71.36 Tax-option items.

(1) It is the intent of this section that shareholders of tax-option corporations include in their Wisconsin adjusted gross income their proportionate share of the corporation's tax-option items unless the corporation elects under s. 71.365 (4) (a) not to be a tax-option corporation or elects under s. 71.365 (4m) (a) to be taxed at the entity level.

(1m)

(a) A tax-option corporation may deduct from its net income all amounts included in the Wisconsin adjusted gross income of its shareholders, the capital gain deduction under s. 71.05 (6) (b) 9. and all amounts not taxable to nonresident shareholders under ss. 71.04 (1) and (4) to (9) and 71.362.

(b) For purposes of this subsection, interest on any of the following obligations is not included in shareholders' income:

1. Interest on federal obligations.

2. Interest on obligations issued under s. 66.0304 by a commission if 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, or if 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, or if 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.

3. Interest on obligations issued under s. 66.0621 by a local professional baseball park district, a local professional football stadium district, or a local cultural arts district.

4. Interest on obligations issued under ss. 66.1201, 66.1333, and 66.1335.

5. Interest on obligations 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).

6. Interest on obligations issued under subch. II of ch. 229.

(c) The proportionate share of the net loss of a tax-option corporation shall be attributed and made available to shareholders on a Wisconsin basis but subject to the limitation and carry-over rules as prescribed by section 1366 (d) of the Internal Revenue Code. Net operating losses of the corporation to the extent attributed or made available to a shareholder may not be used by the corporation for further tax benefit. For purposes of computing the Wisconsin adjusted gross income of shareholders, tax-option items shall be reported by the shareholders and those tax-option items, including capital gains and losses, shall retain the character they would have if attributed to the corporation, including their character as business income. In computing the tax liability of a shareholder, no credit against gross tax that would be available to the tax-option corporation if it were a nontax-option corporation may be claimed.

(2) A tax-option corporation shall separately state all tax-option items the separate treatment of which may affect the liability of any shareholder for tax under this chapter.

(3)

(a) The tax treatment of all tax-option items shall be determined at the corporate level.

(b) All shareholders of tax-option corporations shall treat tax-option items on their returns under this chapter in a manner consistent with the manner in which those tax-option items are treated on the corporation's Wisconsin income or franchise tax return or shall notify the department of revenue of any inconsistency and the reason for it.

(4) Every tax-option corporation that is required to file a return under s. 71.24 (1) shall, on or before the due date of the return, including extensions, provide a schedule to each shareholder whose share of income, deductions, credits, or other items of the tax-option corporation may affect the shareholder's tax liability under this chapter. The schedule shall separately indicate the shareholder's share of each item.

History: 1987 a. 312; 1995 a. 27, 56; 1999 a. 65; 1999 a. 150 s. 672; 1999 a. 167; 2001 a. 38; 2009 a. 28, 205; 2017 a. 368.