71.74(8)(a)(a) If an audit of a claim for a credit under s. 71.07, 71.28 or 71.47 or subch. VIII or IX indicates that an incorrect claim was filed, the department shall make a determination of the correct amount and notify the claimant of the determination and the reasons therefor under sub. (11) within 4 years of the last day prescribed by law for filing the claim. If the claim has been paid, or credited against income or franchise taxes otherwise payable, the credit shall be reduced or canceled, and the proper portion of any amount paid shall be similarly recovered by assessment as income or franchise taxes are assessed.

71.74(8)(b) (b) If a claim for a credit under s. 71.07, 71.28 or 71.47 or subch. VIII or IX is false or excessive and was filed with fraudulent intent, the claim shall be disallowed in full and, if the claim has been paid or a credit has been allowed against income or franchise taxes otherwise payable, the credit shall be canceled and the amount paid may be recovered by assessment as income or franchise taxes are assessed.

71.74(8)(c) (c) If a claim for a credit under s. 71.07, 71.28 or 71.47 or subch. VIII or IX is excessive and was negligently prepared, 10 percent of the corrected claim shall be disallowed and, if the claim has been paid or credited against income or franchise taxes otherwise payable, the credit shall be reduced or canceled and the proper portion of any amount paid shall be similarly recovered by assessment as income or franchise taxes are assessed.

71.74(8)(d) (d) If a claim for a state historic rehabilitation credit under s. 71.07 (9r) is false or excessive, the department shall disallow the claim in full. If a credit has been allowed against income taxes otherwise payable, the credit shall be canceled and the amount may be recovered by assessment as income taxes are assessed. Notwithstanding par. (a) and s. 71.77, the department shall notify the claimant of the determination and shall give reasons for the disallowance under sub. (11) within 4 years after the date that the state historical society notifies the department that the preservation or rehabilitation is not in compliance with s. 71.07 (9r) (b) 3. b. or 4., but that notification must be made within 6 years after the date that the physical work of construction, or destruction in preparation for construction, begins.

71.74(9) (9) Liability may be assessed to more than one person. If the department determines that a liability exists under this chapter and that the liability may be owed by more than one person, the department may assess the entire amount to each person, specifying that it is assessing in the alternative.

71.74(10) (10) Notice to taxpayer of adjustment. The department shall notify the taxpayer, as provided in sub. (11), of any adjustment, correction and assessment made under sub. (1).

71.74(11) (11) Notice of additional assessment. The department shall notify the taxpayer in writing of any additional assessment by office audit or field investigation. The department shall serve that notice as provided in s. 73.03 (73m). In the case of joint returns, notice of additional assessment may be a joint notice, and service on one spouse is proper notice to both spouses. If the spouses have different addresses at the time the department serves the notice of additional assessment and if either spouse notifies the department in writing of those addresses, the department shall serve a duplicate of the original notice on the spouse who has the address other than the address to which the department sent the original notice, if no request for a redetermination or a petition for review has been commenced or finalized. For the spouse who did not receive the original notice, redetermination and appeal rights begin upon the service of a duplicate notice. If the taxpayer is a corporation and the department is unable to serve that taxpayer as provided in s. 73.03 (73m), the department may serve the notice by publishing a class 3 notice, under ch. 985, in the official state newspaper.

71.74(12) (12) Taxes delinquent after due date. Additional income or franchise taxes assessed under subs. (1) to (5), (7) and (8) shall become delinquent if not paid on or before the due date stated in the notice to the taxpayer.

71.74(13) (13) Collection of additional tax and issuance of refunds.

71.74(13)(a)(a) If the tax is increased the department shall proceed to collect the additional tax in the same manner as other income or franchise taxes are collected. If the income or franchise taxes are decreased upon direction of the department the secretary of administration shall refund to the taxpayer such part of the overpayment as was actually paid in cash, and the certification of the overpayment by the department shall be sufficient authorization to the secretary of administration for the refunding of the overpayment. No refund of income or franchise tax shall be made by the secretary of administration unless the refund is so certified. The part of the overpayment paid to the county and the local taxation district shall be deducted by the secretary of administration in the secretary's next settlement with the county and local treasurer.

71.74(13)(b) (b) No action or proceeding whatsoever shall be brought against the state or the secretary of administration for the recovery, refund, or credit of any income or surtaxes; except in case the secretary of administration shall neglect or refuse for a period of 60 days to refund any overpayment of any income or surtaxes certified, the taxpayer may maintain an action to collect the overpayment against the secretary of administration so neglecting or refusing to refund such overpayment, without filing a claim for refund with the secretary of administration, provided that such action shall be commenced within one year after the certification of such overpayment.

71.74(14) (14) Additional remedy to collect tax. The department may also proceed under s. 71.91 (5) for the collection of any additional assessment of income or franchise taxes or surtaxes, after notice thereof has been given under sub. (11) and before the same shall have become delinquent, when the department has reasonable grounds to believe that the collection of such additional assessment will be jeopardized by delay. In such cases, the department shall give notice of the intention to so proceed to the taxpayer as provided in s. 73.03 (73m), and the warrant of the department shall not issue if the taxpayer within 10 days after such notice furnishes a bond in such amount, not exceeding double the amount of the tax, and with such sureties as the department shall approve, conditioned upon the payment of so much of the additional taxes as shall finally be determined to be due, together with interest thereon as provided by s. 71.82 (1) (a). Nothing in this subsection affects the review of additional assessments provided by ss. 71.88 (1) (a) and (2) (a), 71.89 (2), 73.01, and 73.015, and any amounts collected under this subsection shall be deposited with the department and disbursed after final determination of the taxes as are amounts deposited under s. 71.90 (2).

71.74(15) (15) Payments. All nondelinquent payments of additional amounts owed shall be applied in the following order: penalties, interest, tax principal.

71.74 Annotation The investigative power of the Department of Revenue under s. 71.11 (20) (b) [now s. 71.74 (2)] is similar to the power of the IRS under 26 USC 7602. A taxpayer subpoenaed by the department has limited discovery rights under Genser, 595 F.2d 146. State v. Beno, 99 Wis. 2d 77, 298 N.W.2d 405 (Ct. App. 1980).

71.745(1)(1) General applicability. Unless specifically provided in subs. (2) to (9), additional assessments and refunds of pass-through entities and pass-through members shall follow the provisions under this chapter. This section shall not apply for taxable years for which a pass-through entity made an election under s. 71.21 (6) (a) or 71.365 (4m) (a) that the pass-through entity did not revoke under s. 71.21 (6) (c) or 71.365 (4m) (c). The department shall not make additional assessments and refunds under this section to an entity treated as a disregarded entity described under U.S. Treasury Regulation 301.7701-2 or to a grantor trust the income of which is reportable under the Internal Revenue Code by the grantor of the trust or by any person other than the trust.

71.745(2) (2) Audit assessments and refunds. Except as provided in sub. (9), for the purpose of performing audit assessments and issuing refunds, the department may do all of the following:

71.745(2)(a) (a) Assess and collect additional tax from a pass-through entity on income otherwise reportable by its pass-through members. In computing the tax to assess to a pass-through entity under this paragraph, the department shall apply the highest tax rate under s. 71.06 on income otherwise reportable by pass-through members that are individuals, estates, or trusts with a direct interest in the pass-through entity and apply the highest tax rate under s. 71.27 on income otherwise reportable by pass-through members, other than individuals, estates, or trusts, with a direct interest in the pass-through entity.

71.745(2)(b) (b) Direct the secretary of administration to refund to a pass-through entity that part of an overpayment paid by the pass-through entity and not by the entity's pass-through members. Pass-through members may claim overpayments not paid by the pass-through entity within one year after the date the determination of the overpayment becomes final or before the end of the period specified under s. 71.75, whichever is later.

71.745(3) (3) Adjustment of credits. Except as provided in sub. (9), for the purpose of adjusting credits, the department may do all of the following:

71.745(3)(a) (a) Assess an adjustment to reduce a credit under s. 71.07, 71.28, or 71.47 to a pass-through entity if the pass-through entity previously computed the credit and reported the credit to its pass-through members. An assessment made under this paragraph may be reduced by the tax effect from the modifications described under ss. 71.05 (6) (a) 15. and 25., 71.21 (4), 71.26 (2) (a) 4. and 11., 71.34 (1k) (g) and (m), and 71.45 (2) (a) 10., if the modification occurs in a taxable year under review, except that the modification shall not pass through to nor be claimed by the pass-through members.

71.745(3)(b) (b) Assess an adjustment to increase a credit under s. 71.07, 71.28, or 71.47 to offset additional tax assessed to a pass-through entity under sub. (2). Any excess credit not used to offset additional tax may be claimed by the pass-through members within one year from the date the determination of the adjustment becomes final or before the end of the period specified under s. 71.75, whichever is later.

71.745(4) (4) Adjustments attributable to members. Adjustments to pass-through items under this section are attributable to each pass-through member in a manner, and for the taxable year, that is consistent with the treatment of the pass-through items if a determination was not made under this section.

71.745(5) (5) Statutes of limitations, interest, and penalties. Statutes of limitations, interest, and penalties under ss. 71.77, 71.82, and 71.83 apply to determinations made under this section without regard to the action or inaction of pass-through members.

71.745(6) (6) Contested adjustments.

71.745(6)(a)(a) Except as provided in par. (b), a determination made by the department under this section is final and conclusive upon receipt by the pass-through entity. Pass-through members shall concede to the accuracy of and shall be bound by a determination made under this section. A pass-through entity shall timely notify all pass-through members of any administrative or judicial proceeding regarding the determination of any pass-through item.

71.745(6)(b) (b) A pass-through entity aggrieved by a determination made by the department under this section may, within 60 days after receipt of the determination, petition the department for redetermination. The department shall make a redetermination on the petition within 6 months after the date on which the petition is filed. If no timely petition for redetermination is filed with the department, the department's determination shall be final and conclusive.

71.745(7) (7) Liability may be assessed to more than one person. If the department determines that a liability exists under this chapter and that the liability may be owed by more than one pass-through member of a pass-through entity, the department may assess any pass-through member of the pass-through entity for their allocated portion of additional tax otherwise due under this chapter.