Amendment SSA1-SB566

One exemption under current law applies to a transaction in which the total number of security holders after the sale does not exceed 25. Certain financial institutions, institutional investors, broker-dealers, investment advisors, and other persons are not counted in determining whether that number is exceeded. In addition, other requirements must be satisfied for the exemption to apply, including the following: 1) no commissions for the sale must be paid to persons in this state who are not licensed broker-dealers and agents; and 2) no advertising for the sale may be published unless it is approved by the division. This substitute amendment changes the exemption so that it applies if the number of security holders does not exceed 100, without counting the persons who are not counted under current law. In addition, the exemption applies even if commissions are paid to a "finder," which the substitute amendment defines as a person whose activities are limited to identifying, introducing, or both, a potential investor to the issuer, or a broker-dealer, who subsequently sells the security to the potential investor. In addition, for a person to qualify as a "finder," the person may not, with respect to any particular issuer of securities, be involved in security sales that exceed $1,000,000 in any year. In addition, the substitute amendment eliminates the requirement that advertising must approved by the division. Instead, the substitute amendment requires the advertising to be filed with the division within three business days of its first use.

Another exemption under current law applies to a transaction pursuant to an offer directed to no more than 25 persons in this state during any 12-month period, except that the division may increase or decrease the number of persons to whom an offer is directed. In addition, certain other requirements, including requirements regarding compensation, must be satisfied for the exemption to apply. This substitute amendment changes the exemption so that it applies to an offer directed to no more than 300 persons in this state. The substitute amendment allows the division to increase the number of persons, but does not allow the division to decrease the number. Also, the substitute amendment allows compensation to be paid to a licensed broker-dealer or agent or a "finder," which the substitute amendment defines as described above. In addition, the substitute amendment requires that, for the exemption to apply, any advertising must be filed with the division within three business days of its first use.

Current law also allows the division, by order or rule, to exempt a transaction if the division finds that registration is not necessary or appropriate for the protection of investors. Based on this authority, the division has promulgated a rule that exempts transactions in which the aggregate offering price of the securities sold in the offering to persons in this state does not exceed $5,000,000. In addition, certain other requirements must be satisfied for the rule to apply. Under this substitute amendment, if the division exempts a transaction, and the exemption depends in whole or in part on the aggregate offering price of the securities sold in the offering to persons in this state, then the exemption must apply to a transaction in which such price does not exceed $20,000,000, or any greater amount specified by the division by rule or order.

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

SB566-SSA1, s. 1 Section 1. 71.05 (6) (a) 15. of the statutes is amended to read:

SB566-SSA1,4,6 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (3g), (3n), (3s), (3t), (5b), and (5d), and (5e) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g).

SB566-SSA1, s. 2 Section 2. 71.05 (24) of the statutes is created to read:

SB566-SSA1,4,9 71.05 (24) Income tax exemption; long-term capital gains; Wisconsin businesses. (a) In this subsection:

SB566-SSA1,4,12 1. "Claimant" means an individual; an individual partner or member of a partnership, limited liability company, or limited liability partnership; or an individual shareholder of a tax-option corporation.

SB566-SSA1,4,13 2. "Financial institution" has the meaning given in s. 69.30 (1) (b).

SB566-SSA1,4,15 3. "Long-term capital gain" means the gain realized from the sale of any asset held more than one year.

SB566-SSA1,4,16 4. "Wisconsin business" means a business to which all of the following apply:

SB566-SSA1,4,17 a. Its headquarters is in this state.

SB566-SSA1,4,19 b. At least 51 percent of the employees employed by the business are employed in this state.

SB566-SSA1,5,3 c. It is engaged in, or has committed to engage in, manufacturing, agriculture, processing or assembling products, conducting research and development, or developing a new product or business process.

SB566-SSA1,5,7 d. It is not engaged in real estate development; insurance; banking; lending; lobbying; political consulting; professional services proved by attorneys, accountants, business consultants, physicians, or health care consultants; wholesale or retail trade; leisure; hospitality; transportation; or construction.

SB566-SSA1,5,8 e. It has less than 500 employees.

SB566-SSA1,5,9 f. It has been in operation in this state for not more than 7 consecutive years.

