SB152: Bill Text

LRB-1748/2

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2005 - 2006 LEGISLATURE

2005 Senate BILL 152

March 30, 2005 - Introduced by Senators Darling, Olsen, Harsdorf, Leibham, Stepp, Brown and Kanavas, cosponsored by Representatives Jensen, Kleefisch, Nischke, Ward, Jeskewitz, Townsend, Pettis, Bies, Hahn, Ainsworth, Musser, Vos, Davis, Suder, Kreibich, Mursau, Pridemore, LeMahieu, Ballweg, Lamb, F. Lasee, Nass, Moulton, Petrowski, Shilling, Gard, Vrakas, Strachota, J. Fitzgerald, Hines, Nerison and Seidel. Referred to Committee on Veterans, Homeland Security, Military Affairs, Small Business and Government Reform.

SB152,1,4 An Act to amend 71.05 (6) (a) 15., 71.21 (4), 71.26 (2) (a), 71.34 (1) (g), 71.45 (2) (a) 10. and 77.92 (4); and to create 71.07 (5r), 71.10 (4) (cd), 71.28 (5r), 71.30 (3) (dm), 71.47 (5r) and 71.49 (1) (dm) of the statutes; relating to: an education tax credit for businesses.

Analysis by the Legislative Reference Bureau

This bill creates an income tax and franchise tax credit for businesses that pay tuition for an individual to attend a university, college, or technical college. Sole proprietorships, corporations, and insurers may claim the credit. Partnerships, limited liability companies, and tax-option corporations compute the credit but pass it on to the partners, members, and shareholders in proportion to their ownership interests. The credit is an amount equal to: 1) 50 percent of the tuition paid by a business for an individual to attend school in a taxable year, if the individual is enrolled in a degree-granting program; and 2) 75 percent of the tuition paid by a business for an individual to attend school in a taxable year, if the individual is enrolled in a degree-granting program and if the individual's taxable income is not more than 185 percent of the federal poverty line. If the credit claimed by a business exceeds the business's tax liability, the state will not issue a refund check, but the business may carry forward any remaining credit to subsequent taxable years.

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:

SB152, s. 1 Section 1. 71.05 (6) (a) 15. of the statutes is amended to read:

SB152,2,6 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 (5r) 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).

SB152, s. 2 Section 2. 71.07 (5r) of the statutes is created to read:

SB152,2,8 71.07 (5r) Education credit. (a) In this subsection:

SB152,2,11 1. "Claimant" means a sole proprietor, a partner, a member of a limited liability company, or a shareholder of a tax-option corporation who files a claim under this subsection.

SB152,2,13 2. "Degree-granting program" means an educational program for which an associate, a bachelor's, or a graduate degree is awarded upon successful completion.

SB152,2,14 3. "Family member" has the meaning given in s. 157.061 (7).

SB152,2,17 4. "Managing employee" means an individual who wholly or partially exercises operational or managerial control over, or who directly or indirectly conducts, the operation of the claimant's business.

SB152,2,18 5. "Poverty line" has the meaning given under s. 49.001 (5).

SB152,2,19 6. "Qualified postsecondary institution" means all of the following:

SB152,3,3 a. A University of Wisconsin System institution, a technical college system institution, or a regionally accredited 4-year nonprofit college or university having its regional headquarters and principal place of business in this state.

SB152,3,5 b. A school approved under s. 45.54, if the delivery of education occurs in this state.

SB152,3,8 (b) Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under ss. 71.02 and 71.08 an amount equal to the following:

SB152,3,12 1. Fifty percent of the tuition that the claimant paid or incurred during the taxable year for an individual to participate in an education program of a qualified postsecondary institution, if the individual was enrolled in a degree-granting program.

SB152,3,18 2. Seventy-five percent of the tuition that the claimant paid or incurred during the taxable year for an individual to participate in an education program of a qualified postsecondary institution, if the individual was enrolled in a degree-granting program and if the individual's taxable income in the year prior to commencing participation in the education program in connection with which a credit is claimed is not more than 185 percent of the poverty line.

