Combined reporting

71.255 Combined reporting. (1) DEFINITIONS. In this section: (a) “Combined group” means the group of all persons whose income and apportionment factors are required to be taken into account under sub. (2) to determine a member’s share of the net business income or loss apportionable to this state that is attributable to a unitary business. (b) “Combined report” means a report in the form and manner prescribed by the department that specifies a combined group’s income from the unitary business, apportionment factors attributable to the unitary business, and any other tax return information prescribed by the department. (c) “Commonly controlled group” means any of the following: 1. A parent corporation and any one or more corporations or

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chains of corporations that are connected to the parent corporation by direct or indirect ownership by the parent corporation, if the parent corporation owns stock representing more than 50 percent of the voting power of at least one of the connected corporations or if the parent corporation or any of the connected corporations owns stock that cumulatively represents more than 50 percent of the voting power of each of the connected corporations. 2. Any 2 or more corporations if a common owner, regardless of whether the owner is a corporate entity, directly or indirectly owns stock representing more than 50 percent of the voting power of the corporations or connected corporations. 3. Any 2 or more corporations if stock representing more than 50 percent of the voting power in each corporation are interests that cannot be separately transferred. 4. Any 2 or more corporations if stock representing more than 50 percent of the voting power in each corporation is directly owned by, or for the benefit of, family members. In this subdivision, “family member” means an individual related by blood, marriage, or adoption within the 3rd degree of kinship, as computed under s. 990.001 (16), or the spouse of such individual. (d) “Consolidated foreign operating corporation” means a corporation that, for the taxable year, satisfies all of the following conditions: 1. It is a member of a unitary business. 2. It is included in the same federal consolidated return as at least one other corporation in that unitary business. 3. It has active foreign business income, as defined in section 861 (c) (1) B of the Internal Revenue Code, in an amount that is 80 percent or more of the corporation’s worldwide income. (e) “Corporation” means any corporation, as defined in s. 71.22 (1k), wherever located, which if it were doing business in this state would be subject to this chapter. “Corporation” does not include a tax-option corporation. (f) “Department” means the department of revenue. (g) “Doing business in this state” has the meaning given in s. 71.22 (1r). (h) “Domestic” means incorporated, organized, or created in the United States or under the laws of the United States or any state. (i) “File” has the meaning given in s. 71.22 (2m). (j) “Foreign” means not incorporated, organized, or created in the United States or under the laws of the United States or any state. (k) “Intangible expenses” has the meaning given in s. 71.22 (3g) for corporations taxable under this subchapter and the meaning given in s. 71.42 (1sg) for corporations taxable under subch. VII. (L) “Interest expenses” has the meaning given in s. 71.22 (3m) for corporations taxable under this subchapter and the meaning given in s. 71.42 (1t) for corporations taxable under subch. VII. (m) “Pass-through entity” means a general or limited partnership, an organization of any kind treated as a partnership for tax purposes under this chapter, a tax-option corporation, a real estate investment trust, a regulated investment company, a real estate mortgage investment conduit, a financial asset securitization investment trust, a trust, or an estate. (n) “Unitary business” means a single economic enterprise that is made up either of separate parts of a single business entity, of multiple business entities that are related under section 267 or 1563 of the Internal Revenue Code, or of a commonly controlled group of business entities 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 sepa-

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rate parts. Two or more business entities are presumed to be a unitary business if the businesses have unity of ownership, operation, and use as indicated by a centralized management or a centralized executive force; centralized purchasing, advertising, or accounting; intercorporate sales or leases; intercorporate services, including administrative, employee benefits, human resources, legal, financial, and cash management services; intercorporate debts; intercorporate use of proprietary materials; interlocking directorates; or interlocking corporate officers. In no event and under no circumstances shall the preceding sentence be construed as exclusive of any and all other factors indicative of a unitary business. For purposes of this section, the term “unitary business” shall be broadly construed, to the extent permitted by the U.S. Constitution. The members of a combined group shall be jointly and severally liable for costs, penalties, interests, and taxes associated with the combined report. Any business conducted by a pass-through entity that is owned directly or indirectly by a corporation shall be treated as conducted by the corporation, to the extent of the corporation’s distributive share of the pass-through entity’s income, regardless of the percentage of the corporation’s ownership interest. A business conducted directly or indirectly by one corporation is unitary with that portion of a business conducted by another corporation through its direct or indirect interest in a pass-through entity if there is a synergy and exchange and flow of value between the 2 parts of the business and the 2 corporations are members of the same commonly controlled group. (2) CORPORATIONS REQUIRED TO USE COMBINED REPORTING. (a) A corporation, not including a corporation of which all its income is exempt from taxation under s. 71.26 (1) or 71.45 (1), engaged in a unitary business with one or more other corporations in the same commonly controlled group shall report its share of income from that unitary business in the amount determined by a combined report filed by a designated agent of the unitary business, as determined under sub. (7). The combined report shall include the income, determined under sub. (3), and apportionment factor or factors determined under sub. (5), of every corporation in the commonly controlled group that is engaged in the unitary business, except as provided in pars. (b) to (f). (b) A foreign corporation that is a combined group member shall include in the combined report income that is derived only from sources within the United States as provided in sections 861 to 865 of the Internal Revenue Code. The foreign corporation shall include in the combined report its apportionment factor or factors related only to that income. (c) 1. Except as provided in par. (d), if 80 percent or more of a corporation’s worldwide income is active foreign business income, the income and apportionment factor or factors of the corporation shall not be included in the combined report, but the corporation shall compute and allocate or apportion its income from the unitary business separately. 2. For purposes of subd. 1., “active foreign business income” means gross income derived from sources outside the United States, as determined in subchapter N of the Internal Revenue Code, including income of a subsidiary corporation, and attributable to the active conduct of a trade or business in a foreign country or in a U.S. possession. 3. For purposes of subd. 2., a corporation is considered a subsidiary if the parent corporation owns, directly or indirectly, stock with at least 50 percent of the total voting power of the corporation and the stock has a value equal to at least 50 percent of the total value of the stock of the corporation. (d) The combined report of the unitary business of which a consolidated foreign operating corporation is a member shall include, and the separate return filed by the consolidated foreign

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operating corporation shall exclude, the following amounts, to the extent that they are attributable to the unitary business: 1. An income amount equal to the interest expenses and intangible expenses that are paid, accrued, or incurred by any combined group member to or for the benefit of the consolidated foreign operating corporation, except to the extent such amounts constitute income to the consolidated foreign operating corporation from sources outside the United States under sections 861 to 865 of the Internal Revenue Code. 2. To the extent that the amounts were not included under subd. 1., interest income and income generated from intangible property received or accrued by the consolidated foreign operating corporation, except to the extent such amounts constitute income from sources outside the United States under sections 861 to 865 of the Internal Revenue Code. For purposes of this subdivision, income generated from intangible property includes income related to the direct or indirect acquisition, use, maintenance, management, ownership, sale, exchange, or any other disposition of intangible property; income from factoring transactions or discounting transactions; royalty, patent, technical, and copyright fees; licensing fees; and other similar income. 3. Dividends paid or accrued by a real estate investment trust to the consolidated foreign operating corporation, if the real estate investment trust is not a qualified real estate investment trust as defined in s. 71.22 (9ad) and the dividend income is from sources within the United States under sections 861 to 865 of the Internal Revenue Code. 4. Income of the consolidated foreign operating corporation that is equal to gains derived from the sale of real or personal property located in the United States. 5. The apportionment factor or factors attributable to the income described in subds. 1. to 4. (e) Except for the amounts in par. (d), a consolidated foreign operating corporation shall compute and allocate or apportion its income from the unitary business separately. (f) 1. The department may require that a combined report include the income and associated apportionment factor or factors of any person who is not otherwise included in a combined group under this subsection, but who is a member of a unitary business, in order to reflect proper apportionment of income of the entire unitary business. The department may require that a combined report include the income and associated apportionment factor or factors of persons that are not corporations. 2. If the department determines that the reported income or loss of a member of a combined group engaged in a unitary business with any person not otherwise included in the combined group under this subsection represents an avoidance or evasion of tax by the person or the combined group member, the department may require all or any part of the income or loss and associated apportionment factor or factors of the person be included in or excluded from the combined report for the unitary business or may require the use of a different apportionment factor or factors. The department may require that a combined report include or exclude the income or loss and associated apportionment factor or factors of persons that are not corporations. 3. The authority granted under this paragraph is in addition to, and not a limitation of or dependent on, the provisions in this chapter enacted to prevent tax avoidance or evasion or to clearly reflect the income of any person. Any determination by the department under this paragraph is presumed correct and the person challenging the determination has the burden of proving by clear and convincing evidence that the determination is incorrect. (2m) ELECTION TO INCLUDE EVERY MEMBER OF COMMONLY CONTROLLED GROUP. (a) The designated agent as provided in sub. (7) may elect, without first obtaining written approval from

