SB246: Bill Text

SB246,1,9 An Act to amend 71.05 (6) (a) 15., 71.21 (4), 71.26 (2) (a) 4., 71.34 (1k) (g), 71.45 (2) (a) 10. and 77.92 (4); and to create 71.05 (6) (a) 25., 71.05 (6) (a) 26., 71.05 (6) (b) 47., 71.05 (6) (b) 48., 71.05 (6) (b) 49., 71.07 (6s), 71.10 (4) (cs), 71.26 (2) (a) 10., 71.28 (6s), 71.30 (3) (dn), 71.45 (2) (a) 19., 71.47 (6s), 71.49 (1) (dn) and 106.115 of the statutes; relating to: a lifelong learning accounts program and creating income tax modifications and an income tax credit for contributions and withdrawals related to lifelong learning accounts, providing an exemption from rule-making procedures, and requiring the exercise of rule-making authority.

Analysis by the Legislative Reference Bureau

This bill is explained in the Notes provided by the Joint Legislative Council in the bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

Joint Legislative Council prefatory note: This bill was prepared for the Joint Legislative Council's Special Committee on Building Wisconsin's Workforce.

This bill creates a lifelong learning accounts program. Under the program, a lifelong learning accounts plan, and the accounts established and administered under the plan, must be approved by the Department of Workforce Development (DWD).

Under the program, a participating employee makes contributions to his or her lifelong learning account and a participating employer may make matching contributions to that account, but must make matching contributions of at least 25 percent of the amount contributed annually by the employer's participating employees in order to be eligible for the lifelong learning tax credit created under the bill. A participating employer that makes matching contributions must base those contributions on a percentage of a participating employee's annual contribution and must apply the same percentage to each participating employee. The combined contributions of the employer and employee may not exceed $5,000 annually, as indexed for inflation, and contributions may not be made to an account with a balance in excess of $25,000, as indexed for inflation.

Employee and employer contributions may be subtracted from the employee's or employer's taxable income, respectively. An employer may claim a nonrefundable income tax credit for certain contributions to the lifelong learning accounts of its employees if the employer matches at least 25 percent of the amount contributed annually by the employer's participating employees. The account must be used to pay for qualified education expenses. If a withdrawal from the account is made for any other purpose, the holder of the account incurs a penalty, unless the holder is 70 years of age or older, in which case the withdrawal is taxed as ordinary income.

SB246, s. 1 Section 1. 71.05 (6) (a) 15. of the statutes, as affected by 2009 Wisconsin Act 2, is amended to read:

SB246,2,8 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3r), (3s), (3t), (3w), (5e), (5f), (5h), (5i), (5j), and (5k), and (6s) 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 (1k) (g).

SB246, s. 2 Section 2. 71.05 (6) (a) 25. of the statutes is created to read:

SB246,2,13 71.05 (6) (a) 25. For taxable years beginning after December 31, 2009, an amount equal to 200 percent of the amount withdrawn by an individual, who is less than 70 years of age at the time of the withdrawal, from a lifelong learning account and not used for qualified education expenses under s. 106.115 (2) (e) or (3) (b).

Note: This Section creates a penalty for nonqualified withdrawals from a lifelong learning account through an addition to an individual's taxable income. The penalty does not apply to persons 70 years of age or older.

SB246, s. 3 Section 3. 71.05 (6) (a) 26. of the statutes is created to read:

SB246,3,5 71.05 (6) (a) 26. For taxable years beginning after December 31, 2009, the amount withdrawn by an individual who is 70 years of age or older at the time of the withdrawal, from a lifelong learning account and not used for qualified education expenses under s. 106.115 (2) (e) or (3) (b).

Note: This Section includes nonqualified lifelong learning account withdrawals by an individual 70 years of age or older in the individual's taxable income.

SB246, s. 4 Section 4. 71.05 (6) (b) 47. of the statutes is created to read:

SB246,3,10 71.05 (6) (b) 47. For taxable years beginning after December 31, 2009, for a participating employee, as defined in s. 106.115 (1) (e), the amount contributed during the taxable year by or on behalf of an individual to a lifelong learning account established under s. 106.115.

Note: This Section subtracts employee and employer lifelong learning account contributions from an individual's federal adjusted gross income (AGI).

SB246, s. 5 Section 5. 71.05 (6) (b) 48. of the statutes is created to read:

SB246,3,16 71.05 (6) (b) 48. For taxable years beginning after December 31, 2009, any increase in value of a lifelong learning account established under s. 106.115, except that the subtraction under this subdivision may not be claimed by any individual who makes a withdrawal for a purpose other than for qualified education expenses under s. 106.115 (2) (e) or (3) (b).

Note: This Section subtracts from federal AGI any gain generated from a lifelong learning account if the withdrawal is used for qualified education expenses.

SB246, s. 6 Section 6. 71.05 (6) (b) 49. of the statutes is created to read:

SB246,4,3 71.05 (6) (b) 49. For taxable years beginning after December 31, 2009, for a participating employer, as defined in s. 106.115 (1) (f), the amount contributed by a participating employer to a lifelong learning account pursuant to a lifelong learning account plan approved under s. 106.115 (2), to the extent not otherwise subtracted in the computation of the employer's taxable income.

Note: This Section subtracts an employer's lifelong learning account contributions made on behalf of the employer's employees from the employer's Wisconsin taxable income.

SB246, s. 7 Section 7. 71.07 (6s) of the statutes is created to read:

SB246,4,7 71.07 (6s) Lifelong learning account credit. (a) Definition. In this subsection, "claimant" means a participating employer, as defined in s. 106.115 (1) (f), who is not an individual.

SB246,4,12 (b) Filing claims. For taxable years beginning after December 31, 2009, subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.02, up to the amount of those taxes, an amount equal to 50 percent of the claimant's lifelong learning account contributions under s. 106.115 (2) (d) paid in the taxable year.

SB246,4,14 (c) Limitations. 1. No credit may be claimed on contributions in excess of $1,000 per employee.

SB246,4,16 2. The amount claimed by a claimant under par. (b) for a taxable year may not exceed $50,000.

SB246,5,2 3. 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 amounts 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 interests.

SB246,5,5 4. No credit may be claimed under a plan in which employer matching contributions are less than 25 percent of the amount contributed annually by participating employees.

SB246,5,7 (d) Administration. The provisions of s. 71.28 (4) (e) to (h), as they apply to the credit under s. 71.28 (4), apply to the credit under this subsection.

Note: This Section creates a nonrefundable employer credit for employer contributions to lifelong learning accounts. The Section grants a credit equal to 50 percent of the employer's first $1,000 contributed per employee. Employers must make matching contributions of at least 25 percent in order to claim the credit. The Section places a $50,000 yearly aggregate limit on the credit available to an employer. The credit may be carried forward and credited against taxes due for the following 15 years.

SB246, s. 8 Section 8. 71.10 (4) (cs) of the statutes is created to read:

SB246,5,9 71.10 (4) (cs) Lifelong learning account credit under s. 71.07 (6s).

SB246, s. 9 Section 9. 71.21 (4) of the statutes, as affected by 2009 Wisconsin Act 2, is amended to read:

SB246,5,15 71.21 (4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3r), (3s), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), and (5k), and (6s) and passed through to partners shall be added to the partnership's income.

SB246, s. 10 Section 10. 71.26 (2) (a) 4. of the statutes, as affected by 2009 Wisconsin Act 2, is amended to read:

SB246,6,2 71.26 (2) (a) 4. Plus the amount of the credit computed under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (1dy), (3g), (3h), (3n), (3p), (3r), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), and (5k), and (6s) 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 (1k) (g).

SB246, s. 11 Section 11. 71.26 (2) (a) 10. of the statutes is created to read:

SB246,6,8 71.26 (2) (a) 10. For taxable years beginning after December 31, 2009, for a participating employer, as defined in s. 106.115 (1) (f), minus the amount contributed by a participating employer to a lifelong learning account pursuant to a lifelong learning account plan approved under s. 106.115 (2), to the extent not otherwise subtracted in the computation of the employer's net income.

