This bill clarifies that the recent U.S. Supreme Court decision that expands a
state's authority to collect sales and use taxes from out-of-state retailers triggers the
determinations mentioned above. The bill also provides that the new individual
income tax rates based on the determinations would not take effect automatically in
the year following DOR's certification, but, instead, the Department of
Administration, in consultation with DOR, would determine the new tax rates to
take effect for the taxable year ending on December 31, 2019, and report its
determinations to the governor, JCF, and the Legislative Audit Bureau. LAB would
then review the determinations and report its findings to JCF and the Joint
Legislative Audit Committee. If LAB's review results in a re-determination of the
rates, JCF would determine which rates apply to the taxable year ending on
December 31, 2019, and report its determination to the governor, the secretary of

administration, and the secretary of revenue. Finally, the bill includes in the
definition of a “retailer engaged in business in this state” any retailer that has
annual gross sales into this state in excess of $100,000 or an annual number of
separate sales transactions into this state of 200 or more.
4.
This bill allows pass-through entities to elect to be taxed at the entity level for
purposes of the state's income and franchise taxes.
Under current law, pass-through entities, such as tax-option corporations and
partnerships, are generally not subject to the income or franchise tax at the entity
level. Rather, any item of income, loss, or deduction flows through to their
shareholders, partners, or members, who are then subject to tax.
The bill allows tax-option corporations and partnerships, including limited
liability companies and other entities that are treated as partnerships under federal
tax law, to elect to be taxed at the entity level for purposes of the income and franchise
taxes. An entity that makes the election is taxed at a rate of 7.9 percent on its net
income that is reportable to Wisconsin, and the situs of income is determined as if
the election was not made. The entity may not claim losses and tax credits except
for the credit for taxes paid to other states. The bill also provides that the adjusted
basis of the entity's partners, shareholders, or members is determined as if the
election was not made. If the entity fails to pay the taxes due, DOR may collect the
amount from the entity's partners, shareholders, or members. Persons who hold
more than 50 percent ownership of the pass-through entity must consent to the
election and must consent to any revocation of the election. The bill allows the
election to be made for taxable years beginning in 2018 for tax-option corporations
and 2019 for other entities.
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:
SB883,1 1Section 1. 20.395 (2) (fq) of the statutes is repealed.
SB883,2 2Section 2. 71.05 (6) (a) 14. of the statutes is amended to read:
SB883,4,33 71.05 (6) (a) 14. Any amount received as a proportionate share of the earnings
4and profits of a corporation that is an S corporation for federal income tax purposes
5if those earnings and profits accumulated during a year for which the shareholders
6have elected under s. 71.365 (4) (a) not to be a tax-option corporation, to the extent
7not included in federal adjusted gross income for the current year. This subdivision

1does not apply to earnings and profits accumulated during a year for which a
2tax-option corporation has made an election under s. 71.365 (4m) (a) to be taxed at
3the entity level.
SB883,3 4Section 3. 71.05 (10) (dm) of the statutes is created to read:
SB883,4,75 71.05 (10) (dm) Any item of income, loss, or deduction passed through from an
6entity that has made an election under s. 71.21 (6) (a) or 71.365 (4m) (a) to be taxed
7at the entity level.
SB883,4 8Section 4 . 71.07 (7) (b) of the statutes, as affected by 2017 Wisconsin Act 59,
9is renumbered 71.07 (7) (b) 1. and amended to read:
SB883,4,2010 71.07 (7) (b) 1. Subject to conditions and limitations in pars. (c) and (d), if a
11resident individual, estate or trust pays a net income tax to another state, that
12resident individual, estate or trust may credit the net tax paid to that other state on
13that income against the net income tax otherwise payable to the this state on income
14of the same year. The credit may not be allowed unless the income taxed by the other
15state is also considered income for Wisconsin tax purposes. The credit may not be
16allowed unless claimed within the time provided in s. 71.75 (2), but s. 71.75 (4) does
17not apply to those credits. For purposes of this paragraph subdivision, amounts
18declared and paid under the income tax law of another state are considered a net
19income tax paid to that other state only in the year in which the income tax return
20for that state was required to be filed.
SB883,5,2 212. Income and franchise taxes paid to another state by a tax-option corporation,
22partnership, or limited liability company that is treated as a partnership may be
23claimed as a credit under this paragraph by that corporation's shareholders, that
24partnership's partners, or that limited liability company's members who are
25residents of this state and who otherwise qualify under this paragraph , unless the

