Tax 2.82(4)(b)4.4. Regularly performing services outside Wisconsin for which the benefits are received in Wisconsin. Tax 2.82(4)(b)5.5. Regularly engaging in transactions with customers in Wisconsin that involve intangible property and result in receipts flowing to the corporation from within Wisconsin. Tax 2.82(4)(b)6.6. Holding loans secured by real or tangible personal property located in Wisconsin. Tax 2.82(4)(b)7.7. Owning, directly or indirectly, a general or limited partnership interest in a partnership that does business in Wisconsin, regardless of the percentage of ownership. Tax 2.82(4)(b)8.8. Owning, directly or indirectly, an interest in a limited liability company that does business in Wisconsin, regardless of the percentage of ownership, if the limited liability company is treated as a partnership for federal income tax purposes. Tax 2.82(4)(c)(c) Nexus for entire taxable year. If a corporation has nexus in Wisconsin for any part of its taxable year, it is considered to have nexus in Wisconsin for its entire taxable year, regardless of whether the activity that created the nexus took place throughout the year. Tax 2.82 NoteExample: Corporation W is a calendar year corporation that operates five retail stores, one of which is in Wisconsin. The stores constitute a unitary business. Corporation W is not in a combined group. In the year 2014, Corporation W operated one store in Wisconsin. On August 31, 2014, Corporation W sold the Wisconsin store to Corporation Y but continued to operate the other stores outside Wisconsin. Between September 1,2014 and December 31, 2014, Corporation W had no activities that would create nexus in Wisconsin. Corporation W is considered to have nexus in Wisconsin for its entire taxable year. Therefore, on its 2014 Wisconsin Form 4, Corporation W must compute its apportioned share of Wisconsin income based on its apportionable income from all of its stores for the entire year 2014. In addition, the numerator of the sales factor in its apportionment computation must include sales shipped to Wisconsin customers for the entire year 2014.
Tax 2.82(4)(d)(d) How to obtain ruling. Paragraph (a) and the statutory definitions summarized in par. (b) as to what activities constitute nexus are not all-inclusive. A ruling may be requested about a particular foreign corporation as to whether it is subject to Wisconsin franchise or income taxes by writing to the Wisconsin Department of Revenue, Audit Bureau, Nexus Unit, P.O. Box 8906, Madison, WI 53708. Tax 2.82 NoteNote: Section 71.23 (3), Stats., provides specific activities that do not constitute nexus in Wisconsin even if they exceed the protection of P.L. 86-272. Tax 2.82(5)(a)(a) General. For a combined group, nexus is determined for the unitary business as a whole, as provided in s. 71.255 (5) (a), Stats. Therefore, if a member of a combined group has nexus in Wisconsin and that nexus is attributable to the combined group’s unitary business, all members of the combined group have nexus in Wisconsin. Tax 2.82 NoteExample: Assume the same facts as the example in sub. (4) (c). In addition, assume Corporation Y is a member of Combined Group XYZ, which reports on a calendar year. Although Group XYZ operated numerous stores outside Wisconsin for the entire year, none of the members of Group XYZ had any nexus-creating activities in Wisconsin until July 1, 2014, when Corporation Y set up a temporary office in Wisconsin in anticipation of the purchase of the store from Corporation W. However, Corporation Z had sales shipped to Wisconsin customers during 2014. Since Corporation Y established nexus in Wisconsin during the year, Group XYZ is considered to have nexus in Wisconsin for its entire taxable year. Therefore, Group XYZ must file a Wisconsin Form 6 for the year 2014. On the combined return, Group XYZ must include its apportionable income for the entire taxable year (from all stores) in the