New Wisconsin budget sees changes to personal property taxes, corporate and personal income tax

September 29, 2017|Sarah Evans

The 2017 Wisconsin budget bill includes notable changes to personal property tax provisions and personal income and corporation franchise and income taxes, including the repeal of alternative minimum tax.

Property tax highlights

Personal property exemption enacted for machinery, tools and patterns

Effective with property tax assessments starting in January 1, 2018, machinery, tools and patterns not used in manufacturing will be exempt from property tax. As machinery is defined, the exemption does not include buildings.

We have no details or insight at this time other than what is in the 2017 Wisconsin Property Assessment Manual. If nothing else changes for 2018, the following information is from the manual related to machinery, tools and patterns. This category of property includes machinery, tools, patterns, dies, jigs, equipment and implements not otherwise exempt from taxation, including the machinery, tools and implements of:

  • Commercial warehouses (i.e. forklifts)
  • Contractors
  • Heating and air conditioning companies
  • Landscapers
  • Plumbers
  • Repair or fix-it shops
  • Welding shops

Machinery, tools, and patterns would not include personal property classified as furniture, fixtures and office equipment. The following property items are not classified as machinery, tools, and patterns:

  • Architects furniture and drafting materials
  • Beauty salon equipment
  • Bowling alley equipment
  • Dentist chairs and equipment
  • Desks and chairs
  • Doctors’ equipment, including instruments
  • Filing cases
  • Furniture in motels, hotels, and rooming houses; kitchen equipment such as dishes, utensils, etc. for use in hotels and motels; and bedding
  • Laundromat equipment and furniture
  • Office furniture and equipment
  • Opticians’ furniture and equipment
  • Pool or billiard tables
  • Restaurant furniture and equipment such as dishes and silverware
  • Safes
  • Scales
  • Store furniture

More clarification will be shared as additional guidance becomes available.

Corporate, personal income tax changes

  • Alternative minimum tax: The alternative minimum tax (AMT) is repealed, effective for tax years beginning after December 31, 2018.
  • IRC update: References to the Internal Revenue Code (IRC) were updated, including a change to follow federal law such that individuals older than 70 ½ can exclude up to $100,000 from taxable income when money is distributed from an individual retirement account direct to a charitable organization, applicable to tax years beginning after 2017.
  • Net operating losses: When a net operating loss occurs, filers are limited to no more than four years after the unextended due date to retroactively recalculate net operating losses.
  • Research credit: Applicable to tax years beginning after 2017, 10% of the research expense credit can be refunded—a change from its previous nonrefundable status. This appears to be only on new credits claimed rather than on amounts previously claimed in prior periods.
  • Manufacturing and agriculture credit: Beginning with tax years after 2016, the qualified production activities income amount an individual can claim under the manufacturing and agriculture credit is affected by multistate taxation. To the extent you claim a credit for taxes paid to other states, your manufacturing credit will be reduced. There is no guidance on how this will work.
  • Wage statements and information returns: Effective for filings required to be filed after 2017, you must electronically file wage statements or information returns when you meet the new threshold of 10 or more, down from the previous threshold of 50 or more. Beginning with payments made in 2017, certain information returns and nonwage payment reporting must be filed by January 31, instead of the end of February.

Sales and use tax changes

  • Internet access. Effective July 1, 2020, the state sales tax on internet access charges is repealed. (Note: the grandfather clause of the Internet Tax Freedom ACT (ITFA) authorizes certain states, including Wisconsin, to continue to tax internet access through June 30, 2020.)
  • Construction contracts. In 2013, Wisconsin enacted an exemption for taxable products sold in a lump-sum real property construction project. This applied if the selling price of the taxable products was less than 10% of the total contract price. Effective for contracts entered into after December 1, 2017, this exemption is expanded to include all eligible construction contracts. In addition, if the prime contractor qualifies for the exemption, the exemption also applies to all subcontractors. Products sold by a subcontractor to a prime contractor as part of the construction contract are exempt if the total sales price of taxable products is less than 10% of the total contract price. The subcontractor is considered the consumer of these products and must pay the sales or use tax on their purchase.
    • State university and technical college building materials exemption. Effective for contracts entered into after July 1, 2018, contractors may file an exemption for tangible personal property when purchased as part of a contract for real estate construction activities and the property is then transferred to certain entities within the University of Wisconsin and technical college systems.
  • Occasional sales. Beginning January 1, 2018, the occasional sales exemption threshold is increased from $1,000 to $2,000 during a calendar year. This exemption applies to persons not otherwise required to hold a seller’s permit. Examples of temporary events that may fall under this exemption include rummage sale and flea market sales. The exemption is not intended to apply to sellers involved in the “business” of selling taxable products.
  • Local room tax. Municipalities are now authorized to impose the local room tax on lodging marketplaces, such as vacation rental websites, and owners of short-term rentals, which are defined as residential dwellings rented for a fee for fewer than 29 consecutive days. Lodging marketplaces must register with the Department of Revenue and then follow the applicable tax collection provisions related to short-term rentals and municipal room taxes. In addition, the lodging marketplace must notify the owner of the rental property that all applicable taxes have been collected and remitted.

For more specific guidance, please contact your Schenck representative or Sarah Evans, State and Local Tax manager, at or 800-236-2246.

Sarah Evans, CPA, has more than 25 years of state and local tax experience. Her experience includes coordination of sales tax audits and reverse audits as well as research, planning and compliance related to sales and use, property, income and franchise taxes.