Weekly Round-Up: Two New Wisconsin Tax Statutes May Not Pass Constitutional Muster


Similarities between some provisions of Wisconsin law and certain statutes recently struck down by appellate courts in California and Oklahoma should give taxpayers some pause, William D. Schenkelberg and Tiffany M. Davister, both with Ernst & Young LLP, write in this week’s issue of the Weekly State Tax Report. The courts in both decisions found that the statutes did not meet constitutional muster under the Commerce Clause.

Wisconsin’s tax statutes in question allow individual taxpayers to either defer the recognition of, or exclude, capital gains from tax. Similar to the statutes found unconstitutional in California and Oklahoma, eligibility for the deferral or exclusion is based on the location of the assets or business in Wisconsin.

If the burden of proof is met and the Wisconsin statutes are determined unconstitutional, a remedy would have to be implemented, Schenkelberg and Davister explain. What that remedy might be is mostly conjecture at this point, but taxpayers should be concerned that the Wisconsin Department of Revenue may take the same position as the California FTB and retroactively deny the deferral or exclusion.

While the constitutionality of the Wisconsin statutes has yet to be challenged, taxpayers who have taken advantage of these provisions should consider the potential impact of a constitutional challenge before taking any position on their tax returns, Schenkelberg and Davister advise.

The complete analysis by Schenkelberg and Davister of the recent developments in California and Oklahoma and a comparison of impacted provisions from those states with similar statutes in Wisconsin can be read here .

In other developments…

New Mexico – New laws provide comprehensive tax reform and deadline extensions , according to a new alert by PwC.

How Easy Is It to Find Tax Information on State Websites , a new report by the Tax Foundation.

What Ever Happened to State Tax Reform , by the Tax Policy Center of the Urban Institute and the Brookings Institution.

Compiled by Priya D. Nair
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