For taxable year 2012 and thereafter, this bill creates a sixth bracket with a
taxation rate of 8.75 percent. For single individuals, certain fiduciaries, and heads
of households, this bracket applies to taxable income exceeding $1,000,000. For
married persons, this bracket applies to taxable income exceeding $1,000,000 for
joint filers and $500,000 for separate filers. This bracket is indexed for inflation.
Earned income tax credit
Under current law, as created in 2011 Wisconsin Act 32, the earned income tax
credit (EITC) is reduced for claimants with two or more qualifying children. The bill
repeals those provisions and restores former law. Under the bill, the EITC, as a
percentage of the federal credit, would be 4 percent for claimants with one qualifying
child, 14 percent for claimants with two qualifying children, and 43 percent for
claimants with three or more qualifying children.
Homestead tax credit
Under current law, as created in 2011 Wisconsin Act 32, the homestead tax
credit formula factors (maximum income, maximum property taxes, and income
threshold) are not indexed for inflation after 2010. The bill repeals those provisions
and restores former law. Under the bill, the homestead tax credit formula factors
would be indexed for inflation for 2011 and beyond.
Exclusion of capital gains
Under current law, there is an income tax exclusion for individuals, fiduciaries,
members of limited liability companies and partnerships, and shareholders of

tax-option corporations for 30 percent of the net long-term capital gains realized
from the sale of assets held more than one year and the sale of all assets acquired
from a decedent, and an exclusion for 60 percent of such gains realized from the sale
of farm assets held more than one year and the sale of all farm assets acquired from
a decedent.
Under this bill, the exclusion of 30 percent of such net long-term capital gains,
and all assets acquired from a decedent, does not apply to taxable years beginning
after December 31, 2011. The bill does not affect the exclusion of the gains realized
from the sale of farm assets held more than one year and the sale of farm assets
acquired from a decedent.
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:
AB637, s. 1 1Section 1. 71.01 (14) of the statutes is amended to read:
AB637,4,52 71.01 (14) "Wisconsin net operating loss" of persons other than corporations
3means "federal net operating loss" adjusted as prescribed in s. 71.05 (6) (a) and (b),
4(7) to (12) and (19) to (21), except s. 71.05 (6) (b) 9., except that no deductions
5allowable on schedule A for federal income tax purposes are allowable.
AB637, s. 2 6Section 2. 71.05 (6) (a) 15. of the statutes, as affected by 2011 Wisconsin Act
732
, is amended to read:
AB637,4,138 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de),
9(2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3q), (3r),
10(3rm), (3rn), (3s), (3t), (3w), (5e), (5f), (5h), (5i), (5j), (5k), (5n), (5r), (5rm), and (8r) and
11not passed through by a partnership, limited liability company, or tax-option
12corporation that has added that amount to the partnership's, company's, or
13tax-option corporation's income under s. 71.21 (4) or 71.34 (1k) (g).
AB637, s. 3
1Section 3. 71.05 (6) (b) 9. of the statutes is amended to read:
AB637,5,112 71.05 (6) (b) 9. On assets held more than one year and on all assets acquired
3from a decedent, 30 percent of the capital gain as computed under the internal
4revenue code, not including capital gains for which the federal tax treatment is
5determined under section 406 of P.L. 99-514; not including amounts treated as
6ordinary income for federal income tax purposes because of the recapture of
7depreciation or any other reason; and not including amounts treated as capital gain
8for federal income tax purposes from the sale or exchange of a lottery prize. For
9purposes of this subdivision, the capital gains and capital losses for all assets shall
10be netted before application of the percentage. This subdivision does not apply to
11taxable years that begin after December 31, 2011.
AB637, s. 4 12Section 4. 71.05 (6) (b) 9m. of the statutes is amended to read:
AB637,5,2313 71.05 (6) (b) 9m. On farm assets held more than one year and on all farm assets
14acquired from a decedent, to the extent that they are not subtracted under subd. 9.
15or
10., 60 percent of the capital gain as computed under the Internal Revenue Code,
16not including capital gains for which the federal tax treatment is determined under
17section 406 of P.L. 99-514; not including amounts treated as ordinary income for
18federal income tax purposes because of the recapture of depreciation or any other
19reason; and not including amounts treated as capital gain for federal income tax
20purposes from the sale or exchange of a lottery prize. In this subdivision, "farm
21assets" means livestock, farm equipment, farm real property, and farm depreciable
22property. For purposes of this subdivision, the capital gains and capital losses for all
23assets shall be netted before application of the percentage.
AB637, s. 5 24Section 5. 71.05 (6) (b) 25. of the statutes is amended to read:
AB637,6,8
171.05 (6) (b) 25. All gains that are not excluded from taxation under subd. 9.,
2on business assets or
9m. on assets used in farming, including shares in a corporation
3or trust that meets the standards under s. 182.001 (1), or both, held more than one
4year, that are sold or otherwise disposed of to persons who are related to the seller
5or transferor by blood, marriage or adoption within the 3rd degree of kinship as
6determined under s. 990.001 (16), as computed under the Internal Revenue Code, not
7including amounts treated as ordinary income for federal income tax purposes
8because of the recapture of depreciation or any other reason.
AB637, s. 6 9Section 6. 71.05 (6) (b) 47. b. of the statutes, as created by 2011 Wisconsin Act
103
, is amended to read:
AB637,7,511 71.05 (6) (b) 47. b. With respect to partners and members of limited liability
12companies, for taxable years beginning after December 31, 2010, for 2 consecutive
13taxable years beginning with the taxable year in which the partnership's or limited
14liability company's business locates to this state from another state or another
15country and begins doing business in this state, as defined in s. 71.22 (1r), and subject
16to the limitations provided under subd. 47. d. and e., the partner's or member's
17distributive share of taxable income as calculated under section 703 of the Internal
18Revenue Code; plus the items of income and gain under section 702 of the Internal
19Revenue Code, including taxable state and municipal bond interest and excluding
20nontaxable interest income or dividend income from federal government obligations;
21minus the items of loss and deduction under section 702 of the Internal Revenue
22Code, except items that are not deductible under s. 71.21; plus guaranteed payments
23to partners under section 707 (c) of the Internal Revenue Code; plus the credits
24claimed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (2dy),
25(3g), (3h), (3n), (3p), (3q), (3r), (3rm), (3rn), (3s), (3t), (3w), (5e), (5f), (5g), (5h), (5i),

1(5j), (5k), (5r), (5rm), and (8r); and plus or minus, as appropriate, transitional
2adjustments, depreciation differences, and basis differences under s. 71.05 (13), (15),
3(16), (17), and (19), multiplied by the apportionment fraction determined in s. 71.04
4(4) and subject to s. 71.04 (7) or by separate accounting. No amounts subtracted
5under this subd. 47. b. may be included in the modification under par. (b) 9. or 9m.
AB637, s. 7 6Section 7. 71.05 (6) (b) 47. c. of the statutes, as created by 2011 Wisconsin Act
73
, is amended to read:
AB637,7,188 71.05 (6) (b) 47. c. With respect to shareholders of a tax-option corporation, for
9taxable years beginning after December 31, 2010, for 2 consecutive taxable years
10beginning with the taxable year in which the tax-option corporation's business
11locates to this state from another state or another country and begins doing business
12in this state, as defined in s. 71.22 (1r), and subject to the limitations provided under
13subd. 47. d. and e., the shareholder's distributive share of the entity's net income or
14loss as determined under this chapter, including interest income from federal, state,
15and municipal government obligations, multiplied by the apportionment fraction
16determined in s. 71.25 (6m) and subject to s. 71.25 (9) or by separate accounting. No
17amounts subtracted under this subdivision may be included in the modification
18under par. (b) 9. or 9m.
AB637, s. 8 19Section 8. 71.05 (8) (b) of the statutes, as affected by 2011 Wisconsin Act 32,
20is amended to read:
AB637,8,821 71.05 (8) (b) A Wisconsin net operating loss may be carried forward against
22Wisconsin taxable incomes of the next 15 taxable years, if the taxpayer was subject
23to taxation under this chapter in the taxable year in which the loss was sustained,
24to the extent not offset against other income of the year of loss and to the extent not
25offset against Wisconsin modified taxable income of any year between the loss year

1and the taxable year for which the loss carry-forward is claimed. In this paragraph,
2"Wisconsin modified taxable income" means Wisconsin taxable income with the
3following exceptions: a net operating loss deduction or offset for the loss year or any
4taxable year thereafter is not allowed, the deduction for long-term capital gains
5under subs. (6) (b) 9. and 9m. and (25) is not allowed, the amount deductible for losses
6from sales or exchanges of capital assets may not exceed the amount includable in
7income for gains from sales or exchanges of capital assets and "Wisconsin modified
8taxable income" may not be less than zero.
AB637, s. 9 9Section 9. 71.05 (25) (b) (intro.) of the statutes, as created by 2011 Wisconsin
10Act 32
, is amended to read:
AB637,8,1511 71.05 (25) (b) (intro.) For taxable years beginning after December 31, 2015, for
12a Wisconsin capital asset that is purchased after December 31, 2010, and held for at
13least 5 years, a claimant may subtract from federal adjusted gross income the lesser
14of one of the following amounts, to the extent that it is not subtracted under sub. (6)
15(b) 9. or 9m.:
AB637, s. 10 16Section 10. 71.06 (1p) (e) of the statutes is amended to read:
AB637,8,1817 71.06 (1p) (e) On all taxable income exceeding $225,000 but not exceeding
18$1,000,000
, 7.75 percent.
AB637, s. 11 19Section 11. 71.06 (1p) (f) of the statutes is created to read:
AB637,8,2020 71.06 (1p) (f) On all taxable income exceeding $1,000,000, 8.75 percent.
AB637, s. 12 21Section 12. 71.06 (2) (g) 5. of the statutes is amended to read:
AB637,8,2322 71.06 (2) (g) 5. On all taxable income exceeding $300,000 but not exceeding
23$1,000,000
, 7.75 percent.
AB637, s. 13 24Section 13. 71.06 (2) (g) 6. of the statutes is created to read:
AB637,8,2525 71.06 (2) (g) 6. On all taxable income exceeding $1,000,000, 8.75 percent.
AB637, s. 14
1Section 14. 71.06 (2) (h) 5. of the statutes is amended to read:
AB637,9,32 71.06 (2) (h) 5. On all taxable income exceeding $150,000 but not exceeding
3$500,000
, 7.75 percent.
AB637, s. 15 4Section 15. 71.06 (2) (h) 6. of the statutes is created to read:
AB637,9,55 71.06 (2) (h) 6. On all taxable income exceeding $500,000, 8.75 percent.
AB637, s. 16 6Section 16. 71.06 (2e) (b) of the statutes is amended to read:
AB637,9,237 71.06 (2e) (b) For taxable years beginning after December 31, 2009, the
8maximum dollar amount in each tax bracket, and the corresponding minimum dollar
9amount in the next bracket, under subs. (1p) (d) and (e) and (2) (g) 4. and 5. and (h)
104. and 5., and the dollar amount in the top bracket under subs. (1p) (e) (f) and (2) (g)
115. 6. and (h) 5. 6., shall be increased each year by a percentage equal to the percentage
12change between the U.S. consumer price index for all urban consumers, U.S. city
13average, for the month of August of the previous year and the U.S. consumer price
14index for all urban consumers, U.S. city average, for the month of August 2008, as
15determined by the federal department of labor, except that for taxable years
16beginning after December 31, 2011, the adjustment may occur only if the resulting
17amount is greater than the corresponding amount that was calculated for the
18previous year. Each amount that is revised under this paragraph shall be rounded
19to the nearest multiple of $10 if the revised amount is not a multiple of $10 or, if the
20revised amount is a multiple of $5, such an amount shall be increased to the next
21higher multiple of $10. The department of revenue shall annually adjust the changes
22in dollar amounts required under this paragraph and incorporate the changes into
23the income tax forms and instructions.
AB637, s. 17 24Section 17. 71.07 (5n) of the statutes, as created by 2011 Wisconsin Act 32, is
25repealed.
AB637, s. 18
1Section 18. 71.07 (9e) (af) (intro.) of the statutes, as affected by 2011 Wisconsin
2Act 32
, is amended to read:
AB637,10,73 71.07 (9e) (af) (intro.) For taxable years beginning after December 31, 1995,
4and before January 1, 2011, any natural person may credit against the tax imposed
5under s. 71.02 an amount equal to one of the following percentages of the federal
6basic earned income credit for which the person is eligible for the taxable year under
7section 32 (b) (1) (A) to (C) of the Internal Revenue Code:
AB637, s. 19 8Section 19. 71.07 (9e) (aj) of the statutes, as created by 2011 Wisconsin Act 32,
9is repealed.
AB637, s. 20 10Section 20. 71.09 (11) (f) of the statutes is amended to read:
AB637,10,1411 71.09 (11) (f) The taxpayer has underpaid the taxpayer's estimated taxes due
12to the change in brackets under s. 71.06 (1p) (e) or (f) and (2) (g) 5. or 6. and (h) 5. or
136.
This paragraph applies only in the first taxable year to which these bracket
14changes apply.
AB637, s. 21 15Section 21. 71.10 (4) (cr) of the statutes, as created by 2011 Wisconsin Act 32,
16is repealed.
AB637, s. 22 17Section 22. 71.21 (4) of the statutes, as affected by 2011 Wisconsin Act 32, is
18amended to read:
AB637,10,2219 71.21 (4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di),
20(2dj), (2dL), (2dm), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3q), (3r), (3rm), (3rn), (3s),
21(3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k), (5n), (5r), (5rm), and (8r) and passed
22through to partners shall be added to the partnership's income.
AB637, s. 23 23Section 23. 71.255 (2m) (d) of the statutes, as affected by 2011 Wisconsin Act
2432
, is amended to read:
AB637,11,4
171.255 (2m) (d) The department may not shall disregard the tax effect of an
2election under this subsection, or disallow the election, with respect to any controlled
3group member or members for any year of the election period, if the department
4determines that the election has the effect of tax avoidance
.
AB637, s. 24 5Section 24. 71.255 (6) (a) of the statutes, as affected by 2011 Wisconsin Act 32,
6is amended to read:
AB637,11,157 71.255 (6) (a) Except as provided in pars. (b), (bm), and (c) no tax credit,
8Wisconsin net business loss carry-forward, or other post-apportionment deduction
9earned by one member of the combined group, but not fully used by or allowed to that
10member, may be used in whole or in part by another member of the combined group
11or applied in whole or in part against the total income of the combined group. A
12member of a combined group may use a carry-forward of a credit, Wisconsin net
13business loss carry-forward, or other post-apportionment deduction otherwise
14allowable under s. 71.26 or 71.45, that was incurred by that same member in a
15taxable year beginning before January 1, 2009.
AB637, s. 25 16Section 25. 71.255 (6) (bm) of the statutes, as created by 2011 Wisconsin Act
1732
, is repealed.
AB637, s. 26 18Section 26. 71.26 (2) (a) 4. of the statutes, as affected by 2011 Wisconsin Act
1932
, is amended to read:
AB637,12,220 71.26 (2) (a) 4. Plus the amount of the credit computed under s. 71.28 (1dd),
21(1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (1dy), (3g), (3h), (3n), (3p), (3q), (3r),
22(3rm), (3rn), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k), (5n), (5r), (5rm), (8r), and
23(9s) and not passed through by a partnership, limited liability company, or
24tax-option corporation that has added that amount to the partnership's, limited

1liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1k)
2(g).
