LRB-1297/4
JK/MES/CTS:wlj:rs
2005 - 2006 LEGISLATURE
March 14, 2005 - Introduced by Representatives Suder, M. Williams, Pettis,
Moulton, Wood, Lamb, Nerison, Ott, Gronemus, Kestell, Davis, Mursau,
Owens, Freese, Van Roy, Musser, Kreibich, McCormick, Hines, Hahn,
Vruwink, Vos, F. Lasee, Petrowski, Ballweg
and Gunderson, cosponsored by
Senators Zien, Harsdorf, Roessler, Brown and Darling. Referred to
Committee on Rural Development.
AB208,1,8 1An Act to amend 71.05 (6) (a) 15., 71.08 (1) (intro.), 71.10 (4) (i), 71.21 (4), 71.26
2(2) (a), 71.30 (3) (f), 71.34 (1) (g), 71.45 (2) (a) 10., 71.49 (1) (f) and 77.92 (4); and
3to create 20.835 (2) (cm), 20.835 (2) (em), 20.835 (2) (eo), 71.07 (3c), 71.07 (3e),
471.07 (3w), 71.28 (3w), 71.47 (3w) and 560.799 of the statutes; relating to:
5creating rural enterprise development zones and providing tax incentives to
6qualified businesses in the zones, creating refundable individual income tax
7credits for income and capital gains derived from the zones, making
8appropriations, and providing a penalty.
Analysis by the Legislative Reference Bureau
This bill authorizes the Department of Commerce (department) to designate up
to ten rural enterprise development zones (zones), upon applications by political
subdivisions. A zone may be no larger than 5,000 acres, and may not include any part
of a city of the first class or a city with a population greater than 200,000. A political
subdivision may apply for designation of a zone that includes land within that
political subdivision by submitting a development plan. A development plan must
contain certain information, including: 1) a map of the proposed zone; 2) evidence
of support in the proposed zone from local government, the public, and business
groups; 3) a description of the applicant's goals and methods for increasing economic

opportunity and expansion, improving infrastructure, reducing regulatory burdens,
and increasing job training opportunities; and 4) anticipated economic activity in the
proposed zone.
In selecting areas for zone designation, the department must consider
indicators of the areas' economic need and likelihood of success. The department
must give preference to applications that propose designation of zones with the
lowest population density and greatest economic need. A zone designation may
remain in effect for no more than 12 years.
The department may certify a business to receive certain tax benefits if the
business begins operations in a zone or relocates to a zone from outside the state. The
department may also certify a business that relocates to a zone from elsewhere in the
state, but only if the business will increase its full-time employees in the zone by at
least 10 percent or will make a capital investment in property in the zone equal to
at least 10 percent of the business's gross revenues in the preceding year.
This bill creates two refundable individual income tax credits. If the allowable
amount of the credit exceeds the taxpayer's income tax liability, the difference is paid
to the claimant by check. Under the rural enterprise development income credit, an
individual who owns or operates a trade or business in a rural enterprise
development zone may claim a credit equal to an amount obtained by multiplying 20
percent of the income the individual derives from the operation of his or her trade
or business in the rural enterprise development zone by 6.5 percent. The credit is
prorated if the claimant, or the claimant's spouse, is not a full-year resident of this
state.
Under the rural enterprise development capital gains credit, an individual may
claim a credit based on capital gains derived from the sale or exchange of property,
both real property and property other than real property, that is used by a rural
enterprise development business that is certified by the department of commerce.
Under current law, there is an income tax exclusion for individuals and shareholders
of tax-option corporations for 60 percent of the net long-term capital gains realized
from the sale of assets held for at least one year. Under this bill, a claimant of the
capital gains credit may claim an amount equal to the amount of capital gains that
is not currently excluded, multiplied by 6.5 percent. The credit is prorated if the
property is also held by the claimant during a period when the rural development
zone was not certified by the department. The credit is also prorated if the claimant,
or the claimant's spouse, is not a full-year resident of this state.