combined unitary income to be apportioned. The Wisconsin share of the combined unitary income for Corporation Y and Corporation Z is then determined as described in s. 71.255 (5), Stats., and s. Tax 2.61 (7). Assuming all of Group XYZ’s Wisconsin sales are attributable to Corporations Y and Z, Corporations Y and Z would be the only corporations in the group with Wisconsin income. Tax 2.82(5)(b)(b) Effect of controlled group election. For a combined group that has made the controlled group election provided in s. 71.255 (2m), Stats., the entire commonly controlled group’s business is deemed to be a single unitary business, and the commonly controlled group becomes a combined group. Therefore, if a combined group has made the controlled group election and at least one member of the combined group has nexus in Wisconsin, all members of the combined group have nexus in Wisconsin. Tax 2.82 NoteNote: See s. Tax 2.62 for further discussion of the concept of a unitary business. Also see s. Tax 2.61 (4) (h) for details of how a corporation’s nexus may be affected by the water’s edge rules of combined reporting, and how these water’s edge rules may affect taxation of a corporation’s income from a unitary business. Tax 2.82(6)(6) Nexus for economic development surcharge. If a corporation has nexus under this section, the corporation is considered to be doing business in this state for purposes of s. 77.93, Stats., relating to the economic development surcharge. Therefore, if a corporation, other than a corporation exempt from taxation, has nexus and has at least $4,000,000 of gross receipts from all activities for the taxable year, the corporation is subject to the economic development surcharge. The economic development surcharge applies to each member of a combined group separately. Tax 2.82 NoteNote: See s. Tax 2.32 for a description of what constitutes gross receipts for purposes of applying the $4,000,000 threshold. Tax 2.82 NoteExamples: 1) Corporation A is incorporated outside Wisconsin and is not a member of a combined group. Corporation A is licensed to do business in Wisconsin, but all of its activities in Wisconsin are protected by P.L. 86-272. Therefore, Corporation A does not have nexus. Corporation A is not subject to the economic development surcharge because it does not have nexus in Wisconsin.
Tax 2.82 Note2) Assume the same facts as Example 1, except that Corporation A is in Combined Group ABCD, which consists of Corporations A, B, C, and D. Corporation D has a warehouse and several stores in Wisconsin that are part of the combined group’s common unitary business. Since Corporation D has nexus in Wisconsin, all corporations in the combined group have nexus in Wisconsin. Corporations A, B, and D have sales to Wisconsin customers but Corporation C does not. The gross receipts, Wisconsin income, gross tax, and resulting economic development surcharge for each corporation in the group are as follows:
Tax 2.82 NoteThe Wisconsin income and gross tax are computed using the method described in s. Tax 2.61. Since the economic development surcharge applies to each member of a combined group separately: Tax 2.82 Note• Corporation A is subject to the economic development surcharge because its gross receipts are at least $4,000,000.
Tax 2.82 Note• Corporation B is not subject to the economic development surcharge because its gross receipts are less than $4,000,000.
Tax 2.82 Note• Corporation C is subject to the minimum $25 economic development surcharge because its gross receipts are at least $4,000,000 and it has no gross tax liability.
Tax 2.82 Note• Corporation D is subject to the maximum $9,800 economic development surcharge because its gross tax of $474,000 multiplied by the economic development surcharge rate of 3% exceeds $9,800. The amount in excess of $9,800 is not imposed even though the other members have economic development surcharge liability of less than $9,800.
