Amendment ASA1-AB729

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1997 - 1998 LEGISLATURE

ASSEMBLY SUBSTITUTE AMENDMENT 1, TO 1997 ASSEMBLY BILL 729

March 18, 1998 - Offered by Representatives Kaufert and Hubler.

AB729-ASA1,1,7 An Act to renumber and amend 565.30 (5m) and 565.37 (5r); to amend 71.04 (1) (a), 71.04 (9), 71.23 (1), 71.23 (2), 71.25 (5) (b), 71.26 (1) (a), 71.362 (1), 71.362 (2), 71.43 (1), 71.43 (2), 71.45 (1), 71.46 (3), 71.67 (4) (a) and 565.30 (5); to repeal and recreate 565.30 (5) and 565.30 (6); and to create 71.45 (2) (a) 15., 71.45 (3r), 565.02 (2) (e), 565.30 (5m) (b), 565.30 (5t) and 565.37 (5r) (b) of the statutes; relating to: the assignment of lottery prizes, taxation of persons that buy or sell lottery tickets and granting rule-making authority.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB729-ASA1, s. 1 Section 1. 71.04 (1) (a) of the statutes, as affected by 1997 Wisconsin Act 27, is amended to read:

AB729-ASA1,3,12 71.04 (1) (a) All income or loss of resident individuals and resident estates and trusts shall follow the residence of the individual, estate or trust. Income or loss of nonresident individuals and nonresident estates and trusts from business, not requiring apportionment under sub. (4), (10) or (11), shall follow the situs of the business from which derived, except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state. All items of income, loss and deductions of nonresident individuals and nonresident estates and trusts derived from a tax-option corporation not requiring apportionment under sub. (9) shall follow the situs of the business of the corporation from which derived, except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state. Income or loss of nonresident individuals and nonresident estates and trusts derived from rentals and royalties from real estate or tangible personal property, or from the operation of any farm, mine or quarry, or from the sale of real property or tangible personal property shall follow the situs of the property from which derived. Income from personal services of nonresident individuals, including income from professions, shall follow the situs of the services. A nonresident limited partner's distributive share of partnership income shall follow the situs of the business, except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state. A nonresident limited liability company member's distributive share of limited liability company income shall follow the situs of the business, except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state. Income of nonresident individuals, estates and trusts from the state lottery under ch. 565 is taxable by this state. Income of nonresident individuals, estates and trusts from any multijurisdictional lottery under ch. 565 is taxable by this state, but only if the winning lottery ticket or lottery share was purchased from a retailer, as defined in s. 565.01 (6), located in this state or from the department. Income of nonresident individuals, nonresident trusts and nonresident estates from pari-mutuel winnings or purses under ch. 562 is taxable by this state. All other income or loss of nonresident individuals and nonresident estates and trusts, including income or loss derived from land contracts, mortgages, stocks, bonds and securities or from the sale of similar intangible personal property, shall follow the residence of such persons, except as provided in par. (b) and sub. (9), except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state.

AB729-ASA1, s. 2 Section 2. 71.04 (9) of the statutes is amended to read:

AB729-ASA1,4,2 71.04 (9) Nonresident income from multistate tax-option corporation. Nonresident individuals and nonresident estates and trusts deriving income from a tax-option corporation which is engaged in business within and without this state shall be taxed only on the income of the corporation derived from business transacted and property located in this state and losses and other items of the corporation deductible by such shareholders shall be limited to their proportionate share of the Wisconsin loss or other item, except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state. For purposes of this subsection, all intangible income of tax-option corporations passed through to shareholders is business income that follows the situs of the business , except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state.

AB729-ASA1, s. 3 Section 3. 71.23 (1) of the statutes is amended to read:

AB729-ASA1,4,13 71.23 (1) Income tax. For the purpose of raising revenue for the state and the counties, cities, villages and towns, there shall be assessed, levied, collected and paid a tax as provided under this chapter on all Wisconsin net incomes of corporations which are not subject to the franchise tax under sub. (2) and which own property within this state or; whose business within this state during the taxable year, except as provided under sub. (3), consists exclusively of foreign commerce, interstate commerce, or both, or that buy or sell lottery prizes if the winning tickets were originally bought in Wisconsin; except as exempted under s. 71.26 (1). This section shall not be construed to prevent or affect the correction of errors or omissions in the assessments of income for former years under s. 71.74 (1) and (2).

AB729-ASA1, s. 4 Section 4. 71.23 (2) of the statutes is amended to read:

AB729-ASA1,5,9 71.23 (2) Franchise tax. For the privilege of exercising its franchise, buying or selling lottery prizes if the winning tickets were originally bought in Wisconsin or doing business in this state in a corporate capacity, except as provided under sub. (3), every domestic or foreign corporation, except corporations specified in s. 71.26 (1), and every nuclear decommissioning trust or reserve fund shall annually pay a franchise tax according to or measured by its entire Wisconsin net income of the preceding taxable year at the rate set forth in s. 71.27 (2). In addition, except as provided in sub. (3) and s. 71.26 (1), a corporation that ceases doing business in this state and a nuclear decommissioning trust or reserve fund that is terminated shall pay a special franchise tax according to or measured by its entire Wisconsin net income for the taxable year during which the corporation ceases doing business in this state or the nuclear decommissioning trust or reserve fund is terminated at the rates under s. 71.27 (2). Every corporation organized under the laws of this state shall be deemed to be residing within this state for the purposes of this franchise tax. All provisions of this chapter and ch. 73 relating to income taxation of corporations shall apply to franchise taxes imposed under this subsection, unless the context requires otherwise. The tax imposed by this subsection on national banking associations shall be in lieu of all taxes imposed by this state on national banking associations to the extent it is not permissible to tax such associations under federal law.

AB729-ASA1, s. 5 Section 5. 71.25 (5) (b) of the statutes is amended to read:

AB729-ASA1,5,18 71.25 (5) (b) Nonapportionable income. 1. Income, gain or loss from the sale of nonbusiness real property or nonbusiness tangible personal property, rental of nonbusiness real property or nonbusiness tangible personal property and royalties from nonbusiness real property or nonbusiness tangible personal property are nonapportionable and shall be allocated to the situs of the property , except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state.

AB729-ASA1,5,24 2. All income, gain or loss from intangible property that is earned by a personal holding company, as defined in section 542 of the internal revenue code, as amended to December 31, 1974, shall be allocated to the residence of the taxpayer, except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state.

AB729-ASA1, s. 6 Section 6. 71.26 (1) (a) of the statutes is amended to read:

AB729-ASA1,7,2 71.26 (1) (a) Certain corporations. Income of corporations organized under ch. 185, except income of a cooperative sickness care association organized under s. 185.981, or of a service insurance corporation organized under ch. 613, that is derived from a health maintenance organization as defined in s. 609.01 (2) or a limited service health organization as defined in s. 609.01 (3), or operating under subch. I of ch. 616 which are bona fide cooperatives operated without pecuniary profit to any shareholder or member, or operated on a cooperative plan pursuant to which they determine and distribute their proceeds in substantial compliance with s. 185.45, and the income, except the unrelated business taxable income as defined in section 512 of the internal revenue code and except income that is derived from a health maintenance organization as defined in s. 609.01 (2) or a limited service health organization as defined in s. 609.01 (3), of all religious, scientific, educational, benevolent or other corporations or associations of individuals not organized or conducted for pecuniary profit. This paragraph does not apply to the income of savings banks, mutual loan corporations or savings and loan associations. This paragraph does not apply to income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin. This paragraph applies to the income of credit unions except to the income of any credit union that is derived from public deposits for any taxable year in which the credit union is approved as a public depository under ch. 34 and acts as a depository of state or local funds under s. 186.113 (20). For purposes of this paragraph, the income of a credit union that is derived from public deposits is the product of the credit union's gross annual income for the taxable year multiplied by a fraction, the numerator of which is the average monthly balance of public deposits in the credit union during the taxable year, and the denominator of which is the average monthly balance of all deposits in the credit union during the taxable year.

AB729-ASA1, s. 7 Section 7. 71.362 (1) of the statutes is amended to read:

AB729-ASA1,7,9 71.362 (1) All tax-option items of nonresident individuals, nonresident estates and nonresident trusts derived from a tax-option corporation not requiring apportionment under sub. (2) shall follow the situs of the business of the corporation from which they are derived, except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state.

AB729-ASA1, s. 8 Section 8. 71.362 (2) of the statutes is amended to read:

AB729-ASA1,7,23 71.362 (2) Nonresident individuals, nonresident estates and nonresident trusts deriving income from a tax-option corporation which is engaged in business within and without this state shall be taxed only on the income of the corporation derived from business transacted and property located in this state and losses and other items of the corporation deductible by such shareholders shall be limited to their proportionate share of the Wisconsin loss or other item, except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state. For purposes of this subsection, all intangible income of tax-option corporations passed through to shareholders is business income that follows the situs of the business, except that all income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state.

AB729-ASA1, s. 9 Section 9. 71.43 (1) of the statutes is amended to read:

AB729-ASA1,8,10 71.43 (1) Income tax. For the purpose of raising revenue for the state and the counties, cities, villages and towns, there shall be assessed, levied, collected and paid a tax as provided under this chapter on all Wisconsin net incomes of corporations which are not subject to the franchise tax under sub. (2) and which own property within this state or; whose business within this state during the taxable year, except as provided under s. 71.23 (3), consists exclusively of foreign commerce, interstate commerce, or both, or that buy or sell lottery prizes if the winning tickets were originally bought in Wisconsin; except as exempted under ss. 71.26 (1) and 71.45 (1). This section shall not be construed to prevent or affect the correction of errors or omissions in the assessments of income for former years under s. 71.74 (1) and (2).

AB729-ASA1, s. 10 Section 10. 71.43 (2) of the statutes is amended to read:

AB729-ASA1,9,7 71.43 (2) Franchise tax on corporations. For the privilege of exercising its franchise, buying or selling lottery prizes if the winning tickets were originally bought in Wisconsin or doing business in this state in a corporate capacity, except as provided under s. 71.23 (3), every domestic or foreign corporation, except corporations specified in ss. 71.26 (1) and 71.45 (1), shall annually pay a franchise tax according to or measured by its entire Wisconsin net income of the preceding taxable year at the rates set forth in s. 71.46 (2). In addition, except as provided in ss. 71.23 (3), 71.26 (1) and 71.45 (1), a corporation that ceases doing business in this state shall pay a special franchise tax according to or measured by its entire Wisconsin net income for the taxable year during which the corporation ceases doing business in this state at the rate under s. 71.46 (2). Every corporation organized under the laws of this state shall be deemed to be residing within this state for the purposes of this franchise tax. All provisions of this chapter and ch. 73 relating to income taxation of corporations shall apply to franchise taxes imposed under this subsection, unless the context requires otherwise. The tax imposed by this subsection on insurance companies subject to taxation under this chapter shall be based on Wisconsin net income computed under s. 71.45, and no other provision of this chapter relating to computation of taxable income for other corporations shall apply to such insurance companies. All other provisions of this chapter shall apply to insurance companies subject to taxation under this chapter unless the context clearly requires otherwise.