The bill also creates refundable income and franchise tax credits for businesses
located in a rural enterprise development zone. A taxpayer may claim credits based
on the amount that the taxpayer pays to employees in the rural enterprise
development zone. In addition, the taxpayer may claim a credit equal to the amount
of property taxes the taxpayer paid on his or her personal property located in a rural
enterprise development zone, the amount of sales and use taxes the taxpayer paid
to purchase tangible personal property or taxable services that are used or consumed
primarily in a rural enterprise development zone, or the amount the taxpayer paid
in the taxable year to provide certain training to the taxpayer's full-time employees.

For further information see the state 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:
AB208, s. 1 1Section 1. 20.835 (2) (cm) of the statutes is created to read:
AB208,3,32 20.835 (2) (cm) Rural enterprise development zone jobs credit. A sum sufficient
3to make the payments under ss. 71.07 (3w) (c) 1., 71.28 (3w) (c) 1., 71.47 (3w) (c) 1.
AB208, s. 2 4Section 2. 20.835 (2) (em) of the statutes is created to read:
AB208,3,65 20.835 (2) (em) Rural enterprise development income credit. A sum sufficient
6to pay the claims approved under s. 71.07 (3c).
AB208, s. 3 7Section 3. 20.835 (2) (eo) of the statutes is created to read:
AB208,3,98 20.835 (2) (eo) Rural enterprise development capital gains credit. A sum
9sufficient to pay the claims approved under s. 71.07 (3e).
AB208, s. 4 10Section 4. 71.05 (6) (a) 15. of the statutes is amended to read:
AB208,3,1511 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de),
12(2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (3g), (3n), (3s), (3t), (3w), (5b), and (5d)
13and not passed through by a partnership, limited liability company, or tax-option
14corporation that has added that amount to the partnership's, company's, or
15tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g).
AB208, s. 5 16Section 5. 71.07 (3c) of the statutes is created to read:
AB208,3,1817 71.07 (3c) Rural enterprise development income credit. (a) Definitions. In
18this subsection:
AB208,3,2019 1. "Claimant" means an individual who owns or operates a trade or business
20in a rural enterprise development zone.
AB208,4,2
12. "Rural enterprise development zone" has the meaning given in s. 71.07 (3w)
2(a) 4.
AB208,4,113 (b) Filing claims. Subject to the limitations provided in this subsection, a
4claimant may claim as a credit against the tax imposed under s. 71.02 an amount
5obtained by multiplying 20 percent of the income that the individual derives from the
6operation of his or her trade or business in a rural enterprise development zone by
76.5 percent. If the allowable amount of the claim exceeds the income taxes otherwise
8due on the claimant's income, the amount of the claim not used as an offset against
9those taxes shall be certified by the department of revenue to the department of
10administration for payment to the claimant by check, share draft, or other draft from
11the appropriation under s. 20.835 (2) (em).
AB208,4,1312 (c) Limitations. 1. No credit may be allowed under this subsection unless it
13is claimed within the time period under s. 71.75 (2).
AB208,4,2314 2. For a claimant who is a nonresident or part-year resident of this state and
15who is a single person or a married person filing a separate return, multiply the
16credit for which the claimant is eligible under par. (b) by a fraction the numerator of
17which is the individual's Wisconsin adjusted gross income and the denominator of
18which is the individual's federal adjusted gross income. If a claimant is married and
19files a joint return, and if the claimant or the claimant's spouse, or both, are
20nonresidents or part-year residents of this state, multiply the credit for which the
21claimant is eligible under par. (b) by a fraction the numerator of which is the couple's
22joint Wisconsin adjusted gross income and the denominator of which is the couple's
23joint federal adjusted gross income.
AB208,4,2524 (d) Administration. Subsection (9e) (d), to the extent that it applies to the credit
25under that subsection, applies to the credit under this subsection.
