(2017 Wisconsin Act 11)

Under prior state law, a work permit issued by the Wisconsin Division of Equal Rights was required before anyone under the age of 18 could work in any job except for agricultural or domestic service work. To obtain a work permit, the minor must:

• provide proof of age;
• get written consent from a parent or legal guardian to work;
• have a signed letter from the employer describing the job duties, hours of work, and the time of day the minor will be working; and
• pay a $10 permit fee – payment of the fee is the responsibility of the employer.

2017 Wisconsin Act 11 eliminated the requirement that a 16 and 17-year-old individuals obtain a work permit for the Wisconsin Division of Equal Rights before being allowed to work in any job except for agricultural or domestic service work.

(2017 Wisconsin Act 59)

Reducing Wisconsin’s property tax burden is an elusive goal. Property taxes are levied and collected by local units of government. State-imposed limits on local government spending keep property taxes in check, but to reduce property taxes requires additional state funding of Wisconsin’s property tax credit programs and/or increases in state aid for public education.

One of Wisconsin’s property tax credit programs is the School Levy Credit which is applied to every taxable property in Wisconsin. The amount of the credit is based on the property’s assessed value as a percentage of the municipality’s total assessed value.

2017 Wisconsin Act 59 increased annual state funding of Wisconsin’s School Levy Tax Credit by $87 million beginning with property taxes levied in 2017 and payable in 2018.

(2017 Wisconsin Act 59)

State law authorizes the Wisconsin Department of Revenue (DOR) to use statistical sampling in sales and use tax audits. This auditing practice is generally used in field audits when it is not efficient to review all the records or to use one of the non-statistical methods.

In a statistical sample, the sample is randomly selected and probability theory is used to evaluate the sample results. When sampling is used, both the DOR and the taxpayer can save time and resources. An example cited by DOR is illustrative:

Company A has approximately 10,000 purchase invoices for each year filed alphabetically by vendor name. If the audit scope includes four years, a block sample based on alphabetical vendor name would require the auditor to review 10,000 records (approximately one-fourth for each year). However, a statistical sample covering that same scope might require the auditor to review 1,000 or fewer invoices.

The requirements imposed by the DOR on taxpayers seeking to utilize statistical sampling – detailed charts of accounts in electronic format; trial balances in electronic format; and electronic detail records of sales and/or purchases, including coding information – are such that only very large companies can access this cost-saving auditing process.

2017 Wisconsin Act 59 extends this option to small employers by requiring the DOR to establish criteria for using statistical sampling methods during sales and use tax field audits. The criteria will specify:

• that any person with less than $10,000,000 in annual sales during any year at issue during a field audit may choose to have the audit conducted using statistical sampling;
• the number of transactions necessary to qualify for statistical sampling; and
• the maximum sample size.

(2017 Wisconsin Act 59)

Wisconsin’s Constitution authorizes a state forestry tax of up to 0.2 mills for acquiring, preserving, and developing state forests. Since 2007, the forestry mill tax – the only property tax levied by the State of Wisconsin – has been set at 16.97¢ per $1,000 of assessed value.

2017 Wisconsin Act 59 ended Wisconsin’s forestry mill tax beginning with property taxes levied in 2017 and payable in 2018 thereby reducing statewide property tax collections by roughly $90 million annually.

(2017 Wisconsin Act 231)

If the Wisconsin Department of Revenue (DOR) reviews a taxpayer’s transactions during a tax audit and finds no tax liability, we believe the taxpayer should be able to rely upon this determination in the event of future tax audit. Existing state law on this issue is ambiguous.

Under 2017 Wisconsin Act 231, the DOR in subsequent tax audits would not be able to revisit a topic that has been previously settled, unless the taxpayers provided “false or incomplete” information during the initial tax audit.

(2017 Wisconsin Act 59)

In 1997, state lawmakers exempted computers, related equipment and software from the personal property tax. Four years later, cash registers and fax machines, except for fax machines that are also copiers, were exempted from Wisconsin’s personal property tax. These tax laws required the owners of exempt computers, cash registers and fax machines to annually report the value of this exempt property on their Statement of Personal Property.

2017 Wisconsin Act 59 repealed the requirement that owners of exempt computers, cash registers, and fax machines report the value of their property tax exempt computers, related equipment and software, cash registers and fax machines on their Statement of Personal Property.

(2017 Wisconsin Act 59)

Wisconsin is one of only six states to have an Alternative Minimum Tax (AMT) as a component of their tax code. The AMT is calculated by first determining alternative minimum taxable income (AMTI), subtracting any allowable exemption, and applying the AMT rate. The base for computing AMTI is regular taxable income, to which adjustments and tax preference items are added.

An exemption is provided to taxpayers with an AMTI below specified amounts. The exemptions vary by filing status and phase out as income rises. Finally, the taxpayer’s AMT liability is compared to the taxpayer’s regular tax liability. If the AMT liability exceeds the regular tax amount, an AMT is owed equal to the difference.

