SE1 SB17: Bill Text

LRB-3092/2

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September 2011 Special Session

2011 - 2012 LEGISLATURE

Senate BILL 17

October 11, 2011 - Introduced by Committee on Senate Organization, by request of Governor Scott Walker, Senator Lassa, and Representatives Molepske and Williams. Referred to Committee on Economic Development and Veterans and Military Affairs.

SB17,1,5 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., 76.67 (2) and 77.92 (4); and to create 71.07 (5p), 71.10 (4) (cs), 71.28 (5p), 71.30 (3) (dp), 71.47 (5p), 71.49 (1) (dp), 76.634 and 238.17 of the statutes; relating to: an income and franchise tax credit for investments in a community development financial institution.

Analysis by the Legislative Reference Bureau

Under this bill, the Wisconsin Economic Development Corporation (WEDC) may certify a person who makes a qualified investment in a registered community development financial institution (CDFI) to receive a credit against state income and franchise taxes, for taxable years beginning after December 31, 2011, and before January 1, 2014, and against license fees paid by insurers. WEDC may, however, determine whether or not to extend the credit to taxable years beginning on or after January 1, 2014. The bill defines a CDFI as an entity that is organized under the laws of this state and has been certified by the Community Development Financial Institutions Fund established under federal law (fund) as meeting certain eligibility requirements. The bill permits WEDC to register a CDFI that applies to WEDC and complies with annual reporting requirements. The bill defines a "qualified investment" as a loan or deposit that pays no interest of at least $10,000 that is made for a minimum of 60 months and over which the CDFI retains complete control for the duration of the investment period.

WEDC may revoke the registration of a CDFI that fails to comply with annual reporting requirements or that no longer meets the eligibility requirement for certification by the fund. WEDC may certify up to $1,000,000 in tax credits in any calendar year.

A person certified to receive tax credits may claim 10 percent of the person's qualified investment, if the investment is at least $10,000, but not more than $150,000, or 12 percent of the person's qualified investment, if the investment is more than $150,000, but not more than $500,000. If the person withdraws the qualified investment from the CDFI before the end of the investment period and does not reinvest the qualified investment in another CDFI, the person must repay a portion of the credit amounts that the person received by adding the portion to the person's tax or fee liability in a subsequent year. However, the portion that the person must repay depends on when the person withdraws the investment during the investment period. The portion that the person must repay decreases the longer the person holds the investment during the investment period.

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:

SB17, s. 1 Section 1. 71.05 (6) (a) 15. of the statutes, as affected by 2011 Wisconsin Act 32, is amended to read:

SB17,2,8 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), (3q), (3r), (3rm), (3rn), (3s), (3t), (3w), (5e), (5f), (5h), (5i), (5j), (5k), (5n), (5p), (5r), (5rm), and (8r) 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).

SB17, s. 2 Section 2. 71.07 (5p) of the statutes is created to read:

SB17,2,11 71.07 (5p) Steve Hilgenberg community development credit. (a) Definition. In this subsection, "claimant" means a person who files a claim under this subsection.

SB17,3,7 (b) Filing claims. Subject to the limitations provided under this subsection and the requirements under s. 238.17, for taxable years beginning after December 31, 2011, and before January 1, 2014, except as provided under s. 238.17 (5) (d), a claimant may claim as a credit against the tax imposed under s. 71.02, up to the amount of the tax, for the taxable year in which the investment is made, an amount equal to 10 percent of the claimant's qualified investment in a community development financial institution, if the investment is at least $10,000, but not more than $150,000, or 12 percent of the claimant's qualified investment in a community development financial institution, if the investment is more than $150,000, but not more than $500,000.

SB17,3,15 (c) Limitations. 1. 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.

SB17,3,22 2. A claimant who withdraws a qualified investment from a community development financial institution prior to the date of withdrawal specified in the written notice provided to the claimant under s. 238.17 (5) (b) and who does not immediately reinvest the proceeds of the qualified investment as a qualified investment in another community development financial institution shall add to the claimant's liability for taxes imposed under s. 71.02 one of the following percentages of the amount of the credits received under this subsection:

SB17,3,24 a. If the withdrawal occurs during the first year after the date on which the claimant made the qualified investment, 100 percent.

SB17,4,2 b. If the withdrawal occurs during the 2nd year after the date on which the claimant made the qualified investment, 75 percent.

SB17,4,4 c. If the withdrawal occurs during the 3rd year after the date on which the claimant made the qualified investment, 50 percent.

SB17,4,6 d. If the withdrawal occurs during the 4th year after the date on which the claimant made the qualified investment, 25 percent.

