2.105 Notice by taxpayer of federal audit ad-

justments and amended returns. (1) PURPOSE. This sec- tion clarifies the time periods for a taxpayer to report federal au- dit adjustments and federal and other state amended returns for Wisconsin franchise or income tax and economic development surcharge purposes, and the result if a taxpayer fails to report the adjustments or amended returns. (2) DEFINITION. In this section, XtaxpayerY includes individ- uals, estates, trusts, partnerships, limited liability companies and corporations. For combined groups, XtaxpayerY includes the des- ignated agent of a combined group under s. 71.255 (1) (a), Stats., if any member of the combined group was the subject of a federal audit adjustment or amended return. (3) GENERAL. (a) Under ss. 71.76 and 77.96 (4), Stats., a tax- payer meeting the conditions described in sub. (4) shall report to the department changes or corrections made to a tax return by the internal revenue service, or file with the department amended Wisconsin franchise or income tax returns or amended economic development surcharge returns reporting any information con- tained in amended returns filed with the internal revenue service, or with another state if there has been allowed a credit against Wisconsin taxes for taxes paid to that state. If such changes, cor- rections, or amended returns relate to income, credits claimed or carried forward, net business losses or net business losses carried forward, capital losses or capital losses carried forward, or any other item that is required to be included in a combined report un- der s. 71.255 (1) (b), Stats., the designated agent of the combined group shall report such changes or corrections or file amended combined returns. Note: See s. Tax 2.65 for additional rules relating to the designated agent of a combined group. (b) Except as provided in sub. (5), the department may give notice to the taxpayer of assessment or refund within 90 days of the date the department receives the taxpayer[s report of federal adjustments or amended return described in par. (a). The 90-day limitation does not apply to instances where the taxpayer files an incorrect franchise or income tax return or economic develop- ment surcharge return with intent to defeat or evade the franchise or income tax or economic development surcharge assessment. (4) TAXPAYER REQUIRED TO REPORT. (a) Federal adjust- ments. If the federal net income tax payable, a credit claimed or carried forward, a net operating loss carried forward or a capital loss carried forward on a taxpayer[s federal tax return is adjusted by the internal revenue service in a way which affects the amount of Wisconsin net franchise or income tax or economic develop- ment surcharge payable, the amount of a Wisconsin credit or a Wisconsin net operating loss, net business loss or capital loss car- ried forward, the taxpayer shall report the adjustments to the de- partment within 90 days after they become final. If such adjust- ments relate to income, credits claimed or carried forward, net business losses or net business losses carried forward, capital losses or capital losses carried forward, or any other item that is required to be included in a combined report under s. 71.255 (1) (b), Stats., the designated agent of the combined group shall re- port such adjustments. The following shall also apply with re- spect to federal adjustments: 1. ZFinality of federal adjustments.[ For the purpose of deter- mining when the federal adjustments become final, the following shall be deemed a final determination: a. Payment of any additional tax, not the subject of any other final determination described in subd. 1. b., c., d. or e. b. An agreement entered into with the internal revenue ser- vice waiving restrictions on the assessment and collection of a deficiency and accepting an overassessment. Federal form 870, XWaiver of Restrictions on Assessment and Collection of Defi- ciency in Tax and Acceptance of Overassessment,Y or 870-AD, XOffer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment,Y are the forms prescribed for this purpose. c. Expiration of the 90-day time period, or the 150-day pe- riod in the case of a notice addressed to a person outside the United States, within which a petition for redetermination may be filed with the United States tax court with respect to a statutory notice of deficiency issued by the internal revenue service, if a petition is not filed with that court within that time. d. A closing agreement entered into with the internal revenue service under section 7121 of the Internal Revenue Code. e. A decision by the United States tax court or a judgment, decree or other order by a court of competent jurisdiction which has become final, or the date the court approves a voluntary agreement stipulating disposition of the case. A court of compe- Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published. WISCONSIN ADMINISTRATIVE CODE tent jurisdiction includes a United States district court, a court of appeals, a court of claims or the United States supreme court. f. For combined groups, the Xfinality of federal adjustmentsY is determined on the basis of that particular combined group member the adjustments of which ultimately affect the amount of Wisconsin net franchise or income tax or economic development surcharge payable, the amount of a Wisconsin credit, credit car- ryforward, net business loss, net business loss carryforward, cap- ital loss or capital loss carried forward of the combined group to which that member belongs. Note: Decisions of the U.S. tax court and other courts ordinarily become final as follows: a. If no appeal is made of a U.S. tax court decision, it becomes final upon expira- tion of a period of 90 days after the decision is entered. Decisions in unappealable cases involving