates, as defined under 26 USC 45D (a) (3), 5 percent.

SB461,5,14 2. For the taxable years that correspond to the 4 credit allowance dates, as defined under 26 USC 45D (a) (3), following the credit allowance dates described in subd. 1., 6 percent.

SB461,6,8 (c) Limitations. 1. A partnership, limited liability company, or tax-option corporation may not claim the credit under this subsection. The partners of a partnership, members of a limited liability company, or shareholders in a tax-option corporation may claim the credit under this subsection based on eligible costs incurred by the partnership, company, or tax-option corporation. The partnership, limited liability company, or tax-option corporation shall calculate the amount of the credit which may be claimed by each partner, member, or shareholder and shall provide that information to the partner, member, or shareholder. For shareholders of a tax-option corporation, the credit may be allocated in proportion to the ownership interest of each shareholder. Credits computed by a partnership or limited liability company may be claimed in proportion to the ownership interests of the partners or members or allocated to partners or members as provided in a written agreement among the partners or members that is entered into no later than the last day of the taxable year of the partnership or limited liability company, for which the credit is claimed. Any partner or member who claims the credit as provided under this paragraph shall attach a copy of the agreement, if applicable, to the tax return on which the credit is claimed. A person claiming the credit as provided under this paragraph is solely responsible for any tax liability arising from a dispute with the department of revenue related to claiming the credit.

SB461,6,14 2. The tax basis of a claimant's interest in a partnership, limited liability company, or tax-option corporation shall be reduced, but not below zero, by the amount of any credit claimed under this subsection. The credit claimed under this subsection shall not be limited to the amount of the adjusted tax basis for the claimant's interest in a partnership, limited liability company, or tax-option corporation.

SB461,6,21 3. Any claimant who transfers an interest in a partnership, limited liability company, or tax-option corporation after the first credit allowance date, as defined under 26 USC 45D (b), but before the final credit allowance date for the credit allowed under this subsection shall be entitled to claim the credit for the remaining credit allowance dates by filing with the claimant's return a written agreement between the claimant and the transferee of the interest that specifies that the claimant, not the transferee, is the person entitled to claim the credit.

SB461,6,23 4. The limitation under section 469 (a) (1) (B) of the Internal Revenue Code does not apply to the credit under this subsection.

SB461,6,25 (d) Administration. 1. Subsection (4) (e) to (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

SB461,7,3 2. No credit may be allowed under this subsection unless the claimant includes with the claimant's return a copy of the claimant's certification for tax benefits under s. 560.2065 (2).

SB461, s. 5 Section 5. 71.30 (3) (dn) of the statutes is created to read:

SB461,7,5 71.30 (3) (dn) Supplement to federal new markets credit under s. 71.28 (5n).

SB461, s. 6 Section 6. 71.47 (5n) of the statutes is created to read:

SB461,7,8 71.47 (5n) Supplement to federal new markets credit. (a) Definition. In this subsection, "claimant" means a person who files a claim under this subsection.

SB461,7,14 (b) Filing claims. Subject to the limitations provided under this subsection and s. 560.2065, a claimant may claim as a credit against the taxes imposed under s. 71.43, up to the amount of the taxes, the amount the claimant paid to a qualified community development entity, as defined under 26 USC 45D (c), for a qualified equity investment, as defined under 26 USC 45D (b), at its original issue, multiplied by the following percentage:

SB461,7,16 1. For the taxable years that correspond to the first 3 credit allowance dates, as defined under 26 USC 45D (a) (3), 5 percent.

SB461,7,19 2. For the taxable years that correspond to the 4 credit allowance dates, as defined under 26 USC 45D (a) (3), following the credit allowance dates described in subd. 1., 6 percent.

SB461,8,13 (c) Limitations. 1. A partnership, limited liability company, or tax-option corporation may not claim the credit under this subsection. The partners of a partnership, members of a limited liability company, or shareholders in a tax-option corporation may claim the credit under this subsection based on eligible costs incurred by the partnership, company, or tax-option corporation. The partnership, limited liability company, or tax-option corporation shall calculate the amount of the credit which may be claimed by each partner, member, or shareholder and shall provide that information to the partner, member, or shareholder. For shareholders of a tax-option corporation, the credit may be allocated in proportion to the ownership interest of each shareholder. Credits computed by a partnership or limited liability company may be claimed in proportion to the ownership interests of the partners or members or allocated to partners or members as provided in a written agreement among the partners or members that is entered into no later than the last day of the taxable year of the partnership or limited liability company, for which the credit is claimed. Any partner or member who claims the credit as provided under this paragraph shall attach a copy of the agreement, if applicable, to the tax return on which the credit is claimed. A person claiming the credit as provided under this paragraph is solely responsible for any tax liability arising from a dispute with the department of revenue related to claiming the credit.

SB461,8,19 2. The tax basis of a claimant's interest in a partnership, limited liability company, or tax-option corporation shall be reduced, but not below zero, by the amount of any credit claimed under this subsection. The credit claimed under this subsection shall not be limited to the amount of the adjusted tax basis for the claimant's interest in a partnership, limited liability company, or tax-option corporation.

SB461,9,2 3. Any claimant who transfers an interest in a partnership, limited liability company, or tax-option corporation after the first credit allowance date, as defined under 26 USC 45D (b), but before the final credit allowance date for the credit allowed under this subsection shall be entitled to claim the credit for the remaining credit allowance dates by filing with the claimant's return a written agreement between the claimant and the transferee of the interest that specifies that the claimant, not the transferee, is the person entitled to claim the credit.

SB461,9,4 (d) Administration. 1. 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.

