Section 2.955. Credit for taxes paid to other states.

 

(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.

(2)   Credits allowable.

(a) Except as provided in sub. (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 upon income of the individual, estate or trust taxable by that state.

(b) Except as provided in sub. (3) , an income tax credit may be claimed by a Wisconsin resident shareholder in a tax-option (S) corporation for any net minimum tax, income tax, or franchise tax paid by that shareholder to another state on or measured by income of the tax-option (S) corporation.

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

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

(b) Minimum tax or income tax paid to another state on income considered neither taxable income for Wisconsin tax purposes nor a tax preference item in the computation of the Wisconsin minimum tax.

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

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

(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 or form 1NPR. The credit may not exceed the Wisconsin net tax. To support the credit claimed, the following information shall be attached to form 1 or form 1NPR:

(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.

(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:

1. If a Wisconsin resident shareholder files an individual income tax return with that state, attach a copy of the other state's income tax return to the Wisconsin income tax return.

2. If the corporation files a combined or composite return with that state on behalf of its shareholders who are nonresidents of that state and pays the tax on their proportionate share of the income earned there, attach to 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) .

3. If the corporation files a corporate income or franchise tax return with that state and pays tax on or measured by income earned there that is attributable to its shareholders who are nonresidents of that state, attach to 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) .

(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, attach to 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) .

(d) If the tax-option (S) corporation is not subject to Wisconsin's income or franchise tax, a Wisconsin resident shareholder shall attach to the Wisconsin income tax return a letter provided by the corporation in lieu of Wisconsin schedule 5K-1 as required in pars. (b) 2. and 3. and (c) . The letter shall include a schedule showing the shareholder's proportionate share of the items of income taxable by that state, the adjusted gross income, and the net tax paid.

(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.

Cr. Register, December, 1978, No. 276 , eff. 1-1-79; am. (4) (b), Register, January, 1981, No. 301 , eff. 2-1-81; r. (2) (a) and (b), (3) (b), am. (2) (c), (3) (d) and (4), renum. (3) (c) to be (3) (b), r. and recr. (5), Register, September, 1983, No. 333 , eff. 10-1-83; am. (1), (2), (3) (a) and (b), (4) (intro.), renum. (3) (cv) to be (3) (d), cr. (2) (b), (3) (c), (4) (c) and (d), r. and recr. (4) (a) and (b), Register, June, 1990, No. 414 , eff. 7-1-90; am. (3) (intro.), (a), (4) (b) 2., 3., (c) and (d), Register, April, 1993, No. 448 , eff. 5-1-93.

Note

Refer to s. Tax 2.02 for information concerning reciprocity. Microsoft Windows NT 6.1.7601 Service Pack 1 Example: A Wisconsin resident receives income of $4,000 in 1992 from rental property located in Iowa. The person files a 1992 declaration of estimated tax of $200 with Iowa, with $150 of estimated tax payments being made in 1992 and the fourth quarter payment of $50 being made in January 1993. The Iowa income of $4,000 is reported as income on the 1992 Iowa and Wisconsin returns. The 1992 Iowa income tax return shows the following: Microsoft Windows NT 6.1.7601 Service Pack 1   1992 Iowa Return Microsoft Windows NT 6.1.7601 Service Pack 1   Iowa Rental Income   $ 4,000 Microsoft Windows NT 6.1.7601 Service Pack 1   Iowa Net Tax   $ 185 Microsoft Windows NT 6.1.7601 Service Pack 1   Estimated Tax Payments   200 Microsoft Windows NT 6.1.7601 Service Pack 1   Refund   $ 15 Microsoft Windows NT 6.1.7601 Service Pack 1 The taxpayer may claim a credit for net income tax paid to other states of $185 on the 1992 Wisconsin return, even though a part of the tax was paid in 1993. Microsoft Windows NT 6.1.7601 Service Pack 1 Section Tax 2.955 interprets s. 71.07 (7) , Stats. Microsoft Windows NT 6.1.7601 Service Pack 1