Feed for /2011/related/proposals/ab637 PDF
LRB-3206/2
JK&MES:med&cjs:jf
2011 - 2012 LEGISLATURE
February 27, 2012 - Introduced by Representatives C. Taylor, Zamarripa, Grigsby,
E. Coggs, Berceau, Roys
and Sinicki. Referred to Joint Committee on
Finance.
AB637,2,4 1An Act to repeal 71.07 (5n), 71.07 (9e) (aj), 71.10 (4) (cr), 71.255 (6) (bm), 71.26
2(4) (b), 71.28 (5n), 71.30 (3) (dn), 71.45 (4) (b), 71.47 (5n), 71.49 (1) (dn), 71.54
3(1) (g) and 71.54 (2) (b) 4.; to renumber and amend 71.26 (4) (a) and 71.45 (4)
4(a); to amend 71.01 (14), 71.05 (6) (a) 15., 71.05 (6) (b) 9., 71.05 (6) (b) 9m., 71.05
5(6) (b) 25., 71.05 (6) (b) 47. b., 71.05 (6) (b) 47. c., 71.05 (8) (b), 71.05 (25) (b)
6(intro.), 71.06 (1p) (e), 71.06 (2) (g) 5., 71.06 (2) (h) 5., 71.06 (2e) (b), 71.07 (9e)
7(af) (intro.), 71.09 (11) (f), 71.21 (4), 71.255 (2m) (d), 71.255 (6) (a), 71.26 (2) (a)
84., 71.34 (1k) (g), 71.36 (1m) (a), 71.45 (2) (a) 10., 71.54 (1) (f) (intro.), 71.54 (2)
9(b) 3., 71.54 (2m), 72.01 (11m), 72.01 (11n), 72.02 and 77.92 (4); and to create
1071.06 (1p) (f), 71.06 (2) (g) 6. and 71.06 (2) (h) 6. of the statutes; relating to:
11disregarding a taxpayer's election to include another in its combined group,
12disallowing certain carry-forward amounts for combined reporting purposes,
13repealing the income and franchise tax credit for qualified production activities
14income, repealing the changes made to the earned income tax credit in 2011

1Wisconsin Act 32, restoring indexing provisions to the homestead tax credit,
2eliminating the individual income tax exclusion for long-term capital gains
3other than for farm assets, computing the estate tax based on 2002 federal law,
4and creating a new individual income tax upper bracket.
Analysis by the Legislative Reference Bureau
Combined reporting
Under current law, a taxpayer may elect to include in its combined group, for
income and franchise tax reporting purposes, every corporation in its commonly
controlled group, regardless of whether such corporations are engaged in the same
unitary business of the taxpayer. Under current law, the Department of Revenue
(DOR) may not disallow such an election, or disregard its effect. Under this bill, if
DOR determines that such an election has the effect of tax avoidance, DOR must
disregard the election's tax effect or disallow the election.
Under current law, for each taxable year that a corporation that is a member
of a combined group has net business loss carry-forward from a taxable year
beginning before January 1, 2009, the corporation may, for 20 taxable years, use up
to 5 percent of the net business loss carry-forward to offset the income of all other
members of the combined group. The bill eliminates this provision.
Qualified production activities income credit
Under the federal Internal Revenue Code, a taxpayer may claim a deduction
equal to 9 percent of the taxpayer's qualified production activities income in the
taxable year or 9 percent of the taxpayer's total taxable income, whichever is less.
For federal tax purposes, qualified production activities income is, generally, the
amount of the taxpayer's domestic production gross receipts that exceed the sum of
the cost of goods sold and other expenses, losses, or deductions. Domestic production
gross receipts are, generally, gross receipts derived from property that was
manufactured, produced, grown, or extracted in the United States.
Under current law, an individual taxpayer may claim a state income tax credit
equal to the taxpayer's qualified production activities income derived from
manufacturing property and agricultural property, multiplied by a certain
percentage. A corporation or insurer may claim a state income and franchise tax
credit equal to the lesser of its taxable income apportioned to this state or its qualified
production activities income derived from manufacturing property or agricultural
property located in this state, multiplied by a certain percentage. The percentage of
qualified production activities income that a taxpayer may claim as a credit is 1.875
percent for 2013, 3.75 percent for 2014, 5.526 percent for 2015, and 7.5 percent for
2016 and for each year thereafter.
The bill eliminates the tax credit for qualified production activities income.