SB566-SSA1,5,12 (b) To the extent that the gain is not excluded from taxation under sub. (6) (b) 9., a claimant may subtract from federal adjusted gross income any amount of a long-term capital gain if the claimant does all of the following:

SB566-SSA1,5,14 1. Immediately deposits the gain into a segregated account in a financial institution.

SB566-SSA1,5,17 2. Within 180 days after the sale of the asset that generated the gain, invests in a Wisconsin business using all of the proceeds in the account described under subd. 1.

SB566-SSA1,5,22 3. After investing in a Wisconsin business as described under subd. 2., immediately notifies the department, on a form prepared by the department, that the claimant will not declare on the claimant's income tax return the gain described under subd. 1. because the claimant has reinvested the capital gain as described under subd. 2.

SB566-SSA1,5,25 (c) The basis of the investment described in par. (b) 2. shall be calculated by subtracting the gain described in par. (b) 1. from the cost of the investment described in par. (b) 2.

SB566-SSA1,6,3 (d) If a claimant claims the subtraction under this subsection, the claimant may not use the gain described under par. (b) 1. to net capital gains and losses, as described under sub. (10) (c).

SB566-SSA1, s. 3 Section 3. 71.07 (5e) of the statutes is created to read:

SB566-SSA1,6,6 71.07 (5e) Wisconsin business offerings credit. (a) Definitions. In this subsection:

SB566-SSA1,6,7 1. "Agent" has the meaning given in s. 551.02 (2).

SB566-SSA1,6,8 2. "Broker-dealer" has the meaning given in s. 551.02 (3).

SB566-SSA1,6,10 3. "Claimant" means an agent or a broker-dealer who files a claim under this subsection.

SB566-SSA1,6,11 4. "Wisconsin business" has the meaning given in s. 71.05 (24) (a) 4.

SB566-SSA1,6,15 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.02, up to the amount of the tax, an amount equal to 10 percent of the first $500,000 raised in an offering of a Wisconsin business in the taxable year.

SB566-SSA1,6,18 (c) Limitations. 1. The maximum amount of the credits that may be claimed in each taxable year under this subsection and ss. 71.28 (5e) and 71.47 (5e) is $3,000,000.

SB566-SSA1,7,2 2. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of amounts described under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

SB566-SSA1,7,4 (d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

SB566-SSA1, s. 4 Section 4. 71.10 (4) (cg) of the statutes is created to read:

SB566-SSA1,7,6 71.10 (4) (cg) Wisconsin business offerings credit under s. 71.07 (5e).

SB566-SSA1, s. 5 Section 5. 71.21 (4) of the statutes, as affected by 2005 Wisconsin Act 74, is amended to read:

SB566-SSA1,7,11 71.21 (4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2ds), (2dx), (3g), (3n), (3s), (3t), (5b), (5e), and (5g) and passed through to partners shall be added to the partnership's income.

SB566-SSA1, s. 6 Section 6. 71.26 (2) (a) of the statutes, as affected by 2005 Wisconsin Act 74, is amended to read:

SB566-SSA1,8,6 71.26 (2) (a) Corporations in general. The "net income" of a corporation means the gross income as computed under the Internal Revenue Code as modified under sub. (3) minus the amount of recapture under s. 71.28 (1di) plus the amount of credit computed under s. 71.28 (1), (3), (4), and (5) minus, as provided under s. 71.28 (3) (c) 7., the amount of the credit under s. 71.28 (3) that the taxpayer added to income under this paragraph at the time that the taxpayer first claimed the credit plus the amount of the credit computed under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (3g), (3n), (3t), (5b), (5e), and (5g) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g) plus the amount of losses from the sale or other disposition of assets the gain from which would be wholly exempt income, as defined in sub. (3) (L), if the assets were sold or otherwise disposed of at a gain and minus deductions, as computed under the Internal Revenue Code as modified under sub. (3), plus or minus, as appropriate, an amount equal to the difference between the federal basis and Wisconsin basis of any asset sold, exchanged, abandoned, or otherwise disposed of in a taxable transaction during the taxable year, except as provided in par. (b) and s. 71.45 (2) and (5).

SB566-SSA1, s. 7 Section 7. 71.28 (5e) of the statutes is created to read:

SB566-SSA1,8,9 71.28 (5e) Wisconsin business offerings credit. (a) Definitions. In this subsection:

SB566-SSA1,8,10 1. "Agent" has the meaning given in s. 551.02 (2).

