SB376: Bill Text

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2005 - 2006 LEGISLATURE

2005 Senate BILL 376

October 12, 2005 - Introduced by Senators Decker, Hansen, Breske, Miller, Carpenter, Risser, Erpenbach and Jauch, cosponsored by Representatives Lehman, Seidel, Hahn, Pocan, Black, Boyle, Benedict, Turner, Travis, Berceau, Pope-Roberts and Sheridan. Referred to Committee on Job Creation, Economic Development and Consumer Affairs.

SB376,1,8 An Act to repeal 71.46 (3); to amend 71.05 (6) (a) 15., 71.08 (1) (intro.), 71.23 (2), 71.25 (9) (a), 71.26 (3) (x), 71.26 (4), 71.29 (2), 71.44 (1) (a), 71.48 and 71.84 (2) (a); and to create 20.835 (2) (bm), 71.07 (5e), 71.10 (4) (gxx), 71.23 (4), 71.255 and 71.44 (1) (e) of the statutes; relating to: imposing an excess profits tax on integrated oil companies, creating an individual income tax credit for home heating costs, requiring the combined reporting of corporate income and franchise taxes, granting rule-making authority, and making an appropriation.

Analysis by the Legislative Reference Bureau

This bill creates an excess profits tax on integrated oil companies, except those companies that produce or refine less than 150,000 barrels of crude petroleum a day. An integrated oil company is any corporation that itself or including the activities of its subsidiaries engages in exploring for and extracting, producing, and refining crude petroleum and transporting, distributing, and marketing crude petroleum, gasoline, distillate fuels, aviation fuels, kerosene, diesel motor fuel, residual oil, propane, benzol, butane, or other similar petroleum products.

The tax created in the bill has two components. The integrated oil company pays a tax equal to 7.9 percent of its normal taxable income. Normal taxable income is computed by combining the petroleum-related income of the corporation and of all the corporation's subsidiaries and based on the company's taxable income in 2001. The company also pays a tax equal to 50 percent of its excess taxable income. Excess taxable income is the company's total taxable income minus its normal taxable income. Under the bill, generally, the integrated oil company may claim as a credit against the excess profits tax the amount of state corporate franchise taxes that the company paid in the taxable year on its petroleum-related income.

The bill also creates an individual income tax credit for the cost of fuel and electricity used to heat an individual's principal dwelling. The total amount of the credits that may be claimed by all eligible taxpayers each year may not exceed the total amount of revenue from the excess profits tax collected in that year.

Finally, the bill requires that all corporations and their subsidiaries file combined reports and tax returns for state income and franchise tax purposes.

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:

SB376, s. 1 Section 1. 20.835 (2) (bm) of the statutes is created to read:

SB376,2,4 20.835 (2) (bm) Excess profits home heating credit. A sum sufficient to make the payments under s. 71.07 (5e), not to exceed the amount determined under s. 71.07 (5e) (c) 1.

SB376, s. 2 Section 2. 71.05 (6) (a) 15. of the statutes is amended to read:

SB376,2,10 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).

SB376, s. 3 Section 3. 71.07 (5e) of the statutes is created to read:

SB376,2,13 71.07 (5e) Excess profits home heating credit. (a) Definitions. In this subsection:

SB376,2,14 1. "Claimant" means an individual who files a claim under this subsection.

SB376,3,1 2. "Household" has the meaning given in s. 71.07 (3m) (a) 5.

SB376,3,2 3. "Household income" has the meaning given in s. 71.52 (5).

SB376,3,3 4. "Principal dwelling" has the meaning given in s. 79.10 (1) (dm).

SB376,3,7 (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 a percentage of the amount the claimant paid in the taxable year for fuel and electricity used to heat the claimant's principal dwelling.

SB376,3,11 (c) Limitations. 1. The department shall, by rule, determine the percentage of the amount that each claimant may claim so that the maximum amount of all credits claimed in any taxable year may not exceed the amount collected under s. 71.23 (4) and credited to the appropriation account under s. 20.835 (2) (bm).

SB376,3,13 2. Only one member of any household may claim the credit under this subsection in a taxable year.

SB376,3,23 3. For a claimant who is a nonresident or part-year resident of this state and who is a single person or a married person filing a separate return, multiply the credit for which the claimant is eligible under par. (b) by a fraction, the numerator of which is the individual's Wisconsin adjusted gross income and the denominator of which is the individual's federal adjusted gross income. If a claimant is married and files a joint return, and if the claimant or the claimant's spouse, or both, are nonresidents or part-year residents of this state, multiply the credit for which the claimant is eligible under par. (b) by a fraction, the numerator of which is the couple's joint Wisconsin adjusted gross income and the denominator of which is the couple's joint federal adjusted gross income.

