2003 - 2004 LEGISLATURE
September 18, 2003 - Introduced by Representatives McCormick, Nischke,
Staskunas, Seratti, Hahn, Albers, Krawczyk, Friske, Gronemus, Weber,
Gielow and Ott, cosponsored by Senators Kanavas, Stepp, Lassa, Reynolds
and Roessler. Referred to Committee on Economic Development.
AB524,1,7
1An Act to amend 71.05 (6) (a) 15., 71.21 (4), 71.26 (2) (a), 71.34 (1) (g), 71.45 (2)
2(a) 10. and 77.92 (4); and
to create 15.07 (1) (b) 23., 15.155 (5), 71.07 (2r), 71.07
3(5d), 71.10 (4) (gc), 71.10 (4) (gx), 71.28 (2r), 71.30 (3) (eop), 71.47 (2r), 71.49 (1)
4(eop), 73.03 (35p), 73.03 (35r) and 560.20 of the statutes;
relating to: creating
5an income and franchise tax credit for equity investments in a venture capital
6fund, creating an equity investment individual income tax credit, and granting
7rule-making authority.
Analysis by the Legislative Reference Bureau
This bill creates a nonrefundable income and franchise tax credit for equity
investments in venture capital funds that are certified by the Wisconsin Capital
Investment Board as described below. The amount of the tax credit is equal to 6%
of the taxpayer's equity investment in venture capital funds in the taxable year, up
to a maximum claim of $60,000 per claimant, but the total amount of all such credits
awarded in any fiscal year may not exceed $5,000,000. If the credit claimed by a
taxpayer exceeds the taxpayer's tax liability, the state will not issue a refund, but the
taxpayer may carry forward any remaining credit to subsequent taxable years.
This bill creates a Wisconsin Capital Investment Board (board), consisting of
five members with expertise in venture capital and financial investments. The
members are appointed by the governor, with the advice and consent of the senate.
Under this bill, the board must promulgate rules establishing a procedure for the
board to certify venture capital funds as eligible to receive equity investments that
qualify for the tax credits described above. A venture capital fund may obtain a
certification only if the venture capital fund is a private seed and venture capital
partnership or entity fund, the venture capital fund maintains a physical presence
in Wisconsin, and the venture capital fund makes a commitment to consider making
equity investments in businesses located in Wisconsin. The bill requires the board,
upon request of any person, to issue a written notice indicating whether a venture
capital fund is certified as eligible to receive equity investments that qualify for the
tax credits described above. Each such notice that indicates a venture capital fund
is certified must include the following statement: "The Wisconsin Capital
Investment Board has not recommended or approved an investment in this
venture capital fund or assessed the merits or risks of such an investment.
Investors should rely solely on their own investigation and analysis and seek
investment, financial, legal, and tax advice before making their own decision
regarding investment in this enterprise." The bill also requires the board, upon
issuing or discontinuing a certification, to notify the Department of Revenue and give
the Department of Revenue a copy of the certification or discontinuance.
This bill also creates a nonrefundable individual income tax credit that is equal
to 20% of the taxpayer's cash investment in a community-based seed capital fund
or in a business that, generally, has been operating for no more than three years and
has a net worth not exceeding $3,000,000. No individual may claim a credit for more
than $50,000 in a taxable year and the total amount of all credits for all individuals
who claim credits may not exceed $3,000,000 in a state fiscal year.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB524, s. 1
1Section
1. 15.07 (1) (b) 23. of the statutes is created to read:
AB524,2,22
15.07
(1) (b) 23. Wisconsin capital investment board.
AB524, s. 2
3Section
2. 15.155 (5) of the statutes is created to read:
AB524,3,34
15.155
(5) Wisconsin capital investment board. There is created a Wisconsin
5capital investment board attached to the department of commerce under s. 15.03.
6The Wisconsin capital investment board shall consist of 5 members appointed for
75-year terms. Each member of the Wisconsin capital investment board shall have
8expertise concerning venture capital and financial investments. Any person having
1a financial interest in a venture capital fund certified under s. 560.20 (2) may not be
2a member and any member who acquires such an interest shall thereupon vacate his
3or her membership.
