LRB-3906/2
JK:jld&kjf:rs
2011 - 2012 LEGISLATURE
February 27, 2012 - Introduced by Representative Kooyenga, cosponsored by
Senator Grothman. Referred to Committee on Ways and Means.
AB638,1,8
1An Act to repeal 71.47 (5n) and 71.49 (1) (dn);
to renumber 71.07 (5n) (d) and
271.28 (5n) (d);
to renumber and amend 71.21 (4);
to amend 71.05 (6) (a) 15.,
371.07 (5n) (title), 71.10 (4) (cr), 71.26 (2) (a) 4., 71.28 (5n) (title), 71.30 (3) (dn),
471.34 (1k) (g) and 71.45 (2) (a) 10.;
to repeal and recreate 71.07 (5n) (a) and
571.28 (5n) (a); and
to create 71.05 (6) (a) 25., 71.07 (5n) (d) 2., 71.21 (4) (b), 71.26
6(2) (a) 11., 71.28 (5n) (d) 2., 71.28 (5n) (d) 3. and 71.34 (1k) (m) of the statutes;
7relating to: technical changes to the qualified production activities income and
8franchise tax credit.
Analysis by the Legislative Reference Bureau
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, as created by
2011 Wisconsin Act 32, an individual taxpayer
may claim a state income tax credit equal to the taxpayer's qualified production
activities income derived from manufacturing property or agricultural property
located in this state, multiplied by a certain percentage. A corporation 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. Under
current law, "qualified production activities income" means qualified production
activities income as determined under the federal Internal Revenue Code for
purposes of claiming a federal tax deduction.
This bill makes technical changes to the state tax credits for qualified
production activities income derived from manufacturing property or agricultural
property located in this state in order to facilitate the Department of Revenue's
administration of the credits. Specifically, the bill provides a method for determining
the qualified production activities income derived from manufacturing property or
agricultural property located in this state rather than rely on the federal definition
of "qualified production activities income," which includes income from economic
activities in all states.
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:
AB638,2,83
71.05
(6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de),
4(2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3q), (3r),
5(3rm), (3rn), (3s), (3t), (3w), (5e), (5f), (5h), (5i), (5j), (5k),
(5n), (5r), (5rm), and (8r) and
6not passed through by a partnership, limited liability company, or tax-option
7corporation that has added that amount to the partnership's, company's, or
8tax-option corporation's income under s. 71.21 (4) or 71.34 (1k) (g).
AB638, s. 2
9Section
2. 71.05 (6) (a) 25. of the statutes is created to read:
AB638,3,310
71.05
(6) (a) 25. The amount computed under s. 71.07 (5n) in the previous
11taxable year and not passed through by a partnership, limited liability company, or
1tax-option corporation that has added that amount to the partnership's, company's,
2or tax-option corporation's income under s. 71.21 (4) (a) or 71.34 (1k) (m) and not
3included in federal adjusted gross income.
AB638,3,76
71.07
(5n) (title)
Qualified production activities Manufacturing and
7agriculture credit.
AB638,3,1010
71.07
(5n) (a)
Definitions. In this subsection:
AB638,3,1711
1. "Agriculture property factor" means a fraction, the numerator of which is the
12average value of the claimant's real property and improvements assessed under s.
1370.32 (2) (a) 4., owned or rented and used in this state by the claimant during the
14taxable year to produce, grow, or extract qualified production property, and the
15denominator of which is the average value of all of the claimant's real property and
16improvements owned or rented during the taxable year and used by the claimant to
17produce, grow, or extract qualified production property.
AB638,3,1818
2. "Claimant" means a person who files a claim under this subsection.
AB638,3,2219
3. "Direct costs" include all of the claimant's ordinary and necessary expenses
20paid or incurred during the taxable year in carrying on the trade or business that are
21deductible under section
162 of the Internal Revenue Code and identified as direct
22costs in the claimant's managerial or cost accounting records.
AB638,4,223
4. "Indirect costs" include all of the claimant's ordinary and necessary expenses
24paid or incurred during the taxable year in carrying on the trade or business that are
25deductible under section
162 of the Internal Revenue Code, other than cost of goods
1sold and direct costs, and identified as indirect costs in the claimant's managerial or
2cost accounting records.
AB638,4,93
5. a. "Manufacturing property factor" means a fraction, the numerator of which
4is the average value of the claimant's real and personal property assessed under s.
570.995, owned or rented and used in this state by the claimant during the taxable
6year to manufacture qualified production property, and the denominator of which is
7the average value of all the claimant's real and personal property owned or rented
8during the taxable year and used by the claimant to manufacture qualified
9production property.
AB638,4,1310
b. For purposes of subd. 5. a., property owned by the claimant is valued at its
11original cost and property rented by the claimant is valued at an amount equal to the
12annual rental paid by the claimant, less any annual rental received by the claimant
13from sub-rentals, multiplied by 8.
AB638,4,1814
c. For purposes of subd. 5. a., the average value of property is determined by
15averaging the values at the beginning and ending of the taxable year, except that the
16secretary of revenue may require the averaging of monthly values during the taxable
17year, if such averaging is reasonably required to properly reflect the average value
18of the claimant's property.
