AB328: Bill Text

3. The related entity was subject to tax on its net income, and a measure of the tax included the expenses or costs received from the taxpayer.

Because this bill relates to an exemption from state or local taxes, it may be referred to the Joint Survey Committee on Tax Exemptions for a report to be printed as an appendix to the bill.

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:

AB328, s. 1 Section 1. 71.01 (5p) of the statutes is created to read:

AB328,2,11 71.01 (5p) "Intangible expenses and costs" includes expenses, losses, and costs for, related to, or directly or indirectly in connection with the direct or indirect acquisition of, use of, maintenance or management of, ownership of, sale of, exchange of, or any other direct or indirect disposition of intangible property to the extent that such expenses, losses, and costs are allowed as deductions or costs to determine federal taxable income under the Internal Revenue Code. For purposes of this subsection, "expenses, losses, and costs" includes losses related to or incurred directly or indirectly in connection with factoring transactions and discounting transactions; royalty, patent, technical, and copyright fees; licensing fees; and other similar expenses and costs.

AB328, s. 2 Section 2. 71.01 (9b) of the statutes is created to read:

AB328,3,3 71.01 (9b) "Related entity" means any person related to a taxpayer as provided under section 267, 318, or 1563 of the Internal Revenue Code during all or a portion of the taxpayer's taxable year.

AB328, s. 3 Section 3. 71.05 (6) (a) 21. of the statutes is created to read:

AB328,3,9 71.05 (6) (a) 21. Any amount deducted or excluded under the Internal Revenue Code for management and service fees, interest expenses and costs, intangible expenses and costs, and any other expenses and costs directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.

AB328, s. 4 Section 4. 71.22 (3m) of the statutes is created to read:

AB328,3,20 71.22 (3m) "Intangible expenses and costs" includes expenses, losses, and costs for, related to, or directly or indirectly in connection with the direct or indirect acquisition of, use of, maintenance or management of, ownership of, sale of, exchange of, or any other direct or indirect disposition of intangible property to the extent that such expenses, losses, and costs are allowed as deductions or costs to determine federal taxable income under the Internal Revenue Code. For purposes of this subsection, "expenses, losses, and costs" includes losses related to or incurred directly or indirectly in connection with factoring transactions and discounting transactions; royalty, patent, technical, and copyright fees; licensing fees; and other similar expenses and costs.

AB328, s. 5 Section 5. 71.22 (9b) of the statutes is created to read:

AB328,3,24 71.22 (9b) "Related entity" means any person related to a taxpayer as provided under section 267, 318, or 1563 of the Internal Revenue Code during all or a portion of the taxpayer's taxable year.

AB328, s. 6 Section 6. 71.26 (2) (a) of the statutes is renumbered 71.26 (2) (a) (intro.) and amended to read:

AB328,4,5 71.26 (2) (a) (intro.) 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 and modified as follows:

AB328,4,6 1. Minus the amount of recapture under s. 71.28 (1di) plus.

AB328,4,7 2. Plus the amount of credit computed under s. 71.28 (1), (3), (4), and (5) minus,.

AB328,4,10 3. 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.

AB328,4,15 4. Plus the amount of the credit computed under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (3g), (3n), (3t), (3w), (5b), (5e), (5f), (5g), and (5h) 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.

AB328,4,19 5. 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.

AB328,4,23 6. 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).

AB328, s. 7 Section 7. 71.26 (2) (a) 7. of the statutes is created to read:

AB328,5,5 71.26 (2) (a) 7. Plus any amount deducted or excluded under the Internal Revenue Code for management and service fees, interest expenses and costs, intangible expenses and costs, and any other expenses and costs directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.

AB328, s. 8 Section 8. 71.34 (1) (j) of the statutes is created to read:

AB328,5,12 71.34 (1) (j) An addition shall be made for any amount deducted or excluded under the Internal Revenue Code for management and service fees, interest expenses and costs, intangible expenses and costs, and any other expenses and costs directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.

AB328, s. 9 Section 9. 71.42 (1p) of the statutes is created to read:

AB328,5,23 71.42 (1p) "Intangible expenses and costs" includes expenses, losses, and costs for, related to, or directly or indirectly in connection with the direct or indirect acquisition of, use of, maintenance or management of, ownership of, sale of, exchange of, or any other direct or indirect disposition of intangible property to the extent that such expenses, losses, and costs are allowed as deductions or costs to determine federal taxable income under the Internal Revenue Code. For purposes of this subsection, "expenses, losses, and costs" includes losses related to or incurred directly or indirectly in connection with factoring transactions and discounting transactions; royalty, patent, technical, and copyright fees; licensing fees; and other similar expenses and costs.

AB328, s. 10 Section 10. 71.42 (4m) of the statutes is created to read:

AB328,6,3 71.42 (4m) "Related entity" means any person related to a taxpayer as provided under section 267, 318, or 1563 of the Internal Revenue Code during all or a portion of the taxpayer's taxable year.

AB328, s. 11 Section 11. 71.45 (2) (a) 16. of the statutes is created to read:

AB328,6,10 71.45 (2) (a) 16. By adding to federal taxable income any amount deducted or excluded under the Internal Revenue Code for management and service fees, interest expenses and costs, intangible expenses and costs, and any other expenses and costs directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.

AB328, s. 12 Section 12. 71.738 (3m) of the statutes is created to read:

AB328,6,14 71.738 (3m) "Related entity" means any person related to a taxpayer as provided under section 267, 318, or 1563 of the Internal Revenue Code during all or a portion of the taxpayer's taxable year.

AB328, s. 13 Section 13. 71.80 (23) of the statutes is created to read:

AB328,6,22 71.80 (23) Transactions. (a) Subject to par. (b), if the department asserts the sham transaction doctrine, or any other related tax doctrine, to disallow the tax consequences, as asserted by the taxpayer, of a transaction, the department may allow the tax consequences, as asserted by the taxpayer, of the transaction, if the taxpayer demonstrates by clear and convincing evidence that the transaction had a valid, good faith, business purpose other than tax avoidance and had economic substance apart from any tax benefit asserted by the taxpayer.

AB328,7,3 (b) For all instances in which the department disallows the tax consequences, as asserted by the taxpayer, of a transaction, the department may allow the tax consequences, as asserted by the taxpayer, of the transaction, if the taxpayer demonstrates by clear and convincing evidence that the transaction's nontaxable business purpose, as asserted by the taxpayer, is commensurate with the transaction's tax benefit, as asserted by the taxpayer.

AB328,7,6 (c) The adjustments under ss. 71.05 (6) (a) 21., 71.26 (2) (a) 7., 71.34 (1) (j), and 71.45 (2) (a) 16. shall not apply to any expenses or costs if all of the following apply to the expenses or costs:

AB328,7,8 1. The transaction to which the expenses or costs are related did not have tax avoidance as its principal purpose.

AB328,7,16 2. The related entity to whom the taxpayer paid interest expenses or costs, intangible expenses, or management or service fees during the taxable year directly or indirectly paid, accrued, or incurred such amounts to a person who is not a related entity. For purposes of this subdivision, "interest" means interest on a debt for which the taxpayer is the guarantor, if the interest rate is the market rate in effect at the time of the debt's origination, but excludes interest that is paid in connection with any debt that is incurred to acquire the taxpayer's assets or stock under section 368 of the Internal Revenue Code.

AB328,8,5 3. The related entity was subject to tax on its net income in this state, or any state, U.S. possession, or foreign country; a measure of the tax paid included the interest income, intangible income, or management or service fees received from the taxpayer; and the tax rate applied to the interest income, intangible income, or management or service fees was not less than 3 percentage points below the tax rate that would have applied under s. 71.27. For purposes of this subdivision, "any state, U.S. possession, or foreign country" does not include any state, U.S. possession, or foreign country under the laws of which the taxpayer files or could have elected to file with the related entity, or the related entity files or could have elected to file with another entity, a combined income tax report or return, a consolidated income tax report or return, or any other report or return that is due because of the imposition of a tax that is measured on or by income, if the report of return results in eliminating the tax effects of transactions directly or indirectly between either the taxpayer and the related entity or between the related entity and another entity.

AB328, s. 14 Section 14. Initial applicability.

AB328,8,7 (1) This act first applies to taxable years beginning on January 1, 2008.

AB328,8,8 (End)