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Provides several presumptions to aid taxpayers in determining whether a unitary business exists.
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Provides specific rules relating to the inclusion of passive holding companies and pass-through entities in the unitary business.
Section Tax 2.63 Controlled Group Election.
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Explains how to make the election and how to renew it after its 10-year duration.
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Provides rules relating to the department's authority to disregard the election in cases where it has the primary effect of tax avoidance rather than its intended purpose of simplifying the determination of who must be included in the combined report.
Section Tax 2.64 Alternative Apportionment for Combined Groups Including Specialized Industries.
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Specifies how and when a qualifying group may file a petition for alternative apportionment and what information must be submitted to the department.
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Provides that once the department approves the alternative method, that same method must be used for a 7-year period, subject to a limitation that the tax computation under the alternative method cannot be lower than what it would have been if each corporation apportioned its income separately.
Section Tax 2.65 Designated Agent of Combined Group.
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Explains how to identify which corporation is responsible to act on behalf of the combined group for matters relating to the combined return.
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Defines the scope and limitations of the agency relationship.
Section Tax 2.66 Combined Estimated Tax Payments.
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Explains when a combined group member may make its own estimated payments, rather than having the designated agent make the payments on its behalf.
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Provides rules for determining the combined group's required estimated tax payments.
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Provides rules for applying estimated payments and overpayments of prior year estimated payments.
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Enumerates the required components of a combined return and explains how to report separate entity items.
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Explains how to determine the taxable year of a combined return.
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Provides rules relating to interest, penalties, and statutes of limitations as they relate to combined returns.
Comparison with federal regulations
The rules are very similar to the federal regulations relating to consolidated groups. The federal regulations listed below are specifically referenced or adopted in this rule order, but modified to apply to combined groups instead of federal consolidated groups.
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Treas. Reg. §
1.1502-13, relating to intercompany transactions. This federal regulation was actually adopted by statute (s.
71.255 (4) (g), Stats.), but is interpreted in this rule order (s.
Tax 2.61 (6) (b)).
The general purpose of the above federal regulations is to treat the members of a federal consolidated group as if they were divisions of a single corporation. Likewise, the purpose of adopting these rules for Wisconsin purposes is to treat the members of a combined group as if they were divisions of a single corporation.
Comparison with rules in adjacent states
Illinois
Illinois has comprehensive regulations relating to its combined reporting statute. (including IL Regs. 100.2340, 100.2570, 100.5200, 100.5201, 100.5210, 100.5220, 100.5230, 100.5240, 100.5250, 100.5260, 100.5265, 100.5280, and 100.9700). The following aspects of the rules in this rule order were modeled after the Illinois regulations, with some modifications:
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Adoption of federal consolidated return regulations
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Combined estimated tax payments
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Rules relating to the duties of the designated agent
Iowa
Iowa does not have a statute which permits or allows combined reporting. Thus, it has no rules or regulations relating to combined reporting.
Michigan
Michigan adopted combined reporting in 2008, when it enacted its Michigan Business Tax. At the time this rule order was authored, Michigan has not yet promulgated rules or regulations relating to its combined reporting statute. However, Michigan has published an extensive amount of guidance in the form of Frequently Asked Questions.
Minnesota
Like Illinois, Minnesota has rules relating to its combined reporting statute (including Rules 8019.0100, 8019.0300, 8019.0405, and 8019.0500, Minn. Rules). The section of this rule order that provides guidance in determining a “unitary business" (s.
Tax 2.62) is modeled after Minnesota's rule 8019.0100, with some modifications.
Summary of factual data and analytical methodologies
The department developed these regulations based upon research of the combined reporting laws, rules, regulations, published guidance, and tax form instructions of other states. The Illinois and Minnesota regulations referenced above were frequently used as a resource, in addition to various law journal articles and tax publications.
The combined reporting regulations recently promulgated by Massachusetts (830 CMR 63.32B.2) were heavily relied upon. The Massachusetts combined reporting law (M.G.L. c. 63 §32B), like Wisconsin's, is first effective for taxable years beginning on or after January 1, 2009, and Wisconsin's law has many similarities with the Massachusetts law.
The department also studied the regulations under section
1502 of the Internal Revenue Code, relating to consolidated returns.
Analysis and supporting documents used to determine effect on small business
Combined reporting primarily affects larger corporations, rather than small businesses. Combined reporting is required for regular “C" corporations, but is not required for the types of entities that are more characteristic of small businesses, such as:
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Sole proprietorships,
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Partnerships,
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Limited liability companies taxed as partnerships, and
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S corporations
Anticipated costs incurred by private sector
This proposed rule does not have a significant fiscal effect on the private sector independently from the statute it interprets.
Small Business Impact
This proposed rule does not have a significant effect on small business.
Fiscal Estimate
The proposed rules create Tax 2.60 through 2.67 to incorporate tax law changes included in
2009 Act 2 and
2009 Act 28 related to combined reporting for commonly controlled groups of corporations.
The fiscal effect from implementation of combined reporting was included in the fiscal effect for Act 2, and the fiscal effect of certain changes to combined reporting that were a part of Act 28 were included in the fiscal effect for the Act. Therefore, the proposed rules have no fiscal effect.
Wisconsin Technical College System Board
The Wisconsin Technical College System Board proposes an order to revise section
TCS 10.03 (3), relating to statutory residents. Public hearing and notice are not required under s.
227.16 (2) (b), Stats., as the proposed rule amendment brings the existing rule into conformity with s.
38.22 (6), Stats.
Analysis Prepared by the Wisconsin Technical College System Board
Statutes interpreted
Statutory authority
Explanation of agency authority
Pursuant to s.
38.22 (4), Stats., the Technical College System Board shall establish procedures to determine the residence of students attending district schools.
Related statute or rule
Plain language analysis
The 2009-11 state budget bill,
2009 Wisconsin Act 28, added new state residency provisions for tuition purposes for persons who are not residents of the state, but who are enrolled in a technical college district and who meet three eligibility requirements: they graduated from a Wisconsin high school or received a Wisconsin HSED; they have been continuously present in the state for the three years following their enrollment in a Wisconsin high school or preceding receipt of a Wisconsin HSED; and upon enrollment in a technical college, they demonstrate proof of filing (or intent to file) for a permanent U.S. resident visa as soon as they are eligible. In addition, previous legislation added s.
38.22 (6) (f) relating to the residency status for tuition purposes for certain veterans, which was never codified into administrative rule.
Comparison with federal regulations
Not applicable.
Comparison with rules in adjacent states
Not applicable.
Summary of factual data and analytical methodologies
Not applicable.
Text of Rule
SECTION 1. TCS 10.03 (3) (e) and (f) are created to read:
TCS 10.03 (3) (e) Any person who is a citizen of a country other than the United States if that person meets all of the following requirements:
1. The person graduated from a high school in this state or received declaration of equivalency of high school graduation from this state.
2. The person was continuously present in this state for at least 3 years following the first day of attending a high school in this state or immediately preceding receipt of a declaration of equivalency of high school graduation.
3. The person enrolls in a district school and provides the district board with proof that the person has filed or will file an application for a permanent resident visa with U.S. Citizenship and Immigration Services as soon as the person is eligible to do so.
(f) Any person verified by the department of veterans affairs as being a resident of this state under s.
38.24 (8) (a), Stats.
Small Business Impact
Not applicable.
Fiscal Estimate
The functions required by this rule can be absorbed within existing staff. Therefore, there is no fiscal effect on the agency.
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