SB152,3,23 (c) 1. No credit may be allowed under par. (b) unless the claimant obtains written certification from a qualified postsecondary institution concerning the amount of tuition that the claimant paid or incurred during the taxable year for an individual to participate in an education program of the qualified postsecondary institution and includes a copy of the certification with the claimant's return.

SB152,4,8 2. No credit may be allowed under par. (b) 2. unless the claimant obtains written certification from a qualified postsecondary institution that the taxable income of the individual for whom the claimant has paid or incurred tuition during the taxable year for the individual to participate in an education program of the qualified postsecondary institution is not more than 185 percent of the poverty line and includes a copy of the certification with the claimant's return. For purposes of this subdivision and par. (b) 2., if an individual for whom the claimant has paid or incurred tuition is claimed as a dependent on another person's tax return, the individual's taxable income shall be the taxable income of the person on whose return the individual is claimed as a dependent.

SB152,4,11 3. No credit may be allowed under par. (b) unless the claimant certifies to the department of revenue that the claimant will not be reimbursed for any amount of tuition for which the claimant claims a credit under par. (b).

SB152,4,14 (d) A claimant may not claim the credit under par. (b) for any tuition amounts that the claimant excluded under s. 71.05 (6) (b) 28. or under section 127 of the Internal Revenue Code.

SB152,4,17 (e) A claimant may not claim the credit under par. (b) for any tuition amounts that the claimant paid or incurred for a family member of the claimant or for a family member of a managing employee unless all of the following apply:

SB152,4,21 1. The family member was employed an average of at least 20 hours a week as an employee of the claimant, or the claimant's business, during the one-year period prior to commencing participation in the education program in connection with which the claimant claims a credit under par. (b).

SB152,4,23 2. The family member is enrolled in a degree-granting program that is substantially related to the claimant's business.

SB152,4,25 3. The family member is making satisfactory progress towards completing the degree-granting program under subd. 2.

SB152,5,2 (f) The carry-over provisions of s. 71.28 (4) (e) and (f), as they apply to the credit under s. 71.28 (4), apply to the credit under this subsection.

SB152,5,10 (g) 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 tuition 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 interest.

SB152,5,12 (h) Section 71.28 (4) (g) and (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

SB152,5,17 (i) The department of revenue shall biennially submit a report to the legislature under s. 13.172 (2) that identifies each qualified postsecondary institution for which it has received written certification from a claimant under par. (c). The report shall specify the total amount of the tuition for each such institution that is claimed as a credit under this subsection in the previous biennium.

SB152, s. 3 Section 3. 71.10 (4) (cd) of the statutes is created to read:

SB152,5,19 71.10 (4) (cd) The education credit under s. 71.07 (5r).

SB152, s. 4 Section 4. 71.21 (4) of the statutes is amended to read:

SB152,5,23 71.21 (4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2ds), (2dx), (3g), (3n), (3s), (3t), and (5b), and (5r) and passed through to partners shall be added to the partnership's income.

SB152, s. 5 Section 5. 71.26 (2) (a) of the statutes is amended to read:

SB152,6,18 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), and (5b), and (5r) 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).

SB152, s. 6 Section 6. 71.28 (5r) of the statutes is created to read:

SB152,6,20 71.28 (5r) Education credit. (a) In this subsection:

SB152,6,21 1. "Claimant" means a corporation that files a claim under this subsection.

SB152,6,23 2. "Degree-granting program" means an education program for which an associate, a bachelor's, or a graduate degree is awarded upon successful completion.

SB152,6,24 3. "Family member" has the meaning given in s. 157.061 (7).

SB152,7,3 4. "Managing employee" means an individual who wholly or partially exercises operational or managerial control over, or who directly or indirectly conducts, the operation of the claimant's business.

SB152,7,4 5. "Poverty line" has the meaning given under s. 49.001 (5).