Tax 2.82 HistoryHistory: Cr. Register, January, 1979, No. 277, eff. 2-1-79; correction in (3) (b) 1. made under s. 13.93 (2m) (b) 5., Stats., Register, November, 1993, No. 455; EmR0943: emerg. r. and recr. eff. 12-31-09; CR 10-001: r. and recr. Register June 2010 No. 654, eff. 7-1-10; CR 12-011: am. (1) (c), (6) Register July 2012 No. 679, eff. 8-1-12; CR 16-046: am. (1) (a), (4) (c) (Example), (5) (a) (Example) Register January 2018 No. 745, eff. 2-1-18; CR 18-081: cr. (2) (bm), am. (3) (b) 3. a., (4) (a) 3., r. (4) (a) 4., am. (4) (a) 5., cr. (4) (a) 5m., r. (4) (a) 6., am. (4) (a) 7., cr. (4) (a) 7. (example), am. (4) (a) 8., 9., cr. (4) (a) 9m., am. (4) (a) 11., cr. (4) (a) 11 (example), am. (4) (d) Register October 2019 No. 766, eff. 11-1-19; (2) (bm) renum. from (2) (d) under s. 13.92 (4) (b) 1., Stats., and correction in (2) (bm), (3) (b) 1., (4) (a) 3., 9. made under s. 35.17, Stats., Register October 2019 No. 766. Tax 2.85Tax 2.85 Penalty for failure to produce records under s. 71.80 (9m), Stats. Tax 2.85(1)(1) General. A person who fails to produce records or documents, as provided under ss. 71.74 (2) and 73.03 (9), Stats., that were requested by the department may be subject to any of the following penalties under s. 71.80 (9m), Stats.: Tax 2.85(1)(a)(a) The disallowance of deductions, credits, exemptions or income inclusion to which the requested records relate. Tax 2.85(1)(b)(b) In addition to any other penalties that the department may impose, a penalty for each violation that is equal to the greater of $500 or 25% of the amount of the additional tax on any adjustment made by the department that results from the person’s failure to produce the records. Tax 2.85(2)(a)(a) “Disallowance,” “inclusion,” or “adjustment” means that an item is disallowed, included or adjusted through action taken by the department when a proposed assessment or refund or notice of assessment or refund is issued to a taxpayer. Tax 2.85(2)(b)(b) “Records” include both paper and electronic formats. Examples include bills, receipts, invoices, contracts, letters, memos, accounting statements or schedules, general ledgers, journal entries, and board of director’s minutes. “Records” do not include items protected by attorney-client privilege, if the taxpayer provides a brief description or summary of the contents of each record, the date each record was prepared, the person or persons who prepared each record, the person to whom each record was directed, or for whom each record was prepared, the purpose in preparing each record, and how each element of the privilege is met as to each record. Tax 2.85(2)(c)(c) “Records requested were not provided” means that all records requested were not provided to the department within the time specified by the department. Tax 2.85(2)(cm)(cm) “Summons request” means a request for records issued by the department pursuant to s. 73.03 (9), Stats. Tax 2.85(2)(d)(d) “Written request for records” includes requests made by letter, e-mail, fax or any other written form. Tax 2.85(2)(e)(e) “Provided” means the records are provided by electronic means or in paper format to the address specified by the department in its written request for records. If the address specified by the department is the person’s location, the records are considered provided on the date the person notifies the department they are available for review at that location. Tax 2.85(3)(3) Procedures. The penalties in this section may be imposed if the records requested were not provided and the department provided the notifications in pars. (a), (b), and (c) regarding the records requested. The number of days established by the department for the person to respond to the record requests should be reasonable based on the facts of each situation. Tax 2.85(3)(a)(a) A first written request for records where the department allowed the person a minimum of 30 days from the date of request for the records to be provided. Tax 2.85(3)(b)(b) After the time period to respond to the first written request has expired as provided in par. (a), a second written request for records where the department allowed the person a minimum of 30 days from the date of request for the records to be provided. This second written request for records shall include a statement explaining that if the requested records are not provided by the date specified, the penalties provided by s. 71.80 (9m), Stats., may be imposed. Tax 2.85(3)(c)(c) After the time period to respond to the second written request has expired as provided in par. (b), a summons request for records where the department allowed the person a minimum of 30 days from the date of receipt of the request for the records