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 exclusion for Wisconsin?

  5. Is an electing partnership eligible to claim an exclusion of long-term capital gains from the sale of an investment in a qualified Wisconsin business or Wisconsin qualified opportunity fund?

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

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

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

  9. Is an electing partnership subject to its partners' basis limitations when determining the amount of deductions or losses allowable in computation of net income of the partnership?

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

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

  12. What is the capital loss limitation for an electing partnership?

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

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

  15. 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?

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

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

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

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

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

  21. 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?

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

  23. 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?

  24. 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?

  25. 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?

  26. 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?

  27. 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?

  28. 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?

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

  30. Can an electing partnership deduct from partnership income the health insurance premiums allowed as a deduction from a partner's income as self-employed health insurance according to sec. 162(I), IRC?

  31. Can an electing partnership deduct from partnership income retirement contributions paid by the partnership on behalf of a partner (i.e., the partnership reduces the amount of a partner's cash distributions to make retirement contributions)?

  32. Can an electing partnership deduct from partnership income the federal one-half of self-employment tax deduction provided in sec. 164(f), IRC?

  33. 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 enacted as of March 6, 2024: secs. 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, Internal Revenue Code and 26 CFR § 163-8T, Federal Treasury Regulations.

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

​​​​Contact Us

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: ​​DORAuditPassThrough@wisconsin.gov

The department welcomes your input on our guidance. Submit comments on this guidance document.

Guidance Document Number: 100179

March 6, 2024