AB638,4,2019
6. "Production gross receipts" means gross receipts from the lease, rental,
20license, sale, exchange, or other disposition of qualified production property.
AB638,5,421
7. "Production gross receipts factor" means a fraction, the numerator of which
22is production gross receipts and the denominator of which is all gross income from
23whatever source, except for those items specifically excluded under the Internal
24Revenue Code as adopted by this state and otherwise excluded under Wisconsin law.
25For purposes of the denominator, income includes gross sales, gross dividends, gross
1interest income, gross rents, gross royalties, the gross sales price from the disposition
2of capital assets and business assets, gross income from pass-through entities, and
3all other gross receipts that are included in income, before apportionment for
4Wisconsin tax purposes under s. 71.04 (4).
AB638,5,95
8. "Qualified production activities income" means the amount of the claimant's
6production gross receipts for the taxable year that exceeds the sum of the cost of goods
7sold that are allocable to such receipts, the direct costs that are allocable to such
8receipts, and the indirect costs multiplied by the production gross receipts factor.
9"Qualified production activities income" does not include any of the following:
AB638,5,1010
a. Income from film production.
AB638,5,1211
b. Income from producing, transmitting, or distributing electricity, natural gas,
12or potable water.
AB638,5,1313
c. Income from constructing real property.
AB638,5,1514
d. Income from engineering or architectural services performed with respect
15to constructing real property.
AB638,5,1716
e. Income from the sale of food and beverages prepared by the claimant at a
17retail establishment.
AB638,5,1918
f. Income from the lease, rental, license, sale, exchange, or other disposition of
19land.
AB638,5,2020
9. "Qualified production property" means either of the following:
AB638,5,2221
a. Tangible personal property manufactured in whole or in part by the claimant
22on property that is assessed as manufacturing property under s. 70.995.
AB638,5,2523
b. Tangible personal property produced, grown, or extracted in whole or in part
24by the claimant on or from property assessed as agricultural property under s. 70.32
25(2) (a) 4.
AB638, s. 6
3Section
6. 71.07 (5n) (d) 2. of the statutes is created to read:
AB638,6,94
71.07
(5n) (d) 2. For purposes of determining a claimant's eligible qualified
5production activities income under this subsection, the claimant shall multiply the
6claimant's qualified production activities income from property manufactured by the
7claimant by the manufacturing property factor and qualified production activities
8income from property produced, grown, or extracted by the claimant by the
9agriculture property factor.
AB638,6,1312
71.10
(4) (cr)
Qualified production activities Manufacturing and agriculture 13credit under s. 71.07 (5n).
AB638,6,2016
71.21
(4) (a)
Credits The amount of the credits computed by a partnership
17under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2ds), (2dx), (2dy), (3g), (3h), (3n),
18(3p), (3q), (3r), (3rm), (3rn), (3s), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k),
(5n), (5r),
19(5rm), and (8r) and passed through to partners shall be added to the partnership's
20income.
AB638, s. 9
21Section
9. 71.21 (4) (b) of the statutes is created to read:
AB638,6,2422
71.21
(4) (b) Amounts computed by a partnership under s. 71.07 (5n) in the
23previous taxable year and not included in federal ordinary business income shall be
24added to the partnership's income.
AB638,7,93
71.26
(2) (a) 4. Plus the amount of the credit computed under s. 71.28 (1dd),
4(1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (1dy), (3g), (3h), (3n), (3p), (3q), (3r),
5(3rm), (3rn), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k),
(5n), (5r), (5rm), (8r), and
6(9s) and not passed through by a partnership, limited liability company, or
7tax-option corporation that has added that amount to the partnership's, limited
8liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1k)
9(g).
AB638, s. 11
10Section
11. 71.26 (2) (a) 11. of the statutes is created to read:
AB638,7,1211
71.26
(2) (a) 11. Plus the amount computed under s. 71.28 (5n) in the previous
12taxable year that is not included in federal taxable income.
AB638,7,1615
71.28
(5n) (title)
Qualified production activities Manufacturing and
16agriculture credit.
AB638,7,1919
71.28
(5n) (a)
Definitions. In this subsection:
AB638,8,220
1. "Agriculture property factor" means a fraction, the numerator of which is the
21average value of the claimant's real property and improvements assessed under s.
2270.32 (2) (a) 4., owned or rented and used in this state by the claimant during the
23taxable year to produce, grow, or extract qualified production property, and the
24denominator of which is the average value of all of the claimant's real property and
1improvements owned or rented during the taxable year and used by the claimant to
2produce, grow, or extract qualified production property.
AB638,8,33
2. "Claimant" means a person who files a claim under this subsection.
AB638,8,74
3. "Direct costs" include all of the claimant's ordinary and necessary expenses
5paid or incurred during the taxable year in carrying on the trade or business that are
6deductible under section
162 of the Internal Revenue Code and identified as direct
7costs in the claimant's managerial or cost accounting records.