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the department, to include in its combined group every corporation in its commonly controlled group, regardless of whether such corporations are engaged in the same unitary business as the designated agent. Corporations included in the combined group by operation of this election are required to use combined reporting only to the extent described in sub. (2). The commonly controlled group shall calculate its Wisconsin income and apportionment factors as provided under subs. (3), (4), and (5), and all income of all members of the commonly controlled group, whether or not such income would otherwise be subject to apportionment or allocable to a particular state in the absence of an election under this subsection, shall be treated as apportionable income for purposes of the combined report. (b) The election under this subsection shall be executed by the designated agent on an original, timely filed combined report. Any corporation that becomes includable in the commonly controlled group subsequent to the year of election shall have waived any objection to its inclusion in the combined report. (c) An election under this subsection shall be binding for and applicable to the taxable year for which it is made and for the next 9 taxable years. An election may be renewed for another 10 taxable years, without prior written approval from the department after it has been in effect for 10 taxable years. The renewal shall be made on an original, timely filed return for the first taxable year after the completion of a 10-year period for which an election under this subsection was in place. An election that is not renewed shall be revoked. In the case of a revocation, a new election under this subsection shall not be permitted in any of the immediately following 3 taxable years. (d) The department may not disregard the tax effect of an election under this subsection, or disallow the election, with respect to any controlled group member or members for any year of the election period. (3) COMPONENTS OF INCOME SUBJECT TO TAX. Each member is responsible for tax based on its taxable income or loss apportioned or allocated to this state, including: (a) Its share of any business income apportionable to this state of each of the combined groups of which it is a member, as determined under subs. (4) and (5). For financial organizations, as defined in ss. 71.04 (8) (a) and 71.25 (10) (a), business income includes interest, dividends, and receipts from investments of any kind. For purposes of this section, a financial organization shall treat the expenses associated with an investment as business expenses. (b) Its share of any business income apportionable to this state of a distinct business activity conducted within and outside the state wholly by the member, as determined under s. 71.25 or 71.45. (c) Its income from a business conducted wholly by the member entirely within the state. If a combined group consists only of corporations that are conducting business entirely within this state, sub. (4) (f) to (j) applies to those corporations. (d) Its income sourced to this state from the sale or exchange of capital assets, and from involuntary conversions, as determined under sub. (4) (i). (e) Its nonbusiness income or loss allocable to this state. (f) Its income that is realized from the purchase and subsequent sale or redemption of lottery prizes, if the winning tickets were originally bought in this state. (g) Its income or loss allocated or apportioned in an earlier year, required to be taken into account as state source income or loss during the taxable year, other than a net business loss carryforward. (h) Its net business loss carry-forward, as determined under sub. (6).

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(4) BUSINESS INCOME OF THE COMBINED GROUP. (a) The business income of a combined group is the sum of the income of each member of the combined group as determined under the Internal Revenue Code, as modified under s. 71.26 or 71.45, and except as provided under pars. (b) to (j). If a unitary business includes income from a pass-through entity, the pass-through entity income to be included in the total income of the combined group shall be the member of the combined group’s direct and indirect distributive share of the pass-through entity’s unitary business income. (b) 1. Subtract any apportionable income of a distinct business activity conducted within and outside the state wholly by the member, income from a business conducted wholly by the member entirely within this state, the member’s nonbusiness income, the member’s income realized from the purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state, and its income allocated or apportioned in an earlier year required to be taken into account as state source income during the taxable year. 2. Add any apportionable expense or loss of a distinct business activity conducted within and outside the state wholly by the member, expense or loss from a business conducted wholly by the member entirely within this state, the member’s nonbusiness expense or loss, its loss allocated or apportioned in an earlier year required to be taken into account as state source loss during the taxable year, and its net business loss carry-forward. (c) For combined group members that are consolidated foreign operating corporations, include only the income described in sub. (2) (d) 2. to 4. A combined group may deduct expenses properly attributable to a consolidated foreign operating corporation’s income described in sub. (2) (d) 2. to 4., subject to ss. 71.30 (2) and (2m) and 71.80 (1) (b) and (1m). (d) The modifications provided under ss. 71.26 (2) (a) 7., 8., and 9. and 71.45 (2) (a) 16., 17., and 18. shall not apply with respect to interest expenses or intangible expenses paid, accrued, or incurred by a combined group member to or for the benefit of a consolidated foreign operating corporation. (f) Except as provided in sub. (2) (d) 3. and except if the modification under s. 71.26 (3) (j) applies, dividends paid by one combined group member to another shall be, to the extent that the dividends are paid out of the earnings and profits of the unitary business included in the combined report, whether in the current taxable year or in a prior taxable year, subtracted from the income of the recipient. This paragraph does not apply to dividends received from members of the unitary business that were not part of the combined group at the time that the dividends were paid. (g) Except as otherwise provided by rule, business income or loss from an intercompany transaction between members of the same combined group shall be deferred as provided under U.S. Treasury Regulation 1.1502-13. Upon the occurrence of any of the following events, deferred business income or loss resulting from an intercompany transaction between members of a combined group shall be included in the income of the seller and shall be apportioned as business income or loss recognized immediately before the event: 1. The object of the deferred intercompany transaction is resold by the buyer to an entity that is not a member of the combined group. 2. The object of the deferred intercompany transaction is resold by the buyer to an entity that is a member of the combined group for use outside the unitary business in which the buyer and seller are engaged. 3. The object of the deferred intercompany transaction is converted by the buyer or is otherwise transferred to a use outside the unitary business in which the buyer and seller are engaged.

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4. The buyer and seller are no longer members of the same combined group, regardless of whether the members are in the same unitary business. (h) Limitations that apply to charitable contribution deductions shall be applied as provided under section 170 of the Internal Revenue Code in the manner prescribed by the department by rule, as provided under sub. (11). (i) Gain or loss from the sale or exchange of capital assets, property described by section 1231 (a) (3) of the Internal Revenue Code, and property subject to an involuntary conversion shall be determined as provided under sections 1211, 1222, and 1231 of the Internal Revenue Code in the manner prescribed by the department by rule, as provided under sub. (11). (j) Any expense of one member of the combined group that is directly or indirectly attributable to the nonbusiness or exempt income of another member of the unitary business shall be allocated to that other member of the unitary business as corresponding nonbusiness or exempt expense, as appropriate. (5) MEMBER’S SHARE OF BUSINESS INCOME OF THE COMBINED GROUP. (a) For purposes of this subsection, each member of a combined group is doing business in this state if any member of the combined group is doing business in this state and that business relates to the combined group’s unitary business. Except as provided in par. (b), a taxpayer’s share of the business income apportionable to this state of each combined group of which it is a member shall be the product of the business income of the combined group as determined under sub. (4) and the taxpayer’s modified sales factor from the combined group, determined as follows: 1. For a member that is subject to apportionment under s. 71.25 (9), the numerator of the modified sales factor includes the member’s sales associated with the combined group’s unitary business in this state. Sales under s. 71.25 (9) (b) 2m. and 3. and (c) shall be included in the numerator of the modified sales factor if no member of the combined group is within the jurisdiction of the destination state for income or franchise tax purposes. 2. For a member that is subject to apportionment using a receipts factor under the department’s rules pursuant to s. 71.25 (10), the numerator of the modified sales factor includes the member’s Wisconsin receipts associated with the combined group’s unitary business in this state, as provided by such rules. 3. For a member that is subject to apportionment under s. 71.45 (3), the numerator of the modified sales factor includes the member’s premiums that are associated with the combined group’s unitary business in this state. 4. The denominator of the modified sales factor shall include the denominator of the sales factor for each combined group member described in subd. 1., the denominator of the receipts factor for each combined group member described in subd. 2., and the denominator of the premiums factor for each combined group member described in subd. 3. 5. For a member that is required under the department’s rules to use an apportionment factor or factors other than the sales factor, receipts factor, or premiums factor, the numerator of the modified sales factor for such member is its Wisconsin apportionment percentage on a separate entity basis based on the rules prescribed by the department, multiplied by the member’s total sales, as defined in s. 71.25 (9) (e) and (f). The denominator of the modified sales factor for such member is the member’s total sales as defined in s. 71.25 (9) (e) and (f). 6. The numerator and denominator, described in subds. 1. to 5., shall include the sales, receipts, or premiums of pass-through entities that are owned directly or indirectly by a corporation in proportion to a ratio the numerator of which is the amount of the corporation’s distributive share of the pass-through entity’s uni-