to be provided. This summons request shall be prepared on a form prescribed by the department and shall be served: Tax 2.85(3)(c)1.1. By certified mail, evidenced by a return receipt signed by the taxpayer or an authorized representative. Tax 2.85(3)(c)2.2. By personal service pursuant to sec. 801.11, Stats., if unable to obtain a signature as provided in subd. 1. Tax 2.85 NoteExamples: 1) The department issues a first written request for records to Corporation A on September 1, 2016, allowing Corporation A until October 6, 2016, to provide the records requested. Corporation A does not provide the requested records to the department by October 6, 2016. The department issues a second written request for records to Corporation A on October 21, 2016, allowing Corporation A until November 30, 2016, to provide the records requested. Included in this second written request for records is a notification regarding the penalties provided by s. 71.80 (9m), Stats. Corporation A does not provide the requested records by November 30, 2016. The department mails a summons request for records to Corporation A which is received on December 20, 2016, allowing Corporation A until January 31, 2017, to provide the records requested. Corporation A does not provide the requested records by January 31, 2017. Therefore, the department may disallow the deductions, credits, or exemptions or include in Wisconsin income the additional income to which the requested records relate and impose a penalty equal to the greater of $500 or 25% of the additional tax on the adjustments made resulting from Corporation A not providing the records requested. Tax 2.85 Note2) The department issues a first written request for records to Corporation B on December 21, 2016, allowing Corporation B until January 20, 2017, to provide the records requested. Corporation B does not provide the requested records to the department by January 20, 2017. The department issues a second written request for records to Corporation B on February 8, 2017, allowing Corporation B until March 10, 2017, to provide the records requested. Included in this second written request for records is a notification regarding the penalties provided by s. 71.80 (9m), Stats. Corporation B does not provide the requested records to the department by March 10, 2017. The department personally serves a summons request for records on Corporation B on March 28, 2017, allowing Corporation B until May 10, 2017, to provide the records requested. Corporation B provides records to the department by May 10, 2017, but the department determines that the taxpayer did not provide some of the records requested by May 10, 2017. Therefore, since the taxpayer did not provide all of the records requested by May 10, 2017, the department may disallow the deductions, credits, or exemptions or include in Wisconsin income the additional income to which the requested records that were not provided relate and impose a penalty equal to the greater of $500 or 25% of the additional tax on the adjustments made resulting from the requested records that were not provided. Tax 2.85(4)(a)(a) The penalties in this section may be waived if the person whose records were requested can show that, under all the facts and circumstances, its response to the written request for records or its failure to respond to the written request for records was reasonable or justified by factors beyond the person’s control. In determining whether the penalties will be waived, the department may consider any of the following factors: Tax 2.85(4)(a)1.1. Death of the taxpayer, tax preparer, accountant or other responsible party. Tax 2.85(4)(a)2.2. Onset of debilitating illness or injury of the taxpayer, tax preparer, accountant or other responsible party. Tax 2.85(4)(a)4.4. Records that were destroyed due to events beyond control of the taxpayer or other responsible party and not due to neglect. Tax 2.85(4)(a)5.5. Any other facts and circumstances that the department believes pertinent. Tax 2.85(4)(b)(b) Providing requested records after the time period required for providing the records has expired, as provided in sub. (3), shall result in a reduction of the penalties provided in sub. (1) (a) and (b) if the department determines that these records support a reduction in the disallowance or inclusion previously made by the department. Tax 2.85 NoteExamples: 1) Since Corporation C does not provide the records requested by the date specified in a summons request for records to support interest expense deducted, the department issues a proposed audit report to Corporation C disallowing all the interest expense previously deducted, which represents the penalty