AB524, s. 3
4Section
3. 71.05 (6) (a) 15. of the statutes is amended to read:
AB524,3,95
71.05
(6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de),
6(2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx),
(2r), (3g), and (3s) and not passed through
7by a partnership, limited liability company, or tax-option corporation that has added
8that amount to the partnership's, company's, or tax-option corporation's income
9under s. 71.21 (4) or 71.34 (1) (g).
AB524, s. 4
10Section
4. 71.07 (2r) of the statutes is created to read:
AB524,3,1211
71.07
(2r) Equity investment in venture capital fund credit. (a) In this
12subsection:
AB524,3,1313
1. "Board" means the Wisconsin capital investment board.
AB524,3,1614
2. "Claimant" means a sole proprietor, a partner, a member of a limited liability
15company, or a shareholder of a tax-option corporation who files a claim under this
16subsection.
AB524,3,1717
3. "Equity investment" means the purchase of an ownership interest.
AB524,3,1918
4. "Venture capital fund" means a venture capital fund certified under s. 560.20
19(2).
AB524,3,2320
(b) Subject to the limitations provided under this subsection, a claimant may
21claim as a credit against the tax imposed under s. 71.02, up to the amount of those
22taxes, an amount equal to 6% of the claimant's equity investment in a venture capital
23fund in the taxable year.
AB524,4,224
(c) 1. The maximum credit that a claimant may claim under this subsection
25may not exceed $60,000 in a taxable year and the total amount of the claims for all
1claimants under this subsection, s. 71.28 (2r), and s. 71.47 (2r) may not exceed
2$5,000,000 in any fiscal year.
AB524,4,63
2. No credit may be allowed under this subsection unless the claimant submits
4with the claimant's return a notice issued by the board under s. 560.20 (3) indicating
5that the board has certified the venture capital fund as eligible to receive equity
6investments that qualify for the credit.
AB524,4,87
3. Section 71.28 (4) (e) to (h), as it applies to the credit under s. 71.28 (4), applies
8to the credit under this subsection.
AB524,4,169
4. Partnerships, limited liability companies, and tax-option corporations may
10not claim the credit under par. (b), but the eligibility for, and the amount of, the credit
11are based on their payment of an equity investment, as described in this subsection.
12A partnership, limited liability company, or tax-option corporation shall compute
13the amount of credit that each of its partners, members, or shareholders may claim
14and shall provide that information to each of them. Partners, members of limited
15liability companies, and shareholders of tax-option corporations may claim the
16credit in proportion to their ownership interest.
AB524, s. 5
17Section
5. 71.07 (5d) of the statutes is created to read:
AB524,4,1818
71.07
(5d) Equity investment credit. (a)
Definitions. In this subsection:
AB524,4,1919
1. "Claimant" means an individual who files a claim under this subsection.
AB524,4,2120
2. "Community-based seed capital fund" means a fund certified under s. 560.20
21(2) (b).
AB524,4,2222
3. "Qualifying business" means a business certified under s. 560.20 (2) (c).
AB524,5,223
(b)
Filing claims. Subject to the limitations provided in this subsection, a
24claimant may claim as a credit against the tax imposed under s. 71.02, up to the
25amount of those taxes, an amount equal to 20% of the claimant's cash investment in
1the taxable year to which the claim relates in a qualifying business or in a
2community-based seed capital fund.
AB524,5,63
(c)
Limitations. 1. The maximum credit that a claimant may claim under
4this subsection may not exceed $50,000 in a taxable year and the total amount of
5the claims for all claimants under this subsection may not exceed $3,000,000 in
6any fiscal year.
AB524,5,87
2. No credit may be allowed under this subsection unless it is claimed
8within the time period under s. 71.75 (2).
AB524,5,189
3. For a claimant who is a nonresident or part-year resident of this state and
10who is a single person or a married person filing a separate return, multiply the
11credit for which the claimant is eligible under par. (b) by a fraction, the numerator
12of which is the individual's Wisconsin adjusted gross income and the denominator of
13which is the individual's federal adjusted gross income. If a claimant is married and
14files a joint return, and if the claimant or the claimant's spouse, or both, are
15nonresidents or part-year residents of this state, multiply the credit for which the
16claimant is eligible under par. (b) by a fraction, the numerator of which is the couple's
17joint Wisconsin adjusted gross income and the denominator of which is the couple's
18joint federal adjusted gross income.
