AB735,5,2117 71.04 (8) (c) The net business income of railroads, sleeping car companies, car
18line companies, pipeline companies, financial organizations, air carriers and public
19utilities requiring apportionment shall be apportioned pursuant to rules of the
20department of revenue, but the income taxed is limited to the income derived from
21business transacted and property located within the state.
AB735, s. 12 22Section 12. 71.04 (10) of the statutes is amended to read:
AB735,6,823 71.04 (10) Department may waive factor. Where, in the case of any nonresident
24individual or nonresident estate or trust engaged in business within in and without
25the
outside this state of Wisconsin and required to apportion its income as provided

1in this section, it shall be shown to the satisfaction of the department of revenue that
2the use of any one of the 3 factors provided under sub. (4) gives an unreasonable or
3inequitable final average ratio because of the fact that such nonresident individual
4or nonresident estate or trust does not employ, to any appreciable extent in its trade
5or business in producing the income taxed, the factors made use of in obtaining such
6ratio, this factor may, with the approval of the department of revenue, be omitted in
7obtaining the final average ratio which is to be applied to the remaining net income.
8This subsection does not apply to taxable years beginning after December 31, 2003.
AB735, s. 13 9Section 13. 71.25 (6) of the statutes is renumbered 71.25 (6) (intro.) and
10amended to read:
AB735,7,511 71.25 (6) Allocation and separate accounting and apportionment formula.
12(intro.) Corporations engaged in business within and without the state shall be taxed
13only on such income as is derived from business transacted and property located
14within the state. The amount of such income attributable to Wisconsin may be
15determined by an allocation and separate accounting thereof, when the business of
16such corporation within the state is not an integral part of a unitary business, but
17the department of revenue may permit an allocation and separate accounting in any
18case in which it is satisfied that the use of such method will properly reflect the
19income taxable by this state. In all cases in which allocation and separate accounting
20is not permissible, the determination shall be made in the following manner: for all
21businesses except air carriers, financial organizations, pipeline companies, public
22utilities, railroads, sleeping car companies, car line companies and corporations or
23associations that are subject to a tax on unrelated business income under s. 71.26 (1)
24(a) there shall first be deducted from the total net income of the taxpayer the part
25thereof (less related expenses, if any) that follows the situs of the property or the

1residence of the recipient. The remaining net income shall be apportioned to
2Wisconsin this state by use of an apportionment fraction composed of a sales factor
3under sub. (9) representing 50% of the fraction, a property factor under sub. (7)
4representing 25% of the fraction and a payroll factor under sub. (8) representing 25%
5of the fraction.
the following:
AB735, s. 14 6Section 14. 71.25 (6) (a) of the statutes is created to read:
AB735,7,107 71.25 (6) (a) For taxable years beginning before January 1, 2002, an
8apportionment fraction composed of a sales factor under sub. (9) representing 50%
9of the fraction, a property factor under sub. (7) representing 25% of the fraction and
10a payroll factor under sub. (8) representing 25% of the fraction.
AB735, s. 15 11Section 15. 71.25 (6) (b) of the statutes is created to read:
AB735,7,1512 71.25 (6) (b) For taxable years beginning after December 31, 2001, and before
13January 1, 2003, an apportionment fraction composed of a sales factor under sub. (9)
14representing 63% of the fraction, a property factor under sub. (7) representing 18.5%
15of the fraction and a payroll factor under sub. (8) representing 18.5% of the fraction.
AB735, s. 16 16Section 16. 71.25 (6) (c) of the statutes is created to read:
AB735,7,2017 71.25 (6) (c) For taxable years beginning after December 31, 2002, and before
18January 1, 2004, an apportionment fraction composed of a sales factor under sub. (9)
19representing 85% of the fraction, a property factor under sub. (7) representing 7.5%
20of the fraction and a payroll factor under sub. (8) representing 7.5% of the fraction.
AB735, s. 17 21Section 17. 71.25 (6) (d) of the statutes is created to read:
AB735,7,2322 71.25 (6) (d) For taxable years beginning after December 31, 2003, an
23apportionment fraction composed of the sales factor under sub. (9).
AB735, s. 18 24Section 18. 71.25 (6) (e) of the statutes is created to read:
AB735,8,7
171.25 (6) (e) For taxable years beginning after December 31, 2001, and before
2January 1, 2004, the apportionment fraction for the remaining net income of a
3financial organization shall include a sales factor that represents more than 50% of
4the apportionment fraction, as determined by rule by the department. For taxable
5years beginning after December 31, 2003, the apportionment fraction for the
6remaining net income of a financial organization is composed of a sales factor, as
7determined by rule by the department.