2017 Wisconsin Act 59 repeals Wisconsin’s AMT for taxable years beginning on or after January 1, 2019.

(2017 Wisconsin Act 59)

Wisconsin’s construction sales tax law is cumbersome and complicated. At the heart of the confusion is the determination of which entity – contractor, subcontractor or customer – pays the applicable sales tax.

In 2013, state lawmakers tried to address this problem by creating a new sales and use tax exemption for property, items and services sold by a contractor as part of a lump sum contract for real property construction activities if the total sales price attributable to the taxable products is less than 10% of the total contract price.

A lump sum contract is defined as a contract for which the contractor quotes the charge for the labor and services of subcontractors and the taxable products and services as one price

The contractor is the consumer of such taxable products and is liable for sales and use tax on its purchase of these products.

This tax code change cleared up some of the confusion, but contractors and subcontractors were still struggling to comply with Wisconsin’s construction sales tax law.

2017 Wisconsin Act 59 expands the exemption for lump sum contracts to apply to all construction contracts involving real property construction activities if the total sales price of the taxable is less than 10% of the total contract price. Furthermore, if the prime contractor qualifies for the exemption, the exemption also applies to all subcontracts entered into with respect to the real property construction activities. If the exemption applies to the subcontract, the subcontractor owes sales tax on its purchase of the materials.

Please refer to enclosed April, 2018 DOR guidance for further details.

(2017 SB 291\AB 387 & 2017 SB 292\AB 386)

During the 20170-2018 legislative session, WIB spent a considerable amount of time lobbying against two legislative proposals which alter the way in which property is assessed in Wisconsin. Collectively, these are referred to as the “Dark Stores” legislation. If they were to become law, we believe the result would be an increase in the property tax burden for small businesses which own or lease their property.

The assessment of real property is guided by the Uniformity Clause of Wisconsin’s Constitution and state law. The Uniformity Clause requires the method or mode of taxing real property to be applied uniformly.

State law requires assessors to use a three-step process to assess the value of real property – the land and all buildings and improvements affixed to the land. The first step is to base the assessment on any recent arm’s-length sale of the property. If the property has not been recently sold, an assessor must consider sales of reasonably comparable properties. If there are no such comparable sales, an assessor may use a “cost” or “income” assessment approach, considering all factors which have a bearing on the value of the property.

2017 Assembly Bill 386/Senate Bill 292 specifies new property tax assessment practices for the use of the comparable sales approach. More specifically, a property may not be considered comparable if the property is a dark property. The term “dark property” is defined as a property that is vacant or unoccupied beyond the normal period for property in the same real estate market segment.

Proponents of this legislation claim these new assessment practices are needed to prevent big-box retailers from having their fully-operational stores assessed at the same value as a vacant property in a different location. While this legislation may accomplish that objective, the Uniformity Clause requires assessors to apply this assessment practices to the sale of property owned by a small, hometown business.

In communities throughout Wisconsin, there are many vacant commercial properties. These vacancies adversely impact the value of occupied commercial property. We believe restricting assessors from even using vacant property to discern the value of occupied property will lead to higher assessments for hometown businesses.

2017 Assembly Bill 387/Senate Bill 291 redefines real property to include any leases, rights, and privileges pertaining to the property, including assets that cannot be taxed separately but that are inextricably intertwined with the real property.

The stated intent of this legislation is to reverse the 2008 decision by the Wisconsin Supreme Court in Walgreen Company v. City of Madison. In this case, the Wisconsin Supreme Court unanimously ruled that a property tax assessment of retail property leased at above market rent values should be based on market rents.

From our perspective, the key commentary from this ruling was:

“If we were to expand the law in the direction the City (Madison) requests, property assessments would in essence become business value assessments, with assessors improperly equating financial arrangements with property value. This is in contravention of the general principle that real property assessments should not be based on business value. Rather, the valuation of the fair market value of property for purposes of property taxes is by its nature different from business, or income tax assessment. “[A]n assessor’s task is to value the real estate, not the business concern which may be using the property.”

We agree with the Wisconsin Supreme Court. The job of the assessor is to value the real estate, not the business using the property. Therefore, we do not believe it is appropriate to overturn the unanimous ruling of the Wisconsin Supreme Court.

State lawmakers failed to reach consensus on either of the so-called “Dark Stores” proposals during the 2017-2018 legislative session. As a result, local assessors must continue to follow the existing law process for the assessment of commercial property.

(2017 Wisconsin Act 327)

Over the past decade, local elected officials representing large American cities have enacted expensive regulations which interfere with private sector employer-employee relationships.

For example, “fair scheduling” ordinances mandate employers post work schedules for their hourly employees up to four weeks in advance, “wage equity” ordinances restrict the ability of employers to seek prior wage history from job applicants and “commuter benefit” ordinances require employers to pay a portion of their worker’s transit expenses.

Local governments in Wisconsin could enact any of these types of ordinances. 2017 Wisconsin Act 327 prevents such action. Under this new law, Wisconsin cities, villages, towns and counties are prohibited from enacting or enforcing an ordinance regarding:

• regulation of employee hours and overtime;
• employment benefits an employer may be required to provide to its employees; or an employer’s right to solicit information regarding the salary history of prospective employees.