AB637, s. 27 3Section 27. 71.26 (4) (a) of the statutes, as affected by 2011 Wisconsin Act 32,
4is renumbered 71.26 (4) and amended to read:
AB637,12,215 71.26 (4) Except as provided in par. (b), a A corporation, except a tax-option
6corporation or an insurer to which s. 71.45 (4) applies, may offset against its
7Wisconsin net business income any Wisconsin net business loss sustained in any of
8the next 15 preceding taxable years, if the corporation was subject to taxation under
9this chapter in the taxable year in which the loss was sustained, to the extent not
10offset by other items of Wisconsin income in the loss year and by Wisconsin net
11business income of any year between the loss year and the taxable year for which an
12offset is claimed. For purposes of this subsection Wisconsin net business income or
13loss shall consist of all the income attributable to the operation of a trade or business
14in this state, less the business expenses allowed as deductions in computing net
15income. The Wisconsin net business income or loss of corporations engaged in
16business within and without the state shall be determined under s. 71.25 (6) and (10)
17to (12). Nonapportionable losses having a Wisconsin situs under s. 71.25 (5) (b) shall
18be included in Wisconsin net business loss; and nonapportionable income having a
19Wisconsin situs under s. 71.25 (5) (b), whether taxable or exempt, shall be included
20in other items of Wisconsin income and Wisconsin net business income for purposes
21of this subsection.
AB637, s. 28 22Section 28. 71.26 (4) (b) of the statutes, as created by 2011 Wisconsin Act 32,
23is repealed.
AB637, s. 29 24Section 29. 71.28 (5n) of the statutes, as created by 2011 Wisconsin Act 32, is
25repealed.
AB637, s. 30
1Section 30. 71.30 (3) (dn) of the statutes, as created by 2011 Wisconsin Act 32,
2is repealed.
AB637, s. 31 3Section 31. 71.34 (1k) (g) of the statutes, as affected by 2011 Wisconsin Act 32,
4is amended to read:
AB637,13,85 71.34 (1k) (g) An addition shall be made for credits computed by a tax-option
6corporation under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (1dy),
7(3), (3g), (3h), (3n), (3p), (3q), (3r), (3rm), (3rn), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j),
8(5k), (5n), (5r), (5rm), and (8r) and passed through to shareholders.
AB637, s. 32 9Section 32. 71.36 (1m) (a) of the statutes is amended to read:
AB637,13,1310 71.36 (1m) (a) A tax-option corporation may deduct from its net income all
11amounts included in the Wisconsin adjusted gross income of its shareholders, the
12capital gain deduction under s. 71.05 (6) (b) 9.
and all amounts not taxable to
13nonresident shareholders under ss. 71.04 (1) and (4) to (9) and 71.362.
AB637, s. 33 14Section 33. 71.45 (2) (a) 10. of the statutes, as affected by 2011 Wisconsin Act
1532
, is amended to read:
AB637,13,2216 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit
17computed under s. 71.47 (1dd) to (1dy), (3g), (3h), (3n), (3p), (3q), (3r), (3rm), (3rn),
18(3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k), (5n), (5r), (5rm), (8r), and (9s) and not passed
19through by a partnership, limited liability company, or tax-option corporation that
20has added that amount to the partnership's, limited liability company's, or
21tax-option corporation's income under s. 71.21 (4) or 71.34 (1k) (g) and the amount
22of credit computed under s. 71.47 (1), (3), (3t), (4), (4m), and (5).
AB637, s. 34 23Section 34. 71.45 (4) (a) of the statutes, as affected by 2011 Wisconsin Act 32,
24is renumbered 71.45 (4) and amended to read:
AB637,14,10
171.45 (4) Except as provided in par. (b), insurers Insurers computing tax under
2this subchapter may subtract from Wisconsin net income any Wisconsin net business
3loss sustained in any of the next 15 preceding taxable years to the extent not offset
4by Wisconsin net business income of any year between the loss year and the taxable
5year for which an offset is claimed and computed without regard to sub. (2) (a) 8. and
69. and this subsection and limited to the amount of net income, but no loss incurred
7for a taxable year before taxable year 1987 by a nonprofit service plan of sickness care
8under ch. 148, or dental care under s. 447.13 may be treated as a net business loss
9of the successor service insurer under ch. 613 operating by virtue of s. 148.03 or
10447.13.
