Instructions For Form 3 - Wisconsin Partnership Return

Line-by-Line Instructions

(continued)

Page 11

The adjustment (column c) for tax-exempt income (that is, the

upon or contributory to the operation of the business as a whole. It

amount of such interest reported on line 16, column b, which is tax-

isn’t necessary that each division or branch operating in Wisconsin

able by Wisconsin) is the amount computed for the period of

contribute to the activities of all divisions or branches outside Wis-

residence. The Wisconsin amount (column d) of tax-exempt interest

consin.

income is the difference between columns b and c. The calculation of

federally tax-exempt interest that is taxable by Wisconsin is:

What Is Nonapportionable Income

Nonapportionable income is that income which is allocable directly

Period of residence:

$300 x .3333 x 90/365

Period of nonresidence:

to a particular state. It includes income or loss derived from the sale

Total

of nonbusiness real or tangible personal property or from rentals and

royalties from nonbusiness real or tangible personal property. This

income is assigned to the state where the property is located.

The United States government interest income included on line 4a,

column d, is calculated as follows:

Total nonapportionable income (loss) is removed from total company

Period of residence:

$100 x .3333 x 90/365

net income before the apportionment percentage is applied. The

Period of nonresidence:

Wisconsin nonapportionable income (loss) is then combined with the

Total

Wisconsin apportionable income to arrive at Wisconsin net income.

What Is the Apportionment Percentage

Determining the Wisconsin Income

For unitary, multistate businesses (except air carriers, motor carriers

Of Multistate Partnerships

of property, railroads and sleeping car companies, pipeline compa-

nies, financial organizations, and public utilities whose incomes are

apportioned by special rules of the department), the apportionment

A partnership that does business in Wisconsin and at least one other

percentage is determined by the weighted average of the following

state or foreign country must determine the amount of income attrib-

three ratios:

utable to Wisconsin for purposes of figuring (a) its temporary

recycling surcharge and (b) a nonresident or part-year resident indi-

1. Wisconsin tangible property to total company (partnership) tangi-

vidual or fiduciary partner’s share of partnership income taxable by

ble property.

Wisconsin. The partnership must use either the apportionment

method or the separate accounting method to allocate a portion of its

2. Wisconsin payroll to total company (partnership) payroll.

income to Wisconsin.

3. Wisconsin sales to total company (partnership) sales. (This ratio

is double-weighted.)

What Is Apportionment

Air carriers, motor carriers, railroads and sleeping car companies,

Under the apportionment method, a partnership shows all income and

pipeline companies, financial organizations (except insurance compa-

deductions for the partnership as a whole and then assigns a part to

nies), and public utilities use special apportionment percentages

Wisconsin according to a formula that determines Wisconsin net

established for these companies in Wisconsin Administrative Code

income.

sections Tax 2.46, 2.47, 2.475, 2.48, 2.49, and 2.50. Professional

sports clubs figure their property, payroll, and sales factors under the

Who Must Use Apportionment

rules provided in Wisconsin Administrative Code section Tax 2.505.

A partnership engaged in business in and outside Wisconsin is re-

For further information about the special apportionment percentages,

quired to report a portion of its total company net income to

contact any Department of Revenue office.

Wisconsin using the apportionment method if its Wisconsin opera-

tions are a part of a unitary business, unless the department gives

What Is Separate Accounting

permission to use separate accounting (see the instructions for sepa-

Under the separate accounting method, a partnership must keep

rate accounting on page 11). To use the apportionment method, a

separate records of the sales, cost of sales, and expenses for the

partnership must have business activity sufficient to create nexus in

Wisconsin business.

Wisconsin and at least one other state or foreign country.

“Nexus” means that a partnership’s business activity is of such a

Who Must Use Separate Accounting

degree that the state or foreign country has jurisdiction to impose an

A partnership engaged in a nonunitary business in and outside Wis-

income tax or franchise tax measured by net income. Under Public

consin is required to determine the amount of income attributable to

Law 86-272, a state can’t impose an income tax or franchise tax

Wisconsin by separate accounting. A nonunitary business is one in

based on net income on a partnership selling tangible personal prop-

which the operations in Wisconsin aren’t dependent upon or con-

erty if the partnership’s only activity in the state is the solicitation of

tributory to the operations outside Wisconsin.

orders, which orders are approved outside the state and are filled by

delivery from a point outside the state.

A unitary business may use separate accounting only with the ap-

proval of the department. An application for such approval must set

What Is a Unitary Business

forth, in detail, the reasons why separate accounting will more clearly

reflect the partnership’s Wisconsin net income. It should be mailed to

A unitary business is one that operates as a unit and can’t be segre-

the Wisconsin Department of Revenue, P.O. Box 8906, Madison, WI

gated into independently operating divisions or branches. The

operations are integrated, and each division or branch is dependent

Instructions For Form 3 - Wisconsin Partnership Return - 1998 Page 11

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