deficiencies of $50,000 or less heard by the U.S. tax court under sec- tion 7463 of the Internal Revenue Code become final 90 days after they are entered. b. Appealed decisions of the U.S. tax court become final as set forth in section 7481 of the Internal Revenue Code. c. A decision of a U.S. district court normally becomes final if not appealed to the U.S. court of appeals within 60 days of the judgment, decree or order. d. A decision of the U.S. court of claims or the U.S. court of appeals normally be- comes final unless an appeal or a petition for certiorari is filed with the U.S. supreme court within 90 days of the judgment or decree. e. A decision of the U.S. supreme court is normally final upon the expiration of a period of 25 days from the date the decision is rendered, if a motion for reconsider- ation or rehearing is not filed within that time. 2. ZInformation to report to department.[ The taxpayer shall submit to the department a copy of the final federal audit report issued by the internal revenue service together with any other documents or schedules necessary to inform the department of the adjustments as finally determined. The report shall be in- cluded with an amended Wisconsin return if a Wisconsin refund is being claimed and may be, but is not required to be, included with an amended return if additional Wisconsin tax or economic development surcharge is due or if there is no change in tax or economic development surcharge. 3. ZAgreement with adjustments.[ A taxpayer shall be deemed to concede the accuracy of the federal adjustments for Wisconsin franchise or income tax or economic development sur- charge purposes unless a statement is included with the report to the department stating why the taxpayer believes the adjustments are incorrect. (b) Amended returns. If a taxpayer files an amended federal tax return and the changes on the amended federal tax return af- fect the amount of Wisconsin net franchise or income tax or eco- nomic development surcharge payable, the amount of a Wiscon- sin credit or a Wisconsin net operating loss, net business loss or capital loss carried forward, the taxpayer shall file with the de- partment an amended Wisconsin return reflecting the same changes. A taxpayer filing an amended return with another state shall file an amended Wisconsin return if a credit has been al- lowed against Wisconsin taxes for taxes paid to that state and if the changes affect the amount of Wisconsin net franchise or in- come tax or economic development surcharge payable, the amount of a Wisconsin credit or a Wisconsin net operating loss, net business loss or capital loss carried forward. If the changes described in this paragraph relate to income, credits claimed or carried forward, net business losses or net business losses carried forward, capital losses or capital losses carried forward, or any other item that is required to be included in a combined report un- der s. 71.255 (1) (b), Stats., the designated agent of the combined group shall file an amended combined return. Changes to a net operating or business loss carryforward may not be made unless the change to the incurred loss was computed on a return that was filed within 4 years of the unextended due date for filing the orig- inal return for the taxable year in which the loss was incurred. Changes to a net operating or business loss carry-back may not be made unless the change to the loss is claimed within 4 years of the unextended due date for filing the original return for the taxable year to which the loss is carried back. The amended Wisconsin return shall be filed within 90 days after the date the amended re- turn is filed with the internal revenue service or other state. (c) Where and how to submit report or amended return. An amended Wisconsin return or a taxpayer[s report of federal ad- justments submitted with an amended Wisconsin return shall be filed in accordance with the provisions of s. Tax 2.12 (5) and (6). A taxpayer[s report of federal adjustments submitted to the de- partment without an amended return shall be identified as re- flecting federal adjustments made by the internal revenue service and shall be mailed to Wisconsin Department of Revenue, Audit Bureau, P.O. Box 8906, Madison, WI 53708-8906. The report submitted without an amended return may not be made a part of or attached to any Wisconsin tax return. (5) ASSESSMENTS AND REFUNDS BY DEPARTMENT. If a tax- payer reports federal adjustments or files an amended Wisconsin return with the department within 90 days after the adjustments become final or after an amended return is filed with the internal revenue service or another state, the department may make an as- sessment or issue a refund relating to the report or amended re- turn as follows: (a) Assessments. Under s. 71.77 (2), Stats., the department may make an assessment within 4 years from the date the original Wisconsin franchise or income tax return was filed. However, under s. 71.77 (7) (a), Stats., if the taxpayer reported less than 75% of the correct net income and the additional tax for the year exceeds $200 for a joint return, or $100 for a return other than a joint return, an assessment may be made within 6 years after the return was filed. If an assessment relates to a federal adjustment that affects a combined report, the department may issue such as- sessment to either the corporation whose income was adjusted for federal purposes or to the designated agent of the combined group, or both. Note: See s. Tax 2.67 (4) for rules relating to the statute of limitations as applied to combined returns. (b) Refunds. Under s. 71.75 (2), Stats., the department may issue a refund if an amended return is filed within 4 years of the unextended date the original Wisconsin franchise or income tax return was due. (c) Exceptions. 1. An assessment may be made later than the 4- and 6-year periods provided in par. (a) if notice of the assess- ment is given to the taxpayer within 90 days of the date the de- partment receives a timely report of federal adjustments or an amended Wisconsin return. However, the assessment made after the expiration of the 4- and 6-year periods shall only relate to those federal adjustments or the changes on the amended Wis- consin return. 2. If a taxpayer reports federal adjustments to the department after the expiration of the 4-year period for filing an amended Wisconsin return as described in par. (b), a refund based upon federal adjustments reducing the taxpayer[s federal tax liability, which are applicable to the taxpayer[s Wisconsin tax or economic development surcharge liability, may still be made if notice of the refund is given to the taxpayer within 90 days of the date the de- partment received a timely report of the federal adjustments. 3. The 90-day period for the department[s giving notice of an assessment or issuing a refund may be extended if a written agreement is entered into by the department and the taxpayer prior to the expiration of the 90 days. 4. If federal adjustments or changes on an amended return filed with the internal revenue service or another state pertain to a year which has been previously field audited by the department and the field audit has been finalized, an assessment or refund nevertheless may be made. However, the assessment or refund Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published. shall only relate to those federal adjustments or the changes on the amended return. Notice of the assessment or refund shall be given to the taxpayer within 90 days of the date the department received the report of federal adjustments or an amended Wis- consin return from the taxpayer. Examples: 1) Federal adjustments were made to an individual[s 2013 calendar- year basis federal income tax return; the adjustments became final on June 1, 2018. On August 15, 2018, within 90 days after the adjustments became final, the depart- ment received the taxpayer[s report of the adjustments. Although the 4-year period provided by s. 71.77 (2), Stats., for making adjustments to the 2013 Wisconsin re- turn expired on April 15, 2018, the department had until November 13, 2018, 90 days after the date the department received a report of the adjustments, to give notice of an assessment to the taxpayer. 2) An individual filed an amended 2015 calendar-year basis New York return on June 1, 2016. An amended Wisconsin return, reflecting the changes on the amended New York return, was filed with the department on July 12, 2016. Under the 4-year assessment period in s. 71.77 (2), Stats., the department has 4 years from April 15, 2016, the due date of the 2015 return, in which to notify the taxpayer of any assess- ment relating to the changes on the amended New York return. (6) TAXPAYER[S FAILURE TO REPORT FEDERAL ADJUSTMENTS OR FILE AMENDED WISCONSIN RETURN; ADJUSTMENTS AND AMENDED RETURNS RELATING TO TAXABLE YEAR 1987 AND THEREAFTER. If a taxpayer fails to report federal adjustments or the filing of an amended federal or other state return, relating to the taxable year 1987 and thereafter, within the 90-day period de- scribed in sub. (3) (b), the department may assess additional Wis- consin franchise or income tax or economic development sur- charge relating to the adjustments or amended return within 4 years after discovery by the department. Example: An individual taxpayer filed a 2015 calendar-year basis Wisconsin in- come tax return on April 15, 2016. The internal revenue service made adjustments to the 2015 federal income tax return which the taxpayer did not report to the de- partment within 90 days after the adjustments became final. The internal revenue service reports these adjustments to the department under the exchange of informa- tion agreement between the two agencies on May 1, 2018. The department may is- sue an assessment for the adjustments any time on or before May 1, 2022. Note: Section 71.76, 1989 Stats., was amended by 1991 Wis. Act 39, effective for federal changes or corrections to a federal income tax return that became final on or after August 15, 1991, and for amended federal and other state returns filed on or af- ter August 15, 1991. Under the statute in effect immediately prior to the enactment of 1991 Wis. Act 39, a taxpayer was required to report internal revenue service ad- justments to taxable income that affected the income reportable or tax payable to Wisconsin, and to file an amended Wisconsin return if information contained on an amended federal or other state tax return affected income reportable or tax payable to Wisconsin. Note: Section Tax 2.105 interprets ss. 71.255 (1) and (7), 71.75 (2), 71.76, 71.77 (2) and (7) and 77.96 (4), Stats. History: Cr. Register, January, 1979, No. 277, eff. 2-1-79; correction in (3) (a) 1. a. made under s. 13.93 (2m) (b) 4., Stats., Register, July, 1987, No. 379; r. (2), (4) and (5) (d); renum. (1), (3), (5) (a) to (c) and (6) to be (2), (4), (6) and (7) and am. (2), (4) (a) 1.b., c. and e, (b), (6) (a) to (c) and (7), cr. (1), (3) and (5), Register, Feb- ruary, 1990, No. 410, eff. 3-1-90; r. and recr. Register, May, 1996, No. 485, eff. 6-1- 96; CR 10-095: am. (1), (2), (3), (4) (a) (intro.), 2., 3., (b), (5) (a), (c) 2., (6) (a), cr. (4) (a) 1. f. Register November 2010 No. 659, eff. 12-1-10; CR 12-011: am. (1), (3) (a), (b), (4) (a) (intro.), 1. f., 2., 3., (b), (5) (c) 2., (6) (a) Register July 2012 No. 679, eff. 8-1-12; CR 19-141: am. (4) (b) Register September 2020 No. 777, eff. 10-1-20; CR 21-085: am. (5) (c) 4. (Examples), (6) (a) (Example), r. (6) (b) Register August 2022 No. 800, eff. 9-1-22; renum. (6) (a) to (6) under s. 13.92 (4) (b) 1., Stats., Reg- ister August 2022 No. 800.