provided in s. 71.80 (9m) (a) 1., Stats. Additional tax of $100,000 and the penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $25,000 results in the proposed audit report from disallowing this interest expense. Corporation C provides the records requested 26 days after the department issues the proposed audit report but before the notice of assessment is issued and explains, without any further detail, that they were too busy with other aspects of their business to respond to the three written requests for records by the dates specified. In this situation, the failure to provide the records requested is not reasonable or justified by factors beyond the person’s control. In addition, the records provided do not support a reduction of the interest expense disallowed in the proposed audit report. Therefore, the interest expense adjustment is not modified so the proposed additional tax of $100,000 and the original proposed penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $25,000 remain. Tax 2.85 Note2) Since Mr. Smith does not provide the records requested regarding his business, which primarily receives payments in cash, to support the reported gross receipts by the date specified in a summons request for records, the department issues a notice of assessment to Mr. Smith including an estimated amount into income for unreported receipts, which represents the penalty provided in s. 71.80 (9m) (a) 1., Stats. Additional tax of $60,000, a negligence penalty of $15,000 and the penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $15,000 results in the assessment from including these estimated receipts. Mr. Smith appeals the assessment, provides the records that were requested during the audit, and explains that he forgot to provide the records that were previously requested. In this situation, the failure to provide the records requested is not reasonable or justified by factors beyond the person’s control. However, the records provided show that unreported receipts were only 20% of the amount previously included by the department as estimated unreported receipts. Therefore, the unreported receipts adjustment is modified to reduce the additional tax from $60,000 to $12,000, the negligence penalty is reduced from $15,000 to $3,000 and the original penalty as provided in s. 71.80 (9m) (a) 2., Stats., is reduced from $15,000 to $3,000. Tax 2.85 Note3) Assume the same facts as Example 2, except that Mr. Smith explains that he did not previously provide the requested records because his accountant had possession of them and was in the hospital when the records were requested during the audit. In this situation the failure to provide the records requested is reasonable or justified by factors beyond the person’s control. Therefore, the unreported receipts adjustment is modified to reduce the additional tax from $60,000 to $12,000, the negligence penalty is reduced from $15,000 to $3,000 and the original penalty as provided in s. 71.80 (9m) (a) 2., Stats., of $15,000 is waived. Tax 2.85 HistoryHistory: EmR0929: emerg. cr. eff. 10-19-09; CR 09-087: cr. Register June 2010 No. 654, eff. 7-1-10; correction in (3) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register June 2010 No. 654; CR 17-018: cr. (2) (cm), am. (3) (intro.), cr. (3) (c), am. (3) (c) (Examples), (4) (b) (Examples) Register September 2019 No. 765, eff. 10-1-19; correction in (4) (b) (Examples) made under s. 13.92 (4) (b) 7., Stats., Register September 2019 No. 765. Tax 2.87Tax 2.87 Reduction of delinquent interest rate under s. 71.82 (2) (b), Stats. Tax 2.87(1)(1) Procedures. The secretary may reduce the delinquent interest rate from 18% to 12% per year when the secretary determines the reduction fair and equitable, if the person from whom delinquent taxes are owing: Tax 2.87(1)(a)(a) Requests the reduction in writing, addressed to the Wisconsin Department of Revenue, Compliance Bureau, P.O. Box 8901, Madison, WI 53708. Tax 2.87(1)(b)(b) Clearly indicates why it is fair and equitable for the rate of interest to be reduced. Information regarding one or more of the factors under sub. (2) may be indicated. Tax 2.87(1)(c)(c) Is current in all return and report filings and tax payments for all matters other than the delinquencies for which interest reduction is being sought. Tax 2.87(1)(d)(d) Pays the taxes, reduced amount of interest and any penalties associated with them within 30 days of receiving notice from the department of the reduction. Tax 2.87(1)(e)(e) For combined group members, the designated agent is charged with this responsibility. Tax 2.87 NoteNote: See s. Tax 2.65 for rules relating to the designated agent. Tax 2.87(2)(2) Factors for secretary’s