SB376,4,4 (d) Administration. 1. If the allowable amount of the credit under this subsection exceeds the taxes imposed under s. 71.02 that are otherwise due on the claimant's income, the amount of the claim that is not used to offset those taxes shall be certified by the department of revenue to the department of administration for payment by check, share draft, or other draft drawn from the appropriation under s. 20.835 (2) (bm).

SB376,4,6 2. 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.

SB376, s. 4 Section 4. 71.08 (1) (intro.) of the statutes, as affected by 2005 Wisconsin Act 25, is amended to read:

SB376,4,17 71.08 (1) Imposition. (intro.) If the tax imposed on a natural person, married couple filing jointly, trust, or estate under s. 71.02, not considering the credits under ss. 71.07 (1), (2dd), (2de), (2di), (2dj), (2dL), (2dr), (2ds), (2dx), (2fd), (3m), (3n), (3s), (3t), (5b), (5d), (5e), (6), (6e), and (9e), 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1fd), (2m), (3), (3n), and (3t) and 71.47 (1dd), (1de), (1di), (1dj), (1dL), (1ds), (1dx), (1fd), (2m), (3), (3n), and (3t) and subchs. VIII and IX and payments to other states under s. 71.07 (7), is less than the tax under this section, there is imposed on that natural person, married couple filing jointly, trust, or estate, instead of the tax under s. 71.02, an alternative minimum tax computed as follows:

SB376, s. 5 Section 5. 71.10 (4) (gxx) of the statutes is created to read:

SB376,4,19 71.10 (4) (gxx) Excess profits home heat credit under s. 71.07 (5e).

SB376, s. 6 Section 6. 71.23 (2) of the statutes is amended to read:

SB376,5,18 71.23 (2) Franchise tax. For the privilege of exercising its franchise, buying or selling lottery prizes if the winning tickets were originally bought in this state 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 every 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 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 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 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 otherwise. 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 extent it is not permissible to tax such associations under federal law. The tax imposed under this subsection on an integrated oil company or its subsidiaries shall be in addition to the tax on or measured by the income derived from the petroleum business activities that are subject to taxation under sub. (5) (b) and (c).

SB376, s. 7 Section 7. 71.23 (4) of the statutes is created to read:

SB376,5,20 71.23 (4) Integrated oil companies. (a) Definitions. In this subsection:

SB376,5,22 1. "Excess taxable income" means taxable income minus normal taxable income.

SB376,6,2 2. "Income" means income derived from extracting, producing, and refining crude petroleum and transporting, distributing, and marketing crude petroleum, gasoline, distillate fuels, aviation fuels, kerosene, diesel motor fuel, residual oil, propane, benzol, butane, or other similar petroleum products.

SB376,6,4 3. "In-state sales" is the amount that an integrated oil company reports as the numerator of the sales factor under s. 71.25 (9) (a).

SB376,6,9 4. "In-state taxable income" means the taxable income of an integrated oil company apportioned to this state as determined under s. 71.255, except that for taxable years beginning after December 31, 2000, and before January 1, 2002, "in-state taxable income" means the taxable income that the company would have reported for that year if it computed its income under s. 71.255.

SB376,6,18 5. "Integrated oil company" means a corporation that itself or including the activities of its subsidiaries engages in extracting, producing, and refining crude petroleum and transporting, distributing, and marketing crude petroleum, gasoline, distillate fuels, aviation fuels, kerosene, diesel motor fuel, residual oil, propane, benzol, butane, or other similar petroleum products. "Integrated oil company" does not include any company that either has an average net production of less than 150,000 barrels of crude petroleum per day during the taxable year or refines an average of less than 150,000 barrels of crude petroleum per day during the taxable year.

SB376,6,23 6. "Normal taxable income" means the in-state sales of an integrated oil company for the taxable year multiplied by an amount determined by dividing the company's in-state taxable income for taxable years beginning after December 31, 2000, and before January 1, 2002, by the company's in-state sales for taxable years beginning after December 31, 2000, and before January 1, 2002.

SB376,7,3 7. "Subsidiary" means a corporation in which more than 50 percent of the voting stock of the corporation is owned directly or indirectly by an integrated oil company.

SB376,7,5 8 "Taxable income" means taxable income of a corporation as computed under this chapter.

