Estimated Payments Under Combined Reporting
Effective for taxable years beginning on or after January 1, 2009, Wisconsin law generally requires a group of corporations engaged in a unitary business to use combined reporting to compute their Wisconsin taxable income. Affected groups of corporations must take combined reporting into account when they make their 2009 estimated payments. Generally, the designated agent of the combined group is required to make estimated payments on behalf of the entire combined group. However, exceptions and transitional rules apply. This article covers the following topics:
- Determining the "Designated Agent" Corporation
- Determining the Combined Group's Taxable Year
- Estimated Tax Requirements
- Transitional Rules for Estimated Payments
- How to Pay and Report Estimated Payments
Determining the "Designated Agent" Corporation
The designated agent of the combined group is responsible for acting on behalf of the entire group for matters