AB208, s. 6
1Section 6. 71.07 (3e) of the statutes is created to read:
AB208,5,32 71.07 (3e) Rural enterprise development capital gains credit. (a)
3Definitions. In this subsection:
AB208,5,44 1. "Claimant" means an individual who files a claim under this subsection.
AB208,5,65 2. "Property gain" means the gain derived from the sale or exchange of property,
6other than real property, that is used by a certified business under s. 560.799 (5).
AB208,5,97 3. "Real property gain" means the gain derived from the sale or exchange of real
8property that is located in a rural enterprise development zone and used by a
9certified business under s. 560.799 (5).
AB208,5,1110 4. "Rural enterprise development zone" has the meaning given in s. 71.07 (3w)
11(a) 4.
AB208,5,1412 (b) Filing claims. Subject to the limitations provided in this subsection, a
13claimant may claim as a credit against the tax imposed under s. 71.02 all of the
14following:
AB208,5,1615 1. An amount obtained by multiplying the amount of property gain that is not
16excluded under s. 71.05 (6) (b) 9. by 6.5 percent.
AB208,5,1817 2. An amount obtained by multiplying the amount of real property gain that
18is not excluded under s. 71.05 (6) (b) 9. by 6.5 percent.
AB208,5,2319 (bm) Payment. If the allowable amount of the claim under par. (a) exceeds the
20income taxes otherwise due on the claimant's income, the amount of the claim not
21used as an offset against those taxes shall be certified by the department of revenue
22to the department of administration for payment to the claimant by check, share
23draft, or other draft from the appropriation under s. 20.835 (2) (eo).
AB208,5,2524 (c) Limitations. 1. No credit may be allowed under this subsection unless it
25is claimed within the time period under s. 71.75 (2).
AB208,6,6
12. If the claimant held the property to which the claim relates during a period
2when the rural enterprise development zone was not designated, the gain subject to
3the credit under par. (b) must be multiplied by a fraction, the numerator of which is
4the number of days the claimant held the property during the period the zone
5designation was in effect and the denominator of which is the total number of days
6the claimant held the property.
AB208,6,187 3. For a claimant who is a nonresident or part-year resident of this state and
8who is a single person or a married person filing a separate return, multiply the
9credit for which the claimant is eligible under par. (b), or the credit for which the
10claimant is eligible under par. (b) as modified by subd. 2., if applicable, by a fraction
11the numerator of which is the individual's Wisconsin adjusted gross income and the
12denominator of which is the individual's federal adjusted gross income. If a claimant
13is married and files a joint return, and if the claimant or the claimant's spouse, or
14both, are nonresidents or part-year residents of this state, multiply the credit for
15which the claimant is eligible under par. (b), or the credit for which the claimant is
16eligible under par. (b) as modified by subd. 2., if applicable, by a fraction the
17numerator of which is the couple's joint Wisconsin adjusted gross income and the
18denominator of which is the couple's joint federal adjusted gross income.
AB208,6,2019 (d) Administration. Subsection (9e) (d), to the extent that it applies to the credit
20under that subsection, applies to the credit under this subsection.
AB208, s. 7 21Section 7. 71.07 (3w) of the statutes is created to read:
AB208,6,2322 71.07 (3w) Rural enterprise development zone jobs credit. (a) Definitions.
23In this subsection:
AB208,7,3
11. "Base year" means the taxable year beginning during the calendar year prior
2to the calendar year in which the rural enterprise development zone in which the
3claimant is located takes effect.
AB208,7,54 2. "Claimant" means a person who is certified to claim tax benefits under s.
5560.799 (5) and who files a claim under this subsection.
AB208,7,86 3. "Full-time employee" means an individual who is employed in a regular,
7nonseasonal job and who, as a condition of employment, is required to work at least
82,080 hours per year, including paid leave and holidays.