AB735, s. 19 8Section 19. 71.25 (7) (intro.) of the statutes is amended to read:
AB735,8,109 71.25 (7) Property factor. (intro.) For purposes of sub. (5) and for taxable
10years beginning before January 1, 2004
:
AB735, s. 20 11Section 20. 71.25 (8) (intro.) of the statutes is amended to read:
AB735,8,1312 71.25 (8) Payroll factor. (intro.) For purposes of sub. (5) and for taxable years
13beginning before January 1, 2004
:
AB735, s. 21 14Section 21. 71.25 (9) (d) of the statutes is amended to read:
AB735,8,2215 71.25 (9) (d) Sales, other than sales of tangible personal property, are in this
16state if the income-producing activity is performed in this state. If the
17income-producing activity is performed both in and outside this state the sales shall
18be divided between those states having jurisdiction to tax such business in
19proportion to the direct costs of performance incurred in each such state in rendering
20this service. Services performed in states which do not have jurisdiction to tax the
21business shall be deemed to have been performed in the state to which compensation
22is allocated by sub. s. 71.25 (8) , 1997 stats.
AB735, s. 22 23Section 22. 71.25 (10) (b) of the statutes is renumbered 71.25 (10) (b) 1. and
24amended to read:
AB735,9,7
171.25 (10) (b) 1. In this section, for taxable years beginning before January 1,
22002,
"public utility" means any business entity as described under subd. 2. and any
3business entity which owns or operates any plant, equipment, property, franchise,
4or license for the transmission of communications or the production, transmission,
5sale, delivery, or furnishing of electricity, water or steam the rates of charges for
6goods or services of which have been established or approved by a federal, state or
7local government or governmental agency. "Public
AB735,9,13 82. In this section, for taxable years beginning after December 31, 2001, "public
9utility" also means any business entity providing service to the public and engaged
10in the transportation of goods and persons for hire, as defined in s. 194.01 (4),
11regardless of whether or not the entity's rates or charges for services have been
12established or approved by a federal, state or local government or governmental
13agency.
AB735, s. 23 14Section 23. 71.25 (10) (c) of the statutes is amended to read:
AB735,9,1915 71.25 (10) (c) The net business income of railroads, sleeping car companies, car
16line companies, pipeline companies, financial organizations, air carriers and public
17utilities requiring apportionment shall be apportioned pursuant to rules of the
18department of revenue, but the income taxed is limited to the income derived from
19business transacted and property located within the state.
AB735, s. 24 20Section 24. 71.25 (11) of the statutes is amended to read:
AB735,9,2521 71.25 (11) Department may waive factor. Where, in the case of any corporation
22engaged in business within in and without the outside this state of Wisconsin and
23required to apportion its income as provided in sub. (6), it shall be shown to the
24satisfaction of the department of revenue that the use of any one of the 3 factors
25provided in sub. (6) gives an unreasonable or inequitable final average ratio because

1of the fact that such corporation does not employ, to any appreciable extent in its
2trade or business in producing the income taxed, the factors made use of in obtaining
3such ratio, this factor may, with the approval of the department of revenue, be
4omitted in obtaining the final average ratio which is to be applied to the remaining
5net income. This subsection does not apply to taxable years beginning after
6December 31, 2003.
AB735, s. 25 7Section 25. 71.45 (3) (intro.) of the statutes is amended to read:
AB735,10,168 71.45 (3) Apportionment. (intro.) With respect Except as provided in sub. (3d),
9to determine Wisconsin income for purposes of the franchise tax, domestic insurers
10not engaged in the sale of life insurance but which that, in the taxable year, have
11collected received premiums, other than life insurance premiums, written on
12subjects of
for insurance on property or risks resident, located or to be performed
13outside this state, there shall be subtracted from multiply the net income figure
14derived by application of sub. (2) (a) to arrive at Wisconsin income constituting the
15measure of the franchise tax an amount calculated by multiplying such adjusted
16federal taxable income
by the arithmetic average of the following 2 percentages:
AB735, s. 1751 17Section 1751. 71.45 (3) (a) of the statutes is amended to read:
AB735,11,718 71.45 (3) (a) The Subject to sub. (3d), the percentage of total determined by
19dividing the sum of direct
premiums written on all property and risks for insurance
20other than life insurance, on subjects of insurance resident, located or to be
21performed in this state, and assumed premiums written for reinsurance, other than
22life insurance, with respect to all property and risks resident, located or to be
23performed in this state, by the sum of direct premiums written for insurance on all
24property and risks, other than life insurance,
wherever located during the taxable
25year, as reflects
, and assumed premiums written on insurance for reinsurance on all

1property and risks
, other than life insurance, where the subject of insurance was
2resident, located or to be performed outside this state
wherever located. In this
3paragraph, "direct premiums" means direct premiums as reported for the taxable
4year on an annual statement that is filed by the insurer with the commissioner of
5insurance. In this paragraph, "assumed premiums" means assumed reinsurance
6premiums from domestic insurance companies as reported for the taxable year on an
7annual statement that is filed with the commissioner of insurance
.
AB735, s. 26 8Section 26. 71.45 (3) (b) of the statutes is renumbered 71.45 (3) (b) 1. and
9amended to read:
AB735,11,1410 71.45 (3) (b) 1. The Subject to sub. (3d), the percentage of determined by
11dividing the payroll, exclusive of life insurance payroll, paid in this state in the
12taxable year by
total payroll, exclusive of life insurance payroll, paid everywhere in
13the taxable year as reflects such compensation paid outside this state.
14Compensation
.
AB735,11,23 152. Under subd. 1., compensation is paid outside in this state if the individual's
16service is performed entirely outside in this state; or the individual's service is
17performed both within and without in and outside this state, but the service
18performed within outside this state is incidental to the individual's service without
19in this state; or some service is performed without in this state and the base of
20operations, or if there is no base of operations, the place from which the service is
21directed or controlled is without in this state, or the base of operations or the place
22from which the service is directed or controlled is not in any state in which some part
23of the service is performed, but the individual's residence is outside in this state.
AB735, s. 27 24Section 27. 71.45 (3d) of the statutes is created to read:
AB735,12,6
171.45 (3d) Phase in; domestic insurers. (a) For taxable years beginning after
2December 31, 2001, and before January 1, 2003, a domestic insurer that is subject
3to apportionment under sub. (3) and this subsection shall multiply the net income
4figure derived by the application of sub. (2) by an apportionment fraction composed
5of the percentage under sub. (3) (a) representing 63% of the fraction and the
6percentage under sub. (3) (b) 1. representing 37% of the fraction.
AB735,12,127 (b) For taxable years beginning after December 31, 2002, and before January
81, 2004, a domestic insurer that is subject to apportionment under sub. (3) and this
9subsection shall multiply the net income figure derived by the application of sub. (2)
10by an apportionment fraction composed of the percentage under sub. (3) (a)
11representing 85% of the fraction and the percentage under sub. (3) (b) 1. representing
1215% of the fraction.
AB735,12,1613 (c) For taxable years beginning after December 31, 2003, a domestic insurer
14that is subject to apportionment under sub. (3) and this subsection shall multiply the
15net income figure derived by the application of sub. (2) by the percentage under sub.
16(3) (a).
AB735, s. 28 17Section 28. 71.45 (3m) of the statutes is amended to read:
AB735,12,2518 71.45 (3m) Arithmetic average. The Except as provided in sub. (3d), the
19arithmetic average of the 2 percentages referred to in sub. (3) shall be applied to the
20net income figure arrived at by the successive application of sub. (2) (a) and (b) with
21respect to Wisconsin insurers to which sub. (2) (a) and (b) applies and which have
22collected received premiums, other than life insurance premiums, written upon for
23insurance, other than life insurance, where the subject of such insurance was on
24property or risks
resident, located or to be performed outside this state, to arrive at
25Wisconsin income constituting the measure of the franchise tax.
AB735, s. 29
1Section 29. Nonstatutory provisions.
AB735,13,72 (1) Income apportionment for financial organizations; rules. The
3department of revenue shall submit in proposed form rules related to the
4apportionment of the income of financial organizations under sections 71.04 (4) (e)
5and 71.25 (6) (e) of the statutes, as created by this act, to the legislative council staff
6under section 227.15 (1) of the statutes no later than the first day of the 4th month
7beginning after the effective date of this subsection.
AB735, s. 30 8Section 30. Initial applicability.
AB735,13,109 (1) Apportionment factors. This act first applies to taxable years beginning
10after December 31, 2001.
AB735,13,1111 (End)
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