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tary business income included in the income of the combined group under sub. (4) and the denominator of which is the amount of the pass-through entity’s total unitary business income. 7. The modified sales factor shall exclude transactions between members of the same combined group. 8. For purposes of determining the numerator of the modified sales factor or any apportionment factor or factors determined under par. (b), a taxpayer is considered to be within the jurisdiction for income or franchise tax purposes of any state in which any member of its combined group is within the jurisdiction for income or franchise tax purposes. (b) If 2 or more members of a combined group would in the absence of this section be required to use differing apportionment formulas from one another, and if the business income of the combined group derived from business transacted in this state of that combined group cannot be ascertained with reasonable certainty by use of the modified sales factor as provided in par. (a), the combined group may petition the department to use a different apportionment computation for the combined report. This paragraph does not apply if less than 30 percent of the business income of the combined group would in the absence of this section be required to be apportioned using a factor or factors other than a single sales factor, a single receipts factor, or a single premiums factor. The department shall deny the petition if the taxpayer cannot show, by clear and convincing evidence, that the apportionment methods described in this subsection do not clearly reflect the income of the unitary business attributable to this state. (6) CREDITS, NET BUSINESS LOSSES, AND POST-APPORTIONMENT DEDUCTIONS. (a) Except as provided in pars. (b), (bm), and (c) no tax credit, Wisconsin net business loss carry-forward, or other post-apportionment deduction earned by one member of the combined group, but not fully used by or allowed to that member, may be used in whole or in part by another member of the combined group or applied in whole or in part against the total income of the combined group. A member of a combined group may use a carry-forward of a credit, Wisconsin net business loss carry-forward, or other post-apportionment deduction otherwise allowable under s. 71.26 or 71.45, that was incurred by that same member in a taxable year beginning before January 1, 2009. (b) 1. Subject to the limitations provided under s. 71.26 (3) (n), for each taxable year that a corporation has a net business loss carry-forward, as provided under s. 71.26 (4) or 71.45 (4), that was computed on a combined report for a combined group’s unitary business for a taxable year beginning on or after January 1, 2009, the corporation may, after using such net business loss carry-forward to offset its own income for the taxable year, use any remaining net business loss carry-forward to offset the income of all other members of the combined group on a proportionate basis, to the extent such income is attributable to that same unitary business. 2. Unless otherwise provided by the department by rule, if the corporation may no longer be included in the combined group, as determined under this section, the corporation’s net business loss carry-forward shall be available only to that corporation. (bm) 1. In this paragraph, “pre-2009 net business loss carryforward” means a corporation’s total net Wisconsin business loss carry-forward computed under s. 71.26 (4) or 71.45 (4) as of the beginning of its first taxable year that begins after December 31, 2008, but not used by the corporation in any taxable year beginning before January 1, 2012. 2. Starting with the first taxable year beginning after December 31, 2011, and for each of the 19 subsequent taxable years, and

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subject to the limitations provided under s. 71.26 (3) (n), for each taxable year that a corporation that is a member of a combined group has pre-2009 net business loss carry-forward, the corporation may, after using the pre-2009 net business loss carry-forward to offset its own income for the taxable year, and after using shareable losses to offset its own income for the taxable year, as provided under par. (b) 1., use up to 5 percent of the pre-2009 net business loss carry-forward, until used or expired, to offset the Wisconsin income of all other members of the combined group on a proportionate basis, to the extent such income is attributable to the unitary business. If the full 5 percent of such pre-2009 net business loss carry-forward cannot be fully used to offset the Wisconsin income of all other members of the combined group, the remainder may be added to the portion that may offset the Wisconsin income of all other members of the combined group in a subsequent year, until it is completely used or expired, except that unused pre-2009 net business loss carry-forwards may not be used in any taxable year that begins after December 31, 2031. 3. Unless otherwise provided by the department by rule, if the corporation may no longer be included in the combined group, as determined under this section, the corporation’s pre2009 net business loss carry-forward shall be available only to that corporation. 4. The department shall promulgate rules to administer this paragraph. (c) 1. Subject to the limitations provided under s. 71.26 (3) (n), for each taxable year that a corporation that is a member of a combined group has an unused credit or credit carry-forward under s. 71.28 (4) or (5) or 71.47 (4) or (5), the corporation may, after using that credit or credit carry-forward to offset its own tax liability for the taxable year, use that credit or credit carry-forward to offset the tax liability of all other members of the combined group on a proportionate basis, to the extent such tax liability is attributable to the unitary business. NOTE: Subd. 1. is amended eff. 1-1-35 by 2025 Wis. Act 118 to read: 1. Subject to the limitations provided under s. 71.26 (3) (n), for each taxable year that a corporation that is a member of a combined group has an unused credit or credit carry-forward under s. 71.28 (4) or 71.47 (4), the corporation may, after using that credit or credit carry-forward to offset its own tax liability for the taxable year, use that credit or credit carry-forward to offset the tax liability of all other members of the combined group on a proportionate basis, to the extent such tax liability is attributable to the unitary business.

2. Unless otherwise provided by the department by rule, if the corporation may no longer be included in the combined group, as determined by this section, the corporation’s unused credits shall be available only to that corporation. (7) DESIGNATED AGENT. (a) Each combined group shall have one designated agent. Except as prescribed by the department by rule, the designated agent is the parent corporation of the combined group. If there is no such parent corporation, the designated agent may be appointed in the manner prescribed by the department. (b) Except as prescribed by the department, only the designated agent may act on behalf of the members of the combined group for matters relating to the combined report. The designated agent’s responsibilities include: 1. Filing a combined report under sub. (2) (a). 2. Filing any extension under s. 71.24 or 71.44. 3. Filing any amended combined reports or claims for refunds or credits. 4. Sending and receiving all correspondence with the department regarding the combined report. 5. Remitting all taxes, including estimated taxes, to the department. For purposes of computing interest on late payments, all payments remitted are deemed to be made on a pro rata basis

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by all members of the combined group, unless otherwise specified by the designated agent. 6. Participating on behalf of the combined group members in any investigation or hearing requested by the department regarding a combined report, producing all information requested by the department regarding the combined report, and filing any appeal related to the combined report, investigation, or hearing. Any appeal filed by the designated agent shall be considered to be filed by all members of the combined group. 7. Executing waivers, closing agreements, powers of attorney, and other documents as necessary or required regarding the combined report filed under sub. (2) (a). Any waiver, agreement, power of attorney, or document executed by the designated agent relating to a combined report shall be considered as executed by all members of the combined group, including any corporation not included in the combined report that the department asserts is a member of the combined group. 8. Receiving notices regarding the combined report. Any such notice the designated agent receives is considered received by all members of the combined group. 9. Receiving refunds relating to the combined report. Any such refund shall be paid to and in the name of the designated agent and shall discharge any liability of the state to any member of the combined group regarding the refund. 10. Other responsibilities as determined by rule by the department. (8) TAXABLE YEAR OF COMBINED GROUP. The combined group’s taxable year is determined as follows: (a) If 2 or more members of a combined group file a federal consolidated return, the combined group’s taxable year is the taxable year of the federal consolidated group. In all other cases, the taxable year is the taxable year of the designated agent under sub. (7). (b) If a taxable year of a member of a combined group differs from the taxable year of the combined group, the designated agent shall elect to determine the portion of that member’s income to be included in one of the following ways: 1. A separate income statement prepared from the books and records for the months included in the combined group’s taxable year. 2. Including all of the income for the year that ends during the combined group’s taxable year. (c) For corporations that are subject to an election under par. (b), the same election shall be made for each member of the combined group subject to the election, the same election shall be made in each succeeding year, and the election is irrevocable except upon written approval by the department. (9) PART-YEAR MEMBERS OF A COMBINED GROUP. If a corporation becomes a member of a combined group or ceases to be a member of a combined group after the beginning of the taxable year of the combined group, the corporation’s income shall be determined as provided under subs. (3), (4), and (5) for the portion of the year in which the corporation was a member of the combined group and that income shall be included in the combined report. The income for the remaining short period shall be reported on a separate return or separate combined report. (11) CONFORMITY WITH FEDERAL CONSOLIDATED RETURN REGULATIONS. The department may promulgate any rules necessary to create uniformity between the treatment of transactions entered into by members of a federal consolidated group under federal regulations, including any income, expense, gain, or loss limitations applicable to such transactions, and treatment of transactions entered into by members of a combined group under

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this section, including any income, expense, gain, or loss limitations applicable to such transactions. History: 2009 a. 2, 28, 276; 2011 a. 32; 2017 a. 17; 2025 a. 118. Cross-reference: See also ss. Tax 2.60 and 2.67, Wis. adm. code. “Slicing a Shadow”: The Debate over Combined Reporting and Its Effect on Wisconsin’s Business Climate. Flinchbaugh. 92 MLR 829 (2009).