consideration. In determining whether an interest rate reduction is fair and equitable, the secretary may consider the following factors: Tax 2.87(2)(a)(a) The taxpayer’s prior record of reporting and payment to the department. Tax 2.87(2)(c)(c) Any circumstances which may have prevented payment such as death, imprisonment, hospitalization or other institutionalization. Tax 2.87(2)(d)(d) Any unusual circumstances which may have caused the taxpayer to incur the delinquency or prevent its payment. Tax 2.87(2)(e)(e) Any other factor which the secretary believes pertinent. Tax 2.87(3)(3) Determination not appealable. The secretary’s determination under this rule is not appealable. Tax 2.87 HistoryHistory: Cr. Register, February, 1979, No. 278, eff. 3-1-79; am. (1) (intro.), Register, September, 1983, No. 333, eff. 10-1-83; CR 10-095: cr. (1) (e) Register November 2010 No. 659, eff. 12-1-10; CR 19-141: am. (1) (a) Register September 2020 No. 777, eff. 10-1-20. Tax 2.88(1)(1) Interest on unpaid taxes which are not delinquent. Unpaid individual income or corporate franchise or income taxes which are not delinquent but which are assessed by the department on or after August 1, 1981 shall bear interest computed at the rate of 12% per year from the due date of the taxes to the date paid or delinquent. Tax 2.88(2)(2) Interest on delinquent taxes. Any individual income or corporate franchise or income tax delinquencies shall include interest at the rate of 1.5% per month from the date on which the taxes became delinquent until the taxes are paid. Tax 2.88(3)(a)(a) Any refund of individual income or corporate franchise or income taxes shall include interest at the rate of 3% per year from the due date of the return to the date paid by the department, except as provided in pars. (b), (c), and (d). Tax 2.88(3)(b)(b) No interest may be allowed on income and franchise taxes if the refund is certified on a refund roll within 90 days of the due date of the return or the date the return was filed, whichever occurs later. This treatment shall apply to a refund of taxes resulting from an overpayment of estimated tax as well as from withheld taxes. Tax 2.88(3)(c)(c) No interest may be allowed on a refund of income taxes that results from the carryback of a net operating loss. Tax 2.88(3)(d)(d) No interest may be allowed on refunds due to a tax credit issued under ss. 71.07 (3q), (3w), (3wm), and (3y), 71.28 (3q), (3w), (3wm), and (3y), and 71.47 (3q), (3w), and (3y), Stats., and subch. VIII of ch. 71, Stats. Tax 2.88(4)(4) Interest on deposit of contested taxes. Any refund of an amount deposited with the department pursuant to s. 71.90 (1), Stats., shall include interest at the rate of 3% per year from the date the funds were deposited to the date refunded. Tax 2.88(5)(5) Extension periods. If an extension of time is granted for filing an individual income or a corporate franchise or income tax return, any taxes owing with the return are subject to interest during the extension period at the rate of 12% per year. However, if the return is not filed or the taxpayer files but fails to pay the tax by the end of the extension period, the taxes owing become delinquent and shall be subject to delinquent interest under sub. (2) from the end of the extension period until paid. Tax 2.88 NoteNote: 2013 Wis. Act 20 reduced the rate of interest on refunds of taxes and refunds of the deposit of contested taxes from 9% to 3%. The 3% rate applies to refunds paid on or after July 2, 2013, regardless of the taxable periods to which the refunds pertain. Tax 2.88 NoteNote: Section Tax 2.88 interprets ss. 71.03 (7), 71.07 (3q), (3w), (3wm), and (3y), 71.24 (7), 71.28 (3q), (3w), (3wm), and (3y), 71.44 (3), 71.47 (3q), (3w), and (3y), 71.55 (4), 71.82 (1) and (2) (a), and 71.90 (1), Stats. Tax 2.88 HistoryHistory: Cr. Register, January, 1979, No. 277, eff. 2-1-79; r. and recr. (1), (3) and (4), Register, September, 1983, No. 333, eff. 10-1-83; renum. (2) to (4) to be (3), (2) and (5) and am., cr. (4), Register, July, 1989, No. 403, eff. 8-1-89; CR 14-005: am. (3) (a), (4) Register August 2014 No. 704, eff. 9-1-14; CR 16-046: am. (3) (a), cr. (3) (c) Register January 2018 No. 745, eff. 2-1-18; CR 19-141: am. (3) (a), cr. (3) (d) Register September 2020 No. 777, eff. 10-1-20; correction in (3) (d) made under s. 35.17, Stats., Register September 2020 No. 777. Tax 2.89Tax 2.89 Estimated tax requirements for short taxable years. Tax 2.89(1)(1) General. Under ss. 71.09 and 71.29, Stats., certain corporations and persons other than corporations shall make estimated tax payments. For short taxable years, estimated tax payments shall be made in accordance with this section.
