(1) SCOPE. This section provides rules
relating to the filing of combined returns by corporations required to use
combined reporting under s.
71.255, Stats. This section
explains the filing requirements for combined returns, provides rules relating
to defining the taxable year included in a combined return, and describes how
interest, penalties, and statutes of limitations apply to combined
returns.
(2) FILING REQUIREMENTS
FOR COMBINED RETURNS.
(a)
General. The designated agent of a combined group shall file a
combined return on behalf of the group. For each combined group member included
in the combined return, the combined return satisfies the member's requirement
for filing returns under ss.
71.24(1) or
(1m) or
71.44(1) or
(1m), Stats., as applicable. The combined
return shall be filed by the date provided in ss.
71.24(1), (1m), and
(7) or
71.44(1), (1m), and
(3), Stats., as applicable.
(b)
Electronic filing. All
combined returns shall be filed electronically. The secretary of revenue may
waive the requirement to file a combined return electronically when the
secretary determines that the requirement causes an undue hardship, if the
person requests the waiver in writing and clearly indicates why the requirement
causes an undue hardship. In determining whether the electronic filing
requirement causes an undue hardship, the secretary of revenue may consider the
following factors:
1. Unusual circumstances
that may prevent the person from filing electronically.
Example: The person does not have access to a
computer that is connected to the Internet.
2. Any other factor that the secretary
determines is pertinent.
Note: Written requests should be e-mailed to
DORWaiverRequest@wisconsin.gov, faxed to (608) 267-1030, or addressed to
Mandate Waiver Request, Wisconsin Department of Revenue, Mail Stop 5-77, P.O.
Box 8949, Madison, WI 53708-8949.
Note: Forms not filed electronically may be
delivered in person to the Department of Revenue at 2135 Rimrock Road, Madison,
Wisconsin or mailed to the address specified on the form or in the
instructions.
(c)
Components of combined return. A combined return shall include
the following items, and shall be considered incomplete if any of these items
are excluded:
1. One Wisconsin Form 6, Income
or Franchise Tax Return, for the combined group as a whole.
4. If the combined group is using
apportionment, one of the following forms, per member as applicable:
a. Schedule A-01, Wisconsin Single Sales
Factor Apportionment Data for Nonspecialized Industries.
b. Schedule A-02, Wisconsin Apportionment
Percentage for Interstate Financial Institutions.
c. Schedule A-03, Wisconsin Apportionment
Percentage for Interstate Motor Carriers.
d. Schedule A-04, Wisconsin Apportionment
Percentage for Interstate Telecommunications Companies.
e. Schedule A-05, Wisconsin Premium Factor
for Insurance Companies.
f.
Schedule A-06, Wisconsin Receipts Factor for Interstate Brokers-Dealers,
Investment Advisors, Investment Companies, and Underwriters.
g. Schedule A-07, Wisconsin Apportionment
Percentage for Interstate Air Carriers.
h. Schedule A-08, Wisconsin Apportionment
Percentage for Broadcasters.
i.
Schedule A-09, Wisconsin Apportionment Percentage for Interstate
Railroads.
j. Schedule A-10,
Wisconsin Apportionment Percentage for Interstate Pipeline Companies.
k. Schedule A-11, Wisconsin Apportionment
Percentage for Interstate Air Freight Forwarders Affiliated with a Direct Air
Carrier.
5. Any other
required supporting forms and schedules listed in s. Tax 2.03, as applicable.
Unless stated otherwise in the instructions, supporting forms and schedules
shall be prepared separately for each combined group member.
6. A copy of the complete federal return for
each combined group member, including all supporting schedules and any amended
returns, for the member's taxable year included in the combined return. For
combined group members that also file in a federal consolidated return, any of
the following alternatives shall be considered to satisfy this requirement:
a. A copy of the federal consolidated return,
including all supporting forms, schedules, and statements for each corporation
included in the consolidated return, as submitted to the internal revenue
service.
b. Pro forma federal
returns prepared separately for each combined group member, including all
supporting forms and schedules prepared separately for each combined group
member.
c. A spreadsheet showing
the line-by-line computation of taxable income of each combined group member
included in the federal consolidated return, including consolidating
adjustments, plus the supporting forms, schedules, and statements filed with
the internal revenue service pertaining to each member. The supporting
statements shall include balance sheets as of the beginning and end of the tax
year, a reconciliation of income per books with income per return, and a
reconciliation of retained earnings, to the extent the member was required to
submit these items to the internal revenue service.
7. For combined groups that also file in a
federal consolidated return, a copy of federal Form 851, Affiliations
Schedule.
