AB 38

Under current law, there is an income tax exclusion for individuals for 60

percent of the net capital gains realized from the sale of assets held for at least one

year.

Under the bill, an individual; an individual partner or member of a partnership,

limited liability company, or limited liability partnership; or an individual

shareholder of a tax-option corporation (claimant) may subtract from federal

adjusted gross income the amount of capital gain, not to exceed $10,000,000 in a

taxable year, realized from the sale of any asset held more than one year (original

asset), to the extent that the gain is not already excluded from taxation.

Under the bill, the claimant must place the gain from the original asset in a

segregated account in a financial institution, must invest all of the proceeds in the

account in a Wisconsin business within 180 days after the sale of the original asset

that generated the gain, and must notify the Department of Revenue (DOR) on a

form prepared by DOR that the claimant will not declare the gain from the original

asset because the proceeds have been reinvested in a Wisconsin business.

A "Wisconsin business" is defined as a business that is headquartered in

Wisconsin; that employs at least 51 percent of its employees in this state; that is

engaged in, or is committed to engage, in businesses such as manufacturing,

agriculture, silviculture, conducting research, or developing new products or

business processes; that is not engaged in businesses such as real estate

development, insurance, banking, lobbying, political consulting, professional

services, retail, leisure, hospitality, transportation, or construction; that has fewer

than 500 employees; that has been in operation in this state for not more than seven

consecutive years; and that is not a publicly traded entity.

The bill also specifies that the basis of the investment shall be its cost minus

the gain generated by the sale of the original asset. If a claimant claims the

subtraction allowed under the bill, the claimant may not use that gain to net the

claimant's gains and losses as the claimant could do if the claimant did not claim the

subtraction.