by Samantha A. Fong
On July 5, 2023, Governor Tony Evers signed legislation enacting the state operating budget for the 2023-2025 biennium with over 50 line-item vetoes. The legislation includes a personal income tax cut, commercial loan interest income exemption, and sales and use tax exemption for data centers. (L. 2023, S70 (Act 19), generally effective 07/07/2023 and as otherwise indicated; Governor Evers Veto Message, 07/05/2023.)
Income tax.
Reduction in personal income tax rate: For tax years beginning in 2023, the tax rate for the first and second tax brackets is decreased as follows: the rate is decreased to 3.50% from 3.54% for the first bracket and decreased to 4.40% from 4.65% for the second bracket. The governor vetoed the reduction to individual income tax rates for the third and fourth income tax brackets.
Commercial loan interest exemption: For taxable years beginning after December 31, 2022, income of a financial institution including interest, fees, and penalties, derived from a commercial loan of $5 million or less provided to a person residing or located in the state and used primarily for a business or agricultural purpose, is exempt from tax.
Refundable research credit percentage increased: For taxable years beginning after December 31, 2023, if the allowable amount of the research credit claim exceeds the taxes otherwise due, the excess amount of the claim, up to or equal to 25% (previously, 10%) of the allowable claim, may be certified for payment by check, share draft, or other otherwise refunded.
Sales and use tax.
Data center exemption: Effective October 1, 2023, the sales price from the sale of and the storage and use of tangible personal property, regardless of whether the property is affixed to or incorporated into real property, as well as leased property under Wis. Stat. § 77.52(1)(c), used exclusively for the development, construction, renovation, or repair of a qualified data center is exempt from tax. Likewise, the sale, use, or consumption of tangible personal property or leased property under Wis. Stat. § 77.52(1)(c), to a construction contractor that becomes a component of the qualified data center is exempt from sales tax. “Qualified data center” means one or more buildings or an array of connected buildings owned, leased, or operated by the same business entity that are rehabilitated or constructed to house a group of networked server computers in order to centralize the processing, storage, management, retrieval, communication, or dissemination of data and information. The buildings must equal a minimum qualified investment in the state of any of the following amounts within five years from the date the data center is certified as eligible to claim the exemption: for buildings located in a county having a population greater than 100,000, $150 million; for buildings located in a county having a population greater than 50,000 and not more than 100,000, $100 million; and for buildings in a county having a population of not more than 50,000, $50 million.
Prompt payment discount increase: Effective October 1, 2023, for timely reporting state, county, and stadium sales or use taxes, retailers may deduct for administration expenses a discount of 0.75% (previously, 0.5%), up to $8,000 (previously, $1,000) of the sales and use tax payable for that reporting period.
Cigarette tax.
Effective October 1, 2023, the discount received by manufacturers, bonded direct marketers, and distributors who are authorized by the Department of Revenue to purchase tax stamps is increased to 1.25% from 0.8%.
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