Estate tax
Under current law, the estate tax is equal to the federal estate tax credit allowed
for state death taxes as computed under the federal estate tax law in effect on the day
of the decedent's death. Under current federal law, the estate tax is imposed on the
portion of an estate that is in excess of $5,000,000 and the federal credit for state
death taxes has been eliminated for 2011 and 2012.
Under this bill, for deaths occurring after December 31, 2011, the estate tax is
equal to the federal estate tax credit allowed for state death taxes as computed under
the federal estate tax law in effect on December 31, 2002. Under the bill, the tax
imposed on estates of $1,000,000 or more, but not on property used in farming.
Upper income tax bracket
Under current law, there are five income tax brackets for single individuals,
certain fiduciaries, heads of households, and married persons. The brackets are
indexed for inflation. The rate of taxation under current law for the lowest bracket
for single individuals, certain fiduciaries, heads of households, and married persons
is 4.6 percent of taxable income; the rate for the second bracket is 6.15 percent; the
rate for the third bracket is 6.5 percent; the rate for the fourth bracket is 6.75 percent;
and the rate for the highest bracket, which was created in the 2009-11 biennial
budget act, 2009 Wisconsin Act 28, is 7.75 percent.
For taxable year 2011, the highest bracket applies to taxable income exceeding
$224,210 for single individuals, certain fiduciaries, and heads of households. For
married persons, the highest current bracket applies to taxable income exceeding
$298,940 for joint filers and $149,470 for separate filers.
For taxable year 2012 and thereafter, this bill creates a sixth bracket with a
taxation rate of 8.75 percent. For single individuals, certain fiduciaries, and heads
of households, this bracket applies to taxable income exceeding $1,000,000. For
married persons, this bracket applies to taxable income exceeding $1,000,000 for
joint filers and $500,000 for separate filers. This bracket is indexed for inflation.
Earned income tax credit
Under current law, as created in 2011 Wisconsin Act 32, the earned income tax
credit (EITC) is reduced for claimants with two or more qualifying children. The bill
repeals those provisions and restores former law. Under the bill, the EITC, as a
percentage of the federal credit, would be 4 percent for claimants with one qualifying
child, 14 percent for claimants with two qualifying children, and 43 percent for
claimants with three or more qualifying children.
Homestead tax credit
Under current law, as created in 2011 Wisconsin Act 32, the homestead tax
credit formula factors (maximum income, maximum property taxes, and income
threshold) are not indexed for inflation after 2010. The bill repeals those provisions
and restores former law. Under the bill, the homestead tax credit formula factors
would be indexed for inflation for 2011 and beyond.
Exclusion of capital gains
Under current law, there is an income tax exclusion for individuals, fiduciaries,
members of limited liability companies and partnerships, and shareholders of

tax-option corporations for 30 percent of the net long-term capital gains realized
from the sale of assets held more than one year and the sale of all assets acquired
from a decedent, and an exclusion for 60 percent of such gains realized from the sale
of farm assets held more than one year and the sale of all farm assets acquired from
a decedent.
Under this bill, the exclusion of 30 percent of such net long-term capital gains,
and all assets acquired from a decedent, does not apply to taxable years beginning
after December 31, 2011. The bill does not affect the exclusion of the gains realized
from the sale of farm assets held more than one year and the sale of farm assets
acquired from a decedent.
Because this bill relates to an exemption from state or local taxes, it may be
referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
as an appendix to the bill.
For further information see the state and local 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:
AB637, s. 1 1Section 1. 71.01 (14) of the statutes is amended to read:
AB637,4,52 71.01 (14) "Wisconsin net operating loss" of persons other than corporations
3means "federal net operating loss" adjusted as prescribed in s. 71.05 (6) (a) and (b),
4(7) to (12) and (19) to (21), except s. 71.05 (6) (b) 9., except that no deductions
5allowable on schedule A for federal income tax purposes are allowable.
AB637, s. 2 6Section 2. 71.05 (6) (a) 15. of the statutes, as affected by 2011 Wisconsin Act
732
, is amended to read:
AB637,4,138 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de),
9(2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3q), (3r),
10(3rm), (3rn), (3s), (3t), (3w), (5e), (5f), (5h), (5i), (5j), (5k), (5n), (5r), (5rm), and (8r) and
11not passed through by a partnership, limited liability company, or tax-option
12corporation that has added that amount to the partnership's, company's, or
13tax-option corporation's income under s. 71.21 (4) or 71.34 (1k) (g).
AB637, s. 3
1Section 3. 71.05 (6) (b) 9. of the statutes is amended to read:
AB637,5,112 71.05 (6) (b) 9. On assets held more than one year and on all assets acquired
3from a decedent, 30 percent of the capital gain as computed under the internal
4revenue code, not including capital gains for which the federal tax treatment is
5determined under section 406 of P.L. 99-514; not including amounts treated as
6ordinary income for federal income tax purposes because of the recapture of
7depreciation or any other reason; and not including amounts treated as capital gain
8for federal income tax purposes from the sale or exchange of a lottery prize. For
9purposes of this subdivision, the capital gains and capital losses for all assets shall
10be netted before application of the percentage. This subdivision does not apply to
11taxable years that begin after December 31, 2011.
AB637, s. 4 12Section 4. 71.05 (6) (b) 9m. of the statutes is amended to read:
AB637,5,2313 71.05 (6) (b) 9m. On farm assets held more than one year and on all farm assets
14acquired from a decedent, to the extent that they are not subtracted under subd. 9.
15or
10., 60 percent of the capital gain as computed under the Internal Revenue Code,
16not including capital gains for which the federal tax treatment is determined under
17section 406 of P.L. 99-514; not including amounts treated as ordinary income for
18federal income tax purposes because of the recapture of depreciation or any other
19reason; and not including amounts treated as capital gain for federal income tax
20purposes from the sale or exchange of a lottery prize. In this subdivision, "farm
21assets" means livestock, farm equipment, farm real property, and farm depreciable
22property. For purposes of this subdivision, the capital gains and capital losses for all
23assets shall be netted before application of the percentage.
AB637, s. 5 24Section 5. 71.05 (6) (b) 25. of the statutes is amended to read:
AB637,6,8
171.05 (6) (b) 25. All gains that are not excluded from taxation under subd. 9.,
2on business assets or
9m. on assets used in farming, including shares in a corporation
3or trust that meets the standards under s. 182.001 (1), or both, held more than one
4year, that are sold or otherwise disposed of to persons who are related to the seller
5or transferor by blood, marriage or adoption within the 3rd degree of kinship as
6determined under s. 990.001 (16), as computed under the Internal Revenue Code, not
7including amounts treated as ordinary income for federal income tax purposes
8because of the recapture of depreciation or any other reason.
AB637, s. 6 9Section 6. 71.05 (6) (b) 47. b. of the statutes, as created by 2011 Wisconsin Act
103
, is amended to read:
AB637,7,511 71.05 (6) (b) 47. b. With respect to partners and members of limited liability
12companies, for taxable years beginning after December 31, 2010, for 2 consecutive
13taxable years beginning with the taxable year in which the partnership's or limited
14liability company's business locates to this state from another state or another
15country and begins doing business in this state, as defined in s. 71.22 (1r), and subject
16to the limitations provided under subd. 47. d. and e., the partner's or member's
17distributive share of taxable income as calculated under section 703 of the Internal
18Revenue Code; plus the items of income and gain under section 702 of the Internal
19Revenue Code, including taxable state and municipal bond interest and excluding
20nontaxable interest income or dividend income from federal government obligations;
21minus the items of loss and deduction under section 702 of the Internal Revenue
22Code, except items that are not deductible under s. 71.21; plus guaranteed payments
23to partners under section 707 (c) of the Internal Revenue Code; plus the credits
24claimed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (2dy),
25(3g), (3h), (3n), (3p), (3q), (3r), (3rm), (3rn), (3s), (3t), (3w), (5e), (5f), (5g), (5h), (5i),

