71.25 Situs of income; allocation and apportionment.

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A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

71.25 Situs of income; allocation and apportionment. For purposes of determining the situs of income under this section and s. 71.255

(a)1. and 2. :

(1)Beneficiaries. The situs of income derived by any taxpayer as the beneficiary of the estate of a decedent or of a trust estate shall be determined as if such income had been received without the intervention of a fiduciary.

(2)Grantor trusts. The situs of income received by a trustee, which income, under the internal revenue code, is taxable to the grantor of the trust or to any person other than the trust, shall be determined as if such income had been actually received directly by such grantor or such other person, without the intervention of the trust.

(4)Corporations engaged in business wholly within this state. For corporations engaged in business wholly within this state, all income is subject to, or included in the measure of, the Wisconsin income or franchise tax.

(5)Corporations engaged in business both within and without the state.

(a)Apportionable income. Except as provided in sub.

(6), corporations engaged in business both within and without this state are subject to apportionment. Income gain or loss from the sources listed in this paragraph is presumed apportionable as unitary or operational income or other income that has a taxable presence in this state. Apportionable income includes all income or loss of corporations, other than nonapportionable income as specified in par.

(b), including, but not limited to, income, gain or loss from the following sources:

1. Sale of inventory.

2. Farms, mines and quarries.

3. Sale of scrap and by-products.

4. Commissions.

5. Sale of real property or tangible personal property used in the production of business income.

6. Royalties from intangible assets.

7. Redemption of securities.

8. Interest on trade accounts and trade notes receivable.

9. Interest and dividends if the operations of the payer are unitary with those of the payee, or if those operations are not unitary but the investment activity from which that income is derived is an integral part of a unitary business and the payer and payee are neither affiliates nor related as parent company and subsidiary. In this subdivision, “investment activity” includes decision making relating to the purchase and sale of stocks and other securities, investing surplus funds and the management and record keeping associated with corporate investments, not including activities of a broker or other agent in maintaining an investment portfolio.

10. Sale of intangible assets if the operations of the company in which the investment was made were unitary with those of the investing company, or if those operations were not unitary but the investment activity from which that gain or loss was derived is an integral part of a unitary business and the companies were neither affiliates nor related as parent company and subsidiary. In this subdivision, “investment activity” has the meaning given under subd. 9.

11. Management fees.

12. Franchise fees.

13. Treble damages.

14. A partner’s share of income or loss from a partnership or a member’s share of income or loss from a limited liability company.

16. Foreign exchange gain or loss.

17. Sale of receivables.

18. Rentals of, or royalties from, real property or tangible personal property if that real property or tangible personal property is used in the business.

19. Sale or exchange of petroleum at the wellhead.

20. Personal services performed by employees of the corporation.

21. Patents, copyrights, trademarks, trade names, plans, specifications, blueprints, processes, techniques, formulas, designs, layouts, patterns, drawings, manuals and technical know-how.

22. Redemption of the corporation’s bonds.

23. Interest on state and federal tax refunds on business income or business property.

24. Pari-mutuel wager winnings or purses under ch. 562 .

(b)Nonapportionable income. Income, gain or loss from the sale of nonbusiness real property or nonbusiness tangible personal property, rental of nonbusiness real property or nonbusiness tangible personal property and royalties from nonbusiness real property or nonbusiness tangible personal property are nonapportionable and shall be allocated to the situs of the property, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.

(6)Allocation and separate accounting and apportionment formula. Corporations engaged in business within and without the state shall be taxed only on such income as is derived from business transacted and property located within the state. The amount of such income attributable to Wisconsin may be determined by an allocation and separate accounting thereof, when the business of such corporation within the state is not an integral part of a unitary business, but the department of revenue may permit an allocation and separate accounting in any case in which it is satisfied that the use of such method will properly reflect the income taxable by this state. In all cases in which allocation and separate accounting is not permissible, the determination shall be made in the following manner: for all businesses except air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, railroads, car line companies and corporations or associations that are subject to a tax on unrelated business income under s. 71.26

(a)there shall first be deducted from the total net income of the taxpayer the part thereof (less related expenses, if any) that follows the situs of the property or the residence of the recipient. The remaining net income shall be apportioned to this state by use of an apportionment fraction composed of the sales factor under sub.

(9).

(6m)Apportionment formula computation.

(a)For taxable years beginning after December 31, 2007, if both the numerator and the denominator of the sales factor under sub.

(9)related to a taxpayer’s remaining net income are zero, none of the taxpayer’s remaining net income is apportioned to this state.

(b)For taxable years beginning after December 31, 2007, if the numerator of the sales factor under sub.

(9)related to a taxpayer’s remaining net income is a negative number and the denominator of the sales factor under sub.

(9)related to a taxpayer’s remaining net income is a positive number, a negative number, or zero, none of the taxpayer’s remaining net income is apportioned to this state.

(c)For taxable years beginning after December 31, 2007, if the numerator of the sales factor under sub.

(9)related to a taxpayer’s remaining net income is a positive number and the denominator of the sales factor under sub.

(9)related to a taxpayer’s remaining net income is zero or a negative number, all of the taxpayer’s remaining net income is apportioned to this state.