Amendment SSA1-SB518

LRBs0585/1

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2005 - 2006 LEGISLATURE

SENATE SUBSTITUTE AMENDMENT 1, TO 2005 SENATE BILL 518

March 9, 2006 - Offered by Senator Kanavas.

SB518-SSA1,1,10 An Act to amend 71.83 (1) (a) 1., 71.83 (1) (a) 2., 71.83 (1) (a) 3., 71.83 (1) (a) 4., 73.01 (4) (e) 2., 77.59 (4) (a), 77.59 (8m), 77.60 (3), 77.60 (4), 77.61 (5) (a), 78.68 (3), 78.68 (4), 139.25 (3), 139.25 (4), 227.12 (3), 227.41 (1), 227.41 (3), 227.41 (4), 227.485 (2) (a), 227.485 (3), 227.485 (5), 227.485 (7), 227.485 (10) (intro.) and 803.08; and to create 73.015 (3), 73.14, 227.12 (4), 227.41 (5) and 227.485 (3m) of the statutes; relating to: various duties of the Department of Revenue, including issuing declaratory judgments, conducting audits and assessments, asserting liability, allowing claims for refunds, awarding the costs of litigation to a prevailing party, imposing penalties related to a taxpayer's negligence, and requiring the exercise of rule-making authority.

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

SB518-SSA1, s. 1 Section 1. 71.83 (1) (a) 1. of the statutes is amended to read:

SB518-SSA1,2,12 71.83 (1) (a) 1. `Failure to file.' In case of failure to file any return required under s. 71.03, 71.24 or 71.44 on the due date prescribed therefor, including any extension of time for filing, unless it is shown that the failure is due to reasonable cause and not due to willful neglect and upon a showing by the department under s. 73.14 (5), there shall be added to the amount required to be shown as tax on the return 5% of the amount of the tax if the failure is for not more than one month, with an additional 5% for each additional month or fraction thereof during which the failure continues, not exceeding 25% in the aggregate. For purposes of this subdivision, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the due date prescribed for payment and by the amount of any credit against the tax which may be claimed upon the return.

SB518-SSA1, s. 2 Section 2. 71.83 (1) (a) 2. of the statutes is amended to read:

SB518-SSA1,3,2 71.83 (1) (a) 2. `Incomplete or incorrect return.' If any person required under this chapter to file an income or franchise tax return files an incomplete or incorrect return, unless it is shown that such filing was due to good cause and not due to neglect and upon a showing by the department under s. 73.14 (5), there shall be added to such person's tax for the taxable year 25% of the amount otherwise payable on any income subsequently discovered or reported. The amount so added shall be assessed, levied and collected in the same manner as additional normal income or franchise taxes, and shall be in addition to any other penalties imposed by this chapter. In this subdivision, "return" includes a separate return filed by a spouse with respect to a taxable year for which a joint return is filed under s. 71.03 (2) (g) to (L) after the filing of that separate return, and a joint return filed by the spouses with respect to a taxable year for which a separate return is filed under s. 71.03 (2) (m) after the filing of that joint return.

SB518-SSA1, s. 3 Section 3. 71.83 (1) (a) 3. of the statutes is amended to read:

SB518-SSA1,3,16 71.83 (1) (a) 3. `Incomplete or incorrect deposit or withholding report.' If any person required under subch. X to file a deposit report or withholding report files an incomplete or incorrect report, or fails to properly withhold or fails to properly deposit or pay over withheld funds, unless it can be shown that the filing or failure was due to good cause and not due to neglect and upon a showing by the department under s. 73.14 (5), there shall be added to the tax 25% of the amount not reported or not withheld, deposited or paid over. The amount so added shall be assessed, levied and collected in the same manner as additional income or franchise taxes, and shall be in addition to any other penalties imposed in this subchapter. "Person", in this subdivision, includes an officer or employee of a corporation or other responsible person or a member or employee of a partnership or limited liability company or other responsible person who, as such officer, employee, member or other responsible person, is under a duty to perform the act in respect to which the violation occurs.