SB376,7,13 (b) Tax on normal taxable income. Each integrated oil company or subsidiary of an integrated oil company that is subject to taxation under this chapter shall pay a tax equal to 7.9 percent of its normal taxable income. For purposes of computing the tax under this paragraph, an integrated oil company's income shall be combined with its subsidiaries, as provided under s. 71.255. If a subsidiary of an integrated oil company does business in this state, the subsidiary's income shall be combined with the income of the integrated oil company's income and the income of each of the integrated oil company's other subsidiaries, as provided under s. 71.255.

SB376,8,2 (c) Tax on excess taxable income. In addition to the tax imposed under par. (b), each integrated oil company or subsidiary of an integrated oil company that is subject to taxation under this chapter shall pay a tax equal to 50 percent of its excess taxable income. If the taxable income of the integrated oil company or subsidiary for taxable years beginning after December 31, 2000, and before January 1, 2002, is less than its taxable income for taxable years beginning after December 31, 1999, and before January 1, 2001; or if the source of the taxable income of the company or subsidiary substantially changed after December 31, 2000; the company or subsidiary may use an adjusted base year, with written approval from the department, for determining the amount of the tax due under this paragraph. For purposes of computing the taxable income for an adjusted base year, the company or subsidiary may recalculate its taxable income for taxable years beginning after December 31, 1999, and before January 1, 2001, by disregarding any extraordinary or nonrecurring expenses, but considering substantial changes in its source of taxable income.

SB376,8,10 (d) Tax credit. A person who is subject to the taxes imposed under this subsection may claim as a credit against those taxes, up to the amount of the taxes, an amount determined by multiplying the amount of the taxes imposed under sub. (2) that the person paid in the taxable year by a fraction, the numerator of which is the person's petroleum-related taxable income computed for purposes of sub. (2) and the denominator of which is the person's total taxable income computed for purposes of sub. (2). Section 71.28 (4) (e) to (i), as it applies to the credit under s. 71.28 (4), applies to the credit under this paragraph.

SB376,8,16 (e) Appropriation and notification. The department shall credit all moneys collected under this subsection to the appropriation account under s. 20.835 (2) (bm). Annually on August 1, the secretary of revenue shall notify the secretary of administration and the state treasurer, in writing, of the total amount of moneys credited to the appropriation account under s. 20.835 (2) (bm) in the preceding fiscal year.

SB376, s. 8 Section 8. 71.25 (9) (a) of the statutes is amended to read:

SB376,9,3 71.25 (9) (a) The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period. For sales of tangible personal property, the numerator of the sales factor is the sales of the taxpayer during the tax period under par. (b) 1. and 2. plus 50% of the sales of the taxpayer during the tax period under pars. (b) 2m. and 3. and (c). For purposes of determining the numerator of the sales factor for a member of a combined reporting group under s. 71.255 (7), "taxpayer" means the member of a combined reporting group, as defined in s. 71.255 (1) (c), that transferred title to tangible personal property or, for sales other than sales of tangible personal property, that made the sale.

SB376, s. 9 Section 9. 71.255 of the statutes is created to read:

SB376,9,5 71.255 Combined reporting. (1) Definitions. In this section:

SB376,9,9 (a) "Brother-sister parent corporation" means a parent corporation that is a member of a commonly controlled group, if any members of the commonly controlled group are not connected to the parent corporation by stock ownership or interest ownership as described in par. (d).

SB376,9,12 (b) "Combined report" means a form prescribed by the department that specifies the income of each taxpayer member of a commonly controlled group operating as a unitary business.

SB376,9,14 (c) "Combined reporting group" means the members of a commonly controlled group that are included in a combined report under sub. (2).

SB376,9,16 (d) "Commonly controlled group" means any of the following, but does not include an insurer that is exempt from taxation under s. 71.45 (1):

SB376,9,23 1. A parent corporation and any corporation or chain of corporations that are connected to the parent corporation by direct or indirect ownership by the parent corporation if the parent corporation owns stock representing more than 50 percent of the voting power of at least one of the connected corporations or if the parent corporation or any of the connected corporations own stock that cumulatively represents more than 50 percent of the voting power of each of the connected corporations.

SB376,10,3 2. Any 2 or more corporations if a common owner directly or indirectly owns stock representing more than 50 percent of the voting power of the corporations or the connected corporations.

SB376,10,7 3. A partnership or limited liability company if a parent corporation or any corporation connected to the parent corporation by common ownership directly or indirectly owns more than a 50 percent interest in the capital and profits of the partnership or limited liability company.

