Wisconsin law offsets TCJA limits

December 24, 2018

On Dec. 14, 2018, Gov. Scott Walker signed 2017 Wisconsin Act 368 as a response to the Tax Cuts and Jobs Act and to the U.S. Supreme Court’s decision in South Dakota v. Wayfair.

The law allows S corporations to elect taxation at the entity level for tax years beginning on Jan. 1, 2018, and partnerships to elect taxation for tax years beginning on Jan. 1, 2019.

The bill includes an elective 7.9 percent entity-level income tax on pass-through entities (PTE) and economic nexus standards for out-of-state retailers selling to Wisconsin customers.

Although it could be helpful in generating a larger SALT deduction, the entity-level tax is calculated using a higher tax rate than the highest marginal individual rate and does not include losses or most credits.

Form 5S Wisconsin Tax-Option (S) Corporation Franchise or Income Tax Return includes several changes.

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