SB518-SSA1, s. 4 Section 4. 71.83 (1) (a) 4. of the statutes is amended to read:

SB518-SSA1,3,25 71.83 (1) (a) 4. `Late filing of withholding report.' In case of failure to file any withholding deposit or payment report required under s. 71.65 (3) on the due date prescribed therefor, unless it is shown that the failure is due to reasonable cause and not due to willful neglect upon a showing by the department under s. 73.14 (5), there shall be added to the amount required to be shown as withheld taxes on the report 5% of the amount if the failure is not for more than one month, with an additional 5% for each additional month or fraction thereof during which the failure continues, not exceeding 25% in the aggregate.

SB518-SSA1, s. 5 Section 5. 73.01 (4) (e) 2. of the statutes is amended to read:

SB518-SSA1,4,11 73.01 (4) (e) 2. Except for hearings on ss. 341.405 and 341.45, the department of revenue may choose not to appeal and to nonacquiesce in the decision or order by sending a notice of nonacquiescence to the clerk of the commission, to the revisor of statutes for publication in the Wisconsin administrative register and to the taxpayer or the taxpayer's representative before the time expires for seeking a review of the decision or order under s. 73.015. The effect of this action is that, although the decision or order is binding on the parties for the instant case and the decision or order may be cited by the commission and the courts, the commission's conclusions of law, the rationale and construction of statutes in the instant case are not binding upon or required to be followed by the department of revenue in other cases.

SB518-SSA1, s. 6 Section 6. 73.015 (3) of the statutes is created to read:

SB518-SSA1,4,17 73.015 (3) Except for decisions and orders in small claims matters, as defined in s. 73.01 (1) (b), a conclusion of law or other holding in any decision or order of the commission may be cited by the commission or the courts as authority unless that conclusion of law or holding has been reversed, modified, overruled, or vacated on the merits on appeal or by a subsequent decision or order of the commission.

SB518-SSA1, s. 7 Section 7. 73.14 of the statutes is created to read:

SB518-SSA1,4,19 73.14 General provision. (1) Definition. In this section:

SB518-SSA1,4,20 (a) "Department" means the department of revenue.

SB518-SSA1,4,22 (b) "Controlled group" has the meaning given under section 267 (f) (1) of the Internal Revenue Code.

SB518-SSA1,4,24 (c) "Stale refund" means a refund of any tax or fee administered by the department for which a claim has not been timely filed.

SB518-SSA1,5,8 (2) Relying on published guidance. (a) Except as provided in pars. (b) and (c), in the course of any determination, or in the course of any proceeding appealing any determination, the department shall not take a position that is contrary to any rule promulgated by the department or any statute that was in effect during the period related to the determination or that is contrary to any guidance published by the department prior to that period and not subsequently retracted, altered, or amended by the department or the legislature or by a final and conclusive decision of the tax appeals commission or courts.

SB518-SSA1,5,12 (am) Except as provided in pars. (b) and (c), in the course of any determination, or in the course of any proceeding appealing a determination, the department shall not take a position that is contrary to any written guidance that was provided to a person who is a party to the determination or the appeal of the determination.

SB518-SSA1,5,20 (b) With regard to any position taken by the department in any matter described under par. (a) or (am), if the department amends a rule for any purpose other than to implement a legislative act or final and conclusive decision of the tax appeals commission or courts, the department shall apply the amendment prospectively. A retroactive change in any rule that is related to implementing a legislative act or final and conclusive decision of the tax appeals commission or courts may take effect no earlier than the act's effective date or the date on which the decision became final and conclusive.

SB518-SSA1,6,6 (c) With regard to any position taken by the department in any matter described under par. (a) or (am), if the department retracts, alters, or amends previously published or previously issued guidance for any purpose other than to implement a legislative act or final and conclusive decision of the tax appeals commission or courts, the department shall apply the retraction, alteration, or amendment prospectively only, unless the change is to a taxpayer's benefit, in which case, the department shall apply the retraction, alteration, or amendment retroactively. A retroactive change in any previously published or previously issued guidance related to implementing a legislative act or final and conclusive decision of the tax appeals commission or courts may take effect no earlier than the act's effective date or the date on which the decision became final and conclusive.