SB566-SSA1,8,11 2. "Broker-dealer" has the meaning given in s. 551.02 (3).

SB566-SSA1,8,13 3. "Claimant" means an agent or a broker-dealer who files a claim under this subsection.

SB566-SSA1,8,14 4. "Wisconsin business" has the meaning given in s. 71.05 (24) (a) 4.

SB566-SSA1,8,18 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.23, up to the amount of the tax, an amount equal to 10 percent of the first $500,000 raised in an offering of a Wisconsin business in the taxable year.

SB566-SSA1,8,21 (c) Limitations. 1. The maximum amount of the credits that may be claimed in each taxable year under this subsection and ss. 71.07 (5e) and 71.47 (5e) is $3,000,000.

SB566-SSA1,9,4 2. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of amounts described under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

SB566-SSA1,9,6 (d) Administration. Subsection (4) (e) to (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

SB566-SSA1, s. 8 Section 8. 71.30 (3) (epp) of the statutes is created to read:

SB566-SSA1,9,8 71.30 (3) (epp) Wisconsin business offerings credit under s. 71.28 (5e).

SB566-SSA1, s. 9 Section 9. 71.34 (1) (g) of the statutes, as affected by 2005 Wisconsin Act 74, is amended to read:

SB566-SSA1,9,13 71.34 (1) (g) An addition shall be made for credits computed by a tax-option corporation under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (3), (3g), (3n), (3t), (5b), (5e), and (5g) and passed through to shareholders.

SB566-SSA1, s. 10 Section 10. 71.45 (2) (a) 10. of the statutes, as affected by 2005 Wisconsin Act 74, is amended to read:

SB566-SSA1,9,21 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit computed under s. 71.47 (1dd) to (1dx), (3n), (5b), (5e), and (5g) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g) and the amount of credit computed under s. 71.47 (1), (3), (3t), (4), and (5).

SB566-SSA1, s. 11 Section 11. 71.47 (5e) of the statutes is created to read:

SB566-SSA1,9,24 71.47 (5e) Wisconsin business offerings credit. (a) Definitions. In this subsection:

SB566-SSA1,9,25 1. "Agent" has the meaning given in s. 551.02 (2).

SB566-SSA1,10,1 2. "Broker-dealer" has the meaning given in s. 551.02 (3).

SB566-SSA1,10,3 3. "Claimant" means an agent or a broker-dealer who files a claim under this subsection.

SB566-SSA1,10,4 4. "Wisconsin business" has the meaning given in s. 71.05 (24) (a) 4.

SB566-SSA1,10,8 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.43, up to the amount of the tax, an amount equal to 10 percent of the first $500,000 raised in an offering of a Wisconsin business in the taxable year.

SB566-SSA1,10,11 (c) Limitations. 1. The maximum amount of the credits that may be claimed in each taxable year under this subsection and ss. 71.07 (5e) and 71.28 (5e) is $3,000,000.

SB566-SSA1,10,19 2. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of amounts described under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

SB566-SSA1,10,21 (d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

SB566-SSA1, s. 12 Section 12. 71.49 (1) (epp) of the statutes is created to read:

SB566-SSA1,10,23 71.49 (1) (epp) Wisconsin business offerings credit under s. 71.47 (5e).

SB566-SSA1, s. 13 Section 13. 77.92 (4) of the statutes, as affected by 2005 Wisconsin Act 74, is amended to read:

SB566-SSA1,11,15 77.92 (4) "Net business income," with respect to a partnership, means taxable income as calculated under section 703 of the Internal Revenue Code; plus the items of income and gain under section 702 of the Internal Revenue Code, including taxable state and municipal bond interest and excluding nontaxable interest income or dividend income from federal government obligations; minus the items of loss and deduction under section 702 of the Internal Revenue Code, except items that are not deductible under s. 71.21; plus guaranteed payments to partners under section 707 (c) of the Internal Revenue Code; plus the credits claimed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (3g), (3s), (3n), (3t), (5b), (5e), and (5g); and plus or minus, as appropriate, transitional adjustments, depreciation differences, and basis differences under s. 71.05 (13), (15), (16), (17), and (19); but excluding income, gain, loss, and deductions from farming. "Net business income," with respect to a natural person, estate, or trust, means profit from a trade or business for federal income tax purposes and includes net income derived as an employee as defined in section 3121 (d) (3) of the Internal Revenue Code.