71.26 Income computation. (1) EXEMPT AND EXCLUDABLE INCOME. There shall be exempt from taxation under this subchapter income as follows: (a) Certain corporations. Income of corporations organized under ch. 185, except income of a cooperative health care association organized under s. 185.981, or of a service insurance corporation organized under ch. 613, that is derived from a health maintenance organization as defined in s. 609.01 (2) or a limited service health organization as defined in s. 609.01 (3), or operating under subch. I of ch. 616 which are bona fide cooperatives operated without pecuniary profit to any shareholder or member, or operated on a cooperative plan pursuant to which they determine and distribute their proceeds in substantial compliance with s. 185.45, and the income, except the unrelated business taxable income as defined in section 512 of the internal revenue code and except income that is derived from a health maintenance organization as defined in s. 609.01 (2) or a limited service health organization as defined in s. 609.01 (3), of all religious, scientific, educational, benevolent or other corporations or associations of individuals not organized or conducted for pecuniary profit. This paragraph does not apply to the income of savings banks, mutual loan corporations or savings and loan associations. This paragraph does not apply to 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. This paragraph applies to the income of credit unions except to the income of any credit union that is derived from public deposits for any taxable year in which the credit union is approved as a public depository under ch. 34 and acts as a depository of state or local funds under s. 186.113 (20). For purposes of this paragraph, the income of a credit union that is derived from public deposits is the product of the credit union’s gross annual income for the taxable year multiplied by a fraction, the numerator of which is the average monthly balance of public deposits in the credit union during the taxable year, and the denominator of which is the average monthly balance of all deposits in the credit union during the taxable year. (am) Veterans service organizations. Income of a veterans service organization that is chartered under federal law. (b) Political units. Income received by the United States, the state and all counties, cities, villages, towns, school districts, technical college districts, joint local water authorities created under s. 66.0823, long-term care districts under s. 46.2895 or other political units of this state. (be) Certain authorities. Income of the University of Wisconsin Hospitals and Clinics Authority, of the Fox River Navigational System Authority, of the Wisconsin Economic Development Corporation, and of the Wisconsin Aerospace Authority. (bm) Certain local districts. Income of a local exposition district created under subch. II of ch. 229, a local professional baseball park district created under subch. III of ch. 229, a local professional football stadium district created under subch. IV of ch. 229, or a local cultural arts district created under subch. V of ch. 229. (c) Cooperative associations or corporations. Income of cooperative associations or corporations engaged in marketing farm products for producers, which turn back to such producers the net proceeds of the sales of their products; provided that such corporations or associations have at least 25 stockholders or members delivering such products and that their dividends have not, during

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the preceding 5 years, exceeded 8 percent per year; also income of associations and corporations engaged solely in processing and marketing farm products for one such cooperative association or corporation and which do not charge for such marketing and processing more than a sufficient amount to pay the cost of such marketing and processing and 8 percent dividends on their capital stock and to add 5 percent to their surplus. (d) Bank in liquidation. Income of any bank placed in the hands of the division of banking for liquidation under s. 220.08, if the tax levied, assessed or collected under this chapter on account of such bank diminishes the assets thereof so that full payment of all depositors cannot be made. Whenever the division of banking certifies to the department of revenue that the tax or any part thereof levied and assessed under this chapter against any such bank will so diminish the assets thereof that full payment of all depositors cannot be made, the department of revenue shall cancel and abate such tax or part thereof, together with any penalty thereon. This paragraph shall apply to unpaid taxes which were levied and assessed subsequent to the time the bank was taken over by the division of banking. (e) Menominee Indian tribe; distribution of assets. No distribution of assets from the United States to the members of the Menominee Indian tribe as defined in s. 49.385 or their lawful distributees, or to any corporation, or organization, created by the tribe or at its direction pursuant to section 8 of P.L. 83-399, as amended, and no issuance of stocks, bonds, certificates of indebtedness, voting trust certificates or other securities by any such corporation or organization, or voting trust, to such members of the tribe or their lawful distributees shall be subject to income or franchise taxes under this chapter; provided that so much of any cash distribution made under said P.L. 83-399 as consists of a share of any interest earned on funds deposited in the treasury of the United States pursuant to the supplemental appropriation act, 1952, (65 Stat. 736, 754) shall not by virtue of this paragraph be exempt from the individual income tax of this state in the hands of the recipients for the year in which paid. For the purpose of ascertaining the gain or loss resulting from the sale or other disposition of such assets and stocks, bonds, certificates of indebtedness and other securities under this chapter, the fair market value of such property, on termination date as defined in s. 70.057 (1), 1967 stats., shall be the basis for determining the amount of such gain or loss. (f) Real estate mortgage investment conduits. The income of a real estate mortgage investment conduit that is exempt for federal income tax purposes under section 860A of the internal revenue code. (g) Landowner incentive program. For taxable years beginning after December 31, 2006 and ending before January 1, 2016, the amount of any incentive payment received by an individual under s. 23.33 (5r), 2013 stats., in the taxable year to which the claim relates. (h) Small business job creation. An amount equal to the increase in the number of full-time equivalent employees employed by the taxpayer in this state during the taxable year, multiplied by $4,000 for a business with gross receipts of no greater than $5,000,000 in the taxable year or $2,000 for a business with gross receipts greater than $5,000,000 in the taxable year. For purposes of this paragraph, the increase in the number of full-time equivalent employees employed by the taxpayer in this state during the taxable year is determined by subtracting from the number of full-time equivalent employees employed by the taxpayer in this state during the taxable year, as determined by computing the average employee count from the taxpayer’s quarterly unemployment insurance reports or other information as required by the department for the taxable year, the number of full-time equivalent employees employed by the taxpayer in this state dur-

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ing the immediately preceding taxable year, as determined by computing the average employee count from the taxpayer’s quarterly unemployment insurance reports or other information as required by the department for the immediately preceding taxable year. No person may claim a deduction under this paragraph if the person may claim a credit under this subchapter based on the person relocating the person’s business from another state to this state and in an amount equal to the person’s tax liability. No person may claim a deduction under this paragraph for taxable years beginning after December 31, 2014. The department shall promulgate rules to administer this paragraph. Cross-reference: See also s. Tax 3.05, Wis. adm. code.