SB461,9,7 2. No credit may be allowed under this subsection unless the claimant includes with the claimant's return a copy of the claimant's certification for tax benefits under s. 560.2065 (2).

SB461, s. 7 Section 7. 71.49 (1) (dn) of the statutes is created to read:

SB461,9,9 71.49 (1) (dn) Supplement to federal new markets credit under s. 71.47 (5n).

SB461, s. 8 Section 8. 76.639 of the statutes is created to read:

SB461,9,16 76.639 New markets credit. (1) Filing claims. Subject to the limitations provided under this section and s. 560.2065, an insurer may claim as a credit against the fees imposed under s. 76.60, 76.63, 76.65, 76.66, or 76.27 the amount the insurer paid to a qualified community development entity, as defined under 26 USC 45D (c), for a qualified equity investment, as defined under 26 USC 45D (b), at its original issue, multiplied by the following percentage:

SB461,9,18 1. For the taxable years that correspond to the first 3 credit allowance dates, as defined under 26 USC 45D (a) (3), 5 percent.

SB461,9,21 2. For the taxable years that correspond to the 4 credit allowance dates, as defined under 26 USC 45D (a) (3), following the credit allowance dates described in subd. 1., 6 percent.

SB461,9,24 (2) Limitations. No credit may be allowed under this section unless the insurer includes with the insurer's annual return under s. 76.64 a copy of the claimant's certification for tax benefits under s. 560.2065 (2).

SB461,10,6 (3) Carry-forward. If the credit under sub. (2) is not entirely offset against the fees under s. 76.60, 76.63, 76.65, 76.66, or 76.67 otherwise due, the unused balance may be carried forward and credited against those fees for the following 15 years to the extent that it is not offset by those fees otherwise due in all the years between the year in which the expense was made and the year in which the carry-forward credit is claimed.

SB461, s. 9 Section 9. 560.2065 of the statutes is created to read:

SB461,10,9 560.2065 Supplement to federal new markets credit. (1) Definitions. In this section:

SB461,10,11 (a) "Credit allowance date" means a credit allowance date as defined under 26 USC 45D (a) (3).

SB461,10,13 (b) "Qualified community development entity" means a qualified community development entity as defined under 26 USC 45D (c).

SB461,10,15 (c) "Qualified equity investment" means a qualified equity investment as defined under 26 USC 45D (b).

SB461,10,17 (2) Certification. The department may certify a person to receive tax benefits under this section if all of the following apply:

SB461,10,20 (a) The person applies to the department for certification under this section and includes with the application documentation from the federal internal revenue service indicating that all of the following apply:

SB461,10,22 1. The person made a qualified equity investment in a qualified community development entity described in subd. 2.

SB461,10,25 2. The qualified community development entity's primary mission is serving, or providing investment capital for, low-income communities or low-income persons in this state.

SB461,11,2 3. The person is eligible to receive new markets tax credits under 26 USC 45D for the qualified equity investment described in subd. 1.

SB461,11,3 (b) The department verifies the information submitted under par. (a).

SB461,11,8 (3) Eligibility. A person certified under sub. (2) is eligible to receive tax credits under ss. 71.07 (5n), 71.28 (5n), 71.47 (5n), and 76.639 in each taxable year in which a credit allowance date falls if the person continues to hold the qualified equity investment described in sub. (2) (a) 1. in the taxable year in which the credit is claimed.

SB461,11,10 (4) Duties of the department. (a) The department of commerce shall notify the department of revenue of all of the following:

SB461,11,12 1. Every certification issued under sub. (2) and the date on which any such certification is revoked.

SB461,11,15 2. The maximum amount of the tax credits under ss. 71.07 (5n), 71.28 (5n), 71.47 (5n), and 76.639 that a person certified under sub. (2) may claim in each taxable year in which a credit allowance date falls.

SB461,11,19 (b) Annually, the department shall verify to the department of revenue that each person certified under sub. (2) is the holder of a qualified equity investment in the taxable year for which the person files a claim under s. 71.07 (5n), 71.28 (5n), 71.47 (5n), or 76.639.

SB461,11,21 (c) The department shall promulgate rules to administer this program, including all of the following:

SB461,11,23 1. Deadlines for the submission of an application for certification under this section.

SB461,11,25 2. The period for review of applications submitted under this section, which period may not exceed 45 days.

SB461,12,2 3. Criteria for reviewing and prioritizing applications for certification under this section.

SB461,12,5 (d) In consultation with the department of revenue, the department of commerce may promulgate rules governing the recapture of tax benefits awarded to a person certified under this section.

SB461, s. 10 Section 10. Nonstatutory provisions.

SB461,12,10 (1) (a) The department of commerce shall submit in proposed form the rules required under section 560.2065 (4) (c) of the statutes, as created by this act, to the legislative council staff under section 227.15 (1) of the statutes no later than the first day of the 4th month beginning after the effective date of this paragraph.

SB461,12,19 (b) Using the procedure under section 227.24 of the statutes, the department of commerce may promulgate rules required under section 560.2065 (4) (c) of the statutes, as created by this act, for the period before the effective date of the rules submitted under paragraph (a), but not to exceed the period authorized under section 227.24 (1) (c) and (2) of the statutes. Notwithstanding section 227.24 (1) (a), (2) (b), and (3) of the statutes, the department is not required to provide evidence that promulgating a rule under this paragraph as an emergency rule is necessary for the preservation of the public peace, health, safety, or welfare and is not required to provide a finding of emergency for a rule promulgated under this paragraph.

SB461, s. 11 Section 11. Initial applicability.

SB461,12,21 (1) This act first applies to taxable years beginning on January 1, 2010.

SB461,12,22 (End)