7. Gross exploited exempt activity income includable in computing that item of income on line 10 of federal form 990-T.
8. Gross advertising income includable in computing advertising income on line 11 of federal form 990-T.
9. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes.
(c) “Gross receipts from all activities of insurance companies" means the sum of the following items reportable by insurance companies:
1. Gross premiums earned reportable on lines 1 and 8 of schedule A on federal form 1120-PC, U. S. property and casualty insurance company income tax return.
2. Gross dividends reportable on line 2 of schedule A, or line 2 of schedule B if applicable, on federal form 1120-PC.
3. Gross interest income reportable on line 3a of schedule A, or line 1a of schedule B if applicable, on federal form 1120-PC.
4. Gross rents reportable on line 4 of schedule A, or line 3 of schedule B if applicable, on federal form 1120-PC.
5. Gross royalties reportable on line 5 of schedule A, or line 4 of schedule B if applicable, on federal form 1120-PC.
6. The gross sales price from the disposition of capital assets and business assets includable in computing the gain or loss on lines 6 and 7 of schedule A, or lines 5 and 7 of schedule B if applicable, on federal form 1120-PC.
7. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes.
(d) “Gross receipts from all activities of tax-option (S) corporations" means the sum of the following items reportable by S corporations:
1. Gross receipts or sales reportable on line 1a of federal form 1120S, U. S. corporation income tax return for an S corporation.
2. Gross rents includable in computing the income from real estate and other rental activities reportable on lines 2 and 3a of schedule K on federal form 1120S.
3. Gross interest income reportable on line 4a of schedule K on federal form 1120S.
4. Gross dividends reportable on line 4b of schedule K on federal form 1120S.
5. Gross royalties includable in computing royalty income reportable on line 4c of schedule K on federal form 1120S.
6. The gross sales price from the disposition of capital assets and business assets includable in computing the gain or loss on line 4 of federal form 1120S and lines 4d, 4e, 4f and 5 of schedule K on federal form 1120S.
7. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes.
(e) “Gross receipts from farming, of individuals, estates, trusts and partnerships engaged in farming" means the sum of the following items reportable by those entities:
1. Gross receipts or sales reportable on lines 1, 4, 5a, 6a, 7a, 8a and 9 of federal schedule F, profit or loss from farming.
2. The gross sales price of farm assets, including livestock, includable in computing ordinary income or loss on federal form 4797, sales of business property.
(f) “Gross receipts of exempt organizations taxable as trusts" means the total receipts or sales from all trade or business activities other than farming, reportable by those entities for federal income tax purposes, before any deduction for returns and allowances or any other business expenses. Gross receipts include any of the following:
1. Gross receipts or sales reportable on line 1a of federal form 990-T, exempt organization business income tax return.
2. The gross sales price from the disposition of capital assets and business assets includable in computing the gain or loss on lines 4a and 4b of federal form 990-T.
3. Gross rents includable in computing rent income on line 6 of federal form 990-T.
4. Gross income from unrelated debt-financed property includable in computing unrelated debt-financed income on line 7 of federal form 990-T.
5. Gross interest, annuities, royalties and rents from controlled organizations includable in computing those items of income on line 8 of federal form 990-T
6. Gross investment income includable in computing investment income on line 9 of federal form 990-T.
7. Gross exploited exempt activity income includable in computing that item of income on line 10 of federal form 990-T.
8. Gross advertising income includable in computing advertising income on line 11 of federal form 990-T.
9. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes.
(g) “Gross receipts of individuals, estates, trusts and statutory employes" means the total receipts or sales from all trade or business activities other than farming, reportable by those entities for federal income tax purposes, before any deduction for returns and allowances or any other business expenses. Gross receipts include any of the following:
1. Gross receipts or sales reportable on line 1 of federal schedule C, profit or loss from business.
2. Gross receipts reportable on line 1 of federal schedule C-EZ, net profit from business.
3. The gross sales price of assets includable in computing ordinary income or loss on federal form 4797, sales of business property.
Note: See par. (e) for information relating to individuals, estates and trusts engaged in farming.
(h) “Gross receipts of partnerships" means the total receipts or sales from all trade or business activities other than farming, reportable by partnerships for federal income tax purposes, before any deduction for returns and allowances or any other business expenses. Gross receipts include the sum of the following:
1. Gross receipts or sales reportable on line 1a of federal form 1065, U. S. partnership return of income.
2. Gross receipts, other than farm receipts, passed through from other partnerships and fiduciaries and includable in computing the amount on line 4 of federal form 1065.
3. The gross sales price from the sale or disposition of business assets, other than farm assets, includable in computing the net gain or loss on line 6 of federal form 1065.
4. Gross receipts from the rental of tangible personal property.
5. Other gross receipts includable in computing other income or loss on line 7 of federal form 1065.
Note: See par. (e) for information relating to partnerships engaged in farming.
Note: Section Tax 2.32 interprets subch. VII of ch. 77, Stats.
Note: Subchapter VII of ch. 77, Stats., was amended by 1999 Wis. Act 9, to replace the expired temporary recycling surcharge with a recycling surcharge, effective for taxable years beginning on or after January 1, 2000. This section applies to the recycling surcharge imposed for taxable years beginning on or after January 1, 2000.
Initial Regulatory Flexibility Analysis
This proposed rule order does not have a significant economic impact on a substantial number of small businesses.
Fiscal Estimate
This rule defines gross receipts for purposes of the recycling surcharge, as required by section 9143 (3d) of 1999 Wis. Act 9. To the extent that gross receipts as defined in this rule are the receipts intended by the Legislature to be subject to the recycling surcharge in enacted in Act 9, this rule has no fiscal effect.
Notice of Hearing
Revenue
Notice is hereby given that pursuant to ss. 70.32(2)(c) 1., (2r)(b) and 227.11(2)(a), Stats., and interpreting s. 70.32(2)(c)1., (2r)(b) and (c), Stats., the State of Wisconsin Department of Revenue will hold a public hearing in Room 027, GEF-2, 101 South Webster Street, in the City of Madison, Wisconsin, on the 11th day of April, 2000, commencing at 1 p.m. , to consider the proposed rule submitted to the Legislative Council Rules Clearinghouse March 7, 2000 relating to the assessment of agricultural land.
Analysis prepared by the Wisconsin Department Of Revenue
Statutory Authority: ss. 70.32 (2) (c) 1., 70.32 (2r) (b) and 227.11 (2) (a)
Statute Interpreted: s. 70.32 (2) (c) 1., (2r) (b) and (c)
Under the current rule, agricultural use is defined by reference to the 1987 Standard Industrial Classification (SIC) Manual and includes land eligible for enrollment in specified federal agricultural programs. The rule amends the definition of agricultural use to update the 1987 SIC references to 1997 North American Industrial Classification System references. The rule also updates the references to the federal agricultural programs and provides that land enrolled in those programs is in agricultural use. The rule also defines land enrolled in specified state agricultural programs as being in agricultural use if such lands were in agricultural use at the time of enrollment. The updated definition of agricultural use is effective for assessments as of January 1, 2001.
The rule also provides that, beginning with the assessments as of January 1, 2000, the assessed value of each parcel of agricultural land is its use value.
Text of Rule
SECTION 1. Section Tax 18.05 is amended to read:
Tax 18.05 Definitions. In this subchapter:
(1) "Agricultural use" means any of the following:
(a) Activities included in major group 01 -- agricultural production-crops, set forth in the standard industrial classification manual, 1987 edition, subsector 111 Crop Production, set forth in the North American Industry Classification System (NAICS), United States, 1997, published by the executive office of the president, U.S. office of management and budget. "Agricultural use" does not include growing short rotation woody trees with a growing and harvesting cycle of 10 years or less for pulp or tree stock under NAICS industry 111421.
(b) Activities included in major group 02 -- agricultural production-livestock and animal specialties, set forth in the standard industrial classification manual, 1987 edition, subsector 112 Animal Production, set forth in the North American Industry Classification System, United States, 1997, published by the executive office of the president, U.S. office of management and budget.
Note: Major group 01 -- agricultural production-crops and major group 02 -- agricultural production-livestock and animal specialties, set forth in the standard industrial classification manual, 1987 edition, Subsector 111 Crop Production and subsector 112 Animal Production, set forth in the North American Industry Classification System, United States, 1997, published by the executive office of the president, U.S. office of management and budget, are reproduced in full in the Wisconsin property assessment manual under s. 73.03(2a), Stats. In addition, copies are on file with the department, the secretary of state, and the revisor of statutes.
(d) Land eligible for enrollment enrolled in any of the following federal agriculture programs: the conservation reserve program 1991-1995 under 7 C.F.R. 1410; the conservation reserve program 1986-1990 under 7 C.F.R. 704; the feed grain program under 7 C.F.R. 1413; the water bank program under 7 C.F.R. 752; the agricultural conservation program under 7 C.F.R. 701; or the dairy price support program under 7 C.F.R. 1430 and 282 or, provided that the land was in agricultural use under subpar. (a), (b) or (c) at the time of enrollment, the environmental quality incentives program under 7 C.F.R. 1466.
(e) Land that is subject to an easement under any of the following programs provided that the land was in agricultural use under subpar. (a), (b) or (c) at the time the easement was acquired: the stream bank protection program under s. 23.094, Wis. stats.; the conservation reserve enhancement program under s. 93.70, Wis. stats.; or the nonpoint source water pollution abatement program under s. 281.65, Wis. stats.
(f) Land that is subject to a private landowner wildlife agreement under ss. 23.09(2)(h) and 23.11, Wis. stats., provided that the land was in agricultural use under subpar. (a), (b) or (c) at the time the agreement was executed.
SECTION 2. Section Tax18.08 is repealed and recreated to read:
Tax 18.08 Assessment of agricultural land.
Beginning with the assessments as of January 1, 2000, the assessment of each parcel of agricultural land shall be its use-value, as determined under s. Tax 18.07(3)(b).
Initial Regulatory Flexibility Analysis
This rule order is not expected to directly affect small business and, therefore, under s. 227.114(8)(b), Stats., a regulatory flexibility analysis is not required.
Fiscal Estimate
Summary. The fiscal effect of advancing use value assessment from January 1, 2008, to January 1, 2000, is a reduction in the taxable value of agricultural land and a consequent shift in property taxes from agricultural land to other classes of taxable property in each year from 2000 to 2007. In 2000, $41 million is shifted to other taxable property and a total of $164 million is shifted by 2007. Equalizing state aid distribution formulas -- shared revenues and school aids -- will reallocate aids away from taxing jurisdictions with little or no agricultural land to jurisdictions where agricultural land is relatively more important. In addition, state forestry taxes will decrease under the proposed rule in each year from 2000 to 2007. The decrease in 2000 will be $380,000 and the total decrease will be about $1.5 million.
The provisions updating the definition of "agricultural use" have a minimal fiscal effect.
Contact Person
Following the public hearing, the hearing record will remain open until April 18, 2000, for additional written comments. Copies of the proposed rule and complete fiscal estimate are available upon request from the Department of Revenue at the address below. An interpreter for the hearing-impaired will be available on request for the hearing. Please make reservations for a hearing interpreter by April 7, 2000, either by writing:
Blair P. Kruger
Division of Research and Analysis
Wisconsin Department of Revenue
125 S. Webster Street
Madison, WI 53702
or by calling (608) 266-1310
or fax (608) 266-8704