(i) Commercial loans. Income of a financial institution, as defined in s. 69.30 (1) (b), including interest, fees, and penalties, derived from a commercial loan of five million dollars or less provided to a person residing or located in this state and used primarily for a business or agricultural purpose in this state. (1m) EXEMPTION FROM THE INCOME TAX. The interest and income from the following obligations are exempt from the tax imposed under s. 71.23 (1): (b) Those issued under s. 66.1201. (c) Those issued under s. 66.1333. (d) Those issued under s. 66.1335. (e) Those issued under s. 234.65 to fund an economic development loan to finance construction, renovation or development of property that would be exempt under s. 70.11 (36). (em) Those issued under s. 234.08 or 234.61, on or after January 1, 2004, if the obligations are issued to fund multifamily affordable housing projects or elderly housing projects. (f) Those issued under subch. II of ch. 229. (g) Those issued under s. 66.0621 by a local professional baseball park district, a local professional football stadium district, or a local cultural arts district. (h) Those issued under s. 114.70 or 114.74. (i) Those issued under s. 231.03 (6), on or after October 27, 2007, if the proceeds from the obligations that are issued are used by a health facility, as defined in s. 231.01 (5), to fund the acquisition of information technology hardware or software. (k) Those issued under s. 66.0304, if any of the following applies: 1. The bonds or notes are used to fund multifamily affordable housing projects or elderly housing projects in this state, and the Wisconsin Housing and Economic Development Authority has the authority to issue its bonds or notes for the project being funded. 2. The bonds or notes are used by a health facility, as defined in s. 231.01 (5), to fund the acquisition of information technology hardware or software, in this state, and the Wisconsin Health and Educational Facilities Authority has the authority to issue its bonds or notes for the project being funded. 3. The bonds or notes are issued to fund a redevelopment project in this state or a housing project in this state, and the authority exists for bonds or notes to be issued by an entity described under s. 66.1201, 66.1333, or 66.1335. (L) Those issued under s. 231.03 (6), if the bonds or notes are issued for the benefit of a person who is eligible to receive the proceeds of bonds or notes from another entity for the same purpose for which the bonds or notes are issued under s. 231.03 (6) and the interest income received from the other bonds or notes is exempt from taxation under this subchapter. (m) Those issued by the Wisconsin Housing and Economic Development Authority to provide loans to a public affairs network under s. 234.75 (4).

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(n) Those issued by a sponsoring municipality to assist a local exposition district created under subch. II of ch. 229. (o) Those issued by the Wisconsin Health and Educational Facilities Authority under s. 231.03 (6), if the bonds or notes are issued in an amount totaling $35,000,000 or less, and to the extent that the interest income received is not otherwise exempt under this subsection. (2) NET INCOME. (a) Corporations in general. The “net income” of a corporation means the gross income as computed under the Internal Revenue Code as modified under sub. (3) and modified as follows: 2. Plus the amount of credit computed under all of the following: a. Section 71.28 (1). b. Section 71.28 (3). NOTE: Subd. 2. b. is repealed eff. 1-1-32 by 2025 Wis. Act 118, section 271.

c. Section 71.28 (4). e. Section 71.28 (5). NOTE: Subd. 2. is affected eff. 1-1-35 by 2025 Wis. Act 118, sections 268, 270, and 273, to read: 2. Plus the amount of credit computed under s. 71.28 (4).

3. Minus, as provided under s. 71.28 (3) (c) 7., the amount of the credit under s. 71.28 (3) that the taxpayer added to income under this paragraph at the time that the taxpayer first claimed the credit. NOTE: Subd. 3. is repealed eff. 1-1-32 by 2025 Wis. Act 118.

4. Plus the amount of the credit computed under all of the following and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership’s, limited liability company’s, or taxoption corporation’s income under s. 71.21 (4) or 71.34 (1k) (g): a. Section 71.28 (1dm). NOTE: Subd. 4. a. is repealed eff. 1-1-43 by 2025 Wis. Act 118, section 276.

b. Section 71.28 (1dx). NOTE: Subd. 4. b. is repealed eff. 1-1-43 by 2025 Wis. Act 118, section 277.

c. Section 71.28 (1dy). NOTE: Subd. 4. c. is repealed eff. 1-1-37 by 2025 Wis. Act 118, section 278.

d. Section 71.28 (3g). NOTE: Subd. 4. d. is repealed eff. 1-1-41 by 2025 Wis. Act 118, section 279.

e. Section 71.28 (3h). NOTE: Subd. 4. e. is repealed eff. 1-1-35 by 2025 Wis. Act 118, section 280.

f. Section 71.28 (3n). NOTE: Subd. 4. f. is repealed eff. 1-1-35 by 2025 Wis. Act 118, section 281.

g. Section 71.28 (3q). NOTE: Subd. 4. g. is repealed eff. 1-1-30 by 2025 Wis. Act 118, section 282.

h. Section 71.28 (3t). NOTE: Subd. 4. h. is repealed eff. 1-1-29 by 2025 Wis. Act 118, section 283.

i. Section 71.28 (3w). j. Section 71.28 (3wm). k. Section 71.28 (3y). L. Section 71.28 (5f). m. Section 71.28 (5g). NOTE: Subd. 4. m. is repealed eff. 1-1-36 by 2025 Wis. Act 118, section 284.

n. Section 71.28 (5h). o. Section 71.28 (5i). NOTE: Subd. 4. o. is repealed eff. 1-1-35 by 2025 Wis. Act 118, section 285.

p. Section 71.28 (5j). NOTE: Subd. 4. p. is repealed eff. 1-1-35 by 2025 Wis. Act 118, section 286.

q. Section 71.28 (5k). r. Section 71.28 (5r). NOTE: Subd. 4. r. is repealed eff. 1-1-35 by 2025 Wis. Act 118, section 287.

s. Section 71.28 (5rm). NOTE: Subd. 4. s. is repealed eff. 1-1-35 by 2025 Wis. Act 118, section 288.

May 22, 2026, are designated by NOTES. (Published 5-22-26)

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INCOME AND FRANCHISE TAXES

t. Section 71.28 (6n). NOTE: Subd. 4. t. is repealed eff. 1-1-34 by 2025 Wis. Act 118, section 289.

u. Section 71.28 (10). 5. Plus the amount of losses from the sale or other disposition of assets the gain from which would be wholly exempt income, as defined in sub. (3) (L), if the assets were sold or otherwise disposed of at a gain and minus deductions, as computed under the Internal Revenue Code as modified under sub. (3). 6. Plus or minus, as appropriate, an amount equal to the difference between the federal basis and Wisconsin basis of any asset sold, exchanged, abandoned, or otherwise disposed of in a taxable transaction during the taxable year, except as provided in par. (b) and s. 71.45 (2) and (5). 7. Plus the amount deducted or excluded under the Internal Revenue Code for interest expenses, rental expenses, intangible expenses, and management fees that are directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities. 8. Minus the amount added to gross income under subd. 7., to the extent that the conditions under s. 71.80 (23) are satisfied. 9. Minus the amount added, pursuant to subd. 7. or s. 71.05 (6) (a) 24., 71.34 (1k) (j), or 71.45 (2) (a) 16., to the federal income of a related entity that paid interest expenses, rental expenses, intangible expenses, or management fees to the corporation, to the extent that the related entity could not offset such amount with the deduction allowable under subd. 8. or s. 71.05 (6) (b) 45., 71.34 (1k) (k), or 71.45 (2) (a) 17. 11. Plus the amount computed under s. 71.28 (5n) in the previous taxable year that is not included in federal taxable income. 12. Minus the income of an out-of-state business, as defined in s. 323.12 (5) (a) 6., from disaster relief work, as defined in s. 323.12 (5) (a) 3. (b) Regulated investment companies, real estate mortgage investment conduits, real estate investment trusts and financial asset securitization investment trusts. 12. a. For taxable years beginning after December 31, 2017, and before January 1, 2021, for a corporation, conduit, or common law trust which qualifies as a regulated investment company, real estate mortgage investment conduit, real estate investment trust, or financial asset securitization investment trust under the Internal Revenue Code, “net income” means the federal regulated investment company taxable income, federal real estate mortgage investment conduit taxable income, federal real estate investment trust or financial asset securitization investment trust taxable income of the corporation, conduit, or trust as determined under the Internal Revenue Code. b. For purposes of subd. 12. a., “Internal Revenue Code” means the federal Internal Revenue Code as amended to December 31, 2017, except as provided in subd. 12. c. and d. and s. 71.98 and subject to subd. 12. e. c. For purposes of subd. 12. a., “Internal Revenue Code” does not include the following provisions of federal public laws for taxable years beginning after December 31, 2017: sections 1, 3, 4, and 5 of P.L. 106-519; sections 101, 102, and 422 of P.L. 108-357; sections 1310 and 1351 of P.L. 109-58; section 11146 of P.L. 109-59; section 403 (q) of P.L. 109-135; section 513 of P.L. 109-222; section 104 of P.L. 109-432; sections 8233 and 8235 of P.L. 110-28; section 11 (e) and (g) of P.L. 110-172; section 301 of P.L. 110-245; section 15351 of P.L. 110-246; section 302 of division A, section 401 of division B, and sections 312, 322, 502 (c), 707, and 801 of division C of P.L. 110-343; sections 1232, 1251, 1501, and 1502 of division B of P.L. 111-5; sections 211, 212, 213, 214, and 216 of P.L. 111-226; section 2122 of P.L. 111-240; sections 754 and 760 of P.L. 111-312; sections 104, 318, 322, 323, 326, 327, and 411 of P.L. 112-240; P.L. 114-7;

