Wisconsin mandatory combined reporting.

October 15, 2009

On October 15, 2009, Tax Executives Institute filed the following comments with the Wisconsin Department of Revenue relating to proposed regulations implementing the State's recently enacted mandatory combined reporting statute. TEI's comments were prepared under the aegis of its State and Local Tax Committee, whose chair is Cathleen Stevens of Brunswick Corporation. Contributing substantially to the development of TEI's comments was committee member Victor Ledesma of Kimberly-Clark Corporation. Daniel B. De Jong, TEI Tax Counsel, serves as legal staff liaison to the committee.

On February 19, 2009, Governor Jim Doyle signed legislation mandating the use of combined reporting for unitary businesses doing business in Wisconsin effective for tax years ending after December 31, 2008. The Wisconsin legislature passed a set of technical amendments to those combined reporting provisions, which were signed into law on June 29, 2009. On August 31, 2009, the Wisconsin Department of Revenue ("Department") published and sought comment on proposed regulations interpreting various components of the combined reporting statute ("Proposed Regulations"). Tax Executives Institute is pleased to submit the following comments to the Proposed Regulations.

Combined reporting represents a significant shift in the method Wisconsin taxpayers use to compute their corporate income tax liabilities. Historically, that computation was accomplished by each corporation filing a separate return based solely on its activities in the State. Because of the magnitude of the change, clear guidance in the Proposed Regulations on the scope and application of many provisions in the combined reporting statute is critically important to the successful implementation of combined reporting in Wisconsin.

Our comments focus on five areas: (1) the basis of assets owned by corporations that have not previously filed Wisconsin corporate income tax returns; (2) the calculation and sharing of research credits and carry-forwards between members of a combined group; (3) the sharing of net business loss carryforwards between members of a combined group; (4) the mechanics of the controlled group election; and (5) the selection of a designated agent for a combined group. Additionally, TEI commends the Department for providing language in the Proposed Regulations that helps conform the concepts in Wisconsin tax law to the principles of U.S. federal income tax treaties.

Tax Executives Institute

Tax Executives Institute is the preeminent association of business tax executives in North America. Today, the organization has 54 chapters in North America, Europe, and Asia, including two in Wisconsin. Our 7,000 members represent 3,200 of the largest companies in the world, many of which are either resident or do business in Wisconsin. TEI represents a cross-section of the business community, and is dedicated to developing and effectively implementing sound tax policy, promoting the uniform and equitable enforcement of the tax laws, and reducing the cost and burden of administration and compliance to the benefit of taxpayers and governments alike. As a professional association, TEI is firmly committed to maintaining a tax system that works--one that is administrable and with which taxpayers can comply in a cost-efficient manner.

Members of TEI are responsible for managing the tax affairs of their companies and must contend daily with the provisions of the tax law relating to the operation of business enterprises. We believe that the diversity and professional training of our members enable us to bring a balanced and practical perspective to the issues raised by the Proposed Regulations.

Background

Wisconsin's combined reporting statute requires corporations constituting a unitary business to file a combined report with the Department for all tax years ending after December 31, 2008. (1) A unitary business group generally includes corporations connected by stock ownership of more than 50 percent and "that are sufficiently interdependent, integrated, and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts." (2) No requirement exists that all members of a...