1tax-option corporation, partnership, or limited liability company has made an
2election under s. 71.21 (6) (a) or 71.365 (4m) (a)
.
SB883,5 3Section 5 . 71.07 (7) (b) 3. of the statutes is created to read:
SB883,5,214 71.07 (7) (b) 3. Subject to the conditions and limitations in pars. (c) and (d), if
5a tax-option corporation, partnership, or limited liability company makes an
6election under s. 71.21 (6) (a) or 71.365 (4m) (a), that tax-option corporation,
7partnership, or limited liability company may credit the net income or franchise tax
8paid by the entity to another state on that income and the net income tax on that
9income paid by the entity on behalf of its shareholders, partners, and members that
10are residents of this state on a composite return filed with the other state against the
11net income or franchise tax otherwise payable to this state on income of the same
12year. The credit may not be allowed unless the income taxed by the other state is also
13considered income for Wisconsin tax purposes and is otherwise attributable to
14amounts that would be reportable to this state by shareholders, partners, or
15members of the tax-option corporation, partnership, or limited liability company
16that are residents of this state if the election under s. 71.21 (6) (a) or 71.365 (4m) (a)
17was not made. The credit may not be allowed unless claimed within the time
18provided in s. 71.75 (2), but s. 71.75 (4) does not apply to those credits. For purposes
19of this subdivision, amounts declared and paid under the income tax law of another
20state are considered a net income tax paid to that other state only in the year in which
21the income tax return for that state was required to be filed.
SB883,6 22Section 6 . 71.07 (7) (c) of the statutes, as created by 2017 Wisconsin Act 59,
23is amended to read:
SB883,6,524 71.07 (7) (c) The credit total credits under par. (b) 1. and 2. may not exceed an
25amount determined by multiplying the taxpayer's net Wisconsin income tax by a

1ratio derived by dividing the income subject to tax in the other state that is also
2subject to tax in Wisconsin while the taxpayer is a resident of Wisconsin, by the
3taxpayer's Wisconsin adjusted gross income. The credit under par. (b) 3. may not
4exceed an amount determined by multiplying the income subject to tax in the other
5state that is also subject to tax in Wisconsin by 7.9 percent.
SB883,7 6Section 7. 71.21 (6) of the statutes is created to read:
SB883,6,127 71.21 (6) (a) If persons who, on the day on which an election under this
8paragraph is made, hold more than 50 percent of the capital and profits of a
9partnership consent, a partnership that is a partnership for federal income tax
10purposes may elect, on or before the due date or extended due date of its return under
11this chapter, to be taxed at the entity level at a rate of 7.9 percent of net income
12reportable to this state as described in par. (d) 1. for that taxable year.
SB883,6,1713 (b) It is the intent of the election under par. (a) that partners of a partnership
14may not include in their Wisconsin adjusted gross income their proportionate share
15of all items of income, gain, loss, or deduction of the partnership. It is also the intent
16that the partnership shall pay tax on items that would otherwise be taxed if this
17election was not made.
SB883,6,2318 (c) If persons who, on the day on which the election under this paragraph is
19made, hold more than 50 percent of the capital and profits of a partnership that has
20elected to be taxed at the entity level under par. (a) consent, a partnership that is a
21partnership for federal income tax purposes may elect, on or before the due date or
22extended due date of its return under this chapter, to revoke for that taxable year its
23election under par. (a).
SB883,6,2424 (d) If an election is made under par. (a), all of the following apply:
SB883,7,2
11. The net income of the partnership is computed under subs. (1) to (5) and the
2situs of income shall be determined as if the election under par. (a) was not made.
SB883,7,33 2. The partnership may not claim the loss under s. 71.05 (8).
SB883,7,54 3. Except as provided in s. 71.07 (7) (b) 3., the tax credits under this chapter
5may not be claimed by the partnership.
SB883,7,76 4. A partner's adjusted basis of the partner's interest in the partnership is
7determined as if the election under par. (a) was not made.
SB883,7,98 5. The provisions of ss. 71.09 and 71.84 relating to estimated payments and
9underpayment interest shall apply to the partnership.
SB883,7,1210 6. If the partnership fails to pay the amount owed to the department with
11respect to income as a result of the election under par. (a), the department may collect
12the amount from the partners based on their proportionate share of such income.
SB883,7,1313 (e) The department may promulgate rules to implement this subsection.
SB883,8 14Section 8. 71.36 (1) of the statutes is amended to read:
SB883,7,1915 71.36 (1) It is the intent of this section that shareholders of tax-option
16corporations include in their Wisconsin adjusted gross income their proportionate
17share of the corporation's tax-option items unless the corporation elects under s.
1871.365 (4) (a) not to be a tax-option corporation or elects under s. 71.365 (4m) (a) to
19be taxed at the entity level
.
SB883,9 20Section 9 . 71.365 (1) of the statutes is renumbered 71.365 (1) (a) and amended
21to read:
SB883,8,422 71.365 (1) (a) For purposes of this chapter, the adjusted basis of a shareholder
23in the stock and indebtedness of a tax-option corporation shall be determined in the
24manner prescribed by the internal revenue code for a shareholder of an S
25corporation, except that the nature and amount of items affecting that basis shall be

