Plain language analysis: A new subtraction is available for active duty military pay, as adopted in 2021 Wisconsin Act 58. Due to differing definitions of active duty in the US Code, the rule proposes to establish a definition of active duty. The proposed rule also provides guidance as to what type of military pay is nontaxable income in Wisconsin because it is received while on active duty. Summary of, and comparison with, existing or proposed federal regulation: There is no existing or proposed federal regulation that is intended to address the activities to be regulated by the rule.
Summary of public comments and feedback on scope statement: The department received the following public comment.
Comment – Tim Schnese expressed concern that members of the reserves and National Guard that are on full-time active duty, attending military school, or on training duty would not qualify for the subtraction. Tim suggested the department collaborate with the Wisconsin National Guard and/or Wisconsin Department of Military Affairs to gain more knowledge of the various active duty situations relating to members of the reserves and National Guard.
DOR's response to comment – The department met with Wisconsin Department of Military Affairs and the U.S. Armed Forces (Truax Field – Madison) to go over the various pay which would be allowed as a subtraction under current law. The two agencies provided to the department which types of activities would qualify as active duty. Active duty and eligible pay are defined in the rule based on feedback from these agencies.
Comparison with rules in adjacent states: The department is not aware of a similar rule in an adjacent state.
Summary of factual data and analytical methodologies: 2021 Wisconsin Act 58 created a subtraction for active duty military pay. Active duty is not defined in the statutes. The rule needs to be created to define active duty so it is clear which military pay is eligible for the subtraction. No other data or analytical methodologies were used in the preparation of this proposed rule order or this analysis. Analysis and supporting documents used to determine effect on small business: This rule order makes changes to reflect current law and current department policy. It makes no policy or other changes having an effect on small business.
Anticipated costs incurred by private sector: This proposed rule does not have a fiscal effect on the private sector, as no changes to existing policies are being made.
Effect on small business: This proposed rule does not affect small business, as no changes to existing policies are being made.
Agency contact person: Please contact Jen Olson at (608) 266-8253 or jennifer.olson@wisconsin.gov, if you have any questions regarding this proposed rule. Place where comments are to be submitted and deadline for submission: Comments may be submitted to the contact person shown below no later than the date on which the public hearing on this proposed rule is conducted. Information as to the place, date, and time of the public hearing will be published in the Wisconsin Administrative Register.
Jen Olson
Department of Revenue
Mail Stop 6-40
2135 Rimrock Road
P.O. Box 8933
Madison, WI 53708-8933
SECTION 1. Tax 3.045 is created to read:
Tax 3.045 Subtraction for basic, special, or incentive pay received from the federal government while on active duty in the U.S. armed forces.
(1) Purpose. This section clarifies the subtraction from federal adjusted gross income in sec. 71.05 (6) (b) 56., Stats., for basic, special, or incentive pay received from the federal government by an individual who is on active duty in the U.S. armed forces.
(2) Definitions. For purposes of sec. 71.05 (6) (b) 56., stats., all of the following apply:
(a) "Active duty" means full-time duty as a uniformed service member in the active service of the U.S. armed forces and includes full-time training duty, annual training duty, full-time National Guard duty, and attendance, while in the active service, at a school designated as a federal military service academy. Active duty does not include training while on inactive duty or attendance for training not required by the U.S. armed forces.
(b) "U.S. armed forces" has the meaning given in 26 USC 7701 (a) (15) and includes uniformed service members in the reserve components identified under 37 USC 101 (24). (3) Eligible pay. Basic, special, or incentive pay eligible for the subtraction includes only income received while the individual is on active duty. Amounts the individual receives while on inactive duty in a civil service position in the military, while on inactive duty training, or while on inactive duty waiting for reenlistment to inactive duty, are not eligible for the subtraction.
SECTION 2. Effective date; general. This rule shall take effect on the first day of the month following publication in the Wisconsin Administrative Register as provided in s. 227.22 (2) (intro.), Stats.