AB524,5,2419
(d)
Administration. 1. If a credit computed under this subsection is not entirely
20offset against income taxes otherwise due, the unused balance may be carried
21forward and credited against income taxes otherwise due for the following 5 taxable
22years to the extent not offset by those taxes otherwise due in all intervening years
23between the year in which the investment under par. (b) was paid and the year in
24which the carry-forward credit is claimed.
AB524,6,2
12. Section 71.07 (9e) (d), to the extent that it applies to the credit under that
2subsection, applies to the credit under this subsection.
AB524,6,53
3. Community-based seed capital funds and qualifying businesses shall
4submit to the department any information that the department considers necessary
5to administer this subsection.
AB524, s. 6
6Section
6. 71.10 (4) (gc) of the statutes is created to read:
AB524,6,77
71.10
(4) (gc) Equity investment credit under s. 71.07 (5d).
AB524, s. 7
8Section
7. 71.10 (4) (gx) of the statutes is created to read:
AB524,6,109
71.10
(4) (gx) Equity investment in venture capital fund credit under s. 71.07
10(2r).
AB524, s. 8
11Section
8. 71.21 (4) of the statutes is amended to read:
AB524,6,1412
71.21
(4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di),
13(2dj), (2dL), (2dm), (2ds), (2dx),
(2r), (3g), and (3s) and passed through to partners
14shall be added to the partnership's income.
AB524, s. 9
15Section
9. 71.26 (2) (a) of the statutes is amended to read:
AB524,7,516
71.26
(2) (a)
Corporations in general. The "net income" of a corporation means
17the gross income as computed under the Internal Revenue Code as modified under
18sub. (3) minus the amount of recapture under s. 71.28 (1di) plus the amount of credit
19computed under s. 71.28 (1), (3), (4), and (5) plus the amount of the credit computed
20under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx),
(2r), and (3g) and
21not passed through by a partnership, limited liability company, or tax-option
22corporation that has added that amount to the partnership's, limited liability
23company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g) plus
24the amount of losses from the sale or other disposition of assets the gain from which
25would be wholly exempt income, as defined in sub. (3) (L), if the assets were sold or
1otherwise disposed of at a gain and minus deductions, as computed under the
2Internal Revenue Code as modified under sub. (3), plus or minus, as appropriate, an
3amount equal to the difference between the federal basis and Wisconsin basis of any
4asset sold, exchanged, abandoned, or otherwise disposed of in a taxable transaction
5during the taxable year, except as provided in par. (b) and s. 71.45 (2) and (5).
AB524, s. 10
6Section
10. 71.28 (2r) of the statutes is created to read:
AB524,7,87
71.28
(2r) Equity investment in venture capital fund credit. (a) In this
8subsection:
AB524,7,99
1. "Board" means the Wisconsin capital investment board.
AB524,7,1010
2. "Claimant" means a person who files a claim under this subsection.
AB524,7,1111
3. "Equity investment" means the purchase of an ownership interest.
AB524,7,1312
4. "Venture capital fund" means a venture capital fund certified under s. 560.20
13(2).
AB524,7,1714
(b) Subject to the limitations provided under this subsection, a claimant may
15claim as a credit against the tax imposed under s. 71.23, up to the amount of those
16taxes, an amount equal to 6% of the claimant's equity investment in a venture capital
17fund in the taxable year.
AB524,7,2118
(c) 1. The maximum credit that a claimant may claim under this subsection
19may not exceed $60,000 in a taxable year and the total amount of the claims for all
20claimants under this subsection, s. 71.07 (2r), and s. 71.47 (2r) may not exceed
21$5,000,000 in any fiscal year.
AB524,7,2522
2. No credit may be allowed under this subsection unless the claimant submits
23with the claimant's return a notice issued by the board under s. 560.20 (3) indicating
24that the board has certified the venture capital fund as eligible to receive equity
25investments that qualify for the credit.
AB524,8,2
13. Subsection (4) (e) to (h), as it applies to the credit under sub. (4), applies to
2the credit under this subsection.
AB524,8,103
4. Partnerships, limited liability companies, and tax-option corporations may
4not claim the credit under par. (b), but the eligibility for, and the amount of, the credit
5are based on their payment of an equity investment, as described in this subsection.