1(5j), (5k), (5r), (5rm), and (8r); and plus or minus, as appropriate, transitional
2adjustments, depreciation differences, and basis differences under s. 71.05 (13), (15),
3(16), (17), and (19), multiplied by the apportionment fraction determined in s. 71.04
4(4) and subject to s. 71.04 (7) or by separate accounting. No amounts subtracted
5under this subd. 47. b. may be included in the modification under par. (b) 9. or 9m.
AB637, s. 7 6Section 7. 71.05 (6) (b) 47. c. of the statutes, as created by 2011 Wisconsin Act
73
, is amended to read:
AB637,7,188 71.05 (6) (b) 47. c. With respect to shareholders of a tax-option corporation, for
9taxable years beginning after December 31, 2010, for 2 consecutive taxable years
10beginning with the taxable year in which the tax-option corporation's business
11locates to this state from another state or another country and begins doing business
12in this state, as defined in s. 71.22 (1r), and subject to the limitations provided under
13subd. 47. d. and e., the shareholder's distributive share of the entity's net income or
14loss as determined under this chapter, including interest income from federal, state,
15and municipal government obligations, multiplied by the apportionment fraction
16determined in s. 71.25 (6m) and subject to s. 71.25 (9) or by separate accounting. No
17amounts subtracted under this subdivision may be included in the modification
18under par. (b) 9. or 9m.
AB637, s. 8 19Section 8. 71.05 (8) (b) of the statutes, as affected by 2011 Wisconsin Act 32,
20is amended to read:
AB637,8,821 71.05 (8) (b) A Wisconsin net operating loss may be carried forward against
22Wisconsin taxable incomes of the next 15 taxable years, if the taxpayer was subject
23to taxation under this chapter in the taxable year in which the loss was sustained,
24to the extent not offset against other income of the year of loss and to the extent not
25offset against Wisconsin modified taxable income of any year between the loss year

1and the taxable year for which the loss carry-forward is claimed. In this paragraph,
2"Wisconsin modified taxable income" means Wisconsin taxable income with the
3following exceptions: a net operating loss deduction or offset for the loss year or any
4taxable year thereafter is not allowed, the deduction for long-term capital gains
5under subs. (6) (b) 9. and 9m. and (25) is not allowed, the amount deductible for losses
6from sales or exchanges of capital assets may not exceed the amount includable in
7income for gains from sales or exchanges of capital assets and "Wisconsin modified
8taxable income" may not be less than zero.
AB637, s. 9 9Section 9. 71.05 (25) (b) (intro.) of the statutes, as created by 2011 Wisconsin
10Act 32
, is amended to read:
Loading...
Loading...