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section 1101 of P.L. 114-74; section 305 of division P of P.L. 114-113; sections 123, 125 to 128, 143, 144, 151 to 153, 165 to 167, 169 to 171, 189, 191, 326, and 411 of division Q of P.L. 114113; and sections 11011, 11012, 13201 (a) to (e) and (g), 13206, 13221, 13301, 13304 (a), (b), and (d), 13531, 13601, 13801, 14101, 14102, 14103, 14201, 14202, 14211, 14212, 14213, 14214, 14215, 14221, 14222, 14301, 14302, 14304, and 14401 of P.L. 115-97. d. For purposes of subd. 12. a., “Internal Revenue Code” does not include amendments to the federal Internal Revenue Code enacted after December 31, 2017, except that “Internal Revenue Code” includes sections 40307, 40413, and 41113 of P.L. 115-123; sections 101 (m), (n), (o), (p), and (q), 104 (a), 109, 401 (a) (54) and (b) (15) (A), (B), and (C) 19, 20, 23, 26, 27, and 28 of division U of P.L. 115-141; sections 102 and 104 of division M, sections 102, 103, 106, 107, 108, 109, 110, 111, 113, 114, 115, 116, 201, 204, 205, 206, 302, 401, and 601 of division O, section 1302 of division P, and sections 131, 202 (d), and 205 of division Q of P.L. 116-94; sections 1106, 2202, 2203, 2204, 2205, 2206, 2307, 3608, 3609, 3701, and 3702 of division A of P.L. 116-136; sections 202, 208, 209, 211, and 214 of division EE and sections 276 (a) and (b), 277, 278 (a), (b), (c), and (d), 280, and 285 of division N of P.L. 116-260; and sections 9701, 9702, 9703, 9704, 9705, 9706, and 9707 of P.L. 117-2. e. For purposes of subd. 12. a., the provisions of federal public laws that directly or indirectly affect the Internal Revenue Code, as defined in this subdivision, apply for Wisconsin purposes at the same time as for federal purposes, except that changes made by P.L. 115-63 and sections 11026, 11027, 11028, 13207, 13306, 13307, 13308, 13311, 13312, 13501, 13705, 13821, and 13823 of P.L. 115-97 first apply for taxable years beginning after December 31, 2017. Changes made by section 1201 of P.L. 108-173 and section 307 of P.L. 109-432 first apply for taxable years beginning after December 31, 2010. Changes made by section 13113 of P.L. 103-66; section 1241 of division B of P.L. 111-5; section 2011 of P.L. 111-240; section 753 of P.L. 111-312; and section 324 of P.L. 112-240 first apply for taxable years beginning after December 31, 2018. 13. a. For taxable years beginning after December 31, 2020, and before January 1, 2023, for a corporation, conduit, or common law trust that qualifies as a regulated investment company, real estate mortgage investment conduit, real estate investment trust, or financial asset securitization investment trust under the Internal Revenue Code, “net income” means the federal regulated investment company taxable income, federal real estate mortgage investment conduit taxable income, federal real estate investment trust, or financial asset securitization investment trust taxable income of the corporation, conduit, or trust as determined under the Internal Revenue Code. b. For purposes of subd. 13. a., “Internal Revenue Code” means the federal Internal Revenue Code as amended to December 31, 2020, except as provided in subd. 13. c. and d. and s. 71.98 and subject to subd. 13. e. c. For purposes of subd. 13. a., “Internal Revenue Code” does not include the following provisions of federal public laws for taxable years beginning after December 31, 2020: section 13113 of P.L. 103-66; sections 1, 3, 4, and 5 of P.L. 106-519; sections 101, 102, and 422 of P.L. 108-357; sections 1310 and 1351 of P.L. 109-58; section 11146 of P.L. 109-59; section 403 (q) of P.L. 109-135; section 513 of P.L. 109-222; sections 104 and 307 of P.L. 109-432; sections 8233 and 8235 of P.L. 110-28; section 11 (e) and (g) of P.L. 110-172; section 301 of P.L. 110-245; section 15351 of P.L. 110-246; section 302 of division A, section 401 of division B, and sections 312, 322, 502 (c), 707, and 801 of division C of P.L. 110-343; sections 1232, 1241, 1251, 1501, and 1502 of division B of P.L. 111-5; sections 211, 212, 213, 214, and

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216 of P.L. 111-226; sections 2011 and 2122 of P.L. 111-240; sections 753, 754, and 760 of P.L. 111-312; section 1106 of P.L. 112-95; sections 104, 318, 322, 323, 324, 326, 327, and 411 of P.L. 112-240; P.L. 114-7; section 1101 of P.L. 114-74; section 305 of division P of P.L. 114-113; sections 123, 125 to 128, 143, 144, 151 to 153, 165 to 167, 169 to 171, 189, 191, 307, 326, and 411 of division Q of P.L. 114-113; sections 11011, 11012, 13201 (a) to (e) and (g), 13206, 13221, 13301, 13304 (a), (b), and (d), 13531, 13601, 13801, 14101, 14102, 14103, 14201, 14202, 14211, 14212, 14213, 14214, 14215, 14221, 14222, 14301, 14302, 14304, and 14401 of P.L. 115-97; sections 40304, 40305, 40306, and 40412 of P.L. 115-123; section 101 (c) of division T of P.L. 115-141; sections 101 (d) and (e), 102, 201 to 207, 301, 302, and 401 (a) (47) and (195), (b) (13), (17), (22) and (30), and (d) (1) (D) (v), (vi), and (xiii) and (xvii) (II) of division U of P.L. 115-141; sections 104, 114, 115, 116, 130, and 145 of division Q of P.L. 116-94; sections 2304 and 2306 of P.L. 116-136; and sections 111, 114, 115, 116, 118 (a) and (d), 133, 137, 138, and 210 of division EE of P.L. 116-260. d. For purposes of subd. 13. a., “Internal Revenue Code” does not include amendments to the federal Internal Revenue Code enacted after December 31, 2020, except that “Internal Revenue Code” includes sections 9671, 9701, 9702, 9703, 9704, 9705, 9706, and 9707 of P.L. 117-2; and sections 80501, 80504, and 80602 of division H of P.L. 117-58. e. For purposes of subd. 13. a., the provisions of federal public laws that directly or indirectly affect the Internal Revenue Code, as defined in this subdivision, apply for Wisconsin purposes at the same time as for federal purposes, except that changes made by sections 20101, 20102, 20104, 20201, 40201, 40202, 40203, 40308, 40309, 40311, 40414, 41101, 41107, 41114, 41115, and 41116 of P.L. 115-123; section 101 (a), (b), and (h) of division U of P.L. 115-141; section 1203 of P.L. 11625; section 1122 of P.L. 116-92; section 301 of division O, section 1302 of division P, and sections 101, 102, 103, 117, 118, 132, 201, 202 (a), (b), and (c), 204 (a), (b), and (c), 301, and 302 of division Q of P.L. 116-94; section 2 of P.L. 116-98; and sections 301, 302, and 304 of division EE of P.L. 116-260 apply for taxable years beginning after December 31, 2020. Changes made by section 1201 of P.L. 108-173 and section 307 of P.L. 109-432 first apply for taxable years beginning after December 31, 2010. 14. For purposes of s. 71.26 (2) (b) 2., 2013 stats., “Internal Revenue Code” includes section 109 of division U of P.L. 115141. 15. a. For taxable years beginning after December 31, 2022, for a corporation, conduit, or common law trust that qualifies as a regulated investment company, real estate mortgage investment conduit, real estate investment trust, or financial asset securitization investment trust under the Internal Revenue Code, “net income” means the federal regulated investment company taxable income, federal real estate mortgage investment conduit taxable income, federal real estate investment trust, or financial asset securitization investment trust taxable income of the corporation, conduit, or trust as determined under the Internal Revenue Code. b. For purposes of subd. 15. a., “Internal Revenue Code” means the federal Internal Revenue Code as amended to December 31, 2022, except as provided in subd. 15. c. and d. and s. 71.98, and subject to subd. 15. e. c. For purposes of subd. 15. a., “Internal Revenue Code” does not include the following provisions of federal public laws for taxable years beginning after December 31, 2022: sections 1, 3, 4, and 5 of P.L. 106-519; sections 101, 102, and 422 of P.L. 108-357; sections 1310 and 1351 of P.L. 109-58; section 11146 of P.L. 109-59; section 403 (q) of P.L. 109-135; section 513 of P.L. 109-222; section 104 of P.L. 109-432; sections 8233 and 8235 of P.L. 110-28; section 11 (e) and (g) of P.L. 110-172; sec-

