The fiscal effect of the financial records matching program was included in the fiscal estimate for
2009 Wis. Act 28. As such, the rule has no fiscal effect.
State fiscal effect
None.
Text of Proposed Rule
SECTION 1. Tax 1.16 is created to read:
Tax 1.16 Financial record matching program. (1) PURPOSE. The purpose of this section is to specify procedures under which the department shall enter into agreements with financial institutions doing business in this state to operate the financial record matching program under s.
71.91 (8), Stats.
(2) DEFINITIONS. In this section:
(b) “Financial institution" has the meaning given in s.
49.853 (1) (c), Stats.
(3) PROCEDURES. (a) A financial institution doing business in this state shall enter into an agreement with the department to participate in the exchange of data on a quarterly basis. To the extent feasible, the information required under this agreement shall be submitted by electronic means prescribed by the department. The financial institution shall sign the agreement and return the agreement to the department within 20 business days of receipt of the agreement. The department shall review the agreement and, if all conditions have been met, shall sign the agreement and provide the financial institution with a copy of the signed agreement.
(b) A financial institution shall elect one of the following options for the exchange of data described in par. (a):
1. `State matching option.' This option is also known as the “all accounts method." If this option is elected, the agreement described in par. (a) shall include the following:
a. The financial institution agrees to provide an electronic file to the department or department's agent on a quarterly basis. The file contains the name, social security number or federal employer identification number of all persons having an ownership interest in an account maintained at the financial institution, together with a description of each person's interest.
b. The department or department's agent will perform a match against the delinquent debtor file. Upon the request of the department or the department's agent, the financial institution shall provide the department, for each delinquent debtor who matches information provided by the financial institution under subpar. a., the delinquent debtor's address of record, account number, account type and the balance of the account.
c. The department or department's agent agrees not to disclose or retain information received from the financial institution concerning account holders who are not delinquent debtors. Sixty days notice is required for any changes to the conditions of the contract.
2. `Financial institution matching option.' This option is also known as the “matched accounts method." If this option is elected, the agreement described in par. (a) shall include the following:
a. The department or department's agent agrees to provide the financial institution an electronic file on a quarterly basis. The file contains the names and social security numbers or federal employer identification numbers of delinquent debtors.
b. The financial institution agrees to return a file of matched records to the department or department's agent. The return file of matched records contains the delinquent debtor's name, social security number or federal employer identification number, address of record, account number, account type, the nature of the delinquent debtor's ownership interest in the account and the balance of the account at the time that the record match is made.
c. The financial institution agrees not to disclose or retain information received from the department concerning account holders who are not delinquent debtors.
(c) A financial institution may request reimbursement from the department for costs associated with participating in the financial record matching program in an amount not to exceed $125 for each calendar quarter that the financial institution participates in the program.
Agency Contact Person
Dale Kleven, Dept. of Revenue
Mail Stop 6-40
2135 Rimrock Road, PO Box 8933
Madison WI 53708-8933
Phone: (608) 266-8253
Notice of Hearing
Revenue
NOTICE IS HEREBY GIVEN That pursuant to ss.
71.04 (8),
71.25 (10),
227.11 (2) (a), and
227.24, Stats., the Department of Revenue will hold a public hearing to consider emergency rules and the creation of permanent rules revising Chapter
Tax 2, relating to apportionment and nexus.
Hearing Information
The hearing will be held:
Date and Time Location
February 25, 2010 Events Room
at 1:00 p.m. State Revenue Building
2135 Rimrock Road
Madison, Wisconsin
Handicap access is available at the hearing location.
Copies of Proposed Rules
A copy of the full text of the proposed rule order and the full fiscal estimate may be obtained at no cost by contacting the department. See Agency Contact Person listed below.
Submission of Written Comments
Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person shown under Agency Contact Person listed below no later than March 4, 2010, and will be given the same consideration as testimony presented at the hearings.
Analysis Prepared by the Department of Revenue:
Statute interpreted
Sections
71.04(4),
(4m),
(5),
(6),
(7),
(8), and
(10),
71.22 (1r),
71.23 (1) and
(2),
71.25 (5),
(6),
(6m),
(7),
(8),
(9),
(10), and
(15),
71.255 (5), and
77.93, Stats.