(d)
Separate entity items.
1.
Subject to the provisions of s. Tax 2.65 (3) (b), if any combined group member
has separate entity items, the designated agent shall include those separate
entity items in the combined return. If a corporation that would otherwise be a
combined group member has no items that are subject to combination under the
water's edge rules of s. Tax 2.61 (4), the designated agent may include that
corporation's separate entity items in the combined return, in which case the
combined return shall include the items specified in sub. (2) (c) 5. and 6. and
subd. 3. for that corporation as if it is a combined group member.
Alternatively, the corporation may file a separate Wisconsin return to report
those items.
2. The joint and
several liability provisions of s. Tax 2.65 (3) (f) do not apply to any tax,
interest, or penalty attributable to separate entity items. Although the
department may send correspondence, notices, refunds, assessments, or other
documents relating to any combined group member's separate entity items to the
designated agent, and the designated agent may choose to pay any tax, interest,
or penalty on behalf of a combined group member, the tax, interest, or penalty
attributable to separate entity items is ultimately the responsibility of the
combined group member or members to which the separate entity items are
attributable.
3. The separate
entity net income or loss and apportionment factors included in the combined
return shall be reported on Wisconsin Form N, Nonapportionable and Separately
Apportioned Income. The designated agent shall complete and submit Form N with
the combined return for each applicable corporation and carry forward the total
Form N amounts to the appropriate line on Form 6. For purposes of the
requirement of s. 71.255(2) (d),
Stats., separate entity items reported on Form N shall be considered filed on a
separate return. However, for purposes of determining a combined group member's
net income, tax, interest, underpayment interest, economic development
surcharge, and the statute of limitations, the separate entity amounts shall be
added to its amounts, if any, computed in the unitary combination.
4. If a corporation is a member of more than
one combined group at the same time, the corporation shall include its separate
entity items, if any, in the combined return of only one
group.
(e)
Amended returns. If a corporation erroneously fails to join in
the filing of a combined return, the designated agent shall file an amended
combined return adding the corporation and, if a separate return was filed by
the corporation, the corporation shall file an amended separate return showing
no net income, overpayment, or underpayment, and stating that the corporation
has joined in the filing of a combined return and identifying the designated
agent of the combined group in which the corporation has been
included.
(3) TAXABLE
YEAR OF COMBINED RETURN. The taxable year included in a combined return is the
combined group's taxable year as determined in s.
71.255(8),
Stats. For purposes of determining the taxable year and the items includable in
the combined group's taxable year, the following rules apply:
(a)
Combined group's taxable
year. If two or more members of the combined group file in a federal
consolidated return, the combined group's taxable year is the taxable year of
that federal consolidated return. If no federal consolidated return applies or
there is more than one federal consolidated return, the combined group's
taxable year is the taxable year of the designated agent. In any case, s. Tax
2.65 (2) (a) requires that the designated agent's taxable year shall be the
same as the combined group's taxable year.
(b)
Methods for members with
differing taxable years. If the taxable year of a combined group
member differs from the taxable year of the combined group, the designated
agent shall include that member's net income or loss and apportionment factors
in the combined return by using one of the following methods:
1. Preparing a separate income statement from
the member's books and records for the months included in the combined group's
taxable year and using that income statement to determine the amounts
includable in the combined return.
2. Using the net income or loss for the
member's taxable year that ends during the combined group's taxable year to
determine the amounts includable in the combined return.
(c)
Election of method. If
the designated agent converts a combined group member's taxable year to the
combined group's taxable year as described in par. (b) 1. or 2., it shall use
the same method for each combined group member subject to the election. Once
the designated agent files the first combined return including a member whose
taxable year is properly converted, the designated agent may not file an
amended return to change the election, except that if the original return was
not filed under extension, the designated agent may file an amended return to
change the election on or before the end of the automatic seven-month extension
period provided in ss.
71.24(7) or
71.44(3),
Stats., as applicable. The designated agent shall use the same method in each
subsequent taxable year unless it obtains written approval from the department
to use the other method.
Note: Send written requests for approval to change
the election to: Audit Bureau, Wisconsin Department of Revenue, P.O. Box 8906,
Madison, WI 53708-8906.
(d)
Part-year members. If, during a combined group's taxable year,
a corporation ceases to be a member of the combined group or a new corporation
becomes a member, the designated agent shall include that corporation's items
attributable to the portion of the taxable year that the corporation was a
member in the combined return covering the combined group's entire taxable
year. For the portion of the taxable year when the corporation was not a member
of the combined group, the corporation shall file a separate return or file in
the combined return of another combined group, as
applicable.
(4) INTEREST,
PENALTIES, AND STATUTES OF LIMITATIONS.
(a)
Interest. For purposes of computing interest on late payments
by or on behalf of combined group members, the following rules apply:
1. Interest shall be assessed to the
designated agent of a combined group based upon the combined tax liability or
deficiency shown on the combined return for the combined group's taxable year.
However, the joint and several liability provisions of s. Tax 2.65 (3) (f) do
not apply to any interest attributable to separate entity items. If a notice of
an interest amount due is attributable to separate entity items of a combined
group member other than the designated agent, the designated agent may pay the
amount due or may submit a written request to the department to reissue the
notice or a portion of the amount assessed to the combined group member
responsible for the separate entity items. The designated agent shall submit
the written request on or before the due date shown on the notice.
Note: Send written requests to reissue notices
relating to separate entity items to: Wisconsin Department of Revenue, Mail
Stop 5-257, P.O. Box 8906, Madison, WI 53708-8906.
2. An extension filed by the designated agent
shall be considered an extension filed by all members of the combined group.
However, the extension filed by the designated agent does not apply to
affiliated corporations that are not combined group members, even if those
corporations will be included in the combined return under the provisions of
par. (d) 2.
3. Interest due to
underpayment of estimated taxes shall be computed based on the estimated tax
requirements and other provisions described in s. Tax 2.66.
4. If a corporation erroneously fails to join
in the filing of the combined return, all payments, credits, and other amounts
collected from the corporation which are properly attributable to the combined
group's taxable year and attributable to a period of time that the corporation
was a member of the combined group shall be treated as having been paid by the
combined group.
(b)
Late filing fees. If a combined group fails to timely file a
combined return and the late filing fee under s.
71.83(3),
Stats., applies, the amount of the late filing fee shall be the amount provided
in s. 71.83(3),
Stats., regardless of the number of combined group members.
(c)
Failure to file. For
purposes of the penalty provided in s.
71.83(1) (a) 1,
Stats., the following rules apply:
1. A
corporation which erroneously fails to join in the filing of a combined return,
but which timely files a separate Wisconsin return or joins in the timely
filing of a combined return for another combined group, may not be subject to a
penalty for failure to file. In determining whether the return is timely filed,
the taxable year of the erroneously filed return shall be used, rather than the
taxable year of the combined group with which the corporation should have
filed.
2. A corporation which
erroneously fails to join in the filing of a combined return and which fails,
without reasonable cause, to timely file a separate Wisconsin return or join in
the timely filing of a combined return for another combined group, shall be
subject to the penalty computed based on its share of tax required to be
reported on the combined return for its proper combined group, including its
tax attributable to separate entity items. Except as provided in sub. (2) (d)
2., the members of the combined group shall be jointly and severally liable for
the penalty because under s.
71.255(1) (n),
Stats., joint and several liability may apply to penalties and it is the duty
of the designated agent to include the corporation in the combined return. The
department may send a notice of assessment of the penalty to the designated
agent instead of the corporation which was erroneously omitted from the
combined return.
(d)
Statutes of limitations.
1.
The designated agent's filing of a combined return shall be considered to be a
return filed by each combined group member whose items are included in the
combined unitary income reported on that return.
2. If a combined return includes separate
entity items of a corporation that would otherwise be a combined group member
but for the water's edge rules of s. Tax 2.61 (4), the designated agent's
filing of the combined return shall be considered to be a return filed by that
corporation.
3. For purposes of the
statute of limitations in s.
71.77(7) (a),
Stats., allowing the department to make an assessment within six years after
the filing of a return, the statute of limitations shall be determined for each
combined group member separately based on its total net income reported on its
return, which is its net income or loss from the unitary combination as
included in the combined return, plus its net income or loss from separate
entity items. The six-year statute of limitations applies if a combined group
member's total net income reported on its return is less than 75 percent of the
net income properly assessable and the tax attributable to the additional
income is in excess of $100. The designated agent shall be responsible for any
combined group member's return that is open under the 6-year statute of
limitations, subject to the provisions of s. Tax 2.65 (3) (f), even if the
designated agent's return, as included in the combined return, is not open
under the six-year statute of limitations.
Section Tax 2.67 interprets ss.
71.24(1), (1m), and
(7),
71.255(1) (b), (7) (b), (8), and
(9),
71.44(1), (1m), and
(3),
71.77,
71.82, and
71.83,
Stats.
See s. Tax 2.60 for definitions that relate to this section.
See s. Tax 2.65 for more information on the duties of the designated agent. See
s. Tax 2.66 for more information on combined estimated tax
requirements.