Wisconsin Taxation Committee

May 23, 2007 Minutes

Attendees:  Diane Hardt (WDOR), Roger Ervin (WDOR), Rocky Cummings, Ruth Kallio-Mielke, John Mitchell, Brian Kelley, Jon Skavlem, John Austin, Jerry Fine, Pat Pennefeather, Al Young, Greg Butler, Daryl Ohland, Gary Gilbertson, William Mayer, Steve Koritzinsky, James San Fillippo, Brian Ertmer, Barbara DeBaere-Poppy, Joel Lauscher, Richard Scott, Jack De Young, Henry Jasper, Gerri Kroepfl, Thomas Nichols

 

Participated via phone:  Dennis Tomorsky (WICPA), Michael Mayhew

 

The meeting was called to order at 12:06 p.m.

 

Rocky introduced Roger and Diane and thanked Jon Skavlem for arranging for them to attend the meeting.  Roger began by discussing his focus for his new role as Wisconsin Secretary of Revenue:

 

Internal Management – internal controls, projecting 5 years out how to reallocate resources, focusing heavily on audit, and developing market rate salaries for staff.

 

Taxpayer Services – efiling options, developing all forms electronically while leaving room in the market for current software providers, extend VITA cites or processing centers, new WINPASS technology systems has turned out to be a great platform for the WDOR technology, made it easier to migrate sales/use tax compliance to efiling.

 

Tax Policy – no current process to review tax statutes each year, not for reform but for technical amendments.  Discussing options with the Governor’s office, need to update statutes to more clearly reflect the current status of the market (for example, streamline sales tax).  Roger struggles with issues on how to apply Menasha, Newark, and River City holdings.  The courts should interpret statutes not auditors, auditors and taxpayers need clear guidance and bright line tests, enhancing research and policy function to go beyond projections and policy booklet, should be more interactive, user friendly, will focus on improving WDOR website to help businesses understand impact of  rules – simplification, market issues, and revenue.

 

Budget Bill

 

Oil Assessment – proposal requires a 2.5% assessment of gross receipts on oil, three audit positions available to confirm this tax is not passed through to consumers.  WI and PA will break new ground with the implementation of this tax.  Roger is worried about constitutionality of the prevention of pass thru, maybe personal to the Governor so not likely to be dropped.

 

Mainstreet Equity Act – Streamline Sales Tax proposal, thinks it will get done this year but would like to retain sovereignty so that we can opt out at any point.

 

Technology Initiatives

 

Integrated property tax assessment program – will take human error out of the equalization process, if significant discrepancy from prior years, a flag will be created.

 

Data Warehousing System – SAS framework – access historical data to track info by names, address, etc.

 

Diane started the discussion on the Audit Focus Group:

• Brought together companies that had been audited recently (2006) and listened to their thoughts on the experience.  Discussed managing statute of limitations, WDOR will build a tracking system so that WDOR will start an audit at least 1 year before the waiver.  The plan is not to request many waivers. 

• Discussed taxpayers reviewing the WDOR write-up of facts for all issues that g
  into an audit report or when a question goes up to a supervisor.

• Encrypted computer lines must be used to secure taxpayer information. 

• Statistical sampling specialists – comments were made that they are tough.  Will work to make sure sample is agreed to.

• Supervisors more involved in initial meetings with taxpayer prior to start of audit.

Q&A

Tax Policy – need to focus on Menasha appeal to Supreme Court, will work to revise statutes for River City holding.

Tax Gap Study – will help determine focus for tax policy group, for example non-filers.

Technical Request – how long should you expect to wait for a technical response from the WDOR, Diane could not respond to this without specifics because advice involves obtaining WDOR legal opinion and coordinating with audit management.

 

Statute Waiver policy will be put in the WTB with a high level summary.

 

Roger indicated he has placed a greater emphasis on meeting with legislators and open communication than his predecessor.

 

Legal staff – will not be consolidated with other legal staff at the state, will overhire so that more senior lawyers on verge of retiring will have time to train younger attorneys.

 

Adjourned for a few minutes and readjourned after Diane and Roger had left.

 

Minutes from prior meeting approved by Richard Scott and seconded by Brian Kelley.

 

Tammy Hofstede gave a brief update on the WICPA in Dennis’ absence.  Update on legislative issues, she discussed Murphy Desmond Memo on Legislative Report and the Assembly Bill Roster

 

Subcommittee to evaluate and understand the bills introduced, request WDOR summary of the bills, WICPA will send these 2 reports electronically for the committee regularly.  Rocky, Ruth and Gerri agreed to participate in the group to evaluate and vet proposed legislation, we agreed to let Tammy know what is important to our committee. 

 

Technical Updates

 

Sales/Use (Brian Ertmer) – Brian provided an outline of new sales/use issues including the budget bill as the largest pending issues is SSTP, including taxpayer favorable issues such as amnesty, and good faith language being dropped on accepting exemption certificates.

 

Income/Franchise (Greg Butler) – Greg discussed items from the WI Tax Club Outline from Vicki Gibbons presentation, new auditor group starting, oil tax update and hospital tax, clean up of pass thru entity withholding to allow an opt-out retroactive to 1/1/06, statute waiver discussion came up l year for large case and 6 months for district audits, new cases River City Refuse discussed impact on transportation companies, and discussed the idea of cutting more checks rather than handling intercompanies via intercompany adjustments.

 

Case Update (John Austin) – WTB 151 summarizes the holdings in Menasha and River City.  Nestles and Milwaukee Symphony, discuss whether receipts are taxable, WTAC case listing indicates the following manufacturing case Generac, and Assoc Milk Producers, but it is not clear what the issues are.  Manpower sales tax case update, filing briefs and cross motions so unlikely there will be a trial, package won’t get to commission until December, there won’t be a decision until sometime in 2008.

 

Trust Update (John Mitchell) – estate tax may be proposed in 2011

 

Henry Jasper mentioned an update that underground storage tanks will be considered TPP rather than reclassed as real property, EPA indicated that tanks need to be removed if the gas station closes down or if leased property.

 

Thomas Nichols raised a State Bar issue for some proposed legislative changes and he would ask that if it applies and we think it’s appropriate, would the WICPA be willing to support this legislation or approve this and possibly other legislation proposed by state bar.  Tom will report back to the State Bar that there is a consideration by the WICPA to work with the lobbyist for the Bar.

 

The next meeting has been scheduled for August 29, 2007.  A motion was made to adjourn the meeting by Greg Butler and seconded by Richard Scott.  Meeting was adjourned at 2:00.

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