Statutory authority
Explanation of agency authority
Section
227.11 (2) (a), Stats., provides that each agency may promulgate rules interpreting the provisions of any statute enforced or administered by it, if the agency considers it necessary to effectuate the purpose of the statute.
Related statute or rule
Plain language analysis
This rule does the following:
1. Amends s. Tax 2.39, Apportionment Method, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Updates s.
Tax 2.39 (6), relating to the sales factor, to reflect applicable changes that were enacted by
2009 Acts 2 and
28. More specifically, provides that for taxable years beginning on or after January 1, 2009:
□ “Throwback sales" are included in the numerator at their full amount, rather than at 50%.
□ Throwback sales are no longer included in the numerator for sales of services or of the use of computer software.
□ Sales of intangibles or the use or licensing of intangibles are no longer sourced according to where the income producing activity occurs. Instead, they are sourced according to the newly created ss.
71.04 (7) (dj) and
(dk) and
71.25 (9) (dj) and
(dk), Stats. In general, these statutes source the transaction to where the customer uses the intangible property.
•
Provides rules interpreting ss.
71.04 (7) (dj) and
(dk) and
71.25 (9) (dj) and
(dk), Stats. relating to sourcing for intangibles for taxable years beginning on or after January 1, 2009.
•
Clarifies that for purposes of computing throwback sales, nexus for part of a taxable year is recognized as nexus for the entire taxable year.
2. Amends s. Tax 2.49, Apportionment of Apportionable Income of Interstate Financial Institutions, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Amends the definition of “financial institution" to include credit card banks and investment subsidiaries of banks.
•
Provides that s.
Tax 2.49 (4) (zs) does not apply to taxable years beginning on or after January 1, 2009. This means that for taxable years beginning on or after January 1, 2009, throwback sales are not included in the numerator except for sales of tangible personal property.
3. Amends s. Tax 2.495, Apportionment of Apportionable Income of Interstate Brokers-Dealers, Investment Advisers, Investment Companies, and Underwriters, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Provides that s.
Tax 2.495 (4) (g) does not apply to taxable years beginning on or after January 1, 2009. This means that for taxable years beginning on or after January 1, 2009, throwback sales are not included in the numerator except for sales of tangible personal property.
4. Amends s. Tax 2.502, Apportionment of Apportionable Income of Interstate Telecommunications Companies, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Provides that for taxable years beginning on or after January 1, 2009, the sales factor means the sales factor under s.
71.25(9), Stats., as in effect for the current taxable year. This statute sources sales based on where the benefit of the service is received.
•
Specifies how various types of telecommunications services would be sourced under s.
71.25(9), Stats.. Under the rule, the location where the benefit of the service is received is determined using principles consistent with the Streamlined Sales and Use Tax Agreement.
5. Amends s. Tax 2.82, Nexus, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Defines “loans" for purposes of applying s.
71.22(1r), Stats.
•
Clarifies that nexus for part of a taxable year is recognized as nexus for the entire taxable year.
•
Provides that the same nexus standards apply to the recycling surcharge as apply to the corporation franchise or income tax.
6. Amends the following rules to explain how they apply to corporations that are required to use combined reporting, including applicable cross-references:
•
Tax 2.46 — Apportionment of business income of interstate air carriers
•
Tax 2.47 — Apportionment of business income of interstate motor carriers
•
Tax 2.475 — Apportionment of net business income of interstate railroads, sleeping car companies, and car line companies
•
Tax 2.48 — Apportionment of net business incomes of interstate pipeline companies
•
Tax 2.50 — Apportionment of apportionable income of interstate public utilities
Comparison with federal regulations
There are no existing or proposed federal regulations that relate to apportionment of income among states.
Comparison with rules in adjacent states
Minnesota, Michigan, Illinois, and Iowa each have their own unique rules and relating to apportionment and nexus. Following is a summary of how the rules and regulations of these other states have provisions similar to the substantive provisions in this rule order:
Minnesota:
•
Services are sourced to where the benefit of the service is received.
•
Holding loans secured by real or tangible personal property in the state creates nexus.
•
Loan-backed securities are generally not “loans" that would create nexus.
