Wisconsin Enacts Legislation Reducing Taxes, Amending Net Operating Loss Provisions

On March 24, Wisconsin Governor Scott Walker signed legislation which provides for individual income tax and property tax relief.1 Also, for corporate income taxpayers the net operating loss (NOL) carryforward period is extended from 15 to 20 years.

Furthermore, the sales tax exemption for commercial printing is amended. The legislation was requested by the governor in light of an expected $1 billion budget surplus.2

Changes in Individual Income Tax Rates

The legislation reduces the lowest income tax bracket for individuals, trusts, and estates from 4.4 percent to 4.0 percent, retroactive to January 1, 2014.3 The rest of the tax brackets remain unchanged. This is expected to save Wisconsin taxpayers about $99 million.4

NOL Carryforwards and Carrybacks

The carryforward period for corporate NOLs is extended from 15 to 20 years.5 The extended carryforward period applies for tax years beginning on or after January 1, 2014.

The legislation clarifies that an individual taxpayer can choose to forgo the two-year carryback period for NOLs.6 Instead, the NOL can be carried forward, at the taxpayer's option. In addition, the Wisconsin Department of Revenue is not allowed to pay interest on any overpayment resulting from an NOL carryback.7 This legislation refers only to individual income tax NOL carrybacks as corporate NOLs can only be carried forward.

Depletion

For purposes of computing depletion for taxable years beginning on or after January 1, 2014, Wisconsin adopts the federal Internal Revenue Code (IRC) in effect for the year in which the property is placed in service.8 Prior to amendment, the IRC in effect on January 1, 2014 applied for the computation of depletion.

Tax Credits Allowed in Computation of Wisconsin AMT

The legislation now allows the following credits to be used to offset Wisconsin alternative minimum tax (AMT)9 in addition to the regular income tax:

Manufacturing and agricultural credit;10 Research credit;11 and State historic rehabilitation credit.12 Commercial Printing Sales Tax Exemption

For sales made on or after October 1, 2013, the sales tax exemption for commercial printing is amended to provide that the exemption applies to a person primarily engaged, as determined by the Department, in commercial printing, book printing or support activities for printing described under Sections 323111, 323117 and 323120 of the North American Industry Classification System (NAICS).13 Also, the statute is amended to clarify that the...