SB62,55,2317 71.10 (1m) Transactions without economic substance. (a) If any person,
18directly or indirectly, engages in a transaction or series of transactions without
19economic substance to create a loss or to reduce taxable income or to increase credits
20allowed in determining Wisconsin tax, the department shall determine the amount
21of a taxpayer's taxable income or tax so as to reflect what would have been the
22taxpayer's taxable income or tax if not for the transaction or transactions without
23economic substance causing the reduction in taxable income or tax.
SB62,55,2524 (b) A transaction has economic substance only if the taxpayer shows all of the
25following:
SB62,56,2
11. The transaction changes the taxpayer's economic position in a meaningful
2way, apart from federal, state, local, and foreign tax effects.
SB62,56,63 2. The taxpayer has a substantial nontax purpose for entering into the
4transaction and the transaction is a reasonable means of accomplishing the
5substantial nontax purpose. A transaction has a substantial nontax purpose if it has
6substantial potential for profit, disregarding any tax effects.
SB62,56,127 (c) With respect to transactions between members of a controlled group as
8defined in section 267 (f) (1) of the Internal Revenue Code, such transactions shall
9be presumed to lack economic substance and the taxpayer shall bear the burden of
10establishing by clear and convincing evidence that a transaction or a series of
11transactions between the taxpayer and one or more members of the controlled group
12has economic substance.
SB62, s. 112 13Section 112. 71.10 (4) (gv) of the statutes is created to read:
SB62,56,1414 71.10 (4) (gv) Economic development tax credit under s. 71.07 (2dy).
SB62, s. 113 15Section 113. 71.10 (4) (i) of the statutes is amended to read:
SB62,56,2416 71.10 (4) (i) The total of claim of right credit under s. 71.07 (1), farmland
17preservation credit under subch. IX, homestead credit under subch. VIII, farmland
18tax relief credit under s. 71.07 (3m), farmers' drought property tax credit under s.
1971.07 (2fd), dairy manufacturing facility investment credit under s. 71.07 (3p), meat
20processing facility investment credit under s. 71.07 (3r),
film production services
21credit under s. 71.07 (5f) (b) 2., veterans and surviving spouses property tax credit
22under s. 71.07 (6e), enterprise zone jobs credit under s. 71.07 (3w), earned income tax
23credit under s. 71.07 (9e), estimated tax payments under s. 71.09, and taxes withheld
24under subch. X.
SB62, s. 114 25Section 114. 71.21 (4) of the statutes is amended to read:
SB62,57,4
171.21 (4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di),
2(2dj), (2dL), (2dm), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3r), (3s), (3t), (3w), (5e),
3(5f), (5g), (5h), (5i), (5j), and (5k) and passed through to partners shall be added to
4the partnership's income.
SB62, s. 115 5Section 115. 71.22 (1g) of the statutes is amended to read:
SB62,57,116 71.22 (1g) For purposes of s. 71.25 (9) (df) and, (dh), (dj), and (dk), "commercial
7domicile" means the location from which a trade or business is principally managed
8and directed, based on any factors the department determines are appropriate,
9including the location where the greatest number of employees of the trade or
10business work, have their office or base of operations, or from which the employees
11are directed or controlled.
SB62, s. 116 12Section 116. 71.22 (1r) of the statutes is amended to read:
SB62,58,213 71.22 (1r) "Doing business in this state" includes issuing credit, debit, or travel
14and entertainment cards to customers in this state; regularly selling products or
15services of any kind or nature to customers in this state that receive the product or
16service in this state; regularly soliciting business from potential customers in this
17state; regularly performing services outside this state for which the benefits are
18received in this state; regularly engaging in transactions with customers in this state
19that involve intangible property and result in receipts flowing to the taxpayer from
20within this state; holding loans secured by real or tangible personal property located
21in this state;
owning, directly or indirectly, a general or limited partnership interest
22in a partnership that does business in this state, regardless of the percentage of
23ownership; and owning, directly or indirectly, an interest in a limited liability
24company that does business in this state, regardless of the percentage of ownership,

1if the limited liability company is treated as a partnership for federal income tax
2purposes.