AB208,7,109 4. "Rural enterprise development zone" means a zone designated under s.
10560.799.
AB208,7,1211 5. "State payroll" means the amount of payroll apportioned to this state, as
12determined under s. 71.04 (6).
AB208,7,1813 6. "Zone payroll" means the amount of state payroll that is attributable to
14compensation paid to individuals for services that are performed in a rural
15enterprise development zone or who are working from an office located in a rural
16enterprise development zone if the work is incidental to any work that the individual
17performs within the rural enterprise development zone. "Zone payroll" does not
18include the amount of compensation paid to any individual that exceeds $100,000.
AB208,7,2119 (b) Filing claims; payroll. Subject to the limitations provided in this subsection
20and s. 560.799, a claimant may claim as a credit against the tax imposed under s.
2171.02 an amount calculated as follows:
AB208,7,2222 1. Determine the amount that is the lesser of:
AB208,7,2423 a. The claimant's zone payroll in the taxable year, minus the claimant's zone
24payroll in the base year.
AB208,8,2
1b. The claimant's state payroll in the taxable year, minus the claimant's state
2payroll in the base year.
AB208,8,63 2. Subtract the number of full-time employees that the claimant employed in
4the area that comprises the rural enterprise development zone in the base year from
5the number of full-time employees that the claimant employed in the rural
6enterprise development zone in the taxable year.
AB208,8,87 3. Multiply the amount determined under subd. 2., but not an amount less than
8zero, by $30,000.
AB208,8,109 4. Subtract the amount determined under subd. 3. from the amount
10determined under subd. 1.
AB208,8,1111 5. Multiply the amount determined under subd. 4. by 7 percent.
AB208,8,1512 (bm) Filing supplemental claims. In addition to the credit under par. (b) and
13subject to the limitations provided in this subsection and s. 560.799, a claimant may
14claim as a credit against the tax imposed under s. 71.02 an amount equal to all of the
15following:
AB208,8,1816 1. The amount of the property taxes that the claimant paid in the taxable year
17for the claimant's personal property that is located in a rural enterprise development
18zone.
AB208,8,2119 2. The amount of taxes imposed under subch. III of ch. 77 that the claimant paid
20in the taxable year on the purchase of tangible personal property and taxable
21services that are used or consumed primarily in a rural enterprise development zone.
AB208,9,222 3. If all of the claimant's payroll is zone payroll and all of the claimant's
23business-related property is located in a rural enterprise development zone, the
24amount obtained by multiplying 20 percent of the sum of the claimant's zone payroll
25in the taxable year and the adjusted basis of the claimant's property at the time that

1the property is first placed in service in the rural enterprise development zone by 6.5
2percent.
AB208,9,73 4. The amount the claimant paid in the taxable year to upgrade or improve the
4skills of any of the claimant's full-time employees, to train any of the claimant's
5full-time employees on the use of new technologies, or to train any full-time
6employee whose employment with the claimant represents the employee's first
7full-time job.
AB208,9,128 (c) Limitations. 1. If the allowable amount of the claim under this subsection
9exceeds the taxes otherwise due on the claimant's income under s. 71.02, the amount
10of the claim that is not used to offset those taxes shall be certified by the department
11of revenue to the department of administration for payment by check, share draft,
12or other draft drawn from the appropriation under s. 20.835 (2) (cm).
AB208,9,2013 2. Partnerships, limited liability companies, and tax-option corporations may
14not claim the credit under this subsection, but the eligibility for, and the amount of,
15the credit are based on their payment of amounts described under pars. (b) and (bm).
16A partnership, limited liability company, or tax-option corporation shall compute
17the amount of credit that each of its partners, members, or shareholders may claim
18and shall provide that information to each of them. Partners, members of limited
19liability companies, and shareholders of tax-option corporations may claim the
20credit in proportion to their ownership interests.
