Chapter 71

71.05(23)(c) (c) With respect to persons who change their domicile into or from this state during the taxable year and nonresident persons, personal exemptions under pars. (a) and (b) shall be limited to the fraction of the amount so determined that Wisconsin adjusted gross income is of federal adjusted gross income. In this paragraph, for married persons filing separately “adjusted gross income” means the separate adjusted gross income of each spouse and for married persons filing jointly “adjusted gross income” means the total adjusted gross income of both spouses. If a person and that person’s spouse are not both domiciled in this state during the entire taxable year, their personal exemptions on a joint return are determined by multiplying the personal exemption that would be available to each of them if they were both domiciled in this state during the entire taxable year by a fraction the numerator of which is their joint Wisconsin adjusted gross income and the denominator of which is their joint federal adjusted gross income.

71.05(24) (24) Income tax deferral; long-term capital assets.

71.05(24)(a) (a) In this subsection:

71.05(24)(a)1. 1. “Claimant” means an individual; an individual partner or member of a partnership, limited liability company, or limited liability partnership; or an individual shareholder of a tax-option corporation.

71.05(24)(a)2. 2. “Financial institution” has the meaning given in s. 69.30 (1) (b).

71.05(24)(a)3. 3. “Long-term capital gain” means the gain realized from the sale of any capital asset held more than one year that is treated as a long-term gain under the Internal Revenue Code.

71.05(24)(a)4. 4. “Qualified new business venture” means a business certified under s. 238.20, 2011 stats., or s. 560.2085, 2009 stats.

71.05(24)(b) (b) For taxable years beginning after December 31, 2010, and before January 1, 2014, a claimant may subtract from federal adjusted gross income any amount, up to $10,000,000, of a long-term capital gain if the claimant does all of the following:

71.05(24)(b)1. 1. Deposits the gain into a segregated account in a financial institution.

71.05(24)(b)2. 2. Within 180 days after the sale of the asset that generated the gain, invests all of the proceeds in the account described under subd. 1. in a qualified new business venture.

71.05(24)(b)3. 3. After making the investment as described under subd. 2., notifies the department, on a form prepared by the department, that the claimant will not declare on the claimant’s income tax return the gain described under subd. 1. because the claimant has reinvested the capital gain as described under subd. 2. The form shall be sent to the department along with the claimant’s income tax return for the year to which the claim relates.

71.05(24)(c) (c) The basis of the investment described in par. (b) 2. shall be calculated by subtracting the gain described in par. (b) 1. from the amount of the investment described in par. (b) 2.

71.05(24)(d) (d) If a claimant defers the payment of income taxes on a capital gain under this subsection, the claimant may not use the gain described under par. (b) 1. to net capital gains and losses, as described under sub. (10) (c).

71.05(25) (25) Capital gains exclusion; qualified Wisconsin business.

71.05(25)(a) (a) In this subsection:

71.05(25)(a)1. 1. “Claimant” means an individual; an individual partner or member of a partnership, limited liability company, or limited liability partnership; or an individual shareholder of a tax-option corporation.

71.05(25)(a)1m. 1m. “Investment” means amounts paid to acquire stock or other ownership interest in a partnership, corporation, tax-option corporation, or limited liability company treated as a partnership or corporation.

71.05(25)(a)1s. 1s. “Qualified Wisconsin business” means a business certified by the Wisconsin Economic Development Corporation under s. 238.145, 2011 stats., or registered with the department under s. 73.03 (69).

71.05(25)(a)2. 2. “Qualifying gain” means a long-term capital gain under the Internal Revenue Code realized from the sale of an investment made after December 31, 2010, and held for at least 5 uninterrupted years in a business that for the year of investment and at least 2 of the 4 subsequent years was a qualified Wisconsin business; except that a qualifying gain may not include any amount for which the claimant claimed a subtraction under sub. (24) (b) or any gain described under sub. (26) (b) and may not exceed the fair market value of the investment on the date sold, less the fair market value of the investment on the date acquired.

71.05(25)(b) (b) For taxable years beginning after December 31, 2015, for an investment in a qualified Wisconsin business made after December 31, 2010, and held for at least 5 uninterrupted years, a claimant may subtract from federal adjusted gross income the amount of the claimant’s qualifying gain in the year to which the claim relates, to the extent that it is not subtracted under sub. (6) (b) 9. or 9m.

71.05(25m) (25m) Capital gains exclusion; opportunity zones.

71.05(25m)(a) (a) In this subsection:

71.05(25m)(a)1. 1. “Claimant” means an individual; an individual partner or member of a partnership, limited liability company, or limited liability partnership; or an individual shareholder of a tax-option corporation.

71.05(25m)(a)2. 2. “Wisconsin qualified opportunity fund” means a qualified opportunity fund, as defined in 26 USC 1400Z-2 (d) (1), that holds at least 90 percent of its assets in Wisconsin qualified opportunity zone property, as measured on the last day of the first 6-month period of the fund’s taxable year and the last day of the fund’s taxable year.

71.05(25m)(a)3. 3. “Wisconsin qualified opportunity zone” means a population census tract located in this state that is designated as a qualified opportunity zone under 26 USC 1400Z-1.

71.05(25m)(a)4. 4. “Wisconsin qualified opportunity zone property” means qualified opportunity zone property, as defined in 26 USC 1400Z-2 (d) (2), except that qualified opportunity zone business property, as defined in 26 USC 1400Z-2 (d) (2) (D) and (3) (A) (i), shall be located in a Wisconsin qualified opportunity zone.

71.05(25m)(b) (b) For taxable years beginning after December 31, 2019, a claimant may subtract from federal adjusted gross income the amount of gain excluded from federal gross income in the taxable year due to the application of 26 USC 1400Z-2 (b) (2) (B) (iii) for an investment held in a Wisconsin qualified opportunity fund for at least 5 years or due to the application of 26 USC 1400Z-2 (b) (2) (B) (iv) for an investment held in a Wisconsin qualified opportunity fund for at least 7 years; except that the gain may not include any amount for which the claimant claimed a subtraction under sub. (25) (b) or any gain described under sub. (26) (b).

71.05(25m)(c) (c) In the form and manner prescribed by the department, a fund shall annually certify to each investor and the department that it qualifies as a Wisconsin qualified opportunity fund for the fund’s taxable year. A fund shall make the annual certifications under this paragraph no later than the due date, including extensions, of the fund’s corresponding income or franchise tax return under this chapter.

71.05(25m)(d) (d) Nothing in this subsection affects, or requires an adjustment to, a subtraction by the claimant under sub. (6) (b) 9. for the same taxable year.

71.05(25m)(e) (e) An individual partner, member, or shareholder may not make a subtraction under par. (b) if the entity of which the individual is a partner, member, or shareholder makes a subtraction under par. (b) when computing net income under s. 71.21 (6) (d) 1. or makes a subtraction under s. 71.34 (1k) (p) when computing net income under s. 71.365 (4m) (d) 1.

71.05(26) (26) Income tax deferral; qualified Wisconsin business.

71.05(26)(a) (a) In this subsection:

71.05(26)(a)1. 1. “Claimant” means an individual; an individual partner or member of a partnership, limited liability company, or limited liability partnership; or an individual shareholder of a tax-option corporation.

71.05(26)(a)2. 2. “Financial institution” has the meaning given in s. 69.30 (1) (b).

71.05(26)(a)2m. 2m. “Investment” means amounts paid to acquire stock or other ownership interest in a partnership, corporation, tax-option corporation, or limited liability company treated as a partnership or corporation.

71.05(26)(a)3. 3. “Long-term capital gain” means the gain realized from the sale of any capital asset held more than one year that is treated as a long-term gain under the Internal Revenue Code.

71.05(26)(a)4. 4. “Qualified Wisconsin business” means a business certified by the Wisconsin Economic Development Corporation under s. 238.146, 2011 stats., or registered with the department under s. 73.03 (69).

71.05(26)(b) (b) For taxable years beginning after December 31, 2010, and before January 1, 2014, a claimant may subtract from federal adjusted gross income any amount of a long-term capital gain if the claimant does all of the following:

71.05(26)(b)1. 1. Deposits the gain into a segregated account in a financial institution.

71.05(26)(b)2. 2. Within 180 days after the sale of the asset that generated the gain, invests all of the proceeds in the account described under subd. 1. in a qualified Wisconsin business.

71.05(26)(b)3. 3. After making the investment as described under subd. 2., notifies the department, on a form prepared by the department, that the claimant will not declare on the claimant’s income tax return the gain described under subd. 1. because the claimant has reinvested the capital gain as described under subd. 2. The form shall be sent to the department along with the claimant’s income tax return for the year to which the claim relates.

71.05(26)(bm) (bm) For taxable years beginning after December 31, 2013, a claimant may subtract from federal adjusted gross income any amount of a long-term capital gain if the claimant does all of the following:

71.05(26)(bm)1. 1. Within 180 days after the sale of the asset that generated the gain, invests all of the gain in a qualified Wisconsin business.

71.05(26)(bm)2. 2. After making the investment as described under subd. 1., notifies the department, on a form prepared by the department, that the claimant will not declare the gain on the claimant’s income tax return because the claimant has reinvested the capital gain as described under subd. 1. The form shall be sent to the department along with the claimant’s income tax return for the year to which the claim relates.

71.05(26)(c) (c) The basis of the investment described in par. (b) 2. shall be calculated by subtracting the gain described in par. (b) 1. from the amount of the investment described in par. (b) 2. The basis of the investment described in par. (bm) 1. shall be calculated by subtracting the gain described in par. (bm) 1. from the amount of the investment described in par. (bm) 1.

71.05(26)(d) (d) If a claimant defers the payment of income taxes on a capital gain under this subsection, the claimant may not use the gain to net capital gains and losses, as described under sub. (10) (c).

71.05(26)(e) (e) If a claimant claims the subtraction under this subsection, the claimant may not use the gain described under par. (b) 1. to claim a subtraction under sub. (24).

71.05(26)(f) (f) If a claimant claims a subtraction for a capital gain under par. (b) or (bm), the gain may not be used as a qualifying gain under sub. (25).

71.05 History History: 1987 a. 312; 1987 a. 411 ss. 42, 43, 45, 47 to 49, 51 to 53; 1989 a. 31, 46; 1991 a. 2, 37, 39, 269; 1993 a. 16, 112, 204, 263, 437; 1995 a. 27, 56, 209, 227, 261, 371, 403, 453; 1997 a. 27, 35, 39, 237; 1999 a. 9, 32, 44, 54, 65, 167; 2001 a. 16, 104, 105, 109; 2003 a. 85, 99, 119, 135, 183, 255, 289, 321, 326; 2005 a. 22, 25, 216, 254, 335, 361, 479, 483; 2007 a. 20, 96, 226; 2009 a. 2, 28, 205, 265, 269, 276, 295, 332, 344; 2011 a. 3, 5, 10, 32, 212, 232, 237; 2011 a. 260 ss. 80, 81; 2013 a. 19, 20, 128, 145; 2013 a. 166 s. 76; 2013 a. 173, 227; 2015 a. 55, 60, 84, 195; 2015 a. 197 s. 51; 2015 a. 216, 312; 2017 a. 17, 58, 59, 197, 231, 368; 2019 a. 7, 9, 54, 136; 2021 a. 1, 58, 127, 156, 157, 239; 2021 a. 240 ss. 12, 30; 2023 a. 19, 104, 138, 146, 148, 267; s. 13.92 (1) (bm) 2.

71.05 Annotation Shareholder distributions derived from investments in direct obligations of the federal government are exempt under sub. (6) (b) 1. Capital Preservation Fund, Inc. v. DOR, 145 Wis. 2d 841, 429 N.W.2d 551 (Ct. App. 1988).

71.05 Annotation The fact that federal employees whose service is interrupted can repurchase prior years of employment for benefit determination purposes does not erase their absence from employment on December 31, 1963, so that they may be considered to have been employed on that date under sub. (1) (a). Hafner v. DOR, 2000 WI App 216, 239 Wis. 2d 218, 619 N.W.2d 300, 00-0511.

71.05 Annotation Sub. (6) (a) 1. requires adding to Wisconsin income all types of interest excluded from federal interest. All distributions characterized as interest under federal tax law must be included as interest income. Borge v. Wisconsin Tax Appeals Commission, 2002 WI App 14, 250 Wis. 2d 624, 639 N.W.2d 757, 01-0488.

71.05 Annotation When an agreement is silent on the allocation of a payment between a covenant not to compete and other claims or compensation, the commission may make a reasonable allocation if it is: 1) based on credible evidence; 2) the parties intended a portion of the payment as compensation for the covenant not to compete; and 3) the payment is economically reasonable. Schwartz v. DOR, 2002 WI App 255, 258 Wis. 2d 112, 653 N.W.2d 150, 02-0372.

71.05 Annotation Under sub. (1) (a), if one was a member of one of the listed funds on December 31, 1963, retirement benefits paid on that person’s behalf may not be exempt. Withdrawal of contributions terminated membership and the purchase of previously forfeited years of service did not reinstate the account as of December 31, 1963. Kamps v. DOR, 2003 WI App 106, 264 Wis. 2d 794, 663 N.W.2d 306, 02-2355.

71.05 Annotation Sub. (6) (b) 5. requires that there be a recovery of a federal itemized deduction, for which no tax benefit was received for Wisconsin purposes. The tax benefit rule means that if an amount deducted from gross income in one taxable year is recoverable in a later year, the recovery is income in the later year. Dettwiler v. DOR, 2007 WI App 125, 301 Wis. 2d 512, 731 N.W.2d 663, 06-1660.

71.05 Annotation Adoption Assistance Offers Tax Relief. Franklin. Wis. Law. Feb. 1998.

71.06 71.06 Rates of taxation.

71.06(1) (1) Fiduciaries, single individuals and heads of households; 1986 to 1997. The tax to be assessed, levied and collected upon the taxable incomes of all fiduciaries, except fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals for taxable years beginning on or after August 1, 1986, and before January 1, 1994, and upon the taxable incomes of all fiduciaries, except fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals and heads of households for taxable years beginning after December 31, 1993, and before January 1, 1998, shall be computed at the following rates:

71.06(1)(a) (a) On all taxable income from $0 to $7,500, 4.9 percent.

71.06(1)(b) (b) On all taxable income exceeding $7,500 but not exceeding $15,000, 6.55 percent.

71.06(1)(c) (c) On all taxable income exceeding $15,000, 6.93 percent.

71.06(1m) (1m) Fiduciaries, single individuals and heads of households; 1997 to 1999. The tax to be assessed, levied and collected upon the taxable incomes of all fiduciaries, except fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals and heads of households shall be computed at the following rates for taxable years beginning after December 31, 1997, and before January 1, 2000:

71.06(1m)(a) (a) On all taxable income from $0 to $7,500, 4.77 percent.

71.06(1m)(b) (b) On all taxable income exceeding $7,500 but not exceeding $15,000, 6.37 percent.

71.06(1m)(c) (c) On all taxable income exceeding $15,000, 6.77 percent.

71.06(1n) (1n) Fiduciaries, single individuals and heads of households; 2000. The tax to be assessed, levied and collected upon the taxable incomes of all fiduciaries, except fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals and heads of households shall be computed at the following rates for taxable years beginning after December 31, 1999, and before January 1, 2001:

71.06(1n)(a) (a) On all taxable income from $0 to $7,500, 4.73 percent.

71.06(1n)(b) (b) On all taxable income exceeding $7,500 but not exceeding $15,000, 6.33 percent.

71.06(1n)(c) (c) On all taxable income exceeding $15,000 but not exceeding $112,500, 6.55 percent.

71.06(1n)(d) (d) On all taxable income exceeding $112,500, 6.75 percent.

71.06(1p) (1p) Fiduciaries, single individuals and heads of households; 2001 to 2012. The tax to be assessed, levied and collected upon the taxable incomes of all fiduciaries, except fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals and heads of households shall be computed at the following rates for taxable years beginning after December 31, 2000, and before January 1, 2013:

71.06(1p)(a) (a) On all taxable income from $0 to $7,500, 4.6 percent.

71.06(1p)(b) (b) On all taxable income exceeding $7,500 but not exceeding $15,000, 6.15 percent.

71.06(1p)(c) (c) On all taxable income exceeding $15,000 but not exceeding $112,500, 6.5 percent.

71.06(1p)(d) (d) On all taxable income exceeding $112,500 but not exceeding $225,000, 6.75 percent.

71.06(1p)(e) (e) On all taxable income exceeding $225,000, 7.75 percent.

71.06(1q) (1q) Fiduciaries, single individuals, and heads of households; after 2012. The tax to be assessed, levied, and collected upon the taxable incomes of all fiduciaries, except fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals and heads of households shall be computed at the following rates for taxable years beginning after December 31, 2012:

71.06(1q)(a) (a) On all taxable income from $0 to $7,500, 4.40 percent, except that for taxable years beginning after December 31, 2013, 4.0 percent, less fifty hundredths for taxable years beginning after December 2022.

71.06(1q)(b) (b) On all taxable income exceeding $7,500 but not exceeding $15,000, 5.84 percent, except that for taxable years beginning after December 31, 2018, 5.21 percent, less eighty-one hundredths for taxable years beginning after December 2022.

71.06(1q)(c) (c) On all taxable income exceeding $15,000 but not exceeding $225,000, 6.27 percent, except that for taxable years beginning after December 31, 2020, 5.30 percent.

71.06(1q)(d) (d) On all taxable income exceeding $225,000, 7.65 percent.

71.06(2) (2) Married persons. The tax to be assessed, levied and collected upon the taxable incomes of all married persons shall be computed at the following rates:

71.06(2)(a) (a) For joint returns, for taxable years beginning after July 31, 1986, and before January 1, 1998:

71.06(2)(a)1. 1. On all taxable income from $0 to $10,000, 4.9 percent.

71.06(2)(a)2. 2. On all taxable income exceeding $10,000 but not exceeding $20,000, 6.55 percent.

71.06(2)(a)3. 3. On all taxable income exceeding $20,000, 6.93 percent.

71.06(2)(b) (b) For married persons filing separately, for taxable years beginning after July 31, 1986, and before January 1, 1998:

71.06(2)(b)1. 1. On all taxable income from $0 to $5,000, 4.9 percent.

71.06(2)(b)2. 2. On all taxable income exceeding $5,000 but not exceeding $10,000, 6.55 percent.