6A partnership, limited liability company, or tax-option corporation shall compute
7the amount of credit that each of its partners, members, or shareholders may claim
8and shall provide that information to each of them. Partners, members of limited
9liability companies, and shareholders of tax-option corporations may claim the
10credit in proportion to their ownership interest.
AB524, s. 11
11Section
11. 71.30 (3) (eop) of the statutes is created to read:
AB524,8,1312
71.30
(3) (eop) Equity investment in venture capital fund credit under s. 71.28
13(2r).
AB524, s. 12
14Section
12. 71.34 (1) (g) of the statutes is amended to read:
AB524,8,1715
71.34
(1) (g) An addition shall be made for credits computed by a tax-option
16corporation under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx),
(2r), (3),
17and (3g) and passed through to shareholders.
AB524, s. 13
18Section
13. 71.45 (2) (a) 10. of the statutes is amended to read:
AB524,8,2419
71.45
(2) (a) 10. By adding to federal taxable income the amount of credit
20computed under s. 71.47 (1dd) to (1dx)
and (2r) and not passed through by a
21partnership, limited liability company or tax-option corporation that has added that
22amount to the partnership's, limited liability company's or tax-option corporation's
23income under s. 71.21 (4) or 71.34 (1) (g) and the amount of credit computed under
24s. 71.47 (1), (3), (4)
, and (5).
AB524, s. 14
25Section
14. 71.47 (2r) of the statutes is created to read:
AB524,9,2
171.47
(2r) Equity investment in venture capital fund credit. (a) In this
2subsection:
AB524,9,33
1. "Board" means the Wisconsin capital investment board.
AB524,9,44
2. "Claimant" means a person who files a claim under this subsection.
AB524,9,55
3. "Equity investment" means the purchase of an ownership interest.
AB524,9,76
4. "Venture capital fund" means a venture capital fund certified under s. 560.20
7(2).
AB524,9,118
(b) Subject to the limitations provided under this subsection, a claimant may
9claim as a credit against the tax imposed under s. 71.43, up to the amount of those
10taxes, an amount equal to 6% of the claimant's equity investment in a venture capital
11fund in the taxable year.
AB524,9,1512
(c) 1. The maximum credit that a claimant may claim under this subsection
13may not exceed $60,000 in a taxable year and the total amount of the claims for all
14claimants under this subsection, s. 71.07 (2r), and s. 71.28 (2r) may not exceed
15$5,000,000 in any fiscal year.
AB524,9,1916
2. No credit may be allowed under this subsection unless the claimant submits
17with the claimant's return a notice issued by the board under s. 560.20 (3) indicating
18that the board has certified the venture capital fund as eligible to receive equity
19investments that qualify for the credit.
AB524,9,2120
3. Section 71.28 (4) (e) to (h), as it applies to the credit under s. 71.28 (4), applies
21to the credit under this subsection.
AB524,9,2522
4. Partnerships, limited liability companies, and tax-option corporations may
23not claim the credit under par. (b), but the eligibility for, and the amount of, the credit
24are based on their payment of an equity investment, as described in this subsection.
25A partnership, limited liability company, or tax-option corporation shall compute
1the amount of credit that each of its partners, members, or shareholders may claim
2and shall provide that information to each of them. Partners, members of limited
3liability companies, and shareholders of tax-option corporations may claim the
4credit in proportion to their ownership interest.
AB524, s. 15
5Section
15. 71.49 (1) (eop) of the statutes is created to read:
AB524,10,76
71.49
(1) (eop) Equity investment in venture capital fund credit under s. 71.47
7(2r).
AB524, s. 16
8Section
16. 73.03 (35p) of the statutes is created to read:
AB524,10,129
73.03
(35p) To deny a portion of a credit claimed under s. 71.07 (2r), 71.28 (2r),
10or 71.47 (2r), if granting the full amount claimed would violate a requirement under
11s. 71.07 (2r) (c) 1. by bringing the total of the credits claimed under ss. 71.07 (2r),
1271.28 (2r), and 71.47 (2r) over $5,000,000 in any fiscal year.
AB524, s. 17
13Section
17. 73.03 (35r) of the statutes is created to read:
