Summary of factual data and analytical methodologies
The Department reviewed statutes that authorize enforcement to determine the limitations if any of whether discretionary enforcement could be used and the extent of that discretion.
Analysis and supporting documents used to determine effect on small business
Entities that may be affected by the proposed rules include the following: Emergency Medical and Ambulance Service Providers; Asbestos & Lead Abatement Providers, Consultants, and Trainers; Hotels and Motels; Bed and Breakfast Establishments; Tourist Rooming Houses; Recreational and Educational Campgrounds; Restaurants (including mobile restaurants); Tattoo and Body Piercing Establishments; Tanning Bed Facilities; Public Pools; Vending Machine Operators; WIC Vendors; persons subject to licensing and regulation under ch.
DHS 157
; other entities regulated by the Department's Division of Public Health; and certain Medical Assistance providers regulated by the Department's Division of Health Care Access and Accountability.
Section
895.59
, Stats., is applicable only to small businesses that are not covered under ss.
48.685
or
50.065
, Stats. Because the rule requires a reduction or waiver of a penalty for voluntary disclosure of a violation, it is likely that the rule will have a positive fiscal effect on those businesses that receive a waiver or reduction.
Small Business Impact
The proposed rules will have a direct impact on a substantial number of small businesses that are not covered under ss.
48.685
or
50.065
, Stats. The economic impact on the businesses affected by this rule is indeterminate.
Small business regulatory coordinator
Rosie Greer
Phone: 608-266-1279
Fiscal Estimate
A copy of the full fiscal estimate may be obtained from the department's contact person listed below upon request.
State fiscal effect
None.
Local government fiscal effect
None.
Private sector fiscal effect
Indeterminate.
Agency Contact Person
Rosie Greer
Department of Health Services
1 W. Wilson Street, Room 650
Madison, WI 53707
Phone: 608-226-1279
Natural Resources
Environmental Protection — General, Chs. NR 100—
NOTICE IS HEREBY GIVEN THAT pursuant to ss.
227.11 (2) (a)
,
281.16
,
281.19
,
281.65
and
281.66
, Stats., the Department of Natural Resources will hold public hearings on proposed revisions to Chapters
NR 151
,
153
and
155
, Wis. Adm. Code, relating to the control of polluted runoff and two grant programs that help fund those controls.
Hearing Information
The hearings will be held on:
January 25, 2010
Outagamie County Highway Dept.
at 1:00 p.m.
Highway Shop Conference Room
1313 Holland Road
Appleton
January 28, 2010
Best Western Trail Lodge
at 1:00 p.m.
3340 Mondovi Road
Room: Chippewa #1
Eau Claire
February 2, 2010
State Office Bldg.
at 1:00 p.m.
141 NW Barstow St., Room 151
Waukesha
February 10, 2010
Lyman F. Anderson Agricultural and
at 1:00 p.m.
Conservation Center
1 Fen Oak Court
Classrooms A & B (1st floor)
Madison
February 11, 2010
Rib Mountain Municipal Center
at 1:00 p.m.
3700 N. Mountain Road (HWY NN)
Wausau
February 25, 2010
UW Platteville, Pioneer Student Center
at 1:00 p.m.
University North Room
One University Plaza
Platteville
Each hearing will begin with a 1 hour informational session followed by formal testimony.
Pursuant to the Americans with Disabilities Act, reasonable accommodations, including the provision of informational material in an alternative format, will be provided to qualified individuals with disabilities upon request. Please call Carol Holden at (608) 266-0140 with specific information on your request at least 10 days before the date of the scheduled hearing.
Copies of Proposed Rule and Fiscal Estimate
The proposed rule revisions and supporting documents, including the fiscal estimate may be viewed and downloaded and comments electronically submitted at the following internet site:
https://health.wisconsin.gov/admrules/public/
Home
(Search this website using "NR 151", select "NR 151, 153, 155 Relating to Runoff Management Performance Standards and Grants."). If you do not have internet access, a personal copy of the proposed rules and supporting documents, including the fiscal estimate may be obtained from Carol Holden, DNR – WT/3, P.O. Box 7921, Madison, WI 53707-7921 or by calling (608) 266-0140.
Submission of Written Comments
Written comments on the proposed rules may be submitted via U.S. mail to Carol Holden, DNR – WT/3, P.O. Box 7921, Madison, WI 53707-7921 or by e-mail to
carol.holden@ wisconsin.gov
. Comments may be submitted until
March 12, 2010.
Written comments whether submitted electronically or by U.S. mail will have the same weight and effect as oral statements presented at the public hearings.
Analysis Prepared by Department of Natural Resources
Statutes interpreted
Statutory authority
Related statute or rule
Plain language analysis of the rule
Chapter
NR 151
, Runoff Management
The rule adds new and modifies existing performance standards that address nonpoint source pollution from both agricultural and non-agricultural sources, including transportation. The new performance standards include:
•
a setback from waterbodies in agricultural fields within which no tillage would be allowed;
•
a limit on the amount of phosphorus that may run off croplands as measured by a phosphorus index;
•
a prohibition against significant discharge of process wastewater from milk houses, feedlots, and other similar sources;
•
a standard that requires implementation of best management practices designed to meet a load allocation specified in an approved Total Maximum Daily Load (TMDL).
Modifications are made to the agricultural performance standards addressing cropland soil erosion control, nutrient management and manure storage. The rule also changes the non-agricultural performance standards that address construction site erosion control, post-construction storm water management and developed urban areas. The subchapter addressing transportation performance standards is moved to the non-agricultural performance standards sections. The agricultural implementation and enforcement sections are modified to clarify cost-share eligibility and to better align with the department's stepped enforcement procedures. Some definitions are added and other definitions that are no longer used are deleted.
Chapter
NR 153
, Targeted Runoff Management And Notice Of Discharge Grant Programs
This existing rule contains policies and procedures for administering targeted runoff management grants to reduce both agricultural and urban nonpoint source pollution. Grants may be used to cost share the installation of best management practices as well as to support a variety of local administrative and planning functions. Projects are selected through a competitive scoring system and generally take two to three years to complete.
The revisions create four project categories for the targeted runoff management grant program instead of one category in the existing rule. The categories include large-scale/TMDL implementation, large-scale/non-TMDL control, small-scale/TMDL implementation and small-scale/ non-TMDL control projects. The rule will help the state make progress in meeting its obligation to address impaired waters by focused funding of projects addressing TMDLs.
To implement recent statutory changes to the grant program, the rule creates a mechanism outside the competitive TRM process to fund Notices of Discharge (NODs) issued under ch.
NR 243
. Other provisions allow the department more flexibility in allocating grant funds and ensure an equitable scoring system. Portions of ch. NR 153 are repealed and recreated to accommodate the newly created categories, to eliminate or add definitions, clarify and expand restrictions on cost sharing, require the establishment of a local ch.
NR 151
implementation program as a grant condition and allow for additional safeguards in the application documents.
Chapter
NR 155
, Urban Nonpoint Source Pollution Abatement And Storm Water Management Grant Program
This existing rule contains policy and procedures for administering the urban nonpoint source and storm water management grant program authorized under s.
281.66
, Stats. The department may make grants under this program to governmental units for practices to control both point and nonpoint sources of storm water runoff from existing urban areas, and to fund storm water management plans for developing urban areas and areas of urban redevelopment. The goal of this grant program is to achieve water quality standards, minimize flooding, protect groundwater, coordinate urban nonpoint source management activities with the municipal storm water discharge permit program and implement the non-agricultural nonpoint source performance standards under ch.
NR 151
. Grants to a governmental unit may be used to cost share the installation of best management practices as well as to support a variety of local administrative and planning functions. The department may also make grants to the board of regents of the University of Wisconsin System to control urban storm water runoff from campuses in selected locations. Projects are selected through a competitive scoring system and generally take one to two years to complete.
The revisions to ch.
NR 155
increase the department's management oversight and accountability of grants while at the same time increase flexibility in how the grants are used. The revisions limit on the amount of money a grantee may receive in a given grant year, increase the department's management oversight of grants by approving all contracts, regardless of cost, provide the department greater flexibility in awarding funds and allow for additional safeguards in the application documents.
The rule also allows the use of local assistance grants to pay for work done by competent in-house staff rather than hiring an outside consultant thus increasing local government's flexibility to control costs. The rule adds requirements that hired consultants be competent in storm water management, all outstanding grants be completed on schedule prior to a new grant award, a final report be submitted and that the department may deny a grant to an otherwise eligible project if there is a potential impact on hazardous sites in addition to historic sites, cultural resources or endangered resources. Other parts of ch. NR 155 are repealed and recreated to define terms, clarify concepts and merge similar sections, giving the department greater flexibility in awarding funds.
Comparison with federal regulations
The rule revisions are consistent with federal regulations that apply to control of nonpoint sources of pollution, animal feeding operations, nutrient management and storm water management. While federal regulations do not apply specifically to cropland practices or livestock operations that have only nonpoint source runoff, there are federal regulations for concentrated animal feeding operations (point sources) that specify control of nutrients entering surface waters. Certain modifications also better align state grant funding priorities with those of the federal government regarding total maximum daily loads.
The rule's phosphorus index performance standard is based on national policy and guidelines on nutrient management issued by the US Department of Agriculture (USDA) Natural Resources Conservation Service (NRCS) in April, 1999. The national policy and guidelines suggested the use of one of three phosphorus risk assessment tools, the most comprehensive of which is the phosphorus index. Prior to the adoption of this national policy, states began developing phosphorus-based nutrient management guidelines or regulations. The tillage setback performance standard is based on the phosphorus index calculation that assumes no tillage to the edge of the bank. The performance standard specifying BMPs to meet the load requirements of approved TMDLs will help the state to control nonpoint source pollutants to achieve federally required and approved TMDLs. The control of process wastewater discharge is of sufficient concern that USDA has developed technical standards for management of process wastewater.
Comparison of similar rules in adjacent states
In general, the adjacent states do not use statewide performance standards specifically designed to address polluted runoff from agricultural sources. However, these states have various regulations and procedures in place to address many of the polluted runoff sources that these rule revisions address. All four states use the phosphorus index in some form but none have proposed using it as a statewide performance standard as this rule does. The rule differs from the adjacent states' rules because it has more detail in its phosphorus index, is more quantitative and has more research to validate it. Also, in Wisconsin, pursuant to s.
281.16
, Stats., cost sharing must be made available to existing agricultural operations before the state may require compliance with the standards.
Illinois:
Illinois does not have a tillage setback requirement, but it does offer a property tax incentive for the construction of livestock waste management facilities including the development of vegetative filter strips. The filter strips must be in cropland that is surrounding a surface-water or groundwater conduit, must be part of a conservation plan, and must have a uniform ground cover. The minimum and maximum widths that are eligible for the tax reduction is determined by the slope. Illinois does not allow raw materials, by-products and products of livestock management facilities, including milkhouse waste, silage leachate, and other similar products to be discharged to waters of the state. In addition to tax incentives, Illinois relies on federal Clean Water Act section 319 funds from US EPA to fund nonpoint source projects in the state.
Illinois requires that permit applicants follow a series of technical standards that are in the Illinois Urban Manual for both construction and post-construction. If the developer uses the technical standards they are considered in compliance, unless an inspection indicates that the technical standard is not working adequately. The developer will then need to make changes to their construction site or storm water management plan.
Iowa:
Iowa requires that nutrient management plans for livestock operation of 500 or more animal units be based on the phosphorus index. The rule's version of the phosphorus index uses Iowa's "quasi-modeling" approach but the equations are based on Wisconsin research. Iowa does not require a separation distance between tillage activities and waterbodies. Iowa prohibits discharge to waters of the state, polluting waters of the state and discharge to road ditches.
Iowa does not have a performance standard approach to construction projects, but does require BMP implementation. There is no specific goal for post-construction other than to have a storm water management plan similar to the way Wisconsin's program was set up before ch.
NR 151
was promulgated in 2002. The requirement on the municipality is to try to control runoff from new development. There are no specific goals.
Iowa is making an effort to coordinate the development of TMDLs with the implementation of water quality improvement plans based on TMDLs. There is not yet a separate funding source specifically for implementing TMDL plans, but there are several different funding sources currently used for watershed project implementation, including section 319 funds and three different sources of state-funded watershed implementation funds. There is also a state-funded lakes restoration fund which may be partly used for watershed restoration work. Wherever possible, watershed projects try to leverage EQIP and other federal sources of funds.
Iowa does not currently offer a separate source of funds for Animal Feeding Operation BMPs in response to a Notice of Discharge violation. However, Iowa does not preclude a producer from funding because of a Notice of Violation (NOV), except in the case where the NOV results in the requirement for an NPDES permit. Funding from State Revolving Funds and federal section 319 cannot be used for BMPs requiring an NPDES permit, but can be used for non-permitted BMPs. EQIP funds in Iowa are currently allocated such that counties with water quality livestock projects receive 40 percent of the eligible points when scoring for EQIP funding. The Iowa Department of Agriculture and Land Stewardship has a nutrient management program designed to offer financial assistance for livestock producers for manure management, but the program has not been funded in over 10 years.
Michigan:
Michigan does not require a separation distance between tillage activities and waterbodies. The state's rules regarding process wastewater only apply to permitted concentrated animal feeding operations, but discharges from smaller farms are generally prohibited as a violation of water quality standards.
Within permits that apply to municipal separate storm sewer systems (MS4s), Michigan has similar performance standards for post-construction total suspended solids control and peak flow control in new development. It has a minimum treatment volume standard of one inch (or
½
inch if technically supported) where they must achieve an 80 percent total suspended solids reduction. It also has a channel protection criteria where the post-peak flow rate and volume must match the pre-peak flow rate and volume for all storms up to the 2-yr, 24-hr event. The peak flow control standard is more stringent than this rule because it also controls volume. Wisconsin is trying to control streambank erosion by controlling a greater number of smaller storms. Michigan has also identified some water bodies that are not required to meet the channel protection standard, similar to Wisconsin's approach. Michigan has an option to use low impact development to meet these two standards, which is very different from Wisconsin. However, unlike Wisconsin, Michigan is only implementing these performance standards on new development in municipalities that have an MS4 permit. Also, if the municipality had an ordinance in place prior to this rule that addressed water quality for new development even if the performance standard was not included, they are grandfathered in.
Michigan has a pass through grant (section 319 and Clean Michigan Initiative funds) that places a priority on projects that will restore impaired waters or achieve progress toward meeting TMDL load reductions. Michigan does not have a program similar to the rule's mechanism to fund NODs outside of a competitive grant process.
Minnesota:
Minnesota does not have a tillage setback requirement along all waterbodies in agricultural areas, but the state does require a 16.5 foot (one rod) grass strip along certain public drainage ditches as well as vegetated strips, restored wetlands, and other voluntary set-aside lands through federal, state and local programs. For process wastewater, Minnesota rules place a limit of less than 25 mg/l BOD
5
(biological oxygen demand) that can be released to surface water and, if released to a leach field, the threshold is less than 200 mg/l BOD
5
.
For non-agricultural practices, Minnesota recently reissued construction permits that require infiltration and the need for additional BMPs when sites are located near s. 303 (d) or outstanding resource waters. Its permit generally is more prescriptive in terms of how to design a BMP for optimal control, but it is not usually presented as a performance standard which would provide more flexibility. Based on Minnesota's documentation, it appears to require BMPs that will achieve an 80 percent total suspended solids reduction and ones that will infiltrate the first half inch of runoff from impervious surfaces. Minnesota requires more BMPs, including temperature control, if the receiving water has special needs such as ORW/ERW waters or s. 303 (d) waters.
Minnesota provides funding for TMDLs through its Clean Water Legacy Act and section 319 of the federal Clean Water Act. The state does not have a funding mechanism to fund notices of discharge specifically, but is looking for ways to provide more financial support for runoff from feedlots. There is a state cost-share program which is used alone or in combination with federal cost share.
Summary of factual data and analytical methodologies
The rule's agricultural performance standards were developed with input from an advisory committee that met four times between December 2007 and February 2008. The following research results and methodologies were analyzed as part of the development of these standards.
Phosphorus Index:
The Wisconsin Buffer Initiative: A Report to the Natural Resources Board of the Wisconsin Department of Natural Resources by the University of Wisconsin-Madison, College of Agricultural and Life Sciences
. Dec. 22, 2005.
The following series of articles focused on the watershed targeting approach used in the Wisconsin Buffer Initiative report:
Diebel, M. W., J.T. Maxted, P. J. Nowak, and M. J. Vander Zanden. 2008. Landscape planning for agricultural nonpoint source pollution reduction I: A geographical allocation framework. Environmental Management 42 (5): 789-802.
Maxted, J. T., Diebel, M. W., and M. J. Vander Zanden. 2009. Landscape planning for agricultural nonpoint source pollution reduction II: Balancing watershed size, number of watersheds, and implementation effort. Environmental Management 43 (1): 60-68.
Diebel, M. W., J.T. Maxted, D. Robertson, S. Han, and M. J. Vander Zanden. 2009. Landscape planning for agricultural nonpoint source pollution reduction III: Assessing phosphorus and sediment reduction potential. Environmental Management 43 (1): 69-83.
The following studies of in-field runoff sediment and phosphorus concentrations provided some of the data that was used in building phosphorus index equations:
Panuska, J.C., K.G. Karthikeyan and P.S. Miller. 2008. Impact of surface roughness and crusting on particle size distribution of edge-of-field sediments. Geoderma 145: 315 – 324.
Panuska, J.C., K.G. Karthikeyan and J.M. Norman. 2008. Sediment and phosphorus losses in snowmelt and rainfall runoff from three corn management systems. Trans. ASABE 51: 95 – 105.
Panuska, J.C., K.G. Karthikeyan. 2009. Phosphorus and organic matter enrichment in snowmelt and rainfall runoff from agricultural fields. Geoderma XX: XX –XX (in review).
The following articles about the in-field runoff monitoring methods to collect the runoff phosphorus data that are used to validate the phosphorus index:
Bonilla, C.A., D.G. Kroll, J. M. Norman, D.C. Yoder, C.C. Molling. P.S. Miller, J.C. Panuska, J. B. Topel, P.L. Wakeman, and K.G. Karthikeyan. 2006. Instrumentation for measuring runoff, sediment, and chemical losses from agricultural fields. Journal of Environmental Quality 35:216-223.
Stunetebeck, T.D., M.J. Komiskey, D.W. Owens, and D.W. Hall. 2008. Methods of data collection, sample processing and data analysis for edge-of-field, stream gaging, subsurface tile, and meterological stations at Discovery Farms and Pioneer Farm in Wisconsin, 2001-7. U.S. Geological Survey Open File report 2008-1015. 51 p.
The following paper showed one year's worth of research that validated the Wisconsin phosphorus index.
Bundy, L. G., A. P. Mallarino, and L. W. Good. 2008. Field-Scale Tools for Reducing Nutrient Losses to Water Resources. Pp. 159-170 in Final Report: Gulf Hypoxia and Local Water Quality Concerns Workshop. September 26-28, 2005, Ames, Iowa. Sponsored by Iowa State University and EPA. Organized by the MRSHNC, Upper Mississippi River Sub-basin Hypoxia Nutrient Committee. St. Joseph, Michigan.
The following paper in press shows that simple runoff phosphorus loss models, like the Wisconsin phosphorus index can work well:
Vadas, P. A., L.W. Good, P.A. Moore Jr., and N. Widman. 2009. Estimating phosphorus loss in runoff from manure and phosphorus for a phosphorus loss quantification tool. Journal of Environmental Quality (in press).
The following document shows all the phosphorus index equations on the internet:
Good, L. W. and J. C. Panuska. 2008. Current calculations in the Wisconsin P Index. Available at:
http://wpindex.soils
. wisc.edu
.
The following models were used in the development of the Wisconsin phosphorus index:
RUSLE 2 (Revised Universal Soil Loss Equations, version 2), USDA-NRCS official RUSLE2 Program and Database and Training materials and User's Guides are available from
http://fargo.nserl.purdue.edu/rusle2_dataweb/RUSLE2_Index.htm
The draft user's guide on this site is on the link labeled "RUSLE2 Technology."
Snap-Plus 1.129.1, 1/20/2009 Copyright 2003-2008 by University of Wisconsin Regents Software developed by P Kaarakka, L.W. Good, and J. Wolter in the Department of Soil Science, UW Madison. This a software program links models for nutrient management (SNAP), conservation assessment (RUSLE2) and the Wisconsin Phosphorus Index (PI) into one software program for multi-year nutrient and conservation planning. The most current version is available at
http://www.snapplus.net/
.
Process wastewater performance standard:
The rule's performance standard requires that livestock producers have no significant discharge of process wastewater to waters of the state. Sources of greatest concern include feed storage leachate and milk house waste. Process wastewater discharge is of sufficient concern that USDA has developed technical standards for its management. Environmental aspects of milking center waste water and feed storage leachate, including waste characteristics and water quality impacts, are included in:
Pollution Control Guide for Milking Center Wastewater Management.
Springman, R.E., Payer, D.D and B.J. Holmes. 1994. University of Wisconsin-Extension, 44 pages.
"Silage Leachate Control". Wright, Peter, in
Silage: Field to Feedbunk, Proceedings from the North American Conference, Hershey, Pennsylvania, February 11-13, 1997. Pages 173 – 186. NRAES, editor.
"Environmental Problems with Silage Effluent". Graves, R.E., and P.J. Vanderstappen. USDA Natural Resources Conservation Service, National Water Management Center Publication. 6 pages
"Base Flow Leachate Control." Wright, Peter and P.J. Vanderstappen. Paper No. 94-25 60, ASCE Meeting Presentation at the 1994 International Winter Meeting, Atlanta Ga., December 13 – 16, 1994. 7 pages.
The USDA technical standard for managing milk house waste and feed storage leachate discharges is:
Waste Treatment
(no. 629). USDA, Natural Resources Conservation Service. August, 2008.
22 pages.
Modifications to the non-agricultural performance standards were developed with input from a technical advisory committee that met four times between October 2007 and February 2008. Changes to the protective areas performance standard are based on the department's Guidance for the Establishment of Protective Areas for Wetlands in Runoff Management Rules, Wisconsin Administrative Code NR 151 in the Waterway and Wetland Handbook, Ch.
10
. Department staff gathered information from municipal engineers and conducted analyses under various scenarios using analytical models to provide information to the technical advisory committee including:
•
analysis showing the impact of redevelopment on total suspended solids loads, recommendations and estimated costs for control practices,
•
analysis of the infiltration performance standards modifications for different land uses.
Analysis and supporting documentation used to determine effect on small business
The department concluded that the revisions to chs.
NR 151
,
153
and
155
will result in additional compliance requirements for small businesses, but the rules will not result in additional reporting requirements for small businesses. Rather than mandate specific design standards, the rules either establish new performance standards or revise existing performance standards.
Compliance requirements for agricultural producers vary depending on the type of operation and the performance standard, but the revisions to the rules will not change the existing compliance requirements for agricultural operations. Under state law, compliance with the performance standards is not required for existing nonpoint agricultural facilities and practices unless cost sharing is made available for eligible costs. A less stringent compliance schedule is not included for agricultural producers because compliance is contingent on cost sharing and in many cases, it can take years for a county or the state to provide cost share money to a producer.
Agricultural producers who are in compliance with the existing nutrient management performance standard may already be in compliance with the new phosphorus index and tillage setback performance standards. A phosphorus reduction strategy is included in NRCS nutrient management technical standard 590 (Sept. 5, 2005). A phosphorus index of 6 or less is specified in the PI strategy in Criteria C, 2 of the technical standard. The concept of streambank integrity, as proposed through a tillage setback performance standard, is an assumption of the phosphorus index calculation, which estimates phosphorus delivery to the stream via overland flow, but not from bank erosion or other means that soil, manure or fertilizer might enter the stream from farming operations. In circumstances where the phosphorus index has been determined to be insufficient to achieve water quality standards in areas where an approved total maximum daily load (TMDL) has been approved, a higher level of pollution control may be required. An owner or operator in this situation would be required to implement BMPs designed to meet the load allocation in the TMDL.
The rule revisions will not change the schedules for compliance and reporting requirements for non-agricultural businesses. These requirements are the same as those specified in ch.
NR 216
. In determining whether non-agricultural small businesses can be exempted from the rules, the department concluded that because the requirements of ch.
NR 151
, Subchapter III are based on federal requirements the state cannot exempt those businesses. Also, the impacts from certain small business construction activities can have as large a water quality impact as from large businesses.
In determining the compliance and reporting effects, the department considered 1) the existing performance standards and prohibitions in ch.
NR 151
,
2
) the requirements of NRCS technical standard 590 needed to meet the nutrient management performance standard, 3) assumptions contained in the Wisconsin Phosphorus Index, 4) compliance and reporting requirements under ch.
NR 216
, Subchapter II, 5) agreement with the department of commerce to regulate storm water discharges from commercial building sites under one permit, and 6) feedback from members of advisory committees that included small business owners and organizations.
Small Business Impact
(including how this rule will be enforced)
The overall effect on small businesses may be increased time, labor and money spent on BMPs or planning tools, but there will not be a significant economic impact on small business. However, for agricultural producers the proposed new agricultural performance standards and the revised existing agricultural performance standards are not enforceable unless 70 percent cost sharing is provided, or up to 90 percent for economic hardship cases. The rules will be enforced either through county ordinances, DNR stepped enforcement procedures or a combination of the two.
Small businesses in the construction industry will not see an effect from the changes to the construction performance standard, but may experience increased costs from the changes to some of the post-construction performance standards. Most of the businesses affected by the changes to the total suspended solids standard will be commercial and it is difficult to estimate how many of those would be classified as small businesses. The modifications to the infiltration and the protective area performance standards may add additional costs, but they are expected to be small. Businesses affected will be both large and small. The rule will be enforced through permits required under ch.
NR 216
, or through local ordinances. For the non-agricultural performance standards, cost sharing is not required for compliance. However, the department may award grants for certain BMPs and planning activities.
Initial regulatory flexibility analysis
Pursuant to s.
227.114
, Stats., the proposed rule may have an impact on small businesses. The initial regulatory flexibility analysis is as follows:
Describe the type of small business that will be affected by the rule.
Agricultural producers (crops and livestock), business and associated professionals involved with construction (developers, engineers, contractors, others in the building profession, and small commercial establishments that meet the definition of small business).
Briefly explain the reporting, bookkeeping and other procedures required for compliance with the rule.
None.
Describe the type of professional skills necessary for compliance with the rule.
Familiarity with software such as SNAP Plus and RUSLE2 will be needed for the phosphorus index agricultural performance standard.
Small business regulatory coordinator
The Department's Small Business Regulatory Coordinator for this rule may be contacted at
Julia.Riley@wisconsin.gov
or by calling (608) 264-9244.
Environmental Analysis
The Department has made a preliminary determination that this action does not involve significant adverse environmental effects and does not need an environmental analysis under ch.
NR 150
, Wis. Adm. Code. However, based on the comments received, the Department may prepare an environmental analysis before proceeding with the proposal. This environmental review document would summarize the Department's consideration of the impacts of the proposal and reasonable alternatives.
Fiscal Estimate
Summary
Proposed rule revision will result in an increased demand on agency staff devoting more time to training, education, grant oversight, enforcement and development of guidance and procedures. The department estimates that a total of 10.5 FTEs will be needed to implement all three rules.
State fiscal effect
Increase costs. Costs will not be absorbed within the agency's budget.
Local government fiscal effect
Increase costs.
Types of local governmental units affected
Towns, Villages, Cities, Counties.
Fund sources affected
GPR, SEG.
Long-range fiscal implications
State cost-share grants to fully implement the process wastewater performance standard would be $9.3 million or $930,000 annually if awarded over a 10-year period. However, this estimate is dependent upon the availability of cost-share funds to implement the standard.
Agency Contact Person
Carol Holden,
Department of Natural Resources
P.O. Box 7921
Madison, WI 53707-7921
Telephone: (608) 266-0140
Notice of Hearing
Revenue
NOTICE IS HEREBY GIVEN That pursuant to ss.
71.91 (8) (b)
and
227.24
,Stats., the Department of Revenue will hold a public hearing to consider emergency rules and the creation of permanent rules revising Chapter
Tax 1
, relating to the financial record matching program.
Hearing Information
The hearing will be held:
Date and Time
Location
February 11, 2010
Events Room
at 9:00 a.m.
State Revenue Building
2135 Rimrock Road
Madison, Wisconsin
Handicap access is available at the hearing location.
Submission of Written Comments
Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person shown under
Agency Contact Person
listed below no later than February 18, 2010, and will be given the same consideration as testimony presented at the hearing.
Analysis Prepared by the Department of Revenue
Statutes interpreted
Statutory authority
Explanation of agency authority
Section
71.91 (8) (b)
, Stats., provides that the department shall promulgate rules specifying procedures to enter into agreements with financial institutions doing business in the state to operate the financial record matching program.
Related statute or rule
Plain language analysis
This proposed rule does the following:
•
Provides procedures under which the department and a financial institution doing business in Wisconsin shall enter into an agreement for the exchange of data for purposes of operating the financial record matching program.
•
Provides the two methods under which the department and a financial institution doing business in Wisconsin may exchange data under the financial record matching program.
Comparison with federal regulations
There is no existing or proposed federal regulation that is intended to address the activities to be regulated by the rule.
Comparison with rules in adjacent states
The department is not aware of a similar rule in an adjacent state.
Summary of factual data and analytical methodologies
2009 Wisconsin Act 28
created the financial record matching program. Among the provisions created is a requirement for the department to promulgate rules specifying procedures to enter into agreements with financial institutions doing business in Wisconsin. The department has created this proposed rule order to comply with this statutory requirement.
Analysis and supporting documents used to determine effect on small business
Currently all financial institutions doing business in the state are required to participate in the financial records matching program according to s.
49.853
, Stats., operated by the Wisconsin Department of Children and Families. There is no impact on smaller financial institutions.
Anticipated costs incurred by private sector
This proposed rule does not have a significant fiscal effect on the private sector.
Small Business Impact
This proposed rule order does not have a significant economic impact on a substantial number of small businesses.
Fiscal Estimate
The fiscal effect of the financial records matching program was included in the fiscal estimate for
2009 Wis. Act 28
. As such, the rule has no fiscal effect.
State fiscal effect
None.
Text of Proposed Rule
SECTION 1. Tax 1.16 is created to read:
Tax 1.16
Financial record matching program.
(1) PURPOSE. The purpose of this section is to specify procedures under which the department shall enter into agreements with financial institutions doing business in this state to operate the financial record matching program under s.
71.91 (8)
, Stats.
(2) DEFINITIONS. In this section:
(b) "Financial institution" has the meaning given in s.
49.853 (1) (c)
, Stats.
(3) PROCEDURES. (a) A financial institution doing business in this state shall enter into an agreement with the department to participate in the exchange of data on a quarterly basis. To the extent feasible, the information required under this agreement shall be submitted by electronic means prescribed by the department. The financial institution shall sign the agreement and return the agreement to the department within 20 business days of receipt of the agreement. The department shall review the agreement and, if all conditions have been met, shall sign the agreement and provide the financial institution with a copy of the signed agreement.
(b) A financial institution shall elect one of the following options for the exchange of data described in par. (a):
1. `State matching option.' This option is also known as the "all accounts method." If this option is elected, the agreement described in par. (a) shall include the following:
a. The financial institution agrees to provide an electronic file to the department or department's agent on a quarterly basis. The file contains the name, social security number or federal employer identification number of all persons having an ownership interest in an account maintained at the financial institution, together with a description of each person's interest.
b. The department or department's agent will perform a match against the delinquent debtor file. Upon the request of the department or the department's agent, the financial institution shall provide the department, for each delinquent debtor who matches information provided by the financial institution under subpar. a., the delinquent debtor's address of record, account number, account type and the balance of the account.
c. The department or department's agent agrees not to disclose or retain information received from the financial institution concerning account holders who are not delinquent debtors. Sixty days notice is required for any changes to the conditions of the contract.
2. `Financial institution matching option.' This option is also known as the "matched accounts method." If this option is elected, the agreement described in par. (a) shall include the following:
a. The department or department's agent agrees to provide the financial institution an electronic file on a quarterly basis. The file contains the names and social security numbers or federal employer identification numbers of delinquent debtors.
b. The financial institution agrees to return a file of matched records to the department or department's agent. The return file of matched records contains the delinquent debtor's name, social security number or federal employer identification number, address of record, account number, account type, the nature of the delinquent debtor's ownership interest in the account and the balance of the account at the time that the record match is made.
c. The financial institution agrees not to disclose or retain information received from the department concerning account holders who are not delinquent debtors.
(c) A financial institution may request reimbursement from the department for costs associated with participating in the financial record matching program in an amount not to exceed $125 for each calendar quarter that the financial institution participates in the program.
Agency Contact Person
Dale Kleven, Dept. of Revenue
Mail Stop 6-40
2135 Rimrock Road, PO Box 8933
Madison WI 53708-8933
Phone: (608) 266-8253
Notice of Hearing
Revenue
NOTICE IS HEREBY GIVEN That pursuant to ss.
71.04 (8)
,
71.25 (10)
,
227.11 (2) (a)
, and
227.24
, Stats., the Department of Revenue will hold a public hearing to consider emergency rules and the creation of permanent rules revising Chapter
Tax 2
, relating to apportionment and nexus.
Hearing Information
The hearing will be held:
Date and Time
Location
February 25, 2010
Events Room
at 1:00 p.m.
State Revenue Building
2135 Rimrock Road
Madison, Wisconsin
Handicap access is available at the hearing location.
Copies of Proposed Rules
A copy of the full text of the proposed rule order and the full fiscal estimate may be obtained at no cost by contacting the department. See
Agency Contact Person
listed below.
Submission of Written Comments
Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person shown under
Agency Contact Person
listed below no later than March 4, 2010, and will be given the same consideration as testimony presented at the hearings.
Analysis Prepared by the Department of Revenue:
Statute interpreted
Sections
71.04(4)
,
(4m)
,
(5)
,
(6)
,
(7)
,
(8)
, and
(10)
,
71.22 (1r)
,
71.23 (1)
and
(2)
,
71.25 (5)
,
(6)
,
(6m)
,
(7)
,
(8)
,
(9)
,
(10)
, and
(15)
,
71.255 (5)
, and
77.93
, Stats.
Statutory authority
Explanation of agency authority
Section
227.11 (2) (a)
, Stats., provides that each agency may promulgate rules interpreting the provisions of any statute enforced or administered by it, if the agency considers it necessary to effectuate the purpose of the statute.
Related statute or rule
Plain language analysis
This rule does the following:
1.
Amends s.
Tax 2.39
, Apportionment Method, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Updates s.
Tax 2.39 (6)
, relating to the sales factor, to reflect applicable changes that were enacted by
2009 Acts 2
and
28
. More specifically, provides that for taxable years beginning on or after January 1, 2009:
□
"Throwback sales" are included in the numerator at their full amount, rather than at 50%.
□
Throwback sales are no longer included in the numerator for sales of services or of the use of computer software.
□
Sales of intangibles or the use or licensing of intangibles are no longer sourced according to where the income producing activity occurs. Instead, they are sourced according to the newly created ss.
71.04 (7) (dj)
and
(dk)
and
71.25 (9) (dj)
and
(dk)
, Stats. In general, these statutes source the transaction to where the customer uses the intangible property.
•
Provides rules interpreting ss.
71.04 (7) (dj)
and
(dk)
and
71.25 (9) (dj)
and
(dk)
, Stats. relating to sourcing for intangibles for taxable years beginning on or after January 1, 2009.
•
Clarifies that for purposes of computing throwback sales, nexus for part of a taxable year is recognized as nexus for the entire taxable year.
2.
Amends s.
Tax 2.49
, Apportionment of Apportionable Income of Interstate Financial Institutions, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Amends the definition of "financial institution" to include credit card banks and investment subsidiaries of banks.
•
Provides that s.
Tax 2.49 (4) (zs)
does not apply to taxable years beginning on or after January 1, 2009. This means that for taxable years beginning on or after January 1, 2009, throwback sales are not included in the numerator except for sales of tangible personal property.
3.
Amends s.
Tax 2.495
, Apportionment of Apportionable Income of Interstate Brokers-Dealers, Investment Advisers, Investment Companies, and Underwriters, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Provides that s.
Tax 2.495 (4) (g)
does not apply to taxable years beginning on or after January 1, 2009. This means that for taxable years beginning on or after January 1, 2009, throwback sales are not included in the numerator except for sales of tangible personal property.
4.
Amends s.
Tax 2.502
, Apportionment of Apportionable Income of Interstate Telecommunications Companies, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Provides that for taxable years beginning on or after January 1, 2009, the sales factor means the sales factor under s.
71.25(9)
, Stats., as in effect for the current taxable year. This statute sources sales based on where the benefit of the service is received.
•
Specifies how various types of telecommunications services would be sourced under s.
71.25(9)
, Stats.. Under the rule, the location where the benefit of the service is received is determined using principles consistent with the Streamlined Sales and Use Tax Agreement.
5.
Amends s.
Tax 2.82
, Nexus, as follows:
•
Explains how the rule applies to corporations that are required to use combined reporting, including applicable cross-references.
•
Defines "loans" for purposes of applying s.
71.22(1r)
, Stats.
•
Clarifies that nexus for part of a taxable year is recognized as nexus for the entire taxable year.
•
Provides that the same nexus standards apply to the recycling surcharge as apply to the corporation franchise or income tax.
6.
Amends the following rules to explain how they apply to corporations that are required to use combined reporting, including applicable cross-references:
•
Tax 2.46 — Apportionment of
business income of interstate air carriers
•
Tax 2.47 — Apportionment of business income of interstate motor carriers
•
Tax 2.475 — Apportionment of net business income of interstate railroads, sleeping car
companies, and car line companies
•
Tax 2.48 — Apportionment of net business incomes of interstate pipeline companies
•
Tax 2.50 — Apportionment of apportionable income of interstate public utilities
Comparison with federal regulation
s
There are no existing or proposed federal regulations that relate to apportionment of income among states.
Comparison with rules in adjacent states
Minnesota, Michigan, Illinois, and Iowa each have their own unique rules and relating to apportionment and nexus. Following is a summary of how the rules and regulations of these other states have provisions similar to the substantive provisions in this rule order:
Minnesota:
•
Services are sourced to where the benefit of the service is received.
•
Holding loans secured by real or tangible personal property in the state creates nexus.
•
Loan-backed securities are generally not "loans" that would create nexus.
•
Nexus for part of the taxable year is nexus for the entire taxable year.