SB62, s. 117 3Section 117. 71.22 (1t) of the statutes is amended to read:
SB62,58,84 71.22 (1t) For purposes of s. 71.25 (9) (df) and, (dh), (dj), and (dk), "domicile"
5means an individual's true, fixed, and permanent home where the individual intends
6to remain permanently and indefinitely and to which, whenever absent, the
7individual intends to return, except that no individual may have more than one
8domicile at any time.
SB62, s. 118 9Section 118. 71.22 (3g) of the statutes is created to read:
SB62,58,1310 71.22 (3g) For purposes of ss. 71.26 (2) (a) 7. and 9. and 71.255 (2) (d) 1.,
11"intangible expenses" include the following, to the extent that the amounts would
12otherwise be deductible in determining net income under the Internal Revenue Code
13as modified under s. 71.26 (3):
SB62,58,1614 (a) Expenses, losses, and costs for, related to, or directly or indirectly in
15connection with the acquisition, use, maintenance, management, ownership, sale,
16exchange, or any other disposition of intangible property.
SB62,58,1817 (b) Losses related to, or incurred in connection directly or indirectly with,
18factoring transactions or discounting transactions.
SB62,58,1919 (c) Royalty, patent, technical, and copyright fees.
SB62,58,2020 (d) Licensing fees.
SB62,58,2121 (e) Other similar expenses, losses, and costs.
SB62, s. 119 22Section 119. 71.22 (3h) of the statutes is created to read:
SB62,58,2523 71.22 (3h) "Intangible property" includes stocks, bonds, financial instruments,
24patents, patent applications, trade names, trademarks, service marks, copyrights,
25mask works, trade secrets, and similar types of intangible assets.
SB62, s. 120
1Section 120. 71.22 (3m) of the statutes is amended to read:
SB62,59,42 71.22 (3m) For purposes of s. ss. 71.26 (2) (a) 7. and 9. and 71.255 (2) (d) 1.,
3"interest expenses" means interest that would otherwise be deductible under section
4163 of the Internal Revenue Code, as modified under s. 71.26 (3).
SB62, s. 121 5Section 121. 71.22 (6d) of the statutes is created to read:
SB62,59,126 71.22 (6d) For purposes of s. 71.26 (2) (a) 7. and 9., "management fees" include
7expenses and costs, not including interest expenses, pertaining to accounts
8receivable, accounts payable, employee benefit plans, insurance, legal matters,
9payroll, data processing, purchasing, taxation, financial matters, securities,
10accounting, or reporting and compliance matters or similar activities, to the extent
11that the amounts would otherwise be deductible in determining net income under
12the Internal Revenue Code as modified by s. 71.26 (3).
SB62, s. 122 13Section 122. 71.22 (9g) of the statutes is amended to read:
SB62,59,1714 71.22 (9g) For purposes of s. 71.25 (9) (df) and, (dh), (dj), and (dk), "state" means
15a state of the United States, the District of Columbia, the commonwealth of Puerto
16Rico, or any territory or possession of the United States, unless the context requires
17that "state" means only the state of Wisconsin.
SB62, s. 123 18Section 123. 71.25 (intro.) of the statutes is amended to read:
SB62,59,21 1971.25 Situs of income; allocation and apportionment. (intro.) For
20purposes of determining the situs of income under this section and s. 71.255 (5) (a)
211. and 2.
:
SB62, s. 124 22Section 124. 71.25 (5) (b) 1. of the statutes is renumbered 71.25 (5) (b).
SB62, s. 125 23Section 125. 71.25 (5) (b) 2. of the statutes is repealed.
SB62, s. 126 24Section 126. 71.25 (9) (d) of the statutes is repealed.
SB62, s. 127 25Section 127. 71.25 (9) (dj) of the statutes is created to read:
SB62,60,6
171.25 (9) (dj) 1. Except as provided in par. (df), gross royalties and other gross
2receipts received for the use or license of intangible property, including patents,
3copyrights, trademarks, trade names, service names, franchises, licenses, plans,
4specifications, blueprints, processes, techniques, formulas, designs, layouts,
5patterns, drawings, manuals, technical know-how, contracts, and customer lists, are
6sales in this state if any of the following applies:
SB62,60,127 a. The purchaser or licensee uses the intangible property in the operation of a
8trade or business at a location in this state. If the purchaser or licensee uses the
9intangible property in the operation of a trade or business in more than one state,
10the gross royalties and other gross receipts from the use of the intangible property
11shall be divided between those states having jurisdiction to impose an income tax on
12the taxpayer in proportion to the use of the intangible property in those states.
