2017 Wisconsin Act 17

The Wisconsin Legislature has enacted a number of changes to the Wisconsin tax laws. Following is a brief description of the individual income tax, corporation franchise and income tax, sales and use tax, alcohol and tobacco regulation, local exposition tax, unclaimed property, and police and fire protection fee laws.

These provisions are contained in 2017 Wisconsin Act 17. The description for each provision indicates the sections of the statutes affected and the effective date of the new law.


Income/Franchise Tax Laws

Sales and Use Tax Laws

Alcohol and Tobacco Regulations

Local Exposition Tax Law

Unclaimed Property Law

Police and Fire Protection Fee Law



Income/Franchise Tax Laws

 

• Investment Defined for Capital Gains Income Tax Deferral or Exclusion

(amends sec. 71.05(25)(a)2.; and creates secs. 71.05(25)(a)1m. and 71.05(26)(a)2m., effective June 23, 2017)

For purposes of claiming a capital gain income tax deferral or exclusion based on investments in a qualified Wisconsin business, "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.

In addition, the Act clarifies that a qualifying gain from the sale of an investment in a qualified Wisconsin business may not exceed the fair market value (FMV) of the investment on the date sold, less the FMV of the investment on the date acquired.

• Replace an Obsolete Reference to the Internal Revenue Code for Active Foreign Business Income

(renumbers and amends sec. 71.255(2)(c); and creates secs. 71.255(2)(c)2. and 71.255(2)(c)3., effective June 23, 2017)

In 2011, sec. 861(c)(1)(B) of the Internal Revenue Code (IRC), defining foreign business income, was repealed without replacement.  However, Wisconsin's treatment of active foreign business income did not change.  The Act provides the language repealed in IRC 861(c)(1)(B) into Wisconsin statutes as follows:  "'active foreign business income' means gross income derived from sources outside the United States, as determined in subchapter N of the Internal Revenue Code, including income of a subsidiary corporation, and attributable to the active conduct of a trade or business in a foreign country or in a U.S. possession."

In addition, the Act clarifies a corporate subsidiary as follows: "…a corporation is considered a subsidiary if the parent corporation owns, directly or indirectly, stock with at least 50 percent of the total voting power of the corporation and the stock has a value equal to at least 50 percent of the total value of the stock of the corporation."

• Agreements Signed by Designated Agents of a Combined Group

(amends sec. 71.255(7)(b)7., first applies to documents executed on January 1, 2017)

Clarification is provided that a designated agent of a combined group may validly sign a waiver, agreement, power of attorney, or other documents as necessary or required regarding the combined report filed under sec. 71.255(2)(a), Wis. Stats.

• Requirement to File Information Returns in Order to Claim a Deduction Extended to Tax-Option Corporations

(renumbers and amends sec. 71.34(1k)(h); creates secs. 71.34(1k)(h)1. and 71.34(1k)(h)2., first applies to taxable years beginning on January 1, 2017)

Under prior law, C-corporations, partnerships, and individuals were required to file certain information returns in order to claim deductions for payments of wages, salaries, commissions, bonuses, and rent. The Act extends the requirement to tax-option corporations.

 

Sales and Use Tax Laws

 

• Administration for the Ending of a County Tax

(amends secs. 77.70 and 77.76(3), effective June 23, 2017)

The department may not issue any assessments or act on any claims for refund or adjustment after the end of the calendar quarter that is four years after the year in which a county tax ends.  The termination of a county tax must be the last day of a calendar year (December 31).

The Act allows the department to seek reimbursement from the county for overpayments of the county taxes, including interest, which the department refunds in a reporting period and that exceed the amount of county sales and use taxes reported to or assessed by the department in that same or later reporting period.

• Exemption for Medical Records
 
(creates sec. 77.54(64), effective June 23, 2017)

Section 77.54(64), Wis. Stats., provides an exemption from sales and use tax for patient health care records (medical records) that are sold to a patient or to a person authorized by the patient to receive the medical records. The tax treatment of medical records did not change as a result of this exemption. 

Prior to the exemption, sales of paper copies of medical records sold to the patient or to a person authorized by the patient to receive the medical records were not taxable as a result of the decision by the Wisconsin Tax Appeals Commission in Cannon & Dunphy, S.C. vs. Wisconsin Department of Revenue (August 15, 2015). 

Sales of electronic copies of medical records that are transmitted electronically continue to be nontaxable.

• Hotels, Motels, and Other Lodging Providers Deemed to be Consumers

(creates secs. 77.51(13)(fm) and 77.52(2m)(am), effective June 23, 2017)

The Act clarifies the tax treatment of telecommunications services, ancillary services, Internet access services and cable TV services provided by persons selling transient lodging services that are subject to tax under sec. 77.52(2)(a)1., Wis. Stats. Lodging service providers are deemed to be the consumers of such services that it uses in providing lodging services, even if the service provider charges its customer separately for such services.

Therefore, the tax treatment of these telecommunications services, ancillary services, Internet access services and cable TV services is as follows:

  • Charges by a lodging provider for these services are not taxable.
  • The lodging provider's purchase of these services is subject to tax.

