2.66 Combined estimated tax payments. (1)

SCOPE. In general, s. 71.255 (7) (b) 5., Stats., provides that only the designated agent of a combined group may make estimated tax payments applicable to a combined return. This section pro- vides exceptions to the general rule, explains the estimated tax re- quirements, and provides rules for applying estimated payments and overpayments. (2) SEPARATE ESTIMATED PAYMENTS. (a) When separate es- timated payments are allowed. Although the designated agent is always authorized to make estimated payments on behalf of any and all of its combined group members, a combined group mem- ber other than the designated agent may make estimated pay- ments on its own behalf if any of the following apply: 1. For the first taxable year for which a combined group files a combined return, any member of the group may make estimated payments on its own behalf. 2. For the first taxable year for which a corporation is a member of a combined group, that corporation may make esti- mated payments on its own behalf. 3. Any combined group member may make estimated pay- ments on its own behalf to the extent those payments relate to separate entity items. 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 (b) Reporting of separate estimated payments. If a combined group member other than the designated agent makes separate es- timated payments and applies those payments to the combined return, the designated agent shall notify the department of those payments on a department-prescribed form filed with the com- bined return. This notification authorizes the department to ap- ply the separate estimated payments to the combined return. (3) DETERMINATION OF REQUIRED ESTIMATED PAYMENTS. (a) General. If a combined return is filed, the amount of any ad- dition to tax under s. 71.84 (2), Stats., shall be computed as if the combined group were one corporation. XTax shown on the re- turnY and Xtax for the taxable yearY as defined in s. 71.29 (1) (b), Stats., have the same meaning with respect to a combined return as to a separate return. (b) Computation of thresholds. Since, as provided in par. (a), Xtax shown on the returnY has the same meaning with respect to a combined return as to a separate return, the amounts of the fol- lowing thresholds are the same regardless of the number of com- bined group members included in the combined return: 1. Section 71.29 (7), Stats., which provides that no interest on underpayment is required if the tax shown on the return for the taxable year is less than $500. 2. Section 71.29 (9), Stats., which provides that for corpora- tions that have Wisconsin net incomes of less than $250,000 and whose preceding taxable year was a 12-month taxable year, esti- mated payments may be based on the lesser of 90 percent of tax shown on the return for the current taxable year or the tax shown on the return for the preceding year. (c) Effect of separate entity items. The amount of net income and tax shown on a combined return includes net income and tax attributable to separate entity items. If the combined return in- cludes separate entity items of a corporation that would other- wise be a combined group member except that it has no items that are subject to combination under the water[s edge rules of s. Tax 2.61 (4), the corporation is considered a combined group mem- ber for purposes of determining required estimated payments. Example: Combined Group AB consists of Member A and Member B. Group AB filed a combined return for calendar year 2010. The 2010 return includes $30,000 of net tax attributable to Member A[s items and $20,000 attributable to Member B[s items, including $5,000 attributable to B[s separate entity items. The 2010 combined return also includes $10,000 of net tax from the separate entity items of Corporation C, which would be a combined group member except that none of its items are subject to combination under the water[s edge rules. If Group AB is not eligible to base its estimated taxes on its 2009 net tax under the provisions of par. (b), Group AB[s required estimated tax payments for purposes of its 2010 combined return are $54,000 (= ($30,000 + $20,000 + $10,000) x 90%). (d) Annualized income installment method. For purposes of the annualized income installment method provided in s. 71.29 (9) (c) and (10) (c), Stats., the previous year[s apportionment per- centage for a combined group equals the sum of the combined group members[ modified sales factor numerators as determined under s. Tax 2.61 (7) (a) for the combined group[s preceding tax- able year, divided by the combined group[s modified sales factor denominator as determined under s. Tax 2.61 (7) (b) for the com- bined group[s preceding taxable year. (e) Change in membership. For purposes of applying par. (a) and except as provided in par. (f), the combined group[s Xtax shown on the returnY for the current taxable year or the preceding taxable year is the tax shown on the combined return for the ap- plicable year, without regard to corporations that have joined or left the group. Example: Group JK files a combined return for the calendar year 2009. During 2010, Member J acquires L and L becomes a member of the combined group. If the group qualifies to determine its estimated tax obligations for 2010 based on its pre- ceding year[s tax liability, its preceding year[s tax liability only includes the tax shown on Group JK[s 2009 combined return; it does not include any tax liability from L[s 2009 separate return. (f) First combined return year. The following rules apply to the computation of required estimated payments for the first year that a combined group files a combined return: 1. If the total of the combined group[s Wisconsin net income reported on the combined return is less than $250,000, the re- quired estimated payments may be based on the sum of the mem- bers[ tax shown on their Wisconsin returns for the preceding year as provided by s. 71.29 (9) (a) 2., Stats., but only if all combined group members filed a Wisconsin return which covered a full 12 months in the preceding taxable year. If a member was included in the combined return of another combined group in the preced- ing taxable year, its tax shown on the return for that year is the tax attributable to the sum of its share of combined unitary income and income from separate entity items reported on that return. 2. If one or more combined group members did not file a Wisconsin return which covered 12 months in the preceding tax- able year, the combined group shall base its required estimated payments on 90 percent of the tax shown on the combined return as provided under s. 71.29 (9) (a) 1. or (10) (b), Stats., as applicable. 3. The previous year[s apportionment percentage for pur- poses of the annualized income installment method equals the sum of the current combined group members[ apportionment fac- tor numerators from their returns for the preceding taxable year, divided by the sum of the apportionment factor denominators from their returns for the preceding taxable year. If a member was included in the combined return of another combined group in the preceding taxable year, its apportionment percentage for this purpose is its modified sales factor numerator for that taxable year as determined under s. Tax 2.61 (7) (a), divided by its sepa- rate company denominator for that taxable year as determined under s. Tax 2.61 (7) (b). 4. For purposes of subds. 