AB990: Bill Text

AB990,1,6 An Act to renumber and amend 71.27 (1), 71.27 (2), 71.46 (1) and 71.46 (2); to amend 71.08 (1) (a), 71.23 (2), 71.29 (1) (b), 71.29 (2), 71.29 (7) (b), 71.35 and 71.43 (2); and to create 71.27 (1) (b), 71.27 (2) (b), 71.285, 71.30 (3) (g), 71.46 (1) (b), 71.46 (2) (b), 71.475 and 71.49 (1) (g) of the statutes; relating to: corpo rate income and franchise tax rates, capital gains and a minimum corporate tax and granting rule-making authority.

Analysis by the Legislative Reference Bureau

Corporate rate structure

Under current law, the rate for the income tax and franchise tax imposed on cor porations, including tax-option corporations and insurers, is 7.9%. This bill esta blishes a graduated rate structure, the highest rate of which is 7.9%.

Corporate minimum tax

This bill creates an alternative minimum tax that is based on the federal mini mum tax; that is imposed on corporations, including tax-option corporations and in surers; and that is due if it results in greater liability than the regular corporate in come tax or franchise tax.

Capital gains

This bill also changes current law by including one-half of the 60% capital gains exclusion and the net capital gains on certain small business stock as a tax prefer ence item in the calculation of the alternative minimum tax that applies to individu als. Generally, tax preference items are benefits received in the form of deductions, lower tax rates and exclusions.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

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

AB990, s. 1 Section 1. 71.08 (1) (a) of the statutes is amended to read:

AB990,2,9 71.08 (1) (a) Adjust the alternative minimum taxable income, as defined in sec tion 55 (b) (2) of the internal revenue code, by the amounts under s. 71.05 (6) to (21), except s. 71.05 (6) (a) 13. and (b) 5. and 6. and (8) and 50% of the amount calculated under s. 71.05 (6) (b) 9., by the amounts needed to modify federal alternative tax net operating loss deductions to reflect differences between Wisconsin net operating loss deductions and federal net operating loss deductions for minimum tax purposes. The department of revenue shall by rule define Wisconsin net operating loss deductions for minimum tax purposes.

AB990, s. 2 Section 2. 71.23 (2) of the statutes is amended to read:

AB990,3,7 71.23 (2) Franchise tax. For the privilege of exercising its franchise 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 ev ery 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 rates under 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 spe cial 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 other wise. 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 ex tent it is not permissible to tax such associations under federal law.

AB990, s. 3 Section 3. 71.27 (1) of the statutes is renumbered 71.27 (1) (a) and amended to read:

AB990,3,12 71.27 (1) (a) The For taxable years beginning before January 1, 1996, the taxes to be assessed, levied and collected upon Wisconsin net incomes of corporations shall be computed at the rate of 7.9%.

AB990, s. 4 Section 4. 71.27 (1) (b) of the statutes is created to read:

AB990,3,16 71.27 (1) (b) For taxable years beginning after December 31, 1995, the taxes to be assessed, levied and collected upon Wisconsin net incomes of corporations shall be computed at the following rates:

AB990,3,17 1. On all net income from $0 to $99,999, 5.9%.

AB990,3,18 2. On all net income exceeding $99,999 but not exceeding $249,999, 6.4%.

AB990,3,19 3. On all net income exceeding $249,999 but not exceeding $499,999, 7.4%.

AB990,3,20 4. On all net income exceeding $499,999, 7.9%.

AB990, s. 5 Section 5. 71.27 (2) of the statutes is renumbered 71.27 (2) (a) and amended to read:

AB990,3,25 71.27 (2) (a) The For taxable years beginning before January 1, 1996, the corpo ration franchise tax imposed under s. 71.23 (2) and measured by Wisconsin net in come shall be computed at the rate of 7.9%.

AB990, s. 6 Section 6. 71.27 (2) (b) of the statutes is created to read:

AB990,4,4 71.27 (2) (b) For taxable years beginning after December 31, 1995, the corpora tion franchise tax imposed under s. 71.23 (2) and measured by Wisconsin net income shall be computed at the following rates:

AB990,4,5 1. For all net income from $0 to $99,999, 5.9%.

AB990,4,6 2. For all net income exceeding $99,999 but not exceeding $249,999, 6.4%.

AB990,4,7 3. For all net income exceeding $249,999 but not exceeding $499,999, 7.4%.

AB990,4,8 4. For all net income exceeding $499,999, 7.9%.

AB990, s. 7 Section 7. 71.285 of the statutes is created to read:

AB990,4,14 71.285 Corporate minimum tax. (1) Imposition. If the tax imposed on a corporation under s. 71.23 (1) or (2), not considering the credits under s. 71.28 (1di), (1dj), (1dL), (1ds) and (2m) and subch. IX is less than the tax under this section, there is imposed on a corporation, instead of the tax under s. 71.23 (1) or (2), an alternative minimum tax computed as follows:

AB990,4,17 (a) Adjust net apportionable income of a corporation subject to apportionment and net Wisconsin income of a business subject to separate accounting in the manner under section 56, except section 56 (a) (4), and section 58 of the internal revenue code.