This tax treatment is provided in Publication 219, Hotels, Motels, and Other Lodging Providers, Parts III.D. and IV.A.2.


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Alcohol and Tobacco Regulations

• Definition of Restaurant Correction
 
(renumbers and amends sec. 125.02(18); amends sec. 125.29(6); and creates secs. 125.02(18)(a) to (h), effective June 23, 2017)

Restaurant licensing and inspection activities were transferred from the Department of Health Services to the Department of Agriculture Trade and Consumer Protection through 2015 Wis. Act 55. The transfer of licensing inadvertently revised the definition of "restaurant" for alcohol beverage licensing.  The Act modifies the chapter 125 definition of restaurant for purposes related to the regulation and licensing of alcohol beverage premises, removing the requirement that "the predominant activity" in the building room or place was the preparation, service or sale of meals to transients or the general public. 

The Act provides that places where meals are prepared, sold or served to the general public may qualify for an alcohol beverage license as a restaurant, even if that is not the predominant activity at that place.

• Online Posting of Alcohol and Tobacco Permittees

(amends secs. 139.38(6) and 139.82(6); and creates sec. 139.11(4)(a)2., effective June 23, 2017)

State law requires alcohol beverage retailers to purchase alcohol beverages for resale from fermented malt beverage or intoxicating liquor wholesalers holding wholesaler permits from the department, secs. 125.33(9), and 125.69(6), Wis. Stats. Similarly, retailers of cigarettes and other tobacco products (moist snuff, cigars, pipe tobacco, etc.) must purchase cigarettes and other tobacco products from cigarette and tobacco distributors holding distributor permits from the department, secs. 139.321(2), and 139.79(1), Wis. Stats. Prior law allowed for public disclosure on the department's website of intoxicating liquor permit holders (liquor manufacturers and rectifiers, wineries and wine direct shippers, and out of state shippers of liquor and liquor wholesalers), sec. 139.11 (4)(b)2., Wis. Stats.

The Act extends the department's authorization to publish on the department's website a list of fermented malt beverage permit holders (manufacturers-brewers and brewpubs, out of state shippers of fermented malt beverages and fermented malt beverage wholesalers. The Act also authorizes the department to publish on the department's website a list of cigarette and tobacco product permit holders: cigarette distributors and jobbers, and tobacco products distributors and subjobbers.

 

Local Exposition Tax Law

• Local Exposition Food and Beverage Tax Clarifications

(amends secs. 77.98(3) and 77.98(4)(a), effective June 23, 2017)

The Act provides the following amendments to the law:

  1. Removes unnecessary language;
  2. Clarifies which types of retailers qualify for the future exemption that was created in 2015 Wis. Act 60; and
  3. Updates an outdated reference.

Currently, a 0.5% local exposition food and beverage tax applies to sales of candy, soft drinks, and prepared food sold in Milwaukee County. The tax also applies to alcoholic beverages sold for consumption on the seller's premises. 

When the district's bonds and debt are retired, the food and beverage tax will no longer apply to sales by a person primarily engaged, as determined by the department, in the retail trade as a food and beverage store, as classified under sector 44-45, subsector 445, of the North American Industry Classification System, 2017 edition, published by the U.S. Office of Management and Budget.

An article titled "Sales and Use Tax Exemption Created For Materials, Supplies, Equipment, and Landscaping Services Used To Build Sports and Entertainment Arena Facilities," which describes the future exemption created in 2015 Wis. Act 60, was published in Wisconsin Tax Bulletin #190 (August 2015).


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Unclaimed Property Law

• Interest on Unclaimed U.S. Savings Bonds

(amends sec. 177.24(3)(a); and creates sec. 177.24(3)(c), effective June 23, 2017)

The department is no longer required to pay interest on the proceeds from the redemption of unclaimed property that is a U.S. Savings Bond.  Under prior law, the department was required to pay interest on unclaimed property received if the property was interest bearing to the owner at the time the holder delivered the property to the department, which included U.S. Savings Bonds.  The department is unable to redeem savings bonds until the bond has reached final maturity, at which point the federal interest has stopped accruing.

 

 

Police and Fire Protection Fee Law

• Clarification of Department of Revenue's Authority

(renumbers and amends sec. 196.025(6)(d)2.; consolidates, renumbers, and amends secs. 196.025(6)(d)(intro.) and 1.; amends secs. 196.025(6)(b)1., 196.025(6)(b)2., and 196.025(6)(c)2.; and creates sec. 196.025(6)(cm), effective June 23, 2017)

The Department of Revenue administers the police and fire protection fee on behalf of the Public Service Commission.  The fee was created as part of 2009 Wis. Act 28, the governor's executive budget.  The department collects both the $0.75 fee from telecommunications providers and the $0.38 fee from retailers selling pre-paid cell phone plans.

The Act provides communications providers and retailers with explicit appeal rights.  The Act also gives the department statutory authority to collect both types of the fee, require communications providers and retailers to register and file returns with the department, and determine compliance in audit.  This authority is currently provided by PSC Rule (PSC 172).

Since the law is consistent with the PSC Rule, there will be no change in the application or the administration of the police and fire protection fee.

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