SB376,10,9 4. Any 2 or more corporations if stock representing more than 50 percent of the voting power in each corporation is interest that cannot be separately transferred.

SB376,10,14 5. Any 2 or more corporations if stock representing more than 50 percent of the voting power in each corporation is directly owned by, or for the benefit of, family members. In this subdivision, "family member" means an individual related by blood, marriage, or adoption within the 2nd degree of kinship as computed under s. 852.03 (2), 1995 stats., or the spouse of such an individual.

SB376,10,19 6. A corporation, partnership, or limited liability company if a parent corporation or any corporation connected to the parent corporation by common ownership does not hold more than a 50 percent ownership interest in the corporation, partnership, or limited liability company but effectively controls the corporation, partnership, or limited liability company.

SB376,10,20 (e) "Corporation" has the meaning given in s. 71.22 (1k) or 71.42 (1).

SB376,10,21 (f) "Department" means the department of revenue.

SB376,10,24 (g) "Designated agent" means the taxpayer member of a commonly controlled group that files a group return on behalf of the taxpayer members of a combined reporting group.

SB376,11,2 (h) "Group return" means a tax return filed on behalf of the taxpayer members of a combined reporting group.

SB376,11,5 (i) "Intercompany transaction" means a transaction between corporations, partnerships, or limited liability companies that become members of the same combined reporting group immediately after the transaction.

SB376,11,7 (im) "Partnership" means any entity considered a partnership under section 7701 of the Internal Revenue Code.

SB376,11,10 (j) "Separate return" means a return filed by a corporation, regardless of whether the corporation is a member of a combined reporting group or is required to file a tax return under s. 71.24 or 71.44.

SB376,11,13 (k) "Taxpayer member" means a corporation that is subject to tax under s. 71.23 (1) or (2) or 71.43, that is a member of a combined reporting group, and that files a combined report under this section.

SB376,11,20 (L) "Top-tier corporation" means a member of a commonly controlled group that is not connected with a parent corporation by stock ownership or interest ownership as described in par. (d), that is a parent corporation, or that is a brother-sister parent corporation, regardless of whether it is doing business in this state or deriving income from sources in this state, and regardless of whether its income and apportionment factors are excluded from a combined report filed under this section.

SB376,12,4 (m) "Unitary business" includes the business activities or operations of an entity that are of mutual benefit to, integrated with, or dependent upon or that contribute to activities of at least one other entity, including transactions that serve an operational function, as determined by the department. Two or more businesses are presumed to be a unitary business if the businesses have unity of ownership, operation, and use as indicated by centralized management or a centralized executive force; centralized purchasing, advertising, or accounting; intercorporate sales or leases; intercorporate services; intercorporate debts; intercorporate use of proprietary materials; interlocking directorates; or interlocking corporate officers.

SB376,12,13 (2) Corporations required to use combined reporting. (a) Except as provided in par. (b), and subject to sub. (6), a corporation that is subject to the tax imposed under s. 71.23 (1) or (2) or 71.43, that is a member of a commonly controlled group, and that is engaged, in whole or in part, in a unitary business with one or more members of the commonly controlled group shall compute the corporation's income attributable to this state by using the income computation under s. 71.26 or 71.45, the apportionment formula under s. 71.25 (6) or 71.45, and the tax credits under s. 71.28 or 71.47 of all of the following that are members of the commonly controlled group:

SB376,12,18 1. Any corporation organized or incorporated under the laws of the United States, any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any possession of the United States, or any political subdivision of the United States, including corporations under sections 931 to 936 of the Internal Revenue Code.

SB376,12,20 2. Any domestic international sales corporation under sections 991 to 994 of the Internal Revenue Code.

SB376,12,22 3. Any foreign sales corporation under sections 921 to 927 of the Internal Revenue Code.

SB376,12,24 4. Any export trade corporation under sections 970 and 971 of the Internal Revenue Code.

SB376,13,5 5. Any corporation, regardless of its place of incorporation if the average of its property factor under s. 71.25 (7) and its payroll factor under s. 71.25 (8), for property and payroll within the United States and computed on an annual basis, is at least 20 percent during any part of the taxable year that a corporation is a member of the commonly controlled group.

SB376,13,9 6. Any corporation not described in subds. 1. to 5. to the extent of the corporation's income within the United States and the corporation's property factor under s. 71.25 (7) and payroll factor under s. 71.25 (8) that is assignable to a location within the United States.