Assembly Bill 259: Conforming to the Federal Code

WMC has provided several updates on the progress of AB 259, the Taxpayer Fairness Act. The bill has drastically changed since our last update. The State Assembly amended the bill during its final floor period on February 22nd to include a series of changes to Wisconsin’s tax code to bring it more in line with the federal code.

The bill prior to the amendment included:

  • The amendment strikes the last sentence in Wis. Stat. § 73.16(3)(b), which contains an ambiguous exemption to a taxpayer’s ability to rely on past audits to defend against future tax liability. The sentence will be replaced with three limited exemptions.
  • The burden of proof to show a transaction between members of a controlled group has economic substance has been lowered from “clear and convincing” to “clear and satisfactory.” This will make it easier for a member of a controlled group to prove a transaction had economic substance, and was not conducted just to lower tax liability.

The bill will continue to include these two items in addition to a series of others. On the non-business side the bill will include conformity with the IRC regarding: Individual retirement accounts, retirement plan loan offsets, deductibility of travel expenses by members of congress, student loan indebtedness, and 529 college savings accounts.

In addition, the bill would conform twenty-one other areas of the Wisconsin tax code with the IRC. Specifically, the bill would:

  • Depletion For Income and Franchise Tax Purposes
  • Sales and Use Tax Exemption for Property, Items, and Services Purchased by Certain Entities
  • Depreciation of Certain Farm Property
  • Applicable Recovery Period for Real Property
  • Conversion of a S Corp to a C Corp
  • Repeal Like-Kind Exchanges for Tangible Property
  • Qualified Transportation Benefits
  • Repeal Rollover of Public Traded Securities Gain into Certain Companies
  • Treatment of Self-Created Property
  • Repeal Exclusion for Interest on Advance Refunding Bonds
  • Adjustment of Change in Computing Life Insurance
  • Computation of Life Insurance Reserves
  • Modify Discounting Rules for Property casualty Companies
  • Proration Rules for Property and Casualty
  • Treatment of Gains on the Sale of a Partnership Interest
  • Substantial Built-In Loss for Purpose of Partnership Transfers
  • Treatment for Charitable Contributions and Foreign Taxes for a Partner’s Share of Loss
  • Modify Treatment of Gains on Partnership Profits
  • Separate Computation for Each Trade or Business Activity Under the Unrelated Business Income Tax
  • Modify Treatment of Contributions to Capital
  • Simplified Accounting Rules for Small Business

The amendment language can be found here.