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tion 301 of P.L. 110-245; section 15351 of P.L. 110-246; section 302 of division A, section 401 of division B, and sections 312, 322, 502 (c), 707, and 801 of division C of P.L. 110-343; sections 1232, 1251, 1501, and 1502 of division B of P.L. 111-5; sections 211, 212, 213, 214, and 216 of P.L. 111-226; section 2122 of P.L. 111-240; sections 754 and 760 of P.L. 111-312; sections 104, 318, 322, 323, 326, 327, and 411 of P.L. 112-240; P.L. 114-7; section 1101 of P.L. 114-74; section 305 of division P of P.L. 114-113; sections 123, 125 to 128, 143, 144, 151 to 153, 165 to 167, 169 to 171, 189, 191, 326, and 411 of division Q of P.L. 114113; sections 11011, 11012, 13201 (a) to (e) and (g), 13206, 13221, 13301, 13304 (a), (b), and (d), 13531, 13601, 13801, 14101, 14102, 14103, 14201, 14202, 14211, 14212, 14213, 14214, 14215, 14221, 14222, 14301, 14302, 14304, and 14401 of P.L. 115-97; sections 40304, 40305, 40306, and 40412 of P.L. 115-123; section 101 (c) of division T of P.L. 115-141; sections 101 (d) and (e), 102, 201 to 207, 301, 302, and 401 (a) (47) and (195), (b) (13), (17), (22) and (30), and (d) (1) (D) (v), (vi), (xiii), and (xvii) (II) of division U of P.L. 115-141; sections 104, 114, 115, 116, 130, and 145 of division Q of P.L. 116-94; sections 2304 and 2306 of P.L. 116-136; sections 111, 114, 115, 116, 118 (a) and (d), 133, 137, 138, and 210 of division EE of P.L. 116260; sections 5003, 9041, 9673, 9675, and 9708 of P.L. 117-2; section 307 of division P of P.L. 117-103; section 13903 (b) of P.L. 117-169; and section 4151 of division FF of P.L. 117-328. d. For purposes of subd. 15. a., “Internal Revenue Code” does not include amendments to the federal Internal Revenue Code enacted after December 31, 2022. e. For purposes of subd. 15. a., the provisions of federal public laws that directly or indirectly affect the Internal Revenue Code, as defined in this subdivision, apply for Wisconsin purposes at the same time as for federal purposes, except that changes made by sections 5001, 5002, 5005, 9623, 9624, and 9672 of P.L.117-2; section 2 of P.L. 117-6; and sections 80401, 80402, and 80601 of division H of P.L. 117-58 apply for taxable years beginning after December 31, 2022. Changes made by section 1201 of P.L. 108-173 and section 307 of P.L. 109-432 apply for taxable years beginning after December 31, 2010. (3) MODIFICATIONS. The income of a corporation shall be computed under the internal revenue code, except a corporation under sub. (2) (b), as modified in the following ways: (ag) Section 61 (relating to the definition of gross income) is modified to exclude the following: 1. Income received by the original policyholder or original certificate holder who has a catastrophic or life-threatening illness or condition from the sale of a life insurance policy or certificate, or the sale of the death benefit under a life insurance policy or certificate, under a life settlement contract, as defined in s. 632.69 (1) (k). In this paragraph, “catastrophic or life-threatening illness or condition” includes AIDS, as defined in s. 49.686 (1) (a), and HIV infection, as defined in s. 49.686 (1) (d). 2. Income received in the form of allocations issued by this state with moneys received from the coronavirus relief fund authorized under 42 USC 801 to be used for any of the following purposes: a. Broadband expansion. b. Privately owned movie theater grants. c. A nonprofit grant program. d. A tourism grants program. e. A cultural organization grant program. f. Music and performance venue grants. g. Lodging industry grants. h. Low-income home energy assistance. i. A rental assistance program.

May 22, 2026, are designated by NOTES. (Published 5-22-26)

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INCOME AND FRANCHISE TAXES

j. Supplemental child care grants. k. A food insecurity initiative. L. A farm support program. m. Grants to small businesses. n. Ethanol industry assistance. o. Wisconsin Eye. 3. Income received in the form of a grant issued by the Wisconsin Economic Development Corporation during and related to the COVID-19 pandemic under the ethnic minority emergency grant program. Amounts otherwise deductible under this chapter that are paid directly or indirectly with the grant money are deductible. 4. Income received in the form of a grant from the restaurant revitalization fund under section 5003 of the federal American Rescue Plan Act of 2021, P.L. 117-2. Amounts otherwise deductible under this chapter that are paid directly or indirectly with the grant money are deductible. Amounts excluded under this subdivision by a tax-option corporation or partnership shall be treated as tax-exempt income for purposes of sections 705 and 1366 of the Internal Revenue Code. (ar) Section 78 (relating to treating taxes as dividends) is excluded. (b) Section 103 (relating to an exemption for interest) is excluded and replaced, for corporations subject to taxation under s. 71.23 (1), by the rule that any interest income not included in federal taxable income, except interest under sub. (1m), is added to federal taxable income and any interest income which is by federal law exempt from taxation by this state is excluded, and replaced, for corporations subject to taxation under s. 71.23 (2), by the rule that any interest income not included in federal taxable income is added to federal taxable income. (c) Section 108 (b) (relating to reduction of tax attributes) is modified so that the net operating loss under sub. (4), not the federal net operating loss, and Wisconsin credits, not federal credits, are applied, and the reduction rate for a credit carry-over is 7.9 percent, not 33 1/3 percent. (cf) For taxable years beginning after December 31, 2016, section 118 (a) (relating to nonshareholder contributions to capital) is modified so that the amount of income and franchise tax credits under s. 71.28 (3q) (b), (3w) (b) and (bm) 1., 2., and 4., (3wm) (b) and (bm), and (3y) (b) that is not included in federal taxable income is added to federal taxable income. (d) Section 133 (relating to an exclusion for interest) is excluded. (e) Section 162 (relating to trade or business expenses) is modified as follows: 1. So that payments for wages, salaries, commissions and bonuses of employees and officers may be deducted only if the name, address and amount paid to each resident of this state to whom compensation of $600 or more has been paid during the taxable year is reported or if the department of revenue is satisfied that failure to report has resulted in no revenue loss to this state. 2. So that payments for rent may be deducted only if the amount paid, together with the names and addresses of the parties to whom rent has been paid, is reported as provided under s. 71.70 (2). 3. So that payments for wages, salaries, bonuses, interest or other expenses paid to an entertainer or entertainment corporation may be deducted only if the corporation complies with ss. 71.63 (3) (b), 71.64 (4) and (5) and 71.80 (15) (e). 4. So that moving expenses, as defined in s. 71.01 (8j), paid or incurred during the taxable year to move the taxpayer’s Wisconsin business operation, in whole or in part, to a location out-

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side the state or to move the taxpayer’s business operations outside the United States may not be deducted as provided under the Internal Revenue Code. (f) Section 164 (a) is modified so that foreign taxes are not deductible unless the income on which the tax is based is taxable under this chapter and so that gross receipts taxes assessed in lieu of property taxes, the license fee under s. 76.28 and the taxes under ss. 70.375 and 76.81 are deductible. (g) Section 164 (a) (3) is modified so that state taxes and taxes of the District of Columbia that are value-added taxes, single business taxes or taxes on or measured by all or a portion of net income, gross income, gross receipts or capital stock are not deductible. (h) Section 164 (a) (4) as it relates to a deduction for the windfall profits tax is excluded. (hd) Section 164 (a) as it relates to a deduction for the environmental tax that is imposed under section 59A is excluded. (hm) Section 171 is modified so that the rules for federally taxable bonds also apply to bonds that are taxable under par. (b) and the rules for federally tax-exempt bonds apply to bonds that are exempt from tax under this chapter. (i) Section 172 is excluded and replaced by the treatment of business loss carry-forwards under sub. (4). (j) Sections 243, 244, 245, 245A, 246 and 246A are excluded and replaced by the rule that corporations may deduct from income dividends received from a corporation with respect to its common stock if the corporation receiving the dividends owns, directly or indirectly, during the entire taxable year at least 70 percent of the total combined voting stock of the payor corporation. In this paragraph, “dividends received” means gross dividends minus taxes on those dividends paid to a foreign nation and claimed as a deduction under this chapter. The same dividends may not be deducted more than once. Cross-reference: See also s. Tax 3.03, Wis. adm. code.

(k) Section 247 (relating to dividends on preferred stock of public utilities) is excluded. (L) Section 265 is excluded and replaced by the rule that any amount otherwise deductible under this chapter that is directly or indirectly related to income wholly exempt from taxes imposed by this chapter or to losses from the sale or other disposition of assets the gain from which would be exempt under this paragraph if the assets were sold or otherwise disposed of at a gain is not deductible. In this paragraph, “wholly exempt income”, for corporations subject to franchise or income taxes, includes amounts received from affiliated or subsidiary corporations for interest, dividends or capital gains that, because of the degree of common ownership, control or management between the payor and payee, are not subject to taxes under this chapter. In this paragraph, “wholly exempt income”, for corporations subject to income taxation under this chapter, also includes interest on obligations of the United States. In this paragraph, “wholly exempt income” does not include income excludable, not recognized, exempt or deductible under specific provisions of this chapter. If any expense or amount otherwise deductible is indirectly related both to wholly exempt income or loss and to other income or loss, a reasonable proportion of the expense or amount shall be allocated to each type of income or loss, in light of all the facts and circumstances. This paragraph does not apply to the exclusion under par. (ag) 2., 3., or 4. (m) Section 267 (relating to transactions between related taxpayers) is modified so that gains may be reduced only if the corresponding loss was incurred while the corporation was subject to tax under this chapter. (ms) Section 291 (a) (3) is modified so that it does not apply

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to deductions that are allocable to income that is taxable under this chapter. (n) Sections 381, 382 and 383 (relating to carry-overs in certain corporate acquisitions) are modified so that they apply to losses under sub. (4) and credits under the following instead of to federal credits and federal net operating losses: 1. Section 71.28 (1dm). 2. Section 71.28 (1dx). 3. Section 71.28 (3). NOTE: Subd. 3. is repealed eff. 1-1-32 by 2025 Wis. Act 118, section 296.

4. Section 71.28 (4). 6. Section 71.28 (5). NOTE: Subd. 6. is repealed eff. 1-1-35 by 2025 Wis. Act 118, section 298. NOTE: Par. (n) is affected eff. 1-1-43 by 2025 Wis. Act 118, sections 292, 294, and 295, to read: (n) Sections 381, 382 and 383 (relating to carry-overs in certain corporate acquisitions) are modified so that they apply to losses under sub. (4) and credits under s. 71.28 (4) instead of to federal credits and federal net operating losses.

(o) Section 468A (relating to nuclear decommissioning trust and reserve funds) is modified so that the deduction under section 468A (a) is allowed only if the fund is subject to tax under this chapter. (p) Sections 501 to 511 and 513 to 528 (relating to exempt organizations) are excluded, except as they pertain to the definitions of unrelated business taxable income in section 512, and replaced by the treatment of exemptions under sub. (1). (s) Sections 951 to 964 (relating to controlled foreign corporations) are excluded, and, for taxable years beginning on or after January 1, 2006, sections 951 to 965 (relating to controlled foreign corporations) are excluded. (t) Sections 991 to 994, 995 as amended by section 802 of P.L. 98-369, and section 999 as amended by section 802 of P.L. 98369 (relating to domestic international sales corporations) are excluded. (tm) Section 1016 (a) is modified so that the rules for federally taxable bonds also apply to bonds that are taxable under par. (b) and the rules for federally tax-exempt bonds apply to bonds that are exempt from tax under this chapter. (u) Section 1017 (relating to adjustments to basis because of discharge of indebtedness) is modified to reflect the modification under par. (c). (v) Section 1033 is modified so that it does not apply to involuntary conversions of property in this state that produces nonbusiness income and that is replaced with similar property outside this state and to involuntary conversions of property in this state that produces business income and that is replaced with property outside this state if at the time of replacement the taxpayer is not subject to tax under this chapter. (vm) 1. For taxable years beginning after December 31, 2019, section 1400Z-2 (relating to capital gains invested in opportunity zones) is modified so that an increase in basis is twice the amount determined under section 1400Z-2 (b) (2) (B) (iii) for an investment held in a Wisconsin qualified opportunity fund for at least 5 years or under section 1400Z-2 (b) (2) (B) (iv) for an investment held in a Wisconsin qualified opportunity fund for at least 7 years. In this subdivision, “Wisconsin qualified opportunity fund” has the meaning given in s. 71.05 (25m) (a) 2. 2. In the form and manner prescribed by the department, a fund shall annually certify to each investor and the department that it qualifies as a Wisconsin qualified opportunity fund for the fund’s taxable year. A fund shall make the annual certifications under this subdivision no later than the due date, including extensions, of the fund’s corresponding income or franchise tax return under this chapter. (x) Sections 1501 to 1505, 1551, 1552, 1563 and 1564 (relat-

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ing to consolidated returns) are excluded, except that U.S. Treasury Regulation 1.1502-13, relating to deferred gain or loss from an intercompany transaction, applies to transactions between combined group members under s. 71.255 (4) (g). (4) NET BUSINESS LOSS CARRY-FORWARD. (a) Except as provided in par. (b) and s. 71.80 (25), a corporation, except a tax-option corporation or an insurer to which s. 71.45 (4) applies, may offset against its Wisconsin net business income any Wisconsin net business loss incurred in any of the 20 immediately preceding taxable years, if the corporation was subject to taxation under this chapter in the taxable year in which the loss was incurred, to the extent not offset by other items of Wisconsin income in the loss year and by Wisconsin net business income of any year between the loss year and the taxable year for which an offset is claimed. For purposes of this subsection, Wisconsin net business income or loss shall consist of all the income attributable to the operation of a trade or business in this state, less the business expenses allowed as deductions in computing net income. The Wisconsin net business income or loss of corporations engaged in business within and without the state shall be determined under s. 71.25 (6) and (10) to (12). Nonapportionable losses having a Wisconsin situs under s. 71.25 (5) (b) shall be included in Wisconsin net business loss; and nonapportionable income having a Wisconsin situs under s. 71.25 (5) (b), whether taxable or exempt, shall be included in other items of Wisconsin income and Wisconsin net business income for purposes of this subsection. (b) A corporation that is part of a combined group under s. 71.255 may offset against its Wisconsin net business income any unused pre-2009 net business loss carry-forward under s. 71.255 (6) (bm) for the 20 taxable years that begin after December 31, 2011. History: 1987 a. 312; 1987 a. 411 ss. 22, 124 to 129; 1989 a. 31, 336; 1991 a. 37, 39, 221, 269; 1993 a. 16, 112, 246, 263, 399, 437, 491; 1995 a. 27, 56, 351, 371, 380, 428; 1997 a. 27, 37, 184, 237; 1999 a. 9, 65; 1999 a. 150 s. 672; 1999 a. 167, 194; 2001 a. 16, 38, 106, 109; 2003 a. 33, 85, 99, 135, 255, 326; 2005 a. 25, 74, 335, 361, 362, 479, 483; 2007 a. 20, 96, 97, 151, 226; 2009 a. 2, 28, 161, 165, 180, 183, 205, 265, 269, 295, 332, 344; 2011 a. 3, 5, 7, 10, 32, 212, 232; 2011 a. 260 s. 80; 2013 a. 20, 145; 2013 a. 165 ss. 46, 115; 2015 a. 55, 60, 84, 196, 216; 2017 a. 58, 59, 197, 231, 364; 2017 a. 365 s. 111; 2019 a. 7, 9, 54, 136, 185; 2021 a. 1, 127, 156; 2023 a. 19, 36, 138, 146; 2025 a. 15, 118, 129. Under s. 71.06 (1) [now sub. (4)], the loss carry-over privilege was limited to an “identical taxpayer”; merging corporations are not entitled to the privilege. DOR v. United States Shoe Corp., 158 Wis. 2d 123, 462 N.W.2d 233 (Ct. App. 1990). Revisions to sub. (1) (a) by 1995 Wis. Act 27 were constitutional. Group Health Cooperative of Eau Claire v. DOR, 229 Wis. 2d 846, 601 N.W.2d 1 (Ct. App. 1999), 98-1264.