SB566-SSA1, s. 14 Section 14. 180.0622 (2) (a) of the statutes is renumbered 180.0622 (2) and amended to read:

SB566-SSA1,11,21 180.0622 (2) Except as provided in par. (b) or unless Unless otherwise provided in the articles of incorporation, a shareholder of a corporation is not personally liable for the acts or debts of the corporation, except that a shareholder may become personally liable by his or her acts or conduct other than as a shareholder.

SB566-SSA1, s. 15 Section 15. 180.0622 (2) (b) of the statutes is repealed.

SB566-SSA1, s. 16 Section 16. 551.02 (4w) of the statutes is created to read:

SB566-SSA1,12,3 551.02 (4w) "Finder" means a person whose activities are limited to identifying, introducing, or both, a potential investor to a broker-dealer licensed in this state, or an issuer, who subsequently sells a security to the potential investor, if the person's activities result in sales of an issuer's securities that do not exceed $1,000,000 in any period of 12 consecutive months.

SB566-SSA1, s. 17 Section 17. 551.23 (10) of the statutes is amended to read:

SB566-SSA1,12,12 551.23 (10) Any offer or sale of its securities by an issuer having its principal office in this state, if the aggregate number of persons holding directly or indirectly all of the issuer's securities, after the securities to be issued are sold, does not exceed 25 100, exclusive of persons under sub. (8), if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state, except to broker-dealers and agents licensed in this state and to finders, and if no advertising is published unless it has been permitted by filed with the division within 3 business days of the advertising's first use.

SB566-SSA1, s. 18 Section 18. 551.23 (11) (a) of the statutes is amended to read:

SB566-SSA1,12,24 551.23 (11) (a) Any transaction pursuant to an offer directed by the offeror to not more than 25 300 persons in this state, excluding persons exempt under sub. (8) but including persons exempt under sub. (10), during any period of 12 consecutive months, whether or not the offeror or any of the offerees is then present in this state, if the offeror reasonably believes that all the persons in this state are purchasing for investment, and if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state other than those exempt by sub. (8) except for commission or other remuneration paid or given directly or indirectly to broker-dealers and agents licensed in this state and to finders, and if no advertising is published unless it has been filed with the division within 3 business days of the advertising's first use.

SB566-SSA1, s. 19 Section 19. 551.23 (11) (b) of the statutes is amended to read:

SB566-SSA1,13,4 551.23 (11) (b) The division may by rule or order, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption, or increase or decrease the number of offerees permitted, or waive the conditions in par. (a), and may require reports of sales under this exemption.

SB566-SSA1, s. 20 Section 20. 551.23 (18) of the statutes is amended to read:

SB566-SSA1,13,12 551.23 (18) Any other transaction as to which the division by rule or order finds that registration is not necessary or appropriate for the protection of investors, except that any exemption adopted by rule or order under this subsection that depends, in whole or in part, on the aggregate offering price of securities sold in an offering to persons in this state shall apply to a transaction in which such price does not exceed $20,000,000 or any greater amount specified by the division by rule or order.

SB566-SSA1, s. 21 Section 21. 551.53 (1) (b) of the statutes is amended to read:

SB566-SSA1,13,17 551.53 (1) (b) That has not been filed with the division not later than the date of publication or circulation, except for advertising relating to a federal covered security or except as the division may otherwise provide by rule or order and except as provided in s. 551.23 (10) and (11) (a).

SB566-SSA1, s. 22 Section 22. Initial applicability.

SB566-SSA1,13,22 (1) Wisconsin business offerings tax credit. The treatment of sections 71.05 (6) (a) 15., 71.07 (5e), 71.10 (4) (cg), 71.21 (4), 71.26 (2) (a), 71.28 (5e), 71.30 (3) (epp), 71.34 (1) (g), 71.45 (2) (a) 10., 71.47 (5e), 71.49 (1) (epp), and 77.92 (4) of the statutes first applies to taxable years beginning on January 1, 2006.

SB566-SSA1,13,25 (2) Income tax exemption; long-term capital gains; Wisconsin businesses. The treatment of section 71.05 (24) of the statutes first applies to taxable years beginning on January 1, 2006.