AB226: Bill Text

LRB-2060/2

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2015 - 2016 LEGISLATURE

2015 Assembly BILL 226

May 19, 2015 - Introduced by Representatives Kremer, Horlacher, Brandtjen, R. Brooks, Jarchow and Knodl, cosponsored by Senators LeMahieu and Nass. Referred to Committee on Ways and Means.

AB226,1,4 An Act to amend 71.82 (1) (a), 71.82 (1) (c), 71.82 (2) (b), 71.82 (2) (d), 71.84 (1), 71.84 (2) (a), 71.84 (2) (c), 71.91 (6) (e) 3., 71.91 (6) (f) 5., 77.60 (1) (a), 77.60 (1) (b), 77.96 (5) and 78.68 (1); and to create 71.74 (16), 73.16 (3m) and 77.59 (4m) of the statutes; relating to: audits and interest rates on past due amounts.

Analysis by the Legislative Reference Bureau

Under this bill, interest on the amount of a taxpayer's unpaid income or sales taxes does not accrue during the period when the taxpayer is subject to an audit by the Department of Revenue (DOR). In addition, DOR's audit of a person that has annual adjusted gross income of less than $5,000,000 may not last longer than 240 days unless DOR and the person enter into a written agreement to extend the time for conducting the audit. Finally, if such a person is being audited for the first time, DOR may not assess any interest or penalties on amounts owed by the person unless the person commits fraud or willfully attempts to evade paying the taxes owed.

Under current law, a taxpayer must pay interest on any amount owed to DOR that is past due, but not delinquent, at the rate of 12 percent per year. Under the bill, DOR must reduce the interest rate on such amounts by 0.5 percent each year until the rate equals 1 percent plus the prime rate, as reported by the Federal Reserve Board.

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:

AB226,1 Section 1. 71.74 (16) of the statutes is created to read:

AB226,2,10 71.74 (16) Other audits. The department's audit of a person that has annual adjusted gross income of less than $5,000,000 may not last longer than 240 days unless the department and the person enter into a written agreement that extends the time for conducting the audit and specifies the date on which the audit shall end. Notwithstanding ss. 71.82 and 71.83, the department may not assess any interest and penalties on a person described under this subsection as result of the department's first audit of the person, except as provided under s. 71.83 (1) (b) and (2). For purposes of this subsection, an audit commences on the day on which the department sends notice of the audit to the person being audited.

AB226,2 Section 2. 71.82 (1) (a) of the statutes is amended to read:

AB226,2,15 71.82 (1) (a) In assessing taxes interest shall be added to such taxes at 12% the rate determined under s. 73.16 (3m) per year from the date on which such taxes if originally assessed would have become delinquent if unpaid, to the date on which such taxes when subsequently assessed will become delinquent if unpaid.

AB226,3 Section 3. 71.82 (1) (c) of the statutes is amended to read:

AB226,2,21 71.82 (1) (c) Any assessment made as a result of the adjustment or disallowance of a claim for credit under s. 71.07, 71.28 or 71.47 or subch. VIII or IX, except as provided in sub. (2) (c), shall bear interest at 12% the rate determined under s. 73.16 (3m) per year from the due date of the claim, except that interest shall not accrue during the period in which the taxpayer is being audited under s. 71.74.

AB226,4 Section 4. 71.82 (2) (b) of the statutes is amended to read:

AB226,3,5 71.82 (2) (b) Department may reduce delinquent interest. The department shall provide by rule for reduction of interest under par. (a) to 12% the rate determined under s. 73.16 (3m) per year in stated instances wherein the secretary of revenue determines that reduction is fair and equitable.