SB518-SSA1,6,10 (3) Relying on past audits. (a) A person who is subject to a determination by the department, including all other members of that person's controlled group, shall not be liable for any amount that the department asserts that the person owes if all of the following conditions are satisfied:

SB518-SSA1,6,16 1. The liability asserted by the department is the result of a condition, activity, attribute, or transaction that was present during the period associated with a prior determination for which the person is subject to and the condition, activity, attribute, or transaction is materially the same as the condition, activity, attribute, or transaction that is present during the period associated with the current determination.

SB518-SSA1,6,20 2. A department employee who was involved in the prior determination identified or reviewed the condition, activity, attribute, or transaction before completing the prior determination, as shown by any schedules, exhibits, audit reports, documents, or other evidence pertaining to the determination.

SB518-SSA1,6,22 3. The liability asserted by the department as described under subd. 1. was not asserted in the prior determination.

SB518-SSA1,7,4 (b) This subsection does not apply to any period associated with a determination, if the period begins after the promulgation of a rule, dissemination of written guidance to the public or to the person who is subject to the determination, the effective date of a statute, or the date on which a tax appeals commission or court decision becomes final and conclusive and if the rule, guidance, statute, or decision unambiguously imposes the liability as result of the condition, activity, attribute, or transaction described in par. (a) 1.

SB518-SSA1,7,11 (4) Equitable recoupment. A person against whom the department asserts a liability may offset against the liability the amount of any stale refund that the person may claim regardless of whether the time for claiming the stale refund has expired and regardless of whether the year, transaction, tax, or fee related to the liability is the same as that related to the stale refund. This subsection does not apply to any stale refund that is associated with any period that is prior to the initial date of the period associated with the liability.

SB518-SSA1,7,18 (5) Negligence determinations. The department shall not impose a penalty on a taxpayer under ss. 71.83 (1) (a) 1. to 4., 77.60 (3) and (4), 78.68 (3) and (4), and 139.25 (3) and (4), unless the department shows that the taxpayer's action or inaction was caused by the taxpayer's failure to use ordinary care to comply with state tax laws as provided under the statutes, administrative rules, published department guidance or other written notice provided by the department, or a final and conclusive decision of the tax appeals commission or a court.

SB518-SSA1,7,20 (6) Applicability. Notwithstanding any other provision of law, this section applies to all taxes and fees administered by the department.

SB518-SSA1, s. 8 Section 8. 77.59 (4) (a) of the statutes is amended to read:

SB518-SSA1,8,18 77.59 (4) (a) Except as provided in sub. (3m), at any time within 4 years after the due date, or in the case of buyers the unextended due date, of a person's corresponding Wisconsin income or franchise tax return or, if exempt, within 4 years of the 15th day of the 4th month of the year following the close of the calendar or fiscal year for which that person files a claim, that person may, unless a determination by the department by office or field audit of a seller has been made and unless a determination by office audit of a buyer other than an audit in which the tax that is the subject of the refund claim was not adjusted has been made and unless a determination by field audit of the buyer has been made, file with the department a claim for refund of taxes paid to the department by that person. If the amount of the claim is at least $50 or if either the seller has ceased doing business, the buyer is being field audited or the seller may no longer file a claim, the The buyer may, within the time period under this subsection, file a claim with the department for a refund of the taxes paid to the seller. A claim is timely if it fulfills the requirements under s. 77.61 (14). A buyer may claim a refund under this paragraph only on a form prescribed by the department, only by signing that form and only if the seller signs the form unless the department waives that requirement. If both a buyer and a seller file a valid claim for the same refund, the department may pay either claim. The claim for refund shall be regarded as a request for determination. The determination thus requested shall be made by the department within one year after the claim for refund is received by it unless the taxpayer has consented in writing to an extension of the one-year time period prior to its expiration.

SB518-SSA1, s. 9 Section 9. 77.59 (8m) of the statutes is amended to read:

SB518-SSA1,8,24 77.59 (8m) Within the time period under sub. (4), the department of revenue may refund excess taxes paid to it under this chapter, even if the person applying for the refund has been field audited in respect to those taxes, if the applicant's customers have filed valid claims for refunds with provided written notice to the applicant requesting refunds and if the refund is passed along to those customers.