SB62,60,1413 b. The purchaser or licensee is billed for the purchase or license of the use of
14the intangible property at a location in this state.
SB62,60,1615 c. The purchaser or licensee of the use of the intangible property has its
16commercial domicile in this state.
SB62,60,2117 2. If the taxpayer is not within the jurisdiction, for income or franchise tax
18purposes, in the state in which the gross royalties or other gross receipts are
19apportioned under this paragraph, but the taxpayer's commercial domicile is in this
20state, 50 percent of those gross royalties or other gross receipts shall be included in
21the numerator of the sales factor.
SB62, s. 128 22Section 128. 71.25 (9) (dk) of the statutes is created to read:
SB62,60,2423 71.25 (9) (dk) 1. Sales of intangible property, excluding securities, are sales in
24this state if any of the following applies:
SB62,61,5
1a. The purchaser uses the intangible property in the regular course of business
2operations in this state or for personal use in this state. If the purchaser uses the
3intangible property in more than one state, the sales shall be divided between those
4states having jurisdiction to impose an income tax on the taxpayer in proportion to
5the use of the intangible property in those states.
SB62,61,76 b. The purchaser is billed for the purchase of the intangible property at a
7location in this state.
SB62,61,98 c. The purchaser of the intangible property has its commercial domicile in this
9state.
SB62,61,1310 2. If the taxpayer is not within the jurisdiction, for income or franchise tax
11purposes, in the state in which the sales of intangible property are apportioned under
12this paragraph, but the taxpayer's commercial domicile is in this state, 50 percent
13of those gross receipts shall be included in the numerator of the sales factor.
SB62, s. 129 14Section 129. 71.25 (10) (a) of the statutes is renumbered 71.25 (10) (a) 1.
SB62, s. 130 15Section 130. 71.25 (10) (a) 2. of the statutes is created to read:
SB62,61,1916 71.25 (10) (a) 2. As used in this section, "financial organization" includes any
17subsidiary of an entity described in subd. 1., if a significant purpose for the
18subsidiary is to hold investments or if the subsidiary primarily functions to hold
19investments.
SB62, s. 131 20Section 131. 71.255 of the statutes is created to read:
SB62,61,21 2171.255 Combined Reporting. (1) Definitions. In this section:
SB62,61,2522 (a) "Combined group" means the group of all persons whose income and
23apportionment factors are required to be taken into account under sub. (2) to
24determine a member's share of the net business income or loss apportionable to this
25state that is attributable to a unitary business.
SB62,62,4
1(b) "Combined report" means a report in the form and manner prescribed by
2the department that specifies a combined group's income from the unitary business,
3apportionment factors attributable to the unitary business, and any other tax return
4information prescribed by the department.
SB62,62,55 (c) "Commonly controlled group" means any of the following:
SB62,62,126 1. A parent corporation and any one or more corporations or chains of
7corporations that are connected to the parent corporation by direct or indirect
8ownership by the parent corporation, if the parent corporation owns stock
9representing more than 50 percent of the voting power of at least one of the connected
10corporations or if the parent corporation or any of the connected corporations owns
11stock that cumulatively represents more than 50 percent of the voting power of each
12of the connected corporations.
SB62,62,1513 2. Any 2 or more corporations if a common owner, regardless of whether the
14owner is a corporate entity, directly or indirectly owns stock representing more than
1550 percent of the voting power of the corporations or connected corporations.
SB62,62,1716 3. Any 2 or more corporations if stock representing more than 50 percent of the
17voting power in each corporation are interests that cannot be separately transferred.
SB62,62,2218 4. Any 2 or more corporations if stock representing more than 50 percent of the
19voting power in each corporation is directly owned by, or for the benefit of, family
20members. In this subdivision, "family member" means an individual related by
21blood, marriage, or adoption within the 3rd degree of kinship, as computed under s.