AB226,5 Section 5. 71.82 (2) (d) of the statutes is amended to read:

AB226,3,24 71.82 (2) (d) Withholding tax. Of the amounts required to be withheld any amount not deposited or paid over to the department within the time required shall be deemed delinquent and deposit reports or withholding reports filed after the due date shall be deemed late. Delinquent deposits or payments shall bear interest at the rate of 1.5% per month from the date deposits or payments are required under this section until deposited or paid over to the department. The department shall provide by rule for reduction of interest on delinquent deposits to 12% the rate determined under s. 73.16 (3m) per year in stated instances wherein the secretary of revenue determines reduction fair and equitable. In the case of a timely filed deposit or withholding report, withheld taxes shall become delinquent if not deposited or paid over on or before the due date of the report. In the case of no report filed or a report filed late, withheld taxes shall become delinquent if not deposited or paid over by the due date of the report. In the case of an assessment under s. 71.83 (1) (b) 2., the amount assessed shall become delinquent if not paid on or before the first day of the calendar month following the calendar month in which the assessment becomes final, but if the assessment is contested before the tax appeals commission or in the courts, it shall become delinquent on the 30th day following the date on which the order or judgment representing final determination becomes final.

AB226,6 Section 6. 71.84 (1) of the statutes is amended to read:

AB226,4,8 71.84 (1) Individuals and fiduciaries. Except as provided in s. 71.09 (11), in the case of any underpayment of estimated tax by an individual, estate or trust, except as provided under s. 71.09, there shall be added to the aggregate tax for the taxable year interest at the rate of 12% determined under s. 73.16 (3m) per year on the amount of the underpayment for the period of the underpayment. In this subsection, "the period of the underpayment" means the time period from the due date of the installment until either the 15th day of the 4th month beginning after the end of the taxable year or the date of payment, whichever is earlier.

AB226,7 Section 7. 71.84 (2) (a) of the statutes is amended to read:

AB226,4,20 71.84 (2) (a) Except as provided in s. 71.29 (7), in the case of any underpayment of estimated tax under s. 71.29 or 71.48 there shall be added to the aggregate tax for the taxable year interest at the rate of 12% determined under s. 73.16 (3m) per year on the amount of the underpayment for the period of the underpayment. For corporations, except as provided in par. (b), "period of the underpayment" means the time period from the due date of the installment until either the 15th day of the 3rd month beginning after the end of the taxable year or the date of payment, whichever is earlier. If 90% of the tax shown on the return is not paid by the 15th day of the 3rd month following the close of the taxable year, the difference between that amount and the estimated taxes paid, along with any interest due, shall accrue delinquent interest under s. 71.91 (1) (a).

AB226,8 Section 8. 71.84 (2) (c) of the statutes is amended to read:

AB226,5,3 71.84 (2) (c) If a refund under s. 71.29 (3m) results in an income or franchise tax liability that is greater than the amount of estimated taxes paid in reduced by the amount of the refund, the taxpayer shall add to the aggregate tax for the taxable year interest at an annual rate of 12% determined under s. 73.16 (3m) on the amount of the unpaid tax liability for the period beginning on the date the refund is issued and ending on the 15th day of the 3rd month beginning after the end of the taxable year, or the date the tax liability is paid, whichever is earlier.

AB226,9 Section 9. 71.91 (6) (e) 3. of the statutes is amended to read:

AB226,5,10 71.91 (6) (e) 3. For purposes of an adjudication under this paragraph, the assessment of the tax upon which the interest or lien of the department is based is conclusively presumed to be valid. Interest shall be allowed for judgments under this paragraph at the rate of 12% determined under s. 73.16 (3m) per year from the date the department receives the money wrongfully levied upon to the date of payment of the judgment or from the date of sale to the date of payment.

AB226,10 Section 10. 71.91 (6) (f) 5. of the statutes is amended to read:

AB226,6,2 71.91 (6) (f) 5. Before the sale, the department shall determine a minimum price for which the property shall be sold. If no person offers for that property at the sale at least the amount of the minimum price, the state shall purchase the property for the minimum price; otherwise, the property shall be sold to the highest bidder. In determining the minimum price, the department shall take into account the expense of making the levy and sale in addition to the value of the property. If payment in full is required at the time of acceptance of a bid and is not paid then, the department shall sell the property in the manner provided under this paragraph. If the conditions of the sale permit part of the payment to be deferred and if that part is not paid within the prescribed period, the department may sue the purchaser in the circuit court for Dane County for the unpaid part of the purchase price and interest at the rate of 12% determined under s. 73.16 (3m) per year from the date of the sale or the department may declare the sale void and may sell the property again under this paragraph. If the property is sold again, the 2nd purchaser shall receive it free of any claim of the defaulting purchaser and the amount paid upon the bid price by the defaulting purchaser is forfeited.

AB226,11 Section 11. 73.16 (3m) of the statutes is created to read:

AB226,6,9 73.16 (3m) Calculation of interest rates. Annually, the department shall determine and publish an interest rate that is applicable to amounts owed to the department during that calendar year. The rate in effect on January 1, 2016, is 11.5 percent. The department shall reduce the rate by 0.5 percent on January 1 of each year until the rate equals 1 percent plus the prime rate in effect on January 1, as reported by the federal reserve board in federal reserve statistical release H. 15.

AB226,12 Section 12. 77.59 (4m) of the statutes is created to read:

AB226,6,19 77.59 (4m) The department's audit of a person that has annual Wisconsin adjusted gross income of less than $5,000,000 may not last longer than 240 days unless the department and the person enter into a written agreement that extends the time for conducting the audit and specifies the date on which the audit shall end. Notwithstanding s. 77.60, the department may not assess any interest and penalties on a person described under this subsection as result of the department's first audit of the person, except as provided under s. 77.60 (10) and (11). For purposes of this subsection, an audit commences on the day on which the department sends notice of the audit to the person being audited.

AB226,13 Section 13. 77.60 (1) (a) of the statutes is amended to read:

AB226,7,4 77.60 (1) (a) Except as provided in par. (b), unpaid taxes shall bear interest at the rate of 12% determined under s. 73.16 (3m) per year from the due date of the return until paid or deposited with the department. Taxes refunded to the seller shall bear interest at 3 percent per year from the due date of the return to the date on which the refund is certified on the refund rolls. An extension of time within which to file a return shall not extend the due date of the return for purposes of interest computation. Taxes refunded to the buyer shall bear interest at 3 percent per year from the last day of the month following the month during which the buyer paid the tax to the date on which the refund is certified on the refund rolls.

AB226,14 Section 14. 77.60 (1) (b) of the statutes is amended to read:

AB226,7,13 77.60 (1) (b) Any unpaid taxes for a calendar year or a fiscal year resulting from a field an audit under s. 77.59 shall bear interest at the rate of 12% determined under s. 73.16 (3m) per year from the due date of the taxpayer's Wisconsin income or franchise tax return for that calendar or fiscal year or, if exempt, from the 15th day of the 4th month of the year after the close of the calendar or fiscal year for which the taxes are due to the date on which the taxes are paid or, if unpaid, become delinquent, whichever is earlier, except that interest shall not accrue during the period in which the taxpayer is being audited under s. 77.59.

AB226,15 Section 15. 77.96 (5) of the statutes is amended to read:

AB226,7,19 77.96 (5) Each person subject to a surcharge under s. 77.93 shall, on or before the due date, including extensions, for filing under ch. 71, file an accurate statement of its gross tax liability. Payments made after the due date under sub. (2) and on or before the due date under this subsection are not delinquent but are subject to interest at the rate of 12% determined under s. 73.16 (3m) per year.

AB226,16 Section 16. 78.68 (1) of the statutes is amended to read:

AB226,7,25 78.68 (1) Unpaid taxes shall bear interest at the rate of 12% determined under s. 73.16 (3m) per year from the due date of the tax until paid or deposited with the department, and all refunded taxes bear interest at the rate of 3 percent per year from the due date of the return to the date on which the refund is certified on the refund rolls.

AB226,17 Section 17. Initial applicability.

AB226,8,3 (1) This act first applies to an audit for which notice is sent to the person being audited on January 1, 2016.

AB226,8,4 (End)