Note: This Section subtracts an employer's lifelong learning account contributions made on behalf of the employer's employees from the employer's net income.

SB246, s. 12 Section 12. 71.28 (6s) of the statutes is created to read:

SB246,6,12 71.28 (6s) Lifelong learning account credit. (a) Definition. In this subsection, "claimant" means a participating employer, as defined in s. 106.115 (1) (f).

SB246,6,17 (b) Filing claims. For taxable years beginning after December 31, 2009, subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.23, up to the amount of those taxes, an amount equal to 50 percent of the claimant's lifelong learning account contributions under s. 106.115 (2) (d) paid in the taxable year.

SB246,6,19 (c) Limitations. 1. No credit may be claimed on contributions in excess of $1,000 per employee.

SB246,6,21 2. The amount claimed by a claimant under par. (b) for a taxable year may not exceed $50,000.

SB246,7,6 3. 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 amounts 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 interests.

SB246,7,9 4. No credit may be claimed under a plan in which employer matching contributions are less than 25 percent of the amount contributed annually by participating employees.

SB246,7,11 (d) Administration. The provisions of sub. (4) (e) to (h), as they apply to the credit under sub. (4), apply to the credit under this subsection.

Note: This Section creates a nonrefundable employer credit for employer contributions to lifelong learning accounts. The Section grants a credit equal to 50 percent of the employer's first $1,000 contributed per employee. Employers must make matching contributions of at least 25 percent in order to claim the credit. The Section places a $50,000 yearly aggregate limit on the credit available to an employer. The credit may be carried forward and credited against taxes due for the following 15 years.

SB246, s. 13 Section 13. 71.30 (3) (dn) of the statutes is created to read:

SB246,7,13 71.30 (3) (dn) Lifelong learning account credit under s. 71.28 (6s).

SB246, s. 14 Section 14. 71.34 (1k) (g) of the statutes, as affected by 2009 Wisconsin Act 2, is amended to read:

SB246,7,19 71.34 (1k) (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), (1dy), (3), (3g), (3h), (3n), (3p), (3r), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), and (5k), and (6s) and passed through to shareholders.

SB246, s. 15 Section 15. 71.45 (2) (a) 10. of the statutes, as affected by 2009 Wisconsin Act 2, is amended to read:

SB246,8,7 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit computed under s. 71.47 (1dd) to (1dy), (3h), (3n), (3p), (3r), (3w), (5e), (5f), (5g), (5h), (5i), (5j), and (5k), and (6s) 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 (1k) (g) and the amount of credit computed under s. 71.47 (1), (3), (3t), (4), and (5).

SB246, s. 16 Section 16. 71.45 (2) (a) 19. of the statutes is created to read:

SB246,8,14 71.45 (2) (a) 19. For taxable years beginning after December 31, 2009, for a participating employer, as defined in s. 106.115 (1) (f), by subtracting from federal taxable income the amount contributed by a participating employer to a lifelong learning account pursuant to a lifelong learning account plan approved under s. 106.115 (2), to the extent not otherwise subtracted in the computation of the employer's net income.

Note: This Section subtracts an employer's lifelong learning account contributions made on behalf of the employer's employees from the employer's net income.

SB246, s. 17 Section 17. 71.47 (6s) of the statutes is created to read:

SB246,8,18 71.47 (6s) Lifelong learning account credit. (a) Definition. In this subsection, "claimant" means a participating employer, as defined in s. 106.115 (1) (f).

SB246,8,23 (b) Filing claims. For taxable years beginning after December 31, 2009, subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.43, up to the amount of those taxes, an amount equal to 50 percent of the claimant's lifelong learning account contributions under s. 106.115 (2) (d) paid in the taxable year.

SB246,9,2 (c) Limitations. 1. No credit may be claimed on contributions in excess of $1,000 per employee.

SB246,9,4 2. The amount claimed by a claimant under par. (b) for a taxable year may not exceed $50,000.

SB246,9,12 3. 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 amounts 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 interests.

SB246,9,15 4. No credit may be claimed under a plan in which employer matching contributions are less than 25 percent of the amount contributed annually by participating employees.

SB246,9,17 (d) Administration. The provisions of s. 71.28 (4) (e) to (h), as they apply to the credit under s. 71.28 (4), apply to the credit under this subsection.

Note: This Section creates a nonrefundable employer credit for employer contributions to lifelong learning accounts. The Section grants a credit equal to 50 percent of the employer's first $1,000 contributed per employee. Employers must make matching contributions of at least 25 percent in order to claim the credit. The Section places a $50,000 yearly aggregate limit on the credit available to an employer. The credit may be carried forward and credited against taxes due for the following 15 years.

SB246, s. 18 Section 18. 71.49 (1) (dn) of the statutes is created to read:

SB246,9,19 71.49 (1) (dn) Lifelong learning account credit under s. 71.47 (6s).

SB246, s. 19 Section 19. 77.92 (4) of the statutes, as affected by 2009 Wisconsin Act 2, is amended to read:

SB246,10,16 77.92 (4) "Net business income," with respect to a partnership, means taxable income as calculated under section 703 of the Internal Revenue Code; plus the items of income and gain under section 702 of the Internal Revenue Code, including taxable state and municipal bond interest and excluding nontaxable interest income or dividend income from federal government obligations; minus the items of loss and deduction under section 702 of the Internal Revenue Code, except items that are not deductible under s. 71.21; plus guaranteed payments to partners under section 707 (c) of the Internal Revenue Code; plus the credits claimed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3r), (3s), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), and (5k) , and (6s); and plus or minus, as appropriate, transitional adjustments, depreciation differences, and basis differences under s. 71.05 (13), (15), (16), (17), and (19); but excluding income, gain, loss, and deductions from farming. "Net business income," with respect to a natural person, estate, or trust, means profit from a trade or business for federal income tax purposes and includes net income derived as an employee as defined in section 3121 (d) (3) of the Internal Revenue Code.

SB246, s. 20 Section 20. 106.115 of the statutes is created to read:

SB246,10,18 106.115 Lifelong learning accounts program. (1) In this section:

SB246,10,20 (a) "Account" means a lifelong learning account that is approved by the department under sub. (3).

SB246,10,22 (b) "Eligible employee" means an employee who is eligible to participate in a participating employer's plan.

SB246,10,25 (c) "Full-time employee" means an employee who is employed by a participating employer to work at least 2,080 hours per year, including paid leave and holidays, and whose principal place of employment is in this state.

SB246,11,3 (d) "Part-time employee" means an employee who is employed by a participating employer to work less than 2,080 hours per year, including paid leave and holidays, and whose principal place of employment is in this state.

SB246,11,5 (e) "Participating employee" means an eligible employee who participates in a lifelong learning accounts program under this section.

SB246,11,7 (f) "Participating employer" means an employer that participates in a lifelong learning accounts program under this section.

SB246,11,9 (g) "Plan" means a lifelong learning account plan that is approved by the department under sub. (2).

SB246,11,17 (h) "Qualified education expenses" means expenses for tuition and fees, books, equipment, and tools or supplies that may be retained by a participating employee relating to a course of instruction provided by a postsecondary educational institution that is accredited to the satisfaction of the department and moneys transferred from a participating employee's account to the participating employee's account established under the plan of another participating employer. "Qualified education expenses" does not include expenses for meals, lodging, transportation, or any course or other instruction involving sports, games, or hobbies.

SB246,11,18 (2) The department shall approve a plan that satisfies all of the following:

SB246,11,19 (a) Is in writing.

SB246,11,22 (b) Covers at least all full-time employees of the participating employer and, if the participating employer elects to cover part-time employees under the plan, all part-time employees.