22990.001 (16), or the spouse of such individual.
SB62,62,2423 (d) "Consolidated foreign operating corporation" means a corporation that, for
24the taxable year, satisfies all of the following conditions:
SB62,62,2525 1. It is a member of a unitary business.
SB62,63,2
12. It is included in the same federal consolidated return as at least one other
2corporation in that unitary business.
SB62,63,53 3. It has active foreign business income, as defined in section 861 (c) (1) B of
4the Internal Revenue Code, in an amount that is 80 percent or more of the
5corporation's worldwide income.
SB62,63,86 (e) Corporation" means any corporation, as defined in s. 71.22 (1k), wherever
7located, which if it were doing business in this state would be subject to this chapter.
8"Corporation" does not include a tax-option corporation.
SB62,63,99 (f) "Department" means the department of revenue.
SB62,63,1010 (g) "Doing business in this state" has the meaning given in s. 71.22 (1r).
SB62,63,1211 (h) "Domestic" means incorporated, organized, or created in the United States
12or under the laws of the United States or any state.
SB62,63,1313 (i) "File" has the meaning given in s. 71.22 (2m).
SB62,63,1514 (j) "Foreign" means not incorporated, organized, or created in the United States
15or under the laws of the United States or any state.
SB62,63,1816 (k) "Intangible expenses" has the meaning given in s. 71.22 (3g) for corporations
17taxable under this subchapter and the meaning given in s. 71.42 (1sg) for
18corporations taxable under subch. VII.
SB62,63,2119 (L) "Interest expenses" has the meaning given in s. 71.22 (3m) for corporations
20taxable under this subchapter and the meaning given in s. 71.42 (1t) for corporations
21taxable under subch. VII.
SB62,64,222 (m) "Pass-through entity" means a general or limited partnership, an
23organization of any kind treated as a partnership for tax purposes under this
24chapter, a tax-option corporation, a real estate investment trust, a regulated

1investment company, a real estate mortgage investment conduit, a financial asset
2securitization investment trust, a trust, or an estate.
SB62,65,43 (n) "Unitary business" means a single economic enterprise that is made up
4either of separate parts of a single business entity, of multiple business entities that
5are related under section 267 or 1563 of the Internal Revenue Code, or of a commonly
6controlled group of business entities that are sufficiently interdependent,
7integrated, and interrelated through their activities so as to provide a synergy and
8mutual benefit that produces a sharing or exchange of value among them and a
9significant flow of value to the separate parts. Two or more business entities are
10presumed to be a unitary business if the businesses have unity of ownership,
11operation, and use as indicated by a centralized management or a centralized
12executive force; centralized purchasing, advertising, or accounting; intercorporate
13sales or leases; intercorporate services, including administrative, employee benefits,
14human resources, legal, financial, and cash management services; intercorporate
15debts; intercorporate use of proprietary materials; interlocking directorates; or
16interlocking corporate officers. In no event and under no circumstances shall the
17preceding sentence be construed as exclusive of any and all other factors indicative
18of a unitary business. For purposes of this section, the term "unitary business" shall
19be broadly construed, to the extent permitted by the U.S. Constitution. The members
20of a combined group shall be jointly and severally liable for costs, penalties, interests,
21and taxes associated with the combined report. Any business conducted by a
22pass-through entity that is owned directly or indirectly by a corporation shall be
23treated as conducted by the corporation, to the extent of the corporation's distributive
24share of the pass-through entity's income, regardless of the percentage of the
25corporation's ownership interest. A business conducted directly or indirectly by one

1corporation is unitary with that portion of a business conducted by another
2corporation through its direct or indirect interest in a pass-through entity if there
3is a synergy and exchange and flow of value between the 2 parts of the business and
4the 2 corporations are members of the same commonly controlled group.
SB62,65,12 5(2) Corporations required to use combined reporting. (a) A corporation, not
6including a corporation of which all its income is exempt from taxation under s. 71.26
7(1), engaged in a unitary business with one or more other corporations shall report
8its share of income from that unitary business in the amount determined by a
9combined report filed by a designated agent of the unitary business, as determined
10under sub. (7). The combined report shall include the income, determined under sub.