1determined under this chapter. This subsection paragraph does not apply to 1978
2and earlier taxable years of corporations which were S corporations for federal
3income tax purposes or to taxable years of corporations for which an election has been
4made under sub. (4) (a).
SB883,10 5Section 10 . 71.365 (1) (b) of the statutes is created to read:
SB883,8,86 71.365 (1) (b) The adjusted basis of a shareholder in the stock and indebtedness
7of a tax-option corporation that has made an election under sub. (4m) (a) is
8determined as if the election was not made.
SB883,11 9Section 11. 71.365 (4m) of the statutes is created to read:
SB883,8,1610 71.365 (4m) Tax-option corporation election to pay franchise or income tax
11at the entity level.
(a) If persons who hold more than 50 percent of the shares on
12the day on which an election under this paragraph is made consent, a corporation
13that is an S corporation for federal income tax purposes may elect, on or before the
14due date or extended due date of its return under this chapter, to be taxed at the
15entity level at a rate of 7.9 percent of net income reportable to this state as described
16in par. (d) 1. for that taxable year.
SB883,8,2117 (b) It is the intent of the election under par. (a) that shareholders of a tax-option
18corporation may not include in their Wisconsin adjusted gross income their
19proportionate share of all items of income, gain, loss, or deduction of the tax-option
20corporation. It is also the intent that the tax-option corporation shall pay tax on
21items that would otherwise be taxed if this election was not made.
SB883,9,222 (c) If persons who, on the day on which the election under this paragraph is
23made, hold more than 50 percent of the shares of a corporation that has elected to
24be taxed at the entity level under par. (a) consent, a corporation that is an S
25corporation for federal income tax purposes may elect, on or before the due date or