AB729-ASA1, s. 11 Section 11. 71.45 (1) of the statutes is amended to read:

AB729-ASA1,9,25 71.45 (1) Exempt and excludable income. There shall be exempt from taxation under this subchapter income of insurers exempt from federal income taxation pursuant to section 501 (c) (15) of the internal revenue code, town mutuals organized under or subject to ch. 612, foreign insurers, and domestic insurers engaged exclusively in life insurance business, domestic insurers insuring against financial loss by reason of nonpayment of principal, interest and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust or other instrument constituting a lien or charge on real estate and corporations organized under ch. 185, but not including income of cooperative sickness care associations organized under s. 185.981, or of a service insurance corporation organized under ch. 613, that is derived from a health maintenance organization as defined in s. 609.01 (2) or a limited service health organization as defined in s. 609.01 (3), or operating under subch. I of ch. 616 which are bona fide cooperatives operated without pecuniary profit to any shareholder or member, or operated on a cooperative plan pursuant to which they determine and distribute their proceeds in substantial compliance with s. 185.45. This subsection does not apply to income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin.

AB729-ASA1, s. 12 Section 12. 71.45 (2) (a) 15. of the statutes is created to read:

AB729-ASA1,10,6 71.45 (2) (a) 15. By subtracting from federal taxable income all income that is realized from the purchase and subsequent sale or redemption of lottery prizes that is treated as nonapprotionable income under sub. (3r).

AB729-ASA1, s. 13 Section 13. 71.45 (3r) of the statutes is created to read:

AB729-ASA1,10,10 71.45 (3r) Allocation of certain proceeds. All income that is realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin shall be allocated to this state.

AB729-ASA1, s. 14 Section 14. 71.46 (3) of the statutes is amended to read:

AB729-ASA1,10,18 71.46 (3) The tax imposed under this subchapter on each domestic insurer on or measured by its entire net income attributable to lines of insurance in this state may not exceed 2% of the gross premiums, as defined in s. 76.62, received during the taxable year by the insurer on all policies on those lines of insurance if the subject of that insurance was resident, located or to be performed in this state plus 7.9% of the income realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin.

AB729-ASA1, s. 15 Section 15. 71.67 (4) (a) of the statutes, as affected by 1997 Wisconsin Act 27, is amended to read:

AB729-ASA1,11,2 71.67 (4) (a) The administrator of the lottery division in the department under ch. 565 shall withhold from any lottery prize of $2,000 or more an amount determined by multiplying the amount of the prize by the highest rate applicable to individuals under s. 71.06 (1) or (1m) the person who claims the prize. The administrator shall deposit the amounts withheld, on a monthly basis, as would an employer depositing under s. 71.65 (3) (a).

AB729-ASA1, s. 16 Section 16. 565.02 (2) (e) of the statutes is created to read:

AB729-ASA1,11,7 565.02 (2) (e) If requested by a lottery prize winner to provide a certification that lists the amounts of the lottery prize payments, if any, that the administrator is required to withhold under ss. 565.30 (4), (5) and (5m) and 565.37 (5r), the administrator shall provide the certification.

AB729-ASA1, s. 17 Section 17. 565.30 (5) of the statutes, as affected by 1997 Wisconsin Act 27, is amended to read:

AB729-ASA1,12,8 565.30 (5) Withholding of delinquent state taxes, child support or debts owed the state. The administrator shall report the name, address and social security number of each winner of a lottery prize equal to or greater than $1,000 and each person to whom a lottery prize equal to or greater than $1,000 has been assigned to the department of revenue to determine whether the payee or assignee of the prize is delinquent in the payment of state taxes under ch. 71, 72, 76, 77, 78 or 139 or in court-ordered payment of child support or has a debt owing to the state. Upon receipt of a report under this subsection, the department of revenue shall first ascertain based on certifications by the department of workforce development under s. 49.855 (2) whether any person named in the report is currently delinquent in court-ordered payment of child support and shall next certify to the administrator whether any person named in the report is delinquent in court-ordered payment of child support or payment of state taxes under ch. 71, 72, 76, 77, 78 or 139.Upon this certification by the department of revenue or upon court order the administrator shall withhold the certified amount and send it to the department of revenue for remittance to the appropriate agency or person. At the time of remittance, the department of revenue shall charge its administrative expenses to the state agency that has received the remittance. The administrative expenses received by the department of revenue shall be credited to the appropriation under s. 20.566 (1) (h). In instances in which the payee or assignee of the prize is delinquent both in payments for state taxes and in court-ordered payments of child support, or is delinquent in one or both of these payments and has a debt owing to the state, the amount remitted to the appropriate agency or person shall be in proportion to the prize amount as is the delinquency or debt owed by the payee or assignee.