SB152,7,5 6. "Qualified postsecondary institution" means all of the following:

SB152,7,8 a. A University of Wisconsin System institution, a technical college system institution, or a regionally accredited 4-year nonprofit college or university having its regional headquarters and principal place of business in this state.

SB152,7,10 b. A school approved under s. 45.54, if the delivery of education occurs in this state.

SB152,7,12 (b) Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.23 an amount equal to the following:

SB152,7,16 1. Fifty percent of the tuition that the claimant paid or incurred during the taxable year for an individual to participate in an education program of a qualified postsecondary institution, if the individual was enrolled in a degree-granting program.

SB152,7,22 2. Seventy-five percent of the tuition that the claimant paid or incurred during the taxable year for an individual to participate in an education program of a qualified postsecondary institution, if the individual was enrolled in a degree-granting program and if the individual's taxable income in the year prior to commencing participation in the education program in connection with which a credit is claimed is not more than 185 percent of the poverty line.

SB152,8,2 (c) 1. No credit may be allowed under par. (b) unless the claimant obtains written certification from a qualified postsecondary institution concerning the amount of tuition that the claimant paid or incurred during the taxable year for an individual to participate in an education program of the qualified postsecondary institution and includes a copy of the certification with the claimant's return.

SB152,8,12 2. No credit may be allowed under par. (b) 2. unless the claimant obtains written certification from a qualified postsecondary institution that the taxable income of the individual for whom the claimant has paid or incurred tuition during the taxable year for the individual to participate in an education program of the qualified postsecondary institution is not more than 185 percent of the poverty line and includes a copy of the certification with the claimant's return. For purposes of this subdivision and par. (b) 2., if an individual for whom the claimant has paid or incurred tuition is claimed as a dependent on another person's tax return, the individual's taxable income shall be the taxable income of the person on whose return the individual is claimed as a dependent.

SB152,8,15 3. No credit may be allowed under par. (b) unless the claimant certifies to the department of revenue that the claimant will not be reimbursed for any amount of tuition for which the claimant claims a credit under par. (b).

SB152,8,17 (d) A claimant may not claim the credit under par. (b) for any tuition amounts that the claimant has excluded under section 127 of the Internal Revenue Code.

SB152,8,20 (e) A claimant may not claim the credit under par. (b) for any tuition amounts that the claimant paid or incurred for a family member of a managing employee unless all of the following apply:

SB152,8,24 1. The family member was employed an average of at least 20 hours a week as an employee of the claimant, or the claimant's business, during the one-year period prior to commencing participation in the education program in connection with which the claimant claims a credit under par. (b).

SB152,9,2 2. The family member is enrolled in a degree-granting program that is substantially related to the claimant's business.

SB152,9,4 3. The family member is making satisfactory progress towards completing the degree-granting program under subd. 2.

SB152,9,6 (f) The carry-over provisions of sub. (4) (e) and (f), as they apply to the credit under sub. (4), apply to the credit under this subsection.

SB152,9,14 (g) 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 tuition 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 interest.

SB152,9,16 (h) Subsection (4) (g) and (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

SB152,9,21 (i) The department of revenue shall biennially submit a report to the legislature under s. 13.172 (2) that identifies each qualified postsecondary institution for which it has received written certification from a claimant under par. (c). The report shall specify the total amount of the tuition for each such institution that is claimed as a credit under this subsection in the previous biennium.

SB152, s. 7 Section 7. 71.30 (3) (dm) of the statutes is created to read:

SB152,9,23 71.30 (3) (dm) The education credit under s. 71.28 (5r).

SB152, s. 8 Section 8. 71.34 (1) (g) of the statutes is amended to read:

SB152,10,3 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), and (5b), and (5r) and passed through to shareholders.

SB152, s. 9 Section 9. 71.45 (2) (a) 10. of the statutes is amended to read:

SB152,10,10 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit computed under s. 71.47 (1dd) to (1dx), (3n), and (5b), and (5r) 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).