SB518-SSA1, s. 10 Section 10. 77.60 (3) of the statutes is amended to read:

SB518-SSA1,9,6 77.60 (3) If due to neglect an incorrect return is filed, and upon a showing by the department under s. 73.14 (5), the entire tax finally determined shall be subject to a penalty of 25%, or 50% in the case of returns under s. 77.61 (1) (c), of the tax exclusive of interest or other penalty. A person filing an incorrect return shall have the burden of proving that the error or errors were due to good cause and not due to neglect.

SB518-SSA1, s. 11 Section 11. 77.60 (4) of the statutes is amended to read:

SB518-SSA1,9,18 77.60 (4) In case of failure to file any return required under authority of s. 77.58 by the due date, determined with regard to any extension of time for filing, unless it is shown that such failure was due to reasonable cause and not due to neglect and upon a showing by the department under s. 73.14 (5), there shall be added to the amount required to be shown as tax on such return 5% of the amount of such tax if the failure is not for more than one month, with an additional 5% for each additional month or fraction thereof during which such failure continues, not exceeding 25% in the aggregate. For purposes of this subsection, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the due date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed upon the return.

SB518-SSA1, s. 12 Section 12. 77.61 (5) (a) of the statutes is amended to read:

SB518-SSA1,9,25 77.61 (5) (a) It is unlawful for the department or any person having an administrative duty under this subchapter to make known in any manner whatever the business affairs, operations or information obtained by an investigation of records and equipment of any retailer or any other person visited or examined in the discharge of official duty, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any return, or to permit any return or copy thereof to be seen or examined by any person. This paragraph does not prohibit the department of revenue from publishing statistics classified so as not to disclose the identity of particular returns or reports and the items thereof. This paragraph does not prohibit employees or agents of the department of revenue from offering or submitting information obtained by investigation or any return or any schedule, exhibit or writing pertaining to a return or any copy of, or information derived from, any of those documents as evidence into the record of any contested matter involving the department in proceedings or litigation on state tax matters if that evidence has reasonable probative value. This paragraph does not prohibit employees or agents of the department of revenue from informing a buyer or seller who has filed a claim for a refund that a refund has been paid to a seller or buyer with respect to the same transaction.

SB518-SSA1, s. 13 Section 13. 78.68 (3) of the statutes is amended to read:

SB518-SSA1,10,18 78.68 (3) If due to neglect an incorrect return is filed, and upon a showing by the department under s. 73.14 (5), the entire tax finally determined is subject to a penalty of 25% of the tax exclusive of interest or other penalty. A person filing an incorrect return has the burden of proving that the error or errors were due to good cause and not due to neglect.

SB518-SSA1, s. 14 Section 14. 78.68 (4) of the statutes is amended to read:

SB518-SSA1,11,5 78.68 (4) In case of failure to file any return required under ss. 78.12, 78.49, and 78.58 by the due date, unless it is shown that that failure was due to reasonable cause and not due to neglect and upon a showing by the department under s. 73.14 (5), there shall be added to the amount required to be shown as tax on that return 5% of the amount of the tax if the failure is for not more than one month, and an additional 5% of the tax for each additional month or fraction thereof during which the failure continues, not exceeding 25% of the tax in the aggregate. For purposes of this subsection, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the due date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed upon the return.

SB518-SSA1, s. 15 Section 15. 139.25 (3) of the statutes is amended to read:

SB518-SSA1,11,11 139.25 (3) Incorrect return. If due to neglect an incorrect return is filed and upon a showing by the department under s. 73.14 (5), the entire tax finally determined is subject to a penalty of 25% of the tax exclusive of interest or other penalty. A person filing an incorrect return has the burden of proving that the error or errors were due to good cause and not due to neglect.