1extended due date of its return under this chapter, to revoke for that taxable year its
2election under par. (a).
SB883,9,33 (d) If an election is made under par. (a), all of the following apply:
SB883,9,54 1. The net income of the tax-option corporation is computed under s. 71.34 (1k)
5and the situs of income shall be determined as if the election was not made.
SB883,9,76 2. Except as provided in s. 71.07 (7) (b) 3., the tax credits under this chapter
7may not be claimed by the tax-option corporation.
SB883,9,98 3. The tax-option corporation may not claim losses under ss. 71.05 (8) and
971.26 (4).
SB883,9,1210 4. The provisions of ss. 71.29 and 71.84 relating to estimated payments and
11underpayment interest shall apply to the tax-option corporation for the taxable year
12beginning in 2019 and later years.
SB883,9,1613 5. If the tax-option corporation fails to pay the amount owed to the department
14with respect to income as a result of the election under par. (a), the department may
15collect such amount from the shareholders based on their proportionate share of such
16income.
SB883,9,1717 (e) The department may promulgate rules to implement this subsection.
SB883,12 18Section 12. 71.775 (3) (a) 4. of the statutes is created to read:
SB883,9,2019 71.775 (3) (a) 4. The pass-through entity has elected under s. 71.21 (6) (a) or
2071.365 (4m) (a) to be taxed at the entity level.
SB883,13 21Section 13. 73.03 (71) of the statutes is amended to read:
SB883,9,2522 73.03 (71) (a) To determine the amount of additional revenue that reported to
23the department collected from the taxes imposed under subch. III of ch. 77 as a result
24of any federal law to expand the United States Supreme Court decision that expands
25the state's authority to require out-of-state retailers to collect and remit the taxes

1imposed under subch. III of ch. 77 on purchases by Wisconsin residents during the
2first 12 months following the date on which the department begins collecting the
3additional revenue as a result of a change in federal law
period beginning on October
41, 2018, and ending on September 30, 2019
.
SB883,10,135 (b) After the department makes the determination under par. (a), the
6department of administration, in consultation with the department of revenue, shall
7determine how much the individual income tax rates under s. 71.06 may be reduced
8in the following for the taxable year ending on December 31, 2019, in order to
9decrease individual income tax revenue by the amount determined under par. (a).
10For purposes of this paragraph, the department shall calculate the tax rate
11reductions shall be calculated in proportion to the share of gross tax attributable to
12each of the tax brackets under s. 71.06 in effect during the most recently completed
13taxable year.
SB883,10,2014 (c) The department No later than October 20, 2019, the secretary of
15administration
shall certify and report the determinations made under pars. (a) and
16(b) to the secretary of the department of administration, to the governor, and to the
17legislature
the joint committee on finance, and the legislative audit bureau and
18specify with that certification and report that the new tax rates take effect in for the
19taxable year following the taxable year in which the department makes the
20certification under this paragraph
ending on December 31, 2019, subject to par. (d).
SB883,14 21Section 14. 73.03 (71) (d) of the statutes is created to read:
SB883,11,522 73.03 (71) (d) The legislative audit bureau shall review the determinations
23reported under par. (c) and report its findings to the joint legislative audit committee
24and the joint committee on finance no later than November 1, 2019. If the legislative
25audit bureau's review of the determinations reported under par. (c) results in a

1different calculation of the tax rates than that made under par. (b), the joint
2committee on finance shall determine which tax rates to apply to the taxable year
3ending on December 31, 2019, and report its determination to the governor, the
4secretary of administration, and the secretary of revenue no later than November 10,
52019.
SB883,15 6Section 15 . 77.51 (13g) (intro.) of the statutes is amended to read:
SB883,11,97 77.51 (13g) (intro.) Except as provided in sub. subs. (13gm) and (13h), “retailer
8engaged in business in this state", for purposes of the use tax, includes any of the
9following:
SB883,16 10Section 16 . 77.51 (13gm) of the statutes is created to read:
SB883,11,1411 77.51 (13gm) (a) “Retailer engaged in business in this state” does not include
12a retailer who has no activities as described in sub. (13g), except for activities
13described in sub. (13g) (c), unless the retailer meets either of the following criteria
14in the previous year or current year:
SB883,11,1515 1. The retailer's annual gross sales into this state exceed $100,000.
SB883,11,1716 2. The retailer's annual number of separate sales transactions into this state
17is 200 or more.
SB883,11,2218 (b) If an out-of-state retailer's annual gross sales into this state exceed
19$100,000 in the previous year or the retailer's annual number of separate sales
20transactions into this state is 200 or more in the previous year, the retailer shall
21register with the department and collect the taxes administered under s. 77.52 or
2277.53 on sales sourced to this state under s. 77.522 for the entire current year.
SB883,12,523 (c) If an out-of-state retailer's annual gross sales into this state are $100,000
24or less in the previous year and the retailer's annual number of separate sales
25transactions into this state is less than 200 in the previous year, the retailer is not

1required to register with the department and collect the taxes administered under
2s. 77.52 or 77.53 on sales sourced to this state under s. 77.522 until the retailer's sales
3or transactions meet the criteria in par. (a) 1. or 2. for the current year, at which time
4the retailer shall register with the department and collect the tax for the remainder
5of the current year.
SB883,12,66 (d) All of the following apply for purposes of this subsection:
SB883,12,77 1. “Year” means the retailer's taxable year for federal income tax purposes.
SB883,12,98 2. The annual amounts described in this subsection include both taxable and
9nontaxable sales.
SB883,12,1110 3. Each required periodic payment of a lease or license is a separate sales
11transaction.
SB883,12,1212 4. Deposits made in advance of a sale are not sales transactions.
SB883,12,1513 5. An out-of-state retailer's annual amounts include all sales into this state
14by the retailer on behalf of other persons and all sales into this state by another
15person on the retailer's behalf.
SB883,17 16Section 17 . 84.54 of the statutes is created to read:
SB883,12,21 1784.54 Minimum federal expenditures for projects receiving federal
18funding.
(1) Except as provided in sub. (2), for all of the following projects on which
19the department expends federal moneys, the department shall expend federal
20moneys on not less than 70 percent of the aggregate project components eligible for
21federal funding each fiscal year:
SB883,12,2222 (a) Southeast Wisconsin freeway megaprojects.
SB883,12,2323 (b) Major highway development projects.
SB883,12,2524 (c) State highway rehabilitation projects with a total cost of less than $10
25million.
SB883,13,14
1(2) If the department determines that it cannot meet the requirements under
2sub. (1) or that it can make more effective and efficient use of federal moneys than
3the use required under sub. (1), the department may submit a proposed alternate
4funding plan to the joint committee on finance. If the cochairpersons of the
5committee do not notify the department within 14 working days after the date of the
6department's submittal that the committee has scheduled a meeting for the purpose
7of reviewing the proposed plan, the department may expend moneys as proposed in
8the plan. If, within 14 working days after the date of the submittal, the
9cochairpersons of the committee notify the department that the committee has
10scheduled a meeting for the purpose of reviewing the proposed plan, the department
11may expend moneys as proposed in the plan only upon approval of the committee.
12The department may continue with any projects subject to the funding requirement
13under sub. (1) while the committee conducts its review, including any hearings
14conducted by the committee.
SB883,18 15Section 18 . 86.51 of the statutes is created to read:
SB883,13,16 1686.51 Requirements for local projects. (1) In this section:
SB883,13,1917 (a) “Local bridge" means a bridge that is not on the state trunk highway system
18or on marked routes of the state trunk highway system designated as connecting
19highways.
SB883,13,2120 (b) “Local roads" means streets under the authority of cities or villages, county
21trunk highways, or town roads.
SB883,13,2222 (c) “Political subdivision” means a county, city, village, or town.
SB883,13,2423 (d) “Project" means the development, construction, repair, or improvement of
24a local road or a local bridge.
SB883,14,3
1(2) If the department disburses aid to a political subdivision for a project, the
2department shall notify the political subdivision whether the aid includes federal
3moneys and which project components must be paid for with federal moneys, if any.
SB883,14,6 4(3) For any project meeting all of the following criteria, the department may
5not require a political subdivision to comply with any portion of the department's
6facilities development manual other than design standards:
SB883,14,87 (a) The project proposal is reviewed and approved by a professional engineer
8or by the highway commissioner for the county in which the project will be located.
SB883,14,109 (b) The project is conducted by a political subdivision with no expenditure of
10federal money.
SB883,19 11Section 19 . 2017 Wisconsin Act 59, section 9145 (4w) is repealed.
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