2.64 Alternative apportionment for combined

groups including specialized industries. (1) SCOPE. Section 71.255 (5) (a), Stats., provides that a combined group is generally required to use the modified sales factor method to ap- portion its combined unitary income. However, s. 71.255 (5) (b), Stats., provides that a qualifying combined group may petition the department to use an alternative apportionment method. This section provides rules relating to the eligibility requirements, continuity, and limitations of this privilege. (2) ELIGIBILITY REQUIREMENTS. (a) Qualifying combined group. A qualifying combined group is a combined group for which 30 percent or more of the combined unitary income would, in the absence of combined reporting, be required to be appor- tioned using more than one factor under a method described in ss. Tax 2.46, 2.465, 2.47, 2.475, 2.48, 2.50, or 2.502. (b) Requirements for petition. The designated agent of the combined group requesting an alternative apportionment method shall file a petition no less than 60 days before filing the first orig- inal, timely filed return using the alternative method. If a return using the modified sales factor method has already been timely filed without an extension, the designated agent may file an amended return using the alternative method if it files a petition no less than 60 days before the end of the automatic 7-month ex- tension period provided in ss. 71.24 (7) or 71.44 (3), Stats., as ap- plicable, and the petition is approved by the department. The pe- tition shall include the following: 1. The full name, address, and federal employer identifica- tion number of each member of the combined group. 2. The combined group[s taxable year for which the alterna- tive apportionment method as requested would begin to be effective. 3. A description of the alternative apportionment method requested. 4. A complete and precise statement of the reasons for the modification requested, including why the modified sales factor method would result in an unfair representation of the degree of unitary business activity in this state. This statement shall pro- vide clear and convincing evidence of its assertions. 5. A calculation of the combined group[s tax liability for the first taxable year to which the petition applies and for the previ- ous taxable year, using the apportionment method prescribed in s. 71.255 (5) (a), Stats., for both years. For the previous taxable year[s computation, this amount shall be computed as if a com- bined report including those same corporations were required in the previous taxable year, even if it was before s. 71.255, Stats., was in effect. 6. A calculation of the combined group[s tax liability for the first taxable year to which the petition applies and for the previ- ous taxable year, similar to the calculation in subd. 5., but using the requested apportionment method instead of the modified sales factor method. 7. A calculation of each combined group member[s tax lia- bility for the first taxable year to which the petition applies and for the previous taxable year, similar to the calculations in subds. 5. and 6., computed as if each corporation were not a member of the combined group and using the method prescribed by ss. Tax 2.39, 2.45, 2.46, 2.465, 2.47, 2.475, 2.48, 2.49, 2.495, 2.50, or 2.502, as applicable to each corporation. 8. A statement as to whether any combined group member is being audited by the department at the time of the petition. (c) Limitation. The department may not grant a taxpayer[s petition for an alternative apportionment method if the alternative method would result in a lower tax liability than the sum of the tax liabilities of the combined group members computed as if they were not members of a combined group and using the appor- tionment method prescribed by ss. Tax 2.39, 2.45, 2.46, 2.465, 2.47, 2.475, 2.48, 2.49, 2.495, 2.50, or 2.502, as applicable to each corporation. (d) Approval or rejection. 1. The petition shall be approved by the department in writing. The department shall approve or reject the petition within 45 days after receiving it. However, fail- ure of the department to act within 45 days or acceptance of a re- turn using the alternative apportionment method does not consti- tute approval of the petition or method used. The department may, after receipt and review of the petition, require additional information necessary to determine whether the modified sales factor method does not fairly represent the degree of unitary busi- ness activity in this state. If the department does not have all the required information to approve the petition, the 45-day period described in this paragraph is suspended until the information is provided. Filing of a petition does not affect the accrual of inter- est on underpayment of estimated taxes. 2. If the designated agent timely files a petition as described in par. (b) but does not receive an order from the department ap- proving or rejecting the petition before the due date of the return, the designated agent must file the return using the modified sales factor method. If the department subsequently approves the peti- tion, the designated agent may amend the return using the ap- proved method, in which case the amended return must contain the attachments described in par. (e). (e) Attachments to return. For each combined return on which the alternative apportionment method is used, the desig- nated agent shall include the following documentation with the return: 1. A copy of the department[s written approval for the alter- native apportionment method. 2. A calculation of the combined group[s tax liability com- puted as if it used the modified sales factor method instead of the alternative apportionment method. 3. A calculation of each combined group member[s tax lia- bility for the taxable year included in the combined return com- puted as if each corporation were not a member of the combined group and using the apportionment method prescribed by ss. Tax 2.39, 2.45, 2.46, 2.465, 2.47, 2.475, 2.48, 2.49, 2.495, 2.50, or 2.502, as applicable to each corporation. (3) CONTINUITY AND LIMITATIONS. (a) Continuity. 1. If the department approves the alternative apportionment method, the combined group engaged in that unitary business shall continue to use the alternative apportionment method for six taxable years following the first year for which the alternative method was ap- proved, except as provided in par. (b). 2. No later than 60 days before filing the first return for a pe- riod subsequent to the expiration of the seven-year period in 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 subd. 1., the designated agent of the combined group shall file a new petition with the department in order to continue using the alternative apportionment method. The new petition is subject to the same requirements as the original petition except that the des- ignated agent shall include the calculations described in sub. (2) (b) 5. to 7. for the first year to which the renewed election applies and each of the years to which the previous election applied. (b) Limitations. 1. If the sum of the tax liabilities of the com- bined group members for the taxable year computed as if they were not combined group members, as reported in the attachment described in sub. (2) (e) 3., is greater than the combined group[s tax liability using the alternative apportionment method, the combined group may not use the alternative method for the tax- able year. Instead, the combined group shall use the modified sales factor method. For each of the remaining taxable years in the seven-year period described in par. (a) 1., the combined group shall use the alternative apportionment method to the extent the limitations of this paragraph do not apply. 2. If the combined group is no longer a qualifying combined group as described in sub. (2) (a), the combined group may no longer use the alternative apportionment method beginning with the year the combined group no longer qualifies. If it subse- quently becomes a qualifying combined group in a later taxable year, the designated agent of the group may file a new petition for an alternative apportionment method. Note: Mail petitions for alternative apportionment methods to: Administration Technical Services — Corporations Unit, Wisconsin Department of Revenue, P.O. Box 8933, Mail Stop 6-40 Madison, WI 53708-8933. Note: This section interprets s. 71.255 (5) (b), Stats. History: EmR1001: emerg. cr. eff. 1-15-10; CR 09-064: cr. Register April 2010 No. 652, eff. 5-1-10; CR 13-078: am. (2) (a), (b) 7., (c), (e) 3. Register April 2014 No. 700, eff. 5-1-14; CR 19-141: am. (2) (b) 7., (c), (e) 3. Register September 2020 No. 777, eff. 10-1-20. Cross References: See s. Tax 2.60 for definitions that relate to this section. See s. Tax 2.65 for more information on the duties of the designated agent. See s. Tax 2.67 for more information on combined returns.