AB 638

Under the federal Internal Revenue Code, a taxpayer may claim a deduction

equal to 9 percent of the taxpayer's qualified production activities income in the

taxable year or 9 percent of the taxpayer's total taxable income, whichever is less.

For federal tax purposes, qualified production activities income is, generally, the

amount of the taxpayer's domestic production gross receipts that exceed the sum of

the cost of goods sold and other expenses, losses, or deductions. Domestic production

gross receipts are, generally, gross receipts derived from property that was

manufactured, produced, grown, or extracted in the United States.

Under current law, as created by

2011 Wisconsin Act 32

, an individual taxpayer

may claim a state income tax credit equal to the taxpayer's qualified production

activities income derived from manufacturing property or agricultural property

located in this state, multiplied by a certain percentage. A corporation may claim a

state income and franchise tax credit equal to the lesser of its taxable income

apportioned to this state or its qualified production activities income derived from

manufacturing property or agricultural property located in this state, multiplied by

a certain percentage. The percentage of qualified production activities income that

a taxpayer may claim as a credit is 1.875 percent for 2013, 3.75 percent for 2014,

5.526 percent for 2015, and 7.5 percent for 2016 and for each year thereafter. Under

current law, "qualified production activities income" means qualified production

activities income as determined under the federal Internal Revenue Code for

purposes of claiming a federal tax deduction.

This bill makes technical changes to the state tax credits for qualified

production activities income derived from manufacturing property or agricultural

property located in this state in order to facilitate the Department of Revenue's

administration of the credits. Specifically, the bill provides a method for determining

the qualified production activities income derived from manufacturing property or

agricultural property located in this state rather than rely on the federal definition

of "qualified production activities income," which includes income from economic

activities in all states.