2023 Wisconsin Statutes & Annotations › Chapter 71 - Income and franchise taxes for state and local revenues. › 71.745 - Pass-through entity audits, additional assessments and refunds at the entity level.

71.745
Pass-through entity audits, additional assessments and refunds at the entity level.
(1)
General applicability. Unless specifically provided in subs. (2) to (9), additional assessments and refunds of pass-through entities and pass-through members shall follow the provisions under this chapter. This section shall not apply for taxable years for which a pass-through entity made an election under s. 71.21 (6) (a) or 71.365 (4m) (a) that the pass-through entity did not revoke under s. 71.21 (6) (c) or 71.365 (4m) (c). The department shall not make additional assessments and refunds under this section to an entity treated as a disregarded entity described under U.S. Treasury Regulation 301.7701-2 or to a grantor trust the income of which is reportable under the Internal Revenue Code by the grantor of the trust or by any person other than the trust.
(2)
Audit assessments and refunds. Except as provided in sub. (9), for the purpose of performing audit assessments and issuing refunds, the department may do all of the following:
(a)
Assess and collect additional tax from a pass-through entity on income otherwise reportable by its pass-through members. In computing the tax to assess to a pass-through entity under this paragraph, the department shall apply the highest tax rate under s. 71.06 on income otherwise reportable by pass-through members that are individuals, estates, or trusts with a direct interest in the pass-through entity and apply the highest tax rate under s. 71.27 on income otherwise reportable by pass-through members, other than individuals, estates, or trusts, with a direct interest in the pass-through entity.
(b)
Direct the secretary of administration to refund to a pass-through entity that part of an overpayment paid by the pass-through entity and not by the entity's pass-through members. Pass-through members may claim overpayments not paid by the pass-through entity within one year after the date the determination of the overpayment becomes final or before the end of the period specified under s. 71.75, whichever is later.
(3)
Adjustment of credits. Except as provided in sub. (9), for the purpose of adjusting credits, the department may do all of the following:
(a)
Assess an adjustment to reduce a credit under s. 71.07, 71.28, or 71.47 to a pass-through entity if the pass-through entity previously computed the credit and reported the credit to its pass-through members. An assessment made under this paragraph may be reduced by the tax effect from the modifications described under ss. 71.05 (6) (a) 15. and 25., 71.21 (4), 71.26 (2) (a) 4. and 11., 71.34 (1k) (g) and (m), and 71.45 (2) (a) 10., if the modification occurs in a taxable year under review, except that the modification shall not pass through to nor be claimed by the pass-through members.
(b)
Assess an adjustment to increase a credit under s. 71.07, 71.28, or 71.47 to offset additional tax assessed to a pass-through entity under sub. (2). Any excess credit not used to offset additional tax may be claimed by the pass-through members within one year from the date the determination of the adjustment becomes final or before the end of the period specified under s. 71.75, whichever is later.
(4)
Adjustments attributable to members. Adjustments to pass-through items under this section are attributable to each pass-through member in a manner, and for the taxable year, that is consistent with the treatment of the pass-through items if a determination was not made under this section.
(5)
Statutes of limitations, interest, and penalties. Statutes of limitations, interest, and penalties under ss. 71.77, 71.82, and 71.83 apply to determinations made under this section without regard to the action or inaction of pass-through members.
(6)
Contested adjustments.
(a)
Except as provided in par. (b), a determination made by the department under this section is final and conclusive upon receipt by the pass-through entity. Pass-through members shall concede to the accuracy of and shall be bound by a determination made under this section. A pass-through entity shall timely notify all pass-through members of any administrative or judicial proceeding regarding the determination of any pass-through item.
(b)
A pass-through entity aggrieved by a determination made by the department under this section may, within 60 days after receipt of the determination, petition the department for redetermination. The department shall make a redetermination on the petition within 6 months after the date on which the petition is filed. If no timely petition for redetermination is filed with the department, the department's determination shall be final and conclusive.
(7)
Liability may be assessed to more than one person. If the department determines that a liability exists under this chapter and that the liability may be owed by more than one pass-through member of a pass-through entity, the department may assess any pass-through member of the pass-through entity for their allocated portion of additional tax otherwise due under this chapter.
(8)
Election to reduce assessment. Within 60 days after the department's determination under this section becomes final, a pass-through entity may elect, in a manner prescribed by the department, to have the pass-through entity's assessment under this section reduced for pass-through items reported and paid by pass-through members within 60 days of the election. A pass-through entity shall furnish to the department and its pass-through members the adjustments to the each pass-through member's proportionate share of pass-through items for each taxable year.
(9)
Election to preclude assessment. Within 60 days after the department's determination under this section becomes final, a pass-through entity with 25 or fewer pass-through members for all years under review may elect, in a manner prescribed by the department, to require the department to make an assessment to each of its pass-through members. This subsection does not apply to a pass-through entity if one or more of its pass-through members is a pass-through entity for any year under review. The election under this subsection does not relieve a representative designated by the pass-through entity under s. 71.80 (26) (a) of the representative's duties under s. 71.80 (26) (b) 2., 3., and 6.
History:  2021 a. 262; s. 35.17 correction in (1), (2) (intro.), (5).