Wis. Admin. Code § Tax 2.955 — Credit for taxes paid to other states

Tax 2.955(1) (1) Definition. In this section, “state” means the 50 states of the United States and the District of Columbia, but does not include the commonwealth of Puerto Rico or the several territories organized by Congress.

Tax 2.955(2) (2) Credits allowable.

Tax 2.955(2)(a) (a) Except as provided in subs. (2m) and (3) , an income tax credit may be claimed by a Wisconsin resident individual, estate, or trust for any net minimum tax or income tax paid to another state by the resident upon income of the individual, estate or trust taxable by that state.

Tax 2.955(2)(b) (b) Except as provided in subs. (2m) and (3) , an income tax credit may be claimed by a Wisconsin resident shareholder, partner, or member in a tax-option (S) corporation, partnership, or limited liability company for any net minimum tax, income tax, or franchise tax paid by that shareholder, partner, or member to another state on or measured by income of the tax-option (S) corporation, partnership, or limited liability company.

Tax 2.955(2)(c) (c) Except as provided in subs. (2m) and (3) , an income or franchise tax credit may be claimed by a tax-option (S) corporation, partnership, or limited liability company which makes an election to be taxed at the entity level under s. 71.21 (6) (a) or 71.365 (4m) (a) , Stats., for any net minimum tax, income tax, or franchise tax paid by that entity to another state upon income of the entity and net minimum tax, income tax, or franchise tax paid by that entity to another state upon income of the entity on behalf of its Wisconsin resident shareholders, partners, and members on a combined or composite return filed with the other state.

Tax 2.955(2m) (2m) Limitation.

Tax 2.955(2m)(a) (a) The credit may only be allowed if the income taxed by the other state is also considered income for Wisconsin tax purposes.

Tax 2.955(2m)(b) (b) The credit may not exceed the net tax paid to Wisconsin on income that is taxable to both Wisconsin and the other state.

Tax 2.955(2m)(c) (c) The limitation in par. (b) does not apply to income that is taxable to both Wisconsin and to Minnesota, Iowa, Illinois, or Michigan.

Tax 2.955(3) (3) Credits not allowed. An income tax credit may not be allowed for:

Tax 2.955(3)(a) (a) Income tax paid to Illinois, Indiana, Kentucky, or Michigan on personal service income earned in these states included under a reciprocity agreement.

Tax 2.955(3)(b) (b) Minimum tax, income tax, or franchise tax paid to another state on income not considered taxable income for Wisconsin tax purposes.

Tax 2.955(3)(c) (c) Minimum tax paid to a state which does not classify the minimum tax as an income tax.

Tax 2.955(3)(d) (d) Income tax paid to a county, city, village, town or foreign country.

Tax 2.955(3)(e) (e) Minimum tax, income tax, or franchise tax paid to another state by a Wisconsin resident individual on income derived from a tax-option (S) corporation, partnership, or limited liability company that elects to be taxed on the income at the entity level under s. 71.21 (6) (a) or 71.365 (4m) (a) , Stats.

Tax 2.955(3)(f) (f) A tax-option (S) corporation, partnership, or limited liability company electing to be taxed on income at the entity level under s. 71.21 (6) (a) or 71.365 (4m) (a) , Stats., if the shareholder, partner, or member pays the tax to the other state on their proportionate share of income from the entity.

Tax 2.955(4) (4) How to claim a credit. The amount of income tax credit claimed shall be entered on the line provided for net income tax paid to other states on Wisconsin income tax return Form 1, Form 1NPR, Form 2, or for tax-option (S) corporations and partnerships, Schedule 5S-ET or 3-ET. The credit may not exceed the Wisconsin net tax. To support the credit claimed, the following information shall be submitted with Wisconsin Form 1, Form 1NPR, Form 2, Form 3, or Form 5S:

Tax 2.955(4)(a) (a) For a Wisconsin resident individual, estate, or trust, attach copies of the other state’s income tax return and the wage statements, if any, to the Wisconsin income tax return.

Tax 2.955(4)(b) (b) For a Wisconsin resident shareholder in a tax-option (S) corporation, the federal subchapter S status of which is recognized by the other state, partner in a partnership, or member in a limited liability company:

Tax 2.955(4)(b)1. 1. If a Wisconsin resident shareholder, partner, or member files an individual income tax return with that state, submit a copy of the other state’s income tax return with the Wisconsin income tax return.

Tax 2.955(4)(b)2. 2. If the corporation, partnership, or limited liability company files a combined or composite return with that state on behalf of its shareholders, partners, or members who are nonresidents of that state and pays the tax on their proportionate share of the income earned there, submit with the Wisconsin income tax return either a copy of the Wisconsin Schedule 5K-1 or 3K-1 on which is shown the shareholder’s, partner’s, or member’s share of tax paid to that state, or a letter as provided in par. (d) .

Tax 2.955(4)(b)3. 3. If the corporation, partnership, or limited liability company files a corporate or partnership income or franchise tax return with that state and pays tax on or measured by income earned there that is attributable to its shareholders, partners, or members who are nonresidents of that state, submit with the Wisconsin income tax return either a copy of the Wisconsin Schedule 5K-1 or 3K-1 on which is shown the shareholder’s, partner’s, or member’s share of tax paid to that state, or a letter as provided in par. (d) .

Tax 2.955(4)(c) (c) For a Wisconsin resident shareholder in a tax-option (S) corporation, the federal subchapter S status of which is not recognized by the other state, if the corporation pays an income or franchise tax on or measured by the income earned there, submit with the Wisconsin income tax return either a copy of the Wisconsin Schedule 5K-1 on which is shown the shareholder’s share of tax paid to that state, or a letter as provided in par. (d) .

Tax 2.955(4)(d) (d) If the tax-option (S) corporation, partnership, or limited liability company is not subject to Wisconsin’s income or franchise tax, a Wisconsin resident shareholder, partner, or member shall submit with the Wisconsin income tax return a letter provided by the corporation, partnership, or limited liability company in lieu of Wisconsin Schedule 5K-1 or 3K-1 as required in pars. (b) 2. and 3. and (c) . The letter shall include a schedule showing the shareholder’s, partner’s, or member’s proportionate share of the items of income taxable by that state, the adjusted gross income, and the net tax paid.

Tax 2.955(4)(e) (e) For a tax-option (S) corporation, partnership, or limited liability company which makes an election to be taxed on income at the entity level under s. 71.21 (6) (a) or 71.365 (4m) (a) , Stats.:

Tax 2.955(4)(e)1. 1. If the corporation, partnership, or limited liability company files a corporate or partnership income or franchise tax return with another state, submit a copy of the other state’s income or franchise tax return with Wisconsin Form 3 or 5S.

Tax 2.955(4)(e)2. 2. If the corporation, partnership, or limited liability company files a combined or composite return with another state on behalf of its shareholders, partners, or members who are nonresidents of that state and pays tax on their proportionate share of the income taxable to the other state, submit a copy of the other state’s combined or composite income or franchise tax return with Wisconsin Form 3 or 5S.

Tax 2.955(5) (5) Year in which to claim income tax credit. The credit for income tax paid to another state shall be claimed on the Wisconsin return for the year in which the out-of-state income is considered taxable Wisconsin income.