Michigan:
•
Services are sourced to where the benefit of the service is received.
•
For telecommunications services, the location where the benefit of the service is received is determined using principles consistent with the Streamlined Sales and Use Tax Agreement.
•
Loan-backed securities are generally not "loans" that would create nexus.
•
Nexus for part of the taxable year is nexus for the entire taxable year.
Illinois:
•
Loan-backed securities are generally not "loans" that would create nexus.
•
Nexus for part of the taxable year is nexus for the entire taxable year.
•
For telecommunications services, the location where the benefit of the service is received is determined using principles consistent with the Streamlined Sales and Use Tax Agreement.
•
Defines "financial organization" to specifically include credit card banks and their subsidiaries.
Iowa:
•
Services, including telecommunications services, are sourced to where the benefit of the service is received.
•
Holding loans secured by real or tangible personal property in the state creates nexus.
•
Loan-backed securities are generally not "loans" that would create nexus.
•
Nexus for part of the taxable year is nexus for the entire taxable year.
Summary of factual data and analytical methodologies
The Department reviewed the statutory provisions enacted by
2009 Acts 2
and
28
and identified existing provisions of chapter Tax 2, Wisconsin Administrative Code, that no longer reflect current law or do not provide useful interpretation of the statutes as amended. The Department studied the laws and regulations of our neighboring states in addition to the model apportionment regulations developed by the Multistate Tax Commission (MTC) to determine how those states have been interpreting statutes that are similar to Wisconsin's. Also, since Michigan and Illinois just updated their apportionment rules for telecommunications companies (in 2008 and 2009, respectively), the Department contacted those states for insight on the industry reaction to those changes.
Analysis and supporting documents used to determine effect on small business
Nexus and apportionment issues apply only to businesses that are engaged in business in more than one state. Thus, this rule does not have a significant effect on small business.
Anticipated costs incurred by private sector
This rule does not result in a significant cost to the private sector.
Small Business Impact
This rule order does not have a significant economic impact on a substantial number of small businesses.
Fiscal Estimate
This rule order makes various changes to Tax 2.39 through Tax 2.82 to:
1)
Update rules for apportionment and nexus to reflect statutory changes in
2009 Act 2
and
2009 Act 28
relating to the implementation of combined reporting for affiliated groups of corporations;
2)
Update rules on the sourcing of sales as well as definitions of certain terms to implement the streamlined sales tax statutory changes contained in
2009 Act 2
; and
3)
Certain other changes to administrative rules under the authority of s.
71.04(8)
and
71.25(10)
, Stats, related to railroads, financial organizations and public utilities.
The fiscal effects of the rule changes for items 1 and 2 above were included in the fiscal effects for
2009 Act 2
and
2009 Act 28
. As such, these rule changes have no fiscal effect.
The fiscal effect of the rule changes promulgated under authority of s.
71.04 (8)
and
71.25 (10)
, Stats., are expected to be minimal.
Agency Contact Person
Dale Kleven, Dept. of Revenue
Mail Stop 6-40
2135 Rimrock Road, PO Box 8933
Madison WI 53708-8933
Telephone: (608) 266-8253
Notice of Hearing
Revenue
NOTICE IS HEREBY GIVEN That pursuant to ss.
71.255 (6) (b) 2.
and
(c) 2.
,
(7) (a)
, and
(11)
and
227.24
, Stats., the Department of Revenue will hold a public hearing to consider emergency rules to create sections
Tax 2.60
through
2.67
, relating to combined reporting for corporation franchise and income tax purposes.
The emergency rule order:
•
reflects the changes in Wisconsin's franchise and income tax laws affected by
2009 Act 2
, and
•
provides guidance to taxpayers and Department employees so they can properly apply the Wisconsin franchise and income tax laws.
Hearing Information
The hearing will be held:
Date and Time
Location
February 25, 2010
Events Room
at 1:00 p.m.
State Revenue Building
2135 Rimrock Road
Madison, Wisconsin
Handicap access is available at the hearing location.
Copies of Emergency Rule
A copy of the full text of the emergency rule order and the full fiscal estimate may be obtained at no cost by contacting the department. See
Agency Contact Person
listed below.
Submission of Written Comments
Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person shown under
Agency Contact Person
listed below no later than March 4, 2010, and will be given the same consideration as testimony presented at the hearings.
Analysis Prepared by the Department of Revenue:
Statute interpreted
Statutory authority
General rulemaking authority in s.
227.24
, Stats.; specific rulemaking authority granted in s.
71.255
, Stats., as follows:
•
Section
71.255(6)(b)2.
and
(c)2.
, Stats., relating to net business loss carryforwards, credits, and credit carryforwards.
•
Section
71.255(7)(a)
, Stats., relating to identifying the designated agent.
•
Section
71.255(11)
, relating to the adoption of federal treasury regulations so that transactions among combined group members are treated consistently with transactions among federal consolidated group members.
Explanation of agency authority
An agency may promulgate a rule as an emergency rule without complying with the notice, hearing, and publication requirements of the statutes if preservation of the public peace, health, safety, or welfare necessitates putting the rule into effect prior to the time it would take effect if the agency complied with the procedures.
Related statute or rule
Sections
71.24 (1)
,
(1m)
, and
(7)
,
71.29
,
71.44 (1)
,
(1m)
, and
(3)
,
71.77
,
71.82
,
71.83
, and
71.84
, Stats.
Plain language analysis
This rule creates eight new rule sections. The purpose of each rule section is provided below:
Section
Tax 2.60
Definitions Relating to Combined Reporting.
Provides
definitions relating to the other rule sections created by this rule order. Those other sections are ss.
Tax 2.61
,
2.62
,
2.63
,
2.64
,
2.65
,
2.66
, and
2.67
.
•
Explains who must use combined reporting.
•
Provides rules for determining whether a corporation is a member of a "commonly controlled group."
•
Explains when a corporation's income is not subject to combination because of the degree of the corporation's activity outside the U.S. ("water's edge" rules).
•
Explains how to compute the combined group's combined unitary income, including the applicability of federal regulations that relate to consolidated groups. The following components of the computation are covered:
□
Intercompany transactions
□
Capital gains and losses
□
Charitable contributions
□
Dividends
□
Stock basis adjustments
□
Earnings and profits
□
Allocation of expenses and deductions
•
Explains how to apportion the combined unitary income and rules that apply to various aspects of the apportionment computation.
•
Provides rules for determining the taxable income of combined groups that are not subject to apportionment.
•
Describes how to apply net business loss carryforwards, including rules relating to the sharing of net business losses.
•
Describes how to apply credits, including rules relating to the sharing of research credits.
•
Explains the concept of a "unitary business" and its relationship to the concept of a "combined group."
•
Enumerates several characteristics that are indicators of a "unitary business."
•
Lists some key U.S. Supreme Court cases which provide further guidance on the extent to which a business enterprise is considered a "unitary business" under the U.S. Constitution. This is significant because the statute provides that "unitary business" shall be construed to the broadest extent permitted by the U.S. Constitution.
•
Provides several presumptions to aid taxpayers in determining whether a unitary business exists.
•
Provides specific rules relating to the inclusion of passive holding companies and pass-through entities in the unitary business.
Section
Tax 2.63
Controlled Group Election.
•
Explains how to make the election and how to renew it after its 10-year duration.
•
Provides rules relating to the department's authority to disregard the election in cases where it has the primary effect of tax avoidance rather than its intended purpose of simplifying the determination of who must be included in the combined report.
Section
Tax 2.64
Alternative Apportionment for Combined Groups Including Specialized Industries.
•
Specifies how and when a qualifying group may file a petition for alternative apportionment and what information must be submitted to the department.
•
Provides that once the department approves the alternative method, that same method must be used for a 7-year period, subject to a limitation that the tax computation under the alternative method cannot be lower than what it would have been if each corporation apportioned its income separately.
Section
Tax 2.65
Designated Agent of Combined Group.