AB637, s. 35 11Section 35. 71.45 (4) (b) of the statutes, as created by 2011 Wisconsin Act 32,
12is repealed.
AB637, s. 36 13Section 36. 71.47 (5n) of the statutes, as created by 2011 Wisconsin Act 32, is
14repealed.
AB637, s. 37 15Section 37. 71.49 (1) (dn) of the statutes, as created by 2011 Wisconsin Act 32,
16is repealed.
AB637, s. 38 17Section 38. 71.54 (1) (f) (intro.) of the statutes, as affected by 2011 Wisconsin
18Act 32
, is amended to read:
AB637,14,2219 71.54 (1) (f) 2001 to 2011 and thereafter. (intro.) Subject to sub. (2m), the
20amount of any claim filed in 2001 to 2011 and thereafter and based on property taxes
21accrued or rent constituting property taxes accrued during the previous year is
22limited as follows:
AB637, s. 39 23Section 39. 71.54 (1) (g) of the statutes, as created by 2011 Wisconsin Act 32,
24is repealed.
AB637, s. 40
1Section 40. 71.54 (2) (b) 3. of the statutes, as affected by 2011 Wisconsin Act
232
, is amended to read:
AB637,15,43 71.54 (2) (b) 3. Subject to sub. (2m), in calendar years 1990 to 2010 year 1990
4or any subsequent calendar year
, $1,450.
AB637, s. 41 5Section 41. 71.54 (2) (b) 4. of the statutes, as created by 2011 Wisconsin Act
632
, is repealed.
AB637, s. 42 7Section 42. 71.54 (2m) of the statutes, as affected by 2011 Wisconsin Act 32,
8is amended to read:
AB637,15,259 71.54 (2m) Indexing for inflation; 2010 and thereafter. (a) For calendar years
10beginning after December 31, 2009, and before January 1, 2011, the dollar amounts
11of the threshold income under sub. (1) (f) 1. and 2., the maximum household income
12under sub. (1) (f) 3. and the maximum property taxes under sub. (2) (b) 3. shall be
13increased each year by a percentage equal to the percentage change between the U.S.
14consumer price index for all urban consumers, U.S. city average, for the 12-month
15average of the U.S. consumer price index for the month of August of the year before
16the previous year through the month of July of the previous year and the U.S.
17consumer price index for all urban consumers, U.S. city average, for the 12-month
18average of the U.S. consumer price index for August 2007 through July 2008, as
19determined by the federal department of labor, except that the adjustment may occur
20only if the percentage is a positive number. Each amount that is revised under this
21paragraph shall be rounded to the nearest multiple of $10 if the revised amount is
22not a multiple of $10 or, if the revised amount is a multiple of $5, such an amount
23shall be increased to the next higher multiple of $10. The department of revenue
24shall annually adjust the changes in dollar amounts required under this paragraph
25and incorporate the changes into the income tax forms and instructions.
AB637,16,6
1(b) The department of revenue shall annually adjust the slope under sub. (1)
2(f) 2. such that, as a claimant's income increases from the threshold income as
3calculated under par. (a), to an amount that exceeds the maximum household income
4as calculated under par. (a), the credit that may be claimed is reduced to $0 and the
5department of revenue shall incorporate the changes into the income tax forms and
6instructions.
AB637, s. 43 7Section 43. 72.01 (11m) of the statutes is amended to read:
AB637,16,158 72.01 (11m) "Federal credit" means, for deaths occurring after September 30,
92002, and before January 1, 2008, the federal estate tax credit allowed for state death
10taxes as computed under the federal estate tax law in effect on December 31, 2000,
11and
; for deaths occurring after December 31, 2007, and before January 1, 2012, the
12federal estate tax credit allowed for state death taxes as computed under the federal
13estate tax law in effect on the day of the decedent's death; and for deaths occurring
14after December 31, 2011, the federal estate tax credit allowed for state death taxes
15as computed under the federal estate tax law in effect on December 31, 2002
.
AB637, s. 44 16Section 44. 72.01 (11n) of the statutes is amended to read:
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