1. to 3., if a combined group mem- ber has a taxable year different than the combined group[s tax- able year, the member[s preceding taxable year is its taxable year most recently ended before the first day of the combined group[s taxable year. (4) RULES FOR APPLYING ESTIMATED PAYMENTS AND OVER- PAYMENTS. (a) Separate returns filed in year following com- bined return year. If a combined group terminates and the former members properly file separate returns in the subsequent year, any combined estimated payments made for that year shall be credited against the separate tax liabilities of the former members of the combined group in the manner allocated by the designated agent. The designated agent shall notify the department of the manner in which the payments are to be allocated. The desig- nated agent may make this notification in correspondence to the department unless the department prescribes a specific form for this purpose, in which case the prescribed form shall be used. In either case, the notification shall be submitted to the department separately from any return. (b) Combined estimated payments but no combined return. If combined estimated payments are made for a taxable year but no combined return is filed for that year or for the previous year, the estimated payment shall only be credited to the corporation that made the payment. (c) Overpayments. 1. If a combined group member has a credit for an overpayment of taxes from a prior taxable year when it was not a combined group member, the member may, through its designated agent, authorize the department to apply some or all of the credit against the total tax liability reported on the com- bined return. To carry out this authorization, the designated agent shall file a department-prescribed form with the combined return to notify the department of the amount to be applied. Al- 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. ternatively, the member may file a claim for refund of the over- payment, in which case the overpayment shall be refunded to that member. 2. If a corporation leaves a combined group that has an over- payment of taxes carried over from a prior combined return year, the designated agent may allocate a portion of that overpayment to the former member. The designated agent shall notify the de- partment of the amount to be allocated to the former member. The designated agent may make this notification in correspon- dence to the department unless the department prescribes a spe- cific form for this purpose, in which case the prescribed form shall be used. In either case, the notification shall be submitted to the department separately from any return. (d) Erroneous combined estimated payments. If a designated agent makes estimated payments on the erroneous premise that a corporation is an eligible member of the combined group, and discovers the error prior to the time the combined group and the corporation file their respective returns, the designated agent may allocate some or all of the combined estimated payments to the corporation. The designated agent shall notify the department of the amount to be allocated. The designated agent may make this notification in correspondence to the department unless the de- partment prescribes a specific form for this purpose, in which case the prescribed form shall be used. In either case, the notifi- cation shall be submitted to the department separately from any return. The combined group and the corporation shall each com- pute their addition to tax under s. 71.84 (2), Stats., as if the esti- mated payments allocated to the corporation had actually been paid by it rather than by the combined group. (e) Erroneous separate estimated payments. If a corporation makes separate estimated payments on the erroneous premise that it is not a combined group member, the following rules apply: 1. If the corporation discovers the error prior to the time the designated agent files the combined return for the taxable year, and the corporation has not filed a separate return for the period that should have been included in that combined return or other- wise received a refund of the separate estimated payments, the corporation may apply the separate estimated payments to the combined return. The designated agent shall report the separate estimated payments in the manner described in sub. (2) (b). 2. If the corporation discovers the error prior to the time the designated agent files the combined return for the taxable year, but the corporation has already filed a separate return for the pe- riod that should have been included in the combined return, the corporation shall file an amended separate return showing no net income, overpayment, or underpayment, and stating that the cor- poration will join in the filing of a combined return and identify- ing the designated agent of the combined group. Unless the cor- poration specifies otherwise on the amended return, the depart- ment will not refund the erroneously paid amounts. When the designated agent files the combined return including that corpo- ration, the corporation may apply the separate estimated pay- ments to the combined return unless the corporation specified otherwise on its amended return or has otherwise received a re- fund of the separate estimated payments. The designated agent shall report the separate estimated payments so applied in the manner described in sub. (2) (b). 3. If the corporation discovers the error after the designated agent has filed the combined return for the taxable year, but the corporation has not filed a separate return or otherwise received a refund of the separate estimated payments, the designated agent shall file an amended combined return and apply the corpora- tion[s separate estimated payments to the amount due on the amended combined return. The designated agent shall report the separate estimated payments so applied in the manner described in sub. (2) (b). 4. If the corporation discovers the error after the designated agent has filed the combined return for the taxable year and after the corporation has already filed a separate return for the period that should have been included in the combined return, the corpo- ration shall file an amended separate return and the combined group shall file an amended combined return. The provisions of subd. 2. apply with respect to the amended separate return. The corporation may apply the separate estimated payments to the amended combined return unless the corporation specified other- wise on its amended return or has otherwise received a refund of the separate estimated payments. The designated agent shall re- port the separate estimated payments so applied in the manner described in sub. (2) (b). Note: If an allocation described in sub. (4) (a), (c) 2., or (d) is necessary and the department has not prescribed a form to use to notify the department of the alloca- tion, send correspondence notifying the department of the allocation to: Corpora- tion Processing Unit, Wisconsin Department of Revenue, P.O. Box 8908, Madison, WI 53708-8908. Note: Section Tax 2.66 interprets ss. 71.255 (7), 71.29, and 71.84 (2), Stats. History: EmR1001: emerg. cr. eff. 1-15-10; CR 09-064: cr. Register April 2010 No. 652, eff. 5-1-10; CR 22-044: renum. (2) (c) 4. to (2) (c) 4. (intro.) and am., cr. (2) (c) 4. a. to d. Register June 2023 No. 810, eff.7-1-23. 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.