SB17,4,8 e. If the withdrawal occurs during the 5th year after the date on which the claimant made the qualified investment, 10 percent.

SB17,4,17 3. A person who makes an investment in a community development financial institution in a taxable year, withdraws the investment in that taxable year, and immediately reinvests the proceeds into another community development financial institution may claim only one credit under this subsection for that taxable year, based on the lesser of all such investments in that taxable year. Investments in a community development financial institution made before the effective date of this subdivision .... [LRB inserts date], may not be withdrawn prior to the end of their contractual term and reinvested in a community development financial institution in order to claim a credit under this subsection.

SB17,4,19 (d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

SB17, s. 3 Section 3. 71.10 (4) (cs) of the statutes is created to read:

SB17,4,22 71.10 (4) (cs) Steve Hilgenberg community development credit under s. 71.07 (5p).

SB17, s. 4 Section 4. 71.21 (4) of the statutes, as affected by 2011 Wisconsin Act 32, is amended to read:

SB17,5,4 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), (3q), (3r), (3rm), (3rn), (3s), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k), (5n), (5p), (5r), (5rm), and (8r) and passed through to partners shall be added to the partnership's income.

SB17, s. 5 Section 5. 71.26 (2) (a) 4. of the statutes, as affected by 2011 Wisconsin Act 32, is amended to read:

SB17,5,13 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), (3q), (3r), (3rm), (3rn), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k), (5n), (5p), (5r), (5rm), (8r), and (9s) 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).

SB17, s. 6 Section 6. 71.28 (5p) of the statutes is created to read:

SB17,5,16 71.28 (5p) Steve Hilgenberg community development credit. (a) Definition. In this subsection, "claimant" means a person who files a claim under this subsection.

SB17,6,2 (b) Filing claims. Subject to the limitations provided under this subsection and the requirements under s. 238.17, for taxable years beginning after December 31, 2011, and before January 1, 2014, except at provided under s. 238.17 (5) (d), a claimant may claim as a credit against the tax imposed under s. 71.23, up to the amount of the tax, for the taxable year in which the investment is made, an amount equal to 10 percent of the claimant's qualified investment in a community development financial institution, if the investment is at least $10,000, but not more than $150,000, or 12 percent of the claimant's qualified investment in a community development financial institution, if the investment is more than $150,000, but not more than $500,000.

SB17,6,10 (c) Limitations. 1. 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.

SB17,6,17 2. A claimant who withdraws a qualified investment from a community development financial institution prior to the date of withdrawal specified in the written notice provided to the claimant under s. 238.17 (5) (b) and who does not immediately reinvest the proceeds of the qualified investment as a qualified investment in another community development financial institution shall add to the claimant's liability for taxes imposed under s. 71.43 one of the following percentages of the amount of the credits received under this subsection:

SB17,6,19 a. If the withdrawal occurs during the first year after the date on which the claimant made the qualified investment, 100 percent.

SB17,6,21 b. If the withdrawal occurs during the 2nd year after the date on which the claimant made the qualified investment, 75 percent.

SB17,6,23 c. If the withdrawal occurs during the 3rd year after the date on which the claimant made the qualified investment, 50 percent.

SB17,6,25 d. If the withdrawal occurs during the 4th year after the date on which the claimant made the qualified investment, 25 percent.

SB17,7,2 e. If the withdrawal occurs during the 5th year after the date on which the claimant made the qualified investment, 10 percent.

SB17,7,11 3. A person who makes an investment in a community development financial institution in a taxable year, withdraws the investment in that taxable year, and immediately reinvests the proceeds into another community development financial institution may claim only one credit under this subsection for that taxable year, based on the lesser of all such investments in that taxable year. Investments in a community development financial institution made before the effective date of this subdivision .... [LRB inserts date], may not be withdrawn prior to the end of their contractual term and reinvested in a community development financial institution in order to claim a credit under this subsection.

SB17,7,13 (d) Administration. Subsection (4) (e) to (h), as it applies to the credit under sub. (4), applies to the credit under this subsection.

SB17, s. 7 Section 7. 71.30 (3) (dp) of the statutes is created to read:

SB17,7,16 71.30 (3) (dp) Steve Hilgenberg community development credit under s. 71.28 (5p).

SB17, s. 8 Section 8. 71.34 (1k) (g) of the statutes, as affected by 2011 Wisconsin Act 32, is amended to read:

SB17,7,22 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), (3q), (3r), (3rm), (3rn), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k), (5n), (5p), (5r), (5rm), and (8r) and passed through to shareholders.

SB17, s. 9 Section 9. 71.45 (2) (a) 10. of the statutes, as affected by 2011 Wisconsin Act 32, is amended to read: