71.25(13) (13) Unrelated business taxable income. The unrelated business taxable income of organizations that are subject to tax on that income under s. 71.26 (1) (a) shall be apportioned under the department of revenue’s rules.

71.25(14) (14) Alternative allocation.

71.25(14)(a) (a) Upon request by a corporation on or before January 1, 2000, the department of revenue may authorize a corporation or a subsidiary thereof to use or continue to use a different method of apportioning its income to this state for purposes of this subchapter, and may specify the method of apportionment that the corporation or subsidiary shall use. This paragraph is to be used exclusively in the event of a corporate restructuring that would result in an unfair representation of the degree of business activity in this state. In no instance may the alternative method proposed under the new corporate structure result in less franchise or income tax revenue to the state than the current corporate structure is liable for, given the same overall level of sales, payroll and property.

71.25(14)(b) (b) Before the department of revenue grants permission to any corporation to use an alternative method of allocation under par. (a), the department of revenue shall promulgate rules that specify in more detail the circumstances in which that authority may be granted and the kinds of alternative methods that the department may authorize.

71.25(14)(c) (c) At least 14 days before giving final approval to an alternative method of apportionment under par. (a), the department of revenue shall submit the proposed alternative method of apportionment to the cochairpersons of the joint committee for review of administrative rules, together with a description of the proposed alternative and the reasons for the proposed alternative. If, within 14 days after receipt of the proposed alternative method, the cochairpersons of the joint committee for review of administrative rules do not notify the department of revenue that the proposed alternative must be promulgated as an administrative rule in order to be used, the department of revenue may give final approval to the proposed method without promulgating an administrative rule. If the cochairpersons of the joint committee for review of administrative rules notify the department of revenue within 14 days after receipt of the proposed alternative that the proposed alternative must be promulgated as an administrative rule, the proposed alternative may not be used until it is promulgated as an administrative rule under ch. 227.

71.25(15) (15) Partnerships and limited liability companies.

71.25(15)(a) (a) A general or limited partner’s share of the numerator and denominator of a partnership’s apportionment factors under this section are included in the numerator and denominator of the general or limited partner’s apportionment factors under this section.

71.25(15)(b) (b) If a limited liability company is treated as a partnership, for federal tax purposes, a member’s share of the numerator and denominator of a limited liability company’s apportionment factors under this section are included in the numerator and denominator of the member’s apportionment factors under this section.

71.25(16) (16) Disaster relief work. For purposes of the apportionment of any income under this section, the disaster relief work, as defined in s. 323.12 (5) (a) 3., of an out-of-state business, as defined in s. 323.12 (5) (a) 6., shall not increase the amount of income apportioned to this state. For purposes of sub. (7), any property brought temporarily into this state by an out-of-state business in connection with performing disaster relief work is not considered property located in this state. For purposes of sub. (8), compensation paid to out-of-state employees, as defined in s. 323.12 (5) (a) 7., who are performing disaster relief work is not considered compensation paid in this state. For purposes of sub. (9), gross receipts from the sale of property or services as part of performing any disaster relief work are not considered gross receipts from sales received in this state.

71.25 History History: 1987 a. 312; 1987 a. 411 ss. 57, 62, 117 to 123; 1989 a. 31; 1991 a. 39, 269; 1993 a. 112; 1997 a. 299; 1999 a. 9; 2001 a. 16; 2003 a. 37; 2005 a. 25; 2009 a. 2, 28, 276; 2015 a. 84, 216; 2017 a. 59; 2021 a. 239.

71.25 Cross-reference Cross-reference: See also s. Tax 2.39, Wis. adm. code.

71.25 Annotation Under sub. (6), it is within the Department of Revenue’s discretion to decide whether to permit a multistate business to deviate from the apportionment method. Nelson Brothers Furniture Corp. v. DOR, 152 Wis. 2d 746, 449 N.W.2d 328 (Ct. App. 1989).

71.25 Annotation Discussing subjecting an entity’s income to apportionment when the entity’s operations constitute a “unitary business” under sub. (6). Chilstrom Erecting Corp. v. DOR, 174 Wis. 2d 517, 497 N.W.2d 785 (Ct. App. 1993).

71.25 Annotation A corporation’s investment income that served an “operational” function and was not unrelated to corporate functions within the state was subject to apportionment. Port Affiliates, Inc. v. DOR, 190 Wis. 2d 271, 526 N.W.2d 806 (Ct. App. 1994).

71.25 Annotation Sub. (9) (df) is limited to a “licensee” who uses software in Wisconsin. The provision makes no reference to use of the computer software in this state by a “sublicensee.” In this case, when the defendant taxpayer received royalties from licensing its software to businesses that were not located in this state and that manufactured or assembled computers that incorporated the defendant’s software but whose products were used in this state under a sublicense, the royalties were not considered in calculating the defendant’s franchise tax liability under this section. The software end-users were not licensees of the defendant. DOR v. Microsoft Corp., 2019 WI App 62, 389 Wis. 2d 350, 936 N.W.2d 160, 18-2024.

71.255 71.255 Combined reporting.

71.255(1) (1) Definitions. In this section:

71.255(1)(a) (a) “Combined group” means the group of all persons whose income and apportionment factors are required to be taken into account under sub. (2) to determine a member’s share of the net business income or loss apportionable to this state that is attributable to a unitary business.

71.255(1)(b) (b) “Combined report” means a report in the form and manner prescribed by the department that specifies a combined group’s income from the unitary business, apportionment factors attributable to the unitary business, and any other tax return information prescribed by the department.

71.255(1)(c) (c) “Commonly controlled group” means any of the following:

71.255(1)(c)1. 1. A parent corporation and any one or more corporations or chains of corporations that are connected to the parent corporation by direct or indirect ownership by the parent corporation, if the parent corporation owns stock representing more than 50 percent of the voting power of at least one of the connected corporations or if the parent corporation or any of the connected corporations owns stock that cumulatively represents more than 50 percent of the voting power of each of the connected corporations.

71.255(1)(c)2. 2. Any 2 or more corporations if a common owner, regardless of whether the owner is a corporate entity, directly or indirectly owns stock representing more than 50 percent of the voting power of the corporations or connected corporations.

71.255(1)(c)3. 3. Any 2 or more corporations if stock representing more than 50 percent of the voting power in each corporation are interests that cannot be separately transferred.

71.255(1)(c)4. 4. Any 2 or more corporations if stock representing more than 50 percent of the voting power in each corporation is directly owned by, or for the benefit of, family members. In this subdivision, “family member” means an individual related by blood, marriage, or adoption within the 3rd degree of kinship, as computed under s. 990.001 (16), or the spouse of such individual.

71.255(1)(d) (d) “Consolidated foreign operating corporation” means a corporation that, for the taxable year, satisfies all of the following conditions:

71.255(1)(d)1. 1. It is a member of a unitary business.

71.255(1)(d)2. 2. It is included in the same federal consolidated return as at least one other corporation in that unitary business.

71.255(1)(d)3. 3. It has active foreign business income, as defined in section 861 (c) (1) B of the Internal Revenue Code, in an amount that is 80 percent or more of the corporation’s worldwide income.

71.255(1)(e) (e) “Corporation” means any corporation, as defined in s. 71.22 (1k), wherever located, which if it were doing business in this state would be subject to this chapter. “Corporation” does not include a tax-option corporation.