SB518-SSA1, s. 16 Section 16. 139.25 (4) of the statutes is amended to read:

SB518-SSA1,11,23 139.25 (4) Failure to file return. In case of failure to file any return required under s. 139.05, 139.06 or 139.11 by the due date, unless it is shown that that failure was due to reasonable cause and not due to neglect and upon a showing by the department under s. 73.14 (5), there shall be added to the amount required to be shown as tax on that return 5% of the amount of that tax if the failure is for not more than one month, and an additional 5% of the tax for each additional month or fraction thereof during which that failure continues, not exceeding 25% of the tax in the aggregate. For purposes of this subsection, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the due date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed upon the return.

SB518-SSA1, s. 17 Section 17. 227.12 (3) of the statutes is amended to read:

SB518-SSA1,12,6 227.12 (3) Within Except as provided in sub. (4), within a reasonable period of time after the receipt of a petition under this section, an agency shall either deny the petition in writing or proceed with the requested rule making. If the agency denies the petition, it shall promptly notify the petitioner of the denial, including a brief statement of the reason for the denial. If the agency proceeds with the requested rule making, it shall follow the procedures prescribed in this subchapter.

SB518-SSA1, s. 18 Section 18. 227.12 (4) of the statutes is created to read:

SB518-SSA1,12,21 227.12 (4) If a petition to the department of revenue alleges that the department has established a standard by which it is construing a state tax statute, but has not promulgated a rule to adopt the standard or published the standard in a manner that is available to the public, the department shall initiate rule making within 180 days from the date that the petition is received and submit a rule to the legislature pursuant to s. 227.19 (2) no later than 12 months from the date that the petition is received. The rule need not adhere to the standard established by the department, but shall address the same circumstances as the standard addresses. If the department fails to comply with this subsection, any of the petitioners may commence an action in circuit court to compel the department's compliance. If an action is commenced under this subsection, the court may compel the department to provide information to the court related to the degree to which the department is enforcing the standard, except that the information provided by the department shall not disclose the identity of any person who is not a party to the action.

SB518-SSA1, s. 19 Section 19. 227.41 (1) of the statutes is amended to read:

SB518-SSA1,13,4 227.41 (1) Any Except as provided in sub. (5), any agency may, on petition by any interested person, issue a declaratory ruling with respect to the applicability to any person, property or state of facts of any rule or statute enforced by it. Full opportunity for hearing shall be afforded to interested parties. A declaratory ruling shall bind the agency and all parties to the proceedings on the statement of facts alleged, unless it is altered or set aside by a court. A ruling shall be subject to review in the circuit court in the manner provided for the review of administrative decisions.

SB518-SSA1, s. 20 Section 20. 227.41 (3) of the statutes is amended to read:

SB518-SSA1,13,7 227.41 (3) The Except as provided in sub. (5) (b), the petition shall be filed with the administrative head of the agency or with a member of the agency's policy board.

SB518-SSA1, s. 21 Section 21. 227.41 (4) of the statutes is amended to read:

SB518-SSA1,13,13 227.41 (4) Within Except as provided in sub. (5) (c), within a reasonable time after receipt of a petition pursuant to this section, an agency shall either deny the petition in writing or schedule the matter for hearing. If the agency denies the petition, it shall promptly notify the person who filed the petition of its decision, including a brief statement of the reasons therefor.

SB518-SSA1, s. 22 Section 22. 227.41 (5) of the statutes is created to read:

SB518-SSA1,14,2 227.41 (5) (a) The department of revenue shall, on petition by any interested person, or any group or association of interested persons, issue a declaratory ruling with respect to the applicability to any person, property, or state of facts of any rule or statute enforced by it. The department of revenue may issue a declaratory ruling on the facts contained in the petition. If the department of revenue does not deny the petition or issue a declaratory ruling on the facts contained in the petition, the department of revenue shall hold a hearing, as provided under s. 227.44, and shall afford all interested parties an opportunity to participate in the hearing. A declaratory ruling shall bind the department and all parties to the proceedings on the statement of facts alleged or offered, unless it is altered or set aside by the tax appeals commission or a court. A ruling, including the denial of the petition, shall be subject to review by the tax appeals commission as provided in ch. 73.

SB518-SSA1,14,7 (b) A petition under par. (a) shall conform to the requirements under sub. (2) and be filed with the secretary of revenue. A petition under par. (a) shall also allege facts that show that a justiciable controversy exists, or that a justiciable controversy will likely exist, for purposes of this subsection, but no petition under par. (a) shall allege facts that are not likely to occur.

SB518-SSA1,14,17 (c) No later than 30 days after the day that the secretary of revenue receives a petition under this subsection, the department of revenue shall deny the petition in writing, issue a notice that it will issue a declaratory ruling on the facts contained in the petition, in which case the department of revenue shall issue the ruling no later than 90 days after issuing the notice, or schedule the matter for hearing. The department may deny the petition only if the petition fails to comply with the requirements under sub. (2) and par. (b) or if the department determines that the petition is frivolous or lacks merit. If the department denies the petition, it shall promptly notify the person who filed the petition of its decision and include with the notice a brief statement of the reasons for denying the petition.

SB518-SSA1,14,24 (d) If the department of revenue does not deny the petition, or issue a notice that it will issue a declaratory ruling based on the facts contained in the petition, the department shall hold a hearing and issue a ruling on the petition no later than 180 days after the day that the secretary of revenue receives the petition, unless the deadline is extended by written agreement of all parties. Upon agreement of the parties, the department may rule on the petition based on facts stipulated by the parties.

SB518-SSA1, s. 23 Section 23. 227.485 (2) (a) of the statutes is amended to read:

SB518-SSA1,15,2 227.485 (2) (a) "Hearing examiner" means the agency, tax appeals commission, or hearing examiner conducting the hearing.

SB518-SSA1, s. 24 Section 24. 227.485 (3) of the statutes is amended to read:

SB518-SSA1,15,10 227.485 (3) In Except as provided under sub. (3m), in any contested case in which an individual, a small nonprofit corporation or a small business is the prevailing party and submits a motion for costs under this section, the hearing examiner shall award the prevailing party the costs incurred in connection with the contested case, unless the hearing examiner finds that the state agency which is the losing party was substantially justified in taking its position or that special circumstances exist that would make the award unjust.

SB518-SSA1, s. 25 Section 25. 227.485 (3m) of the statutes is created to read:

SB518-SSA1,15,18 227.485 (3m) In any proceeding before the tax appeals commission in which the department of revenue is not the prevailing party and the prevailing party submits a motion for costs under this section, the tax appeals commission shall award the prevailing party the costs incurred in connection with the proceeding unless the tax appeals commission determines that the department of revenue was substantially justified in taking its position or that special circumstances exist that would make the award unjust.

SB518-SSA1, s. 26 Section 26. 227.485 (5) of the statutes is amended to read:

SB518-SSA1,16,7 227.485 (5) If the hearing examiner awards costs under sub. (3) or (3m), he or she shall determine the costs under this subsection, except as modified under sub. (4). The decision on the merits of the case shall be placed in a proposed decision and submitted under ss. 227.47 and 227.48. The prevailing party shall submit, within 30 days after service of the proposed decision, to the hearing examiner and to the state agency which is the losing party an itemized application for fees and other expenses, including an itemized statement from any attorney or expert witness representing or appearing on behalf of the party stating the actual time expended and the rate at which fees and other expenses were computed. The state agency which is the losing party has 15 working days from the date of receipt of the application to respond in writing to the hearing examiner. The hearing examiner shall determine the amount of costs using the criteria specified in s. 814.245 (5) and include an order for payment of costs in the final decision.

SB518-SSA1, s. 27 Section 27. 227.485 (7) of the statutes is amended to read:

SB518-SSA1,16,14 227.485 (7) An individual is not eligible to recover costs under this section if the person's properly reported federal adjusted gross income was $150,000 or more in each of the 3 calendar years or corresponding fiscal years immediately prior to the commencement of the case. This subsection applies whether the person files the tax return individually or in combination with a spouse. This subsection does not apply to costs awarded under sub. (3m).

SB518-SSA1, s. 28 Section 28. 227.485 (10) (intro.) of the statutes is amended to read:

SB518-SSA1,16,19 227.485 (10) (intro.) If the examiner finds that the motion under sub. (3) or (3m) is frivolous, the examiner may award the state agency all reasonable costs in responding to the motion. In order to find a motion to be frivolous, the examiner must find one or more of the following: