Pass-Through Entity-Level Tax: Partnership Determining Income and Computing Tax

Effective for taxable years beginning on or after January 1, 2019

  1. How does an electing partnership determine the situs of income?

  2. What is the entity-level tax rate?

  3. Are long-term capital gains taxed at a different rate?

  4. Can an electing partnership claim the 30-percent or 60-percent long-term capital gain deduction for Wisconsin?

  5. Can an electing partnership register to be a qualified Wisconsin business?

  6. Can an electing partnership claim a deduction for charitable contributions?

  7. Can an electing partnership pass through charitable contributions to its partners?

  8. Is an electing partnership subject to passive activity loss limitations?

  9. How does the electing partnership determine the characterization of passive income or loss?

  10. Is an electing partnership subject to the $500 Wisconsin capital loss limitation or the $3,000 federal capital loss limitation?

  11. Is an electing partnership subject to federal section 179 expense limitations?

  12. Is an electing partnership allowed the federal special depreciation allowance or "bonus depreciation" under sec. 168(k), Internal Revenue Code (IRC)?

  13. How will depreciation that results from a partnership's election under sec. 754, IRC, be treated if the partnership makes an election to be taxed at the entity level?

  14. Can an electing partnership carry forward suspended capital and passive activity losses?

  15. Can an electing partnership carry back or carry forward net operating losses?

  16. Can an electing partnership pass through net operating or business losses to its partners?

  17. Can an electing partnership claim credits to offset taxable income at the entity level?

  18. Can an electing partnership pass through credits to its partners?

  19. How is the manufacturing and agriculture (M&A) credit included in Wisconsin income if a partnership makes an election to pay tax at the entity level in the year the M&A credit is computed and does not make the election to pay tax at the entity level in the following year?

  20. How does an electing partnership compute the credit for taxes paid to another state?

  21. Can an electing partnership claim a credit for taxes paid to another state if the taxes paid to the other state are paid by a partner on an individual income tax return?

  22. Is withholding tax paid by an electing partnership in another state (e.g., Illinois) on behalf of its members considered a "composite return" for purposes of the Wisconsin entity-level credit for taxes paid to another state?

  23. Can a partnership making the election to pay tax at the entity level exclude income at the entity level if the income is attributable to a tax-exempt partner?

  24. For Wisconsin purposes, how will the partnership entity-level tax election affect the deductible amount of a partner's interest expense related to a debt-financed acquisition of a partnership?

  25. For Wisconsin purposes, how will the partnership entity-level tax election affect the deductible amount of a partner's unreimbursed partnership expenses (UPE) reported on federal Schedule E, page 2?

  26. Is an electing partnership subject to Wisconsin franchise tax on federal, state, and municipal government interest that would otherwise be taxable to a partner that is a tax-option (S) corporation?

  27. How are guaranteed payments treated when calculating the partnership's Wisconsin taxable income?

  28. If a partnership makes the entity-level tax election, who may claim a deduction for payments made by the partnership for a partner's health insurance?

  29. If a partnership makes the entity-level tax election, who may claim a deduction for contributions made by the partnership in a partner's retirement plan?

  30. If a partner of an electing partnership had a suspended loss from a prior year due to basis limitations, may the electing partnership use the partner's suspended loss to reduce its Wisconsin taxable income in the current year?


Applicable Laws and Rules

This document provides statements or interpretations of the following laws and regulations in effect as of January 23, 2020: Sections 71.01, 71.04, 71.05, 71.07, 71.21, 71.25, 71.26, 71.34, 71.98 and 73.03, Wis. Stats., secs. Tax 2.08 and 2.955, Wis. Adm. Code, 26 U.S. Code §§ 162, 404, 469 and 642, and 26 CFR § 163-1.

Laws enacted and in effect after January 23, 2020, new administrative rules, and court decisions may change the interpretations in this document. Guidance issued prior to January 23, 2020, that is contrary to the information in this document is superseded by this document, pursuant to sec. 73.16(2)(a), Wis. Stats.

FOR QUESTIONS OR COMMENTS CONTACT:

MS 5-77
WISCONSIN DEPARTMENT OF REVENUE
Customer Service Bureau
PO Box 8949
Madison, WI 53708-8949
Phone: (608) 266-2772
Fax: (608) 267-1030
Email additional questions to DORIncome@wisconsin.gov

Guidance Document Number: 100179

January 23, 2020