AB990,4,20 (b) Add to the amount under par. (a) the preferences under section 57 of the in ternal revenue code to the extent that those preferences reduce net income for pur poses of the tax imposed under s. 71.23 (1) or (2).

AB990,4,23 (c) Multiply the amount under par. (b) by the apportionment percentage under s. 71.25 applicable to the corporation for purposes of the tax imposed under s. 71.23 (1) or (2) if the corporation is subject to apportionment.

AB990,4,25 (d) Add nonapportionable income that has a situs in this state to the amount under par. (c).

AB990,5,3 (e) From the amount under par. (d), subtract Wisconsin minimum tax net busi ness losses. The department of revenue shall promulgate rules defining net business losses for minimum tax purposes.

AB990,5,6 (f) Multiply the exemption amount under section 55 (d) (2) and (3) of the inter nal revenue code by the apportionment percentage under s. 71.25 applicable to the corporation for purposes of the tax imposed under s. 71.23 (1) or (2).

AB990,5,7 (g) Subtract the amount under par. (f) from the amount under par. (e).

AB990,5,11 (h) If the corporation is a tax-option corporation, subtract from the amount un der par. (g) the portion of that amount equal to the ownership percentage of share holders who are residents of this state and of nonresident shareholders who file indi vidual returns in this state for purposes of the tax imposed under s. 71.02 or 71.08.

AB990,5,12 (i) Multiply the amount under par. (h) by 4.6%.

AB990,5,13 (j) Subtract the credit under s. 71.28 (3) (b) from the amount under par. (i).

AB990,5,19 (2) Administration. The department of revenue may impose, enforce and col lect the minimum tax provided in this section and may take any action, conduct any proceeding and in all respects proceed as it is authorized in respect to income or fran chise taxes imposed in this chapter. The income and franchise tax provisions in this chapter relating to assessments, refunds, appeals, collection, interest and penalties shall apply to the minimum tax.

AB990, s. 8 Section 8. 71.29 (1) (b) of the statutes is amended to read:

AB990,5,25 71.29 (1) (b) "Tax shown on the return" and "tax for the taxable year" mean the net taxes imposed under s. 71.23 (1) or (2) or 71.285 after reduction for credits against those taxes but before reduction for amounts paid as estimated tax under this section plus the surcharge imposed under s. 77.93 before reduction for amounts paid as esti mated tax under this section for that surcharge.

AB990, s. 9 Section 9. 71.29 (2) of the statutes is amended to read:

AB990,6,6 71.29 (2) Who shall pay. Every corporation subject to tax under s. 71.23 (1) or (2) or 71.285 and every virtually exempt entity subject to tax under s. 71.125 or, 71.23 (1) or (2) or 71.285 shall pay an estimated tax to the department of revenue at its of fices in Madison unless the department, by rule, prescribes another place of pay ment.

AB990, s. 10 Section 10. 71.29 (7) (b) of the statutes is amended to read:

AB990,6,11 71.29 (7) (b) The preceding taxable year was 12 months, the corporation or virtually exempt entity had no liability under s. 71.125 or , 71.23 (1) or (2) or 71.285 for that year and the corporation or virtually exempt entity has a Wisconsin net in come of less than $250,000 for the current taxable year.

AB990, s. 11 Section 11. 71.30 (3) (g) of the statutes is created to read:

AB990,6,13 71.30 (3) (g) Corporate minimum tax under s. 71.285.

AB990, s. 12 Section 12. 71.35 of the statutes is amended to read:

AB990,7,8 71.35 Imposition of additional tax on tax-option corporations. In addi tion to the other taxes imposed under this chapter, there is imposed on every tax-op tion corporation, except a corporation that qualifies for the exception under section 1374 (c) (1) of the internal revenue code and that has not elected to change from tax- option status under s. 71.365 (4) (a) for that taxable year, that has a net recognized built-in gain, as defined in section 1374 (d) (2) of the internal revenue code, during a recognition period, as defined in section 1374 (d) (7) of the internal revenue code as modified by this section, a tax computed under section 1374 of the internal reve nue code except that the rate is that rates are those under s. 71.27 (2), the net recog nized built-in gain is computed using the Wisconsin basis of the assets and the Wis consin apportionment percentage for the current taxable year, the taxable income is the Wisconsin taxable income and the credit and net operating losses are those under this chapter rather than the federal credits and net operating losses. The tax under this section does not apply if the return is filed pursuant to a federal S corporation election made before January 1, 1987, and the corporation has not elected to change its status under s. 71.365 (4) (a) for any intervening year. If a corporation that elected to change from tax-option status under s. 71.365 (4) (a) subsequently elects to be come a tax-option corporation, its recognition period begins with the first day of the first taxable year affected by the subsequent election.