AB729-ASA1, s. 18 Section 18. 565.30 (5) of the statutes, as affected by 1997 Wisconsin Act .... (this act), is repealed and recreated to read:

AB729-ASA1,13,10 565.30 (5) Withholding of delinquent state taxes, child support or debts owed the state. The administrator shall report the name, address and social security number of each winner of a lottery prize equal to or greater than $1,000 and each person to whom a lottery prize equal to or greater than $1,000 has been assigned to the department of revenue to determine whether the payee or assignee of the prize is delinquent in the payment of state taxes under ch. 71, 72, 76, 77, 78 or 139 or in court-ordered payment of child support or has a debt owing to the state. Upon receipt of a report under this subsection, the department of revenue shall first ascertain based on certifications by the department of workforce development or its designee under s. 49.855 (1) whether any person named in the report is currently delinquent in court-ordered payment of child support and shall next certify to the administrator whether any person named in the report is delinquent in court-ordered payment of child support or payment of state taxes under ch. 71, 72, 76, 77, 78 or 139. Upon this certification by the department of revenue or upon court order the administrator shall withhold the certified amount and send it to the department of revenue for remittance to the appropriate agency or person. At the time of remittance, the department of revenue shall charge its administrative expenses to the state agency that has received the remittance. The administrative expenses received by the department of revenue shall be credited to the appropriation under s. 20.566 (1) (h). In instances in which the payee or assignee of the prize is delinquent both in payments for state taxes and in court-ordered payments of child support, or is delinquent in one or both of these payments and has a debt owing to the state, the amount remitted to the appropriate agency or person shall be in proportion to the prize amount as is the delinquency or debt owed by the payee.

AB729-ASA1, s. 19 Section 19. 565.30 (5m) of the statutes, as affected by 1997 Wisconsin Act 35, is renumbered 565.30 (5m) (a) and amended to read:

AB729-ASA1,13,25 565.30 (5m) (a) The administrator shall report to the department of workforce development the name, address and social security number of each winner of a lottery prize that is payable in instalments and the name, address and social security number or federal income tax number of the person who has been assigned a lottery prize that is payable in instalments. Upon receipt of the report, the department of workforce development shall certify to the administrator whether any payee or assignee named in the report is obligated to provide child support, spousal support, maintenance or family support under s. 767.02 (1) (f) or (g), 767.10, 767.23, 767.25, 767.26, 767.261, 767.465 (2m), 767.51 (3) or 948.22 (7) or ch. 769 and the amount required to be withheld from the lottery prize under s. 767.265. The Subject to par. (b), the administrator shall withhold the certified amount from each payment made to the winner or assignee and shall remit the certified amount to the department of workforce development.

AB729-ASA1, s. 20 Section 20. 565.30 (5m) (b) of the statutes is created to read:

AB729-ASA1,14,6 565.30 (5m) (b) The administrator may not withhold from any payment to an assignee of a lottery prize any child support, spousal support, maintenance or family support specified in par. (a) that is owed by a winner of a lottery prize, nor may the administrator withhold from any payment to a winner any child support, spousal support maintenance or family support that is owed by an assignee.

AB729-ASA1, s. 21 Section 21. 565.30 (5t) of the statutes is created to read:

AB729-ASA1,14,10 565.30 (5t) Use of lottery prize as security for loan. (a) Definition. In this subsection, "prize winner" means a person who has won a lottery prize and any other person who is authorized by law to use a lottery prize as security for a loan.

AB729-ASA1,14,13 (b) Security for a loan. A prize winner may use a lottery prize or part of a lottery prize as security for a loan only pursuant to a court order issued under this subsection.