•
Explains how to identify which corporation is responsible to act on behalf of the combined group for matters relating to the combined return.
•
Defines the scope and limitations of the agency relationship.
Section
Tax 2.66
Combined Estimated Tax Payments.
•
Explains when a combined group member may make its own estimated payments, rather than having the designated agent make the payments on its behalf.
•
Provides rules for determining the combined group's required estimated tax payments.
•
Provides rules for applying estimated payments and overpayments of prior year estimated payments.
•
Enumerates the required components of a combined return and explains how to report separate entity items.
•
Explains how to determine the taxable year of a combined return.
•
Provides rules relating to interest, penalties, and statutes of limitations as they relate to combined returns.
Comparison with federal regulations
The rules are very similar to the federal regulations relating to consolidated groups. The federal regulations listed below are specifically referenced or adopted in this rule order, but modified to apply to combined groups instead of federal consolidated groups.
•
Treas. Reg. §
1.1502
-13, relating to intercompany transactions. This federal regulation was actually adopted by statute (s.
71.255(4)(g)
, Stats.), but is interpreted in this rule order (s.
Tax 2.61(6)(b)
).
•
Treas. Regs. §
1.1502
-22 and
1.1502
-23, relating to capital gains and losses and section 1231 gains and losses (s.
Tax 2.61(6)(c)
).
The general purpose of the above federal regulations is to treat the members of a federal consolidated group as if they were divisions of a single corporation. Likewise, the purpose of adopting these rules for Wisconsin purposes is to treat the members of a combined group as if they were divisions of a single corporation.
Comparison with rules in adjacent states
Illinois:
Illinois has comprehensive regulations relating to its combined reporting statute. (including IL Regs. 100.2340, 100.2570, 100.5200, 100.5201, 100.5210, 100.5220, 100.5230, 100.5240, 100.5250, 100.5260, 100.5265, 100.5280, and 100.9700). The following aspects of the rules in this rule order were modeled after the Illinois regulations, with some modifications:
•
Adoption of federal consolidated return regulations
•
Combined estimated tax payments
•
Rules relating to the duties of the designated agent
Iowa:
Iowa does not have a statute which permits or allows combined reporting. Thus, it has no rules or regulations relating to combined reporting.
Michigan:
Michigan adopted combined reporting in 2008, when it enacted its Michigan Business Tax. At the time this rule order was authored, Michigan has not yet promulgated rules or regulations relating to its combined reporting statute. However, Michigan has published an extensive amount of guidance in the form of Frequently Asked Questions.
Minnesota:
Like Illinois, Minnesota has rules relating to its combined reporting statute (including Rules 8019.0100, 8019.0300, 8019.0405, and 8019.0500, Minn. Rules). The section of this rule order that provides guidance in determining a "unitary business" (s.
Tax 2.62
) is modeled after Minnesota's rule 8019.0100, with some modifications.
Summary of factual data and analytical methodologies
The department developed these rules based upon research of the combined reporting laws, rules, regulations, published guidance, and tax form instructions of other states. The Illinois and Minnesota regulations referenced above were frequently used as a resource, in addition to various law journal articles and tax publications.
The combined reporting regulations recently promulgated by Massachusetts (830 CMR 63.32B.2) were heavily relied upon. The Massachusetts combined reporting law (M.G.L. c. 63 §32B), like Wisconsin's, is first effective for taxable years beginning on or after January 1, 2009, and Wisconsin's law has many similarities with the Massachusetts law.
The department also studied the regulations under section
1502
of the Internal Revenue Code, relating to consolidated returns.
Analysis and supporting documents used to determine effect on small business
Combined reporting primarily affects larger corporations, rather than small businesses. Combined reporting is required for regular "C" corporations, but is not required for the types of entities that are more characteristic of small businesses, such as:
•
Sole proprietorships,
•
Partnerships,
•
Limited liability companies taxed as partnerships, and
•
S corporations
Anticipated costs incurred by private sector
This emergency rule does not have a significant fiscal effect on the private sector independently from the statute it interprets.
Small Business Impact
This emergency rule does not have a significant effect on small business.
Fiscal Estimate
The proposed rules create Tax 2.60 through 2.67 to incorporate tax law changes included in
2009 Act 2
and
2009 Act 28
related to combined reporting for commonly controlled groups of corporations.
The fiscal effect from implementation of combined reporting was included in the fiscal effect for Act 2, and the fiscal effect of certain changes to combined reporting that were a part of Act 28 were included in the fiscal effect for the Act. The administrative rules for these provisions have no fiscal effect independent of Acts 2 and 28.
In addition to the rule changes made necessary by the statutory changes under Acts 2 and 28, the rule also specifies that basis for depreciable assets for corporations that are subject to tax for the first time shall be the federal basis of the assets, except that the basis shall be computed without regard to any bonus depreciation claimed for federal purposes as required by statute. The fiscal effect of this provision is unknown.
Agency Contact Person
Dale Kleven, Dept. of Revenue
Mail Stop 6-40
2135 Rimrock Road, PO Box 8933
Madison WI 53708-8933
Telephone: (608) 266-8253
Notice of Hearing
Revenue
NOTICE IS HEREBY GIVEN That pursuant to ss.
146.98 (3)
,
(4)
, and
(5)
and
227.24
Stats., the Department of Revenue will hold a public hearing to consider emergency rules and the creation of permanent rules revising Chapter
Tax 1
, relating to the ambulatory surgical center assessment.
Hearing Information
The hearing will be held:
Date and Time
Location
February 11, 2010
Events Room
at 1:00 p.m.
State Revenue Building
2135 Rimrock Road
Madison, Wisconsin
Handicap access is available at the hearing location.
Submission of Written Comments
Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person shown under
Agency Contact Person
listed below no later than February 18, 2010, and will be given the same consideration as testimony presented at the hearing.
Analysis Prepared by the Department of Revenue
Statutes interpreted
Statutory authority
Related statute or rule
Section
50.38
, Stats., imposes a hospital assessment, and s.
50.14
, Stats., imposes an assessment on licensed nursing home beds and intermediate care facilities for the mentally retarded (ICF-MR).
Plain language analysis
This proposed rule does the following:
•
Establishes the requirements for administration of the ambulatory surgical center assessment.
•
Describes how the amount of the assessment for each ambulatory surgical center is determined.
•
Details how the department will collect assessments.
•
Provides guidance regarding data required to be submitted to the department to determine assessment amounts.
•
Specifies the filing, reporting, and payment deadlines for the assessment, and penalties imposed for failure to meet the requirements.
Comparison with federal regulations
Federal law
42 CFR §433.68
describes permissible health care-related taxes that states may impose without a reduction in Medicaid Federal Financial Participation (FFP) in the medical assistance program jointly funded by the federal government and the state. The taxes must be broad based, uniformly imposed throughout a jurisdiction, and cannot exceed 5.5% of revenues. Ambulatory surgical center or ASC is defined in
42 CFR §416.2
as "any distinct entity that operates for the purposes of providing surgical services to patients not requiring hospitalization, has an agreement with the Center for Medicare and Medicaid Services (CMS) to participate in Medicare as an ASC, and meets the conditions set forth in subparts B and C of this part."
Comparison with rules in adjacent states
Illinois
imposes health care provider taxes on hospitals, intermediate care facilities for the mentally retarded or developmentally disabled, and nursing homes. There is no assessment of ambulatory surgical centers.
Iowa
imposes a health care provider tax on intermediate care facilities for the mentally retarded or developmentally disabled. There is no assessment on ambulatory surgical centers.
Michigan
imposes a health care provider tax on hospitals, managed care organizations, nursing homes and community mental health programs. There is no assessment on ambulatory surgical centers.
Minnesota
imposes a health care provider tax on hospitals, intermediate care facilities for the mentally retarded or developmentally disabled, managed care organizations, and nursing homes. In addition, a tax of 2% of total gross receipts is imposed on surgical centers.
Summary of factual data and analytical methodologies
2009 Wisconsin Act 28
created s.
146.98
Stats., imposing an assessment on Medicare-certified ambulatory surgical centers in Wisconsin. The statute directs the department of revenue to allocate any assessment imposed among ambulatory surgical centers in proportion to their gross patient revenue. The department may determine the amount of the assessment, collect the assessment, require ambulatory surgical centers to provide any data that is required to determine assessment amounts, establish deadlines by which assessments shall be paid, and impose penalties for failure to comply with the requirements of the statute or any rules promulgated. The department is directed to transfer 99.5 percent of the assessments collected to the medical assistance trust fund and retain 0.5% of the assessment revenues collected to support the administrative costs related to the assessment.
Within the provisions of s.
146.98 (5)
, Stats., is a requirement that the department promulgate rules for the administration of the assessment.
In consultation with ambulatory surgical centers, the departments of administration and health services, the department has created this proposed rule order to satisfy the above requirements.
Analysis and supporting documents used to determine effect on small business
This proposed rule is created in accordance with
2009 Wisconsin Act 28
to administer and enforce statutory requirements relating to the assessment of ambulatory surgical centers. As the rule does not impose any significant financial or other compliance burden, the department has determined that it does not have a significant effect on small business.
Anticipated costs incurred by private sector
This proposed rule does not have a significant fiscal effect on the private sector.
Small Business Impact
This proposed rule does not have a significant effect on small business.
Fiscal Estimate
The fiscal effect of the assessment under s.
146.98
, Stats., was included in the fiscal effect of
2009 Wis. Act 28
. Therefore, this rule has no fiscal effect.
State fiscal effect
None.
Local government fiscal effect
None.
Text of Emergency and Proposed Permanent Rule
SECTION 1. Tax 1.17 is created to read:
Tax 1.17 Ambulatory surgical center assessment.
(1) PURPOSE. The purpose of this section is to establish procedures and other requirements necessary for levying and collecting the ambulatory surgical center assessment imposed under s.
146.98
, Stats.
(2) DEFINITIONS. In this section:
(a) "Ambulatory surgical center" or "ASC" has the meaning given in s.
146.98 (1)
, Stats.
(b) "Cash basis" is the method of accounting where income is reported in the year that it is actually or constructively received in the form of cash or its equivalent or other property.
(c) "Department" means the department of revenue.
(d) "Gross patient revenue" means the gross amount received on a cash basis by the ambulatory surgical center from all patient services.
(e) "Patient services" include any of the following goods and services provided to a patient or consumer:
1. Bed and board.
2. Nursing services and other related services.
3. Use of the ambulatory surgical center.
4. Medical social services.
5. Drugs, biologicals, supplies, appliances and equipment.
6. Other diagnostic or therapeutic items or services.
7. Medical or surgical services.
8. Laboratory services.
9. Items and services furnished to ambulatory patients not requiring emergency care.
10. Emergency services including ambulance services.
(3) REGISTRATION. (a) Ambulatory surgical centers in this state are required to be registered with the department, in the manner prescribed by the department.
(b) On or before January 1, ambulatory surgical centers in this state shall notify the department of a change in ownership, address change, and any other information pertinent to the ambulatory surgical center's assessment under s.
146.98
, Stats., occurring in the previous calendar year.
(c) The department shall update ambulatory surgical center registration using information provided by the department of health services, division of quality assurance.
(4) ANNUAL GROSS PATIENT REVENUE SURVEY. (a) The department shall annually survey ambulatory surgical centers required to be registered under sub. (3) (a) to obtain any data required by the department needed to determine the amount of the assessment imposed in s.
146.98
, Stats. Survey data filed shall be subject to the confidentiality provisions under s.
71.78
, Stats.
(b) Ambulatory surgical centers required to be registered shall electronically file the survey annually on or before March 15.
(c) Ambulatory surgical centers may apply for a 5 day extension of the survey due date. An extension will be granted for good cause only. The application for an extension shall be filed electronically with the department on or before March 15 at
https://tap.revenue.wi.gov
.
(d) Failure to electronically file the survey with the department by the due date, including any extension, shall result in a late filing penalty of $500 per day calculated from the day after the unextended due date up to the date the completed survey is received by the department, or April 1, whichever is earlier. Failure to file the survey during the period for the extension shall make the extension null and void.
Examples: 1) An ambulatory surgical center does not request an extension to file the annual survey and fails to file the survey by April 1, 2010. A daily $500 late filing penalty is assessed for the period of March 16, 2010 through April 1, 2010, for a total late filing penalty of $8,500.
2) An ambulatory surgical center is granted an extension, and files the annual survey on March 19, 2010. No late filing penalty is assessed.
3) An ambulatory surgical center is granted an extension to file the annual survey, but files the survey on March 24, 2010, after the expiration of the 5 day extension. A $4,000 late filing penalty is assessed for the period of March 16, 2010 through March 23, 2010.
(e) The deadline for filing an amended survey is April 1. Information received after April 1 shall not be considered in the determination of the assessment. If any ambulatory surgical center fails, within the time required by this chapter, to file the survey, or files an incomplete or incorrect survey, the department shall make an assessment based upon any other information in the department's possession and according to its best judgment.
(f) The department may impose a penalty of 25% of the amount of the assessment if the ambulatory surgical center fails to file the survey by April 1, pursuant to s.
146.98 (3) (e)
, Stats.
(5) ASSESSMENT. (a) The assessment shall be calculated using a uniform percentage that satisfies the requirements under
42 CFR 433.68
for collecting an assessment without incurring a reduction in federal financial participation under the federal Medicaid program.
(b) The department shall electronically notify an ambulatory surgical center of the amount of the assessment on April 15.
(c) The assessment shall be paid electronically on or before June 1 in a manner prescribed by the department. Failure to pay the assessment by June 1 shall result in a penalty of $500 per day calculated from the day after the due date up to the date the assessment is received by the department, subject to a maximum penalty equal to the amount of the assessment. Payment of the penalty under this subdivision does not relieve the ambulatory surgical center from the responsibility of paying the assessment.
(d) The department may require estimated pre-payment of the assessment, in a manner prescribed by the department. The department shall notify ambulatory surgical centers at least 90 days before the first estimated payment is due.
(6) AUDIT. (a) The department may conduct an office or field audit to determine the assessment under s.
146.98
, Stats., or to ascertain the correctness of the information reported on the annual survey required to be filed under sub. (4) (b).
(b) Ambulatory surgical centers shall retain financial books and records that support the information reported on the annual survey, and provide it to the department pursuant to s.
146.98 (3)
( c), Stats.
(c) The department may impose a penalty equal to the amount of any unreported gross patient revenue multiplied by the percentage established for that period in sub. (5) (a).
(7) APPEALS. Ambulatory surgical centers claiming to be adversely affected by the department's action or inaction, other than a rulemaking action or proposal for legislation, may petition the department for a contested case hearing under s.
227.42
, Stats. The request for hearing shall be in writing and served upon the Secretary of Revenue within 30 days after the department's action or inaction complained of.
Note: Written requests for hearing should be addressed to: Wisconsin Department of Revenue, Office of the Secretary, P.O. Box 8933, Madison, WI 53708.
(8) COLLECTIONS. (a) Assessments under sub. (5) (c) shall become delinquent if not paid when due, unless the department receives a request for hearing under sub. (7).
(b) The department may immediately proceed to collect delinquent assessments, including any penalties, in a manner comparable to that described in s.
77.62
, Stats.
(c) Assessments unpaid for more than 90 days after appeal rights have expired shall be posted on the list on the Internet site maintained by the department under s.
73.03 (62)
, Stats.
Agency Contact Person
Dale Kleven, Dept. of Revenue
Mail Stop 6-40
2135 Rimrock Road, PO Box 8933
Madison WI 53708-8933
Telephone: (608) 266-8253