AB208,9,2321 3. No credit may be allowed under this subsection unless the claimant includes
22with the claimant's return a copy of the claimant's certification for tax benefits under
23s. 560.799 (5).
AB208,9,2524 (d) Administration. Section 71.28 (4) (g) and (h), as it applies to the credit under
25s. 71.28 (4), applies to the credit under this subsection.
AB208, s. 8
1Section 8. 71.08 (1) (intro.) of the statutes is amended to read:
AB208,10,112 71.08 (1) Imposition. (intro.) If the tax imposed on a natural person, married
3couple filing jointly, trust, or estate under s. 71.02, not considering the credits under
4ss. 71.07 (1), (2dd), (2de), (2di), (2dj), (2dL), (2dr), (2ds), (2dx), (2fd), (3c), (3e), (3m),
5(3n), (3s), (3t), (3w), (5b), (5d), (6), and (9e), 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1ds),
6(1dx), (1fd), (2m), (3), (3n), and (3t), and (3w), and 71.47 (1dd), (1de), (1di), (1dj),
7(1dL), (1ds), (1dx), (1fd), (2m), (3), (3n), and (3t), and (3w), and subchs. VIII and IX,
8and payments to other states under s. 71.07 (7), is less than the tax under this
9section, there is imposed on that natural person, married couple filing jointly, trust,
10or estate, instead of the tax under s. 71.02, an alternative minimum tax computed
11as follows:
AB208, s. 9 12Section 9. 71.10 (4) (i) of the statutes is amended to read:
AB208,10,2013 71.10 (4) (i) The total of claim of right credit under s. 71.07 (1), farmland
14preservation credit under subch. IX, homestead credit under subch. VIII, farmland
15tax relief credit under s. 71.07 (3m), farmers' drought property tax credit under s.
1671.07 (2fd), rural enterprise development income credit under s. 71.07 (3c), rural
17enterprise development capital gains credit under s. 71.07 (3e), rural enterprise
18development zone jobs credit under s. 71.07 (3w),
earned income tax credit under s.
1971.07 (9e), estimated tax payments under s. 71.09, and taxes withheld under subch.
20X.
AB208, s. 10 21Section 10. 71.21 (4) of the statutes is amended to read:
AB208,10,2422 71.21 (4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di),
23(2dj), (2dL), (2dm), (2ds), (2dx), (3g), (3n), (3s), (3t), (3w), and (5b) and passed through
24to partners shall be added to the partnership's income.
AB208, s. 11 25Section 11. 71.26 (2) (a) of the statutes is amended to read:
AB208,11,18
171.26 (2) (a) Corporations in general. The "net income" of a corporation means
2the gross income as computed under the Internal Revenue Code as modified under
3sub. (3) minus the amount of recapture under s. 71.28 (1di) plus the amount of credit
4computed under s. 71.28 (1), (3), (4), and (5) minus, as provided under s. 71.28 (3) (c)
57., the amount of the credit under s. 71.28 (3) that the taxpayer added to income
6under this paragraph at the time that the taxpayer first claimed the credit plus the
7amount of the credit computed under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm),
8(1ds), (1dx), (3g), (3n), (3t), (3w), and (5b) and not passed through by a partnership,
9limited liability company, or tax-option corporation that has added that amount to
10the partnership's, limited liability company's, or tax-option corporation's income
11under s. 71.21 (4) or 71.34 (1) (g) plus the amount of losses from the sale or other
12disposition of assets the gain from which would be wholly exempt income, as defined
13in sub. (3) (L), if the assets were sold or otherwise disposed of at a gain and minus
14deductions, as computed under the Internal Revenue Code as modified under sub.
15(3), plus or minus, as appropriate, an amount equal to the difference between the
16federal basis and Wisconsin basis of any asset sold, exchanged, abandoned, or
17otherwise disposed of in a taxable transaction during the taxable year, except as
18provided in par. (b) and s. 71.45 (2) and (5).
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