11(3), and apportionment factor or factors determined under sub. (5), of every
12corporation engaged in the unitary business, except as provided in pars. (b) to (f).
SB62,65,1713 (b) A foreign corporation that is a combined group member shall include in the
14combined report income that is derived only from sources within the United States
15as provided in sections 861 to 865 of the Internal Revenue Code. The foreign
16corporation shall include in the combined report its apportionment factor or factors
17related only to that income.
SB62,65,2318 (c) Except as provided in par. (d), if 80 percent or more of a corporation's
19worldwide income is active foreign business income, as defined in section 861 (c) (1)
20(B) of the Internal Revenue Code, the income and apportionment factor or factors of
21the corporation shall not be included in the combined report, but the corporation
22shall compute and allocate or apportion its income from the unitary business
23separately.
SB62,66,224 (d) The combined report of the unitary business of which a consolidated foreign
25operating corporation is a member shall include, and the separate return filed by the

1consolidated foreign operating corporation shall exclude, the following amounts, to
2the extent that they are attributable to the unitary business:
SB62,66,83 1. An income amount equal to the interest expenses and intangible expenses
4that are paid, accrued, or incurred by any combined group member to or for the
5benefit of the consolidated foreign operating corporation, except to the extent such
6amounts constitute income to the consolidated foreign operating corporation from
7sources outside the United States under sections 861 to 865 of the Internal Revenue
8Code.
SB62,66,189 2. To the extent that the amounts were not included under subd. 1., interest
10income and income generated from intangible property received or accrued by the
11consolidated foreign operating corporation, except to the extent such amounts
12constitute income from sources outside the United States under sections 861 to 865
13of the Internal Revenue Code. For purposes of this subdivision, income generated
14from intangible property includes income related to the direct or indirect acquisition,
15use, maintenance, management, ownership, sale, exchange, or any other disposition
16of intangible property; income from factoring transactions or discounting
17transactions; royalty, patent, technical, and copyright fees; licensing fees; and other
18similar income.
SB62,66,2319 3. Dividends paid or accrued by a real estate investment trust to the
20consolidated foreign operating corporation, if the real estate investment trust is not
21a qualified real estate investment trust as defined in s. 71.22 (9ad) and the dividend
22income is from sources within the United States under sections 861 to 865 of the
23Internal Revenue Code.
SB62,66,2524 4. Income of the consolidated foreign operating corporation that is equal to
25gains derived from the sale of real or personal property located in the United States.
SB62,67,2
15. The apportionment factor or factors attributable to the income described in
2subds 1. to 4.
SB62,67,53 (e) Except for the amounts in par. (d), a consolidated foreign operating
4corporation shall compute and allocate or apportion its income from the unitary
5business separately.
SB62,67,116 (f) 1. The department may require that a combined report include the income
7and associated apportionment factor or factors of any person who is not otherwise
8included in a combined group under this subsection, but who is a member of a unitary
9business, in order to reflect proper apportionment of income of the entire unitary
10business. The department may require that a combined report include the income
11and associated apportionment factor or factors of persons that are not corporations.
SB62,67,2112 2. If the department determines that the reported income or loss of a member
13of a combined group engaged in a unitary business with any person not otherwise
14included in the combined group under this subsection represents an avoidance or
15evasion of tax by the person or the combined group member, the department may
16require all or any part of the income or loss and associated apportionment factor or
17factors of the person be included in or excluded from the combined report for the
18unitary business or may require the use of a different apportionment factor or
19factors. The department may require that a combined report include or exclude the
20income or loss and associated apportionment factor or factors of persons that are not
21corporations.
SB62,68,222 3. The authority granted under this paragraph is in addition to, and not a
23limitation of or dependent on, the provisions in this chapter enacted to prevent tax
24avoidance or evasion or to clearly reflect the income of any person. Any
25determination by the department under this paragraph is presumed correct and the

1person challenging the determination has the burden of proving by clear and
2convincing evidence that the determination is incorrect.
SB62,68,4 3(3) Components of income subject to tax. Each member is responsible for tax
4based on its taxable income or loss apportioned or allocated to this state, including:
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