AB990, s. 13 Section 13. 71.43 (2) of the statutes is amended to read:

AB990,8,3 71.43 (2) Franchise tax on corporations. For the privilege of exercising its franchise 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 speci fied 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 rates 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 fran chise tax. All provisions of this chapter and ch. 73 relating to income taxation of cor porations shall apply to franchise taxes imposed under this subsection, unless the context requires otherwise. The tax imposed by this subsection on insurance compa nies 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 computa tion of taxable income for other corporations shall apply to such insurance compa nies. All other provisions of this chapter shall apply to insurance companies subject to taxation under this chapter unless the context clearly requires otherwise.

AB990, s. 14 Section 14. 71.46 (1) of the statutes is renumbered 71.46 (1) (a) and amended to read:

AB990,8,8 71.46 (1) (a) The For taxable years beginning before January 1, 1996, the taxes to be assessed, levied and collected upon Wisconsin net incomes of corporations shall be computed at the rate of 7.9%.

AB990, s. 15 Section 15. 71.46 (1) (b) of the statutes is created to read:

AB990,8,12 71.46 (1) (b) For taxable years beginning after December 31, 1995, the taxes to be assessed, levied and collected upon Wisconsin net incomes of corporations shall be computed at the following rates:

AB990,8,13 1. On all net income from $0 to $99,999, 5.9%.

AB990,8,14 2. On all net income exceeding $99,999 but not exceeding $249,999, 6.4%.

AB990,8,15 3. On all net income exceeding $249,999 but not exceeding $499,999, 7.4%.

AB990,8,16 4. On all net income exceeding $499,999, 7.9%.

AB990, s. 16 Section 16. 71.46 (2) of the statutes is renumbered 71.46 (2) (a) and amended to read:

AB990,8,21 71.46 (2) (a) The For taxable years beginning before January 1, 1996, the corpo ration franchise tax imposed under s. 71.43 (2) and measured by Wisconsin net in come shall be computed at the rate of 7.9%.

AB990, s. 17 Section 17. 71.46 (2) (b) of the statutes is created to read:

AB990,8,25 71.46 (2) (b) For taxable years beginning after December 31, 1995, the corpora tion franchise tax imposed under s. 71.43 (2) and measured by Wisconsin net income shall be computed at the following rates:

AB990,9,1 1. For all net income from $0 to $99,999, 5.9%.

AB990,9,2 2. For all net income exceeding $99,999 but not exceeding $249,999, 6.4%.

AB990,9,3 3. For all net income exceeding $249,999 but not exceeding $499,999, 7.4%.

AB990,9,4 4. For all net income exceeding $499,999, 7.9%.

AB990, s. 18 Section 18. 71.475 of the statutes is created to read:

AB990,9,10 71.475 Corporate minimum tax. (1) Imposition. If the tax imposed on a corporation under s. 71.43 (1) or (2), not considering the credits under s. 71.47 (1di), (1dj), (1dL), (1ds) and (2m) and subch. IX is less than the tax under this section, there is imposed on a corporation, instead of the tax under s. 71.43 (1) or (2), an alternative minimum tax computed as follows:

AB990,9,13 (a) Adjust net apportionable income of a corporation subject to apportionment and net Wisconsin income of a business subject to separate accounting in the manner under section 56, except section 56 (a) (4), and section 58 of the internal revenue code.

AB990,9,16 (b) Add to the amount under par. (a) the preferences under section 57 of the in ternal revenue code to the extent that those preferences reduce net income for pur poses of the tax imposed under s. 71.43 (1) or (2).

AB990,9,19 (c) Multiply the amount under par. (b) by the apportionment percentage under s. 71.45 applicable to the corporation for purposes of the tax imposed under s. 71.43 (1) or (2) if the corporation is subject to apportionment.

AB990,9,21 (d) Add nonapportionable income that has a situs in this state to the amount under par. (c).

AB990,9,24 (e) From the amount under par. (d), subtract Wisconsin minimum tax net busi ness losses. The department of revenue shall promulgate rules defining net business losses for minimum tax purposes.

AB990,10,3 (f) Multiply the exemption amount under section 55 (d) (2) and (3) of the inter nal revenue code by the apportionment percentage under s. 71.45 applicable to the corporation for purposes of the tax imposed under s. 71.43 (1) or (2).

AB990,10,4 (g) Subtract the amount under par. (f) from the amount under par. (e).

AB990,10,8 (h) If the corporation is a tax-option corporation, subtract from the amount un der par. (g) the portion of that amount equal to the ownership percentage of share holders who are residents of this state and of nonresident shareholders who file indi vidual returns in this state for purposes of the tax imposed under s. 71.02 or 71.08.

AB990,10,9 (i) Multiply the amount under par. (h) by 4.6%.

AB990,10,10 (j) Subtract the credit under s. 71.47 (3) (b) from the amount under par. (i).

AB990,10,16 (2) Administration. The department of revenue may impose, enforce and col lect the minimum tax provided in this section and may take any action, conduct any proceeding and in all respects proceed as it is authorized in respect to income or fran chise taxes imposed in this chapter. The income and franchise tax provisions in this chapter relating to assessments, refunds, appeals, collection, interest and penalties shall apply to the minimum tax.

AB990, s. 19 Section 19. 71.49 (1) (g) of the statutes is created to read:

AB990,10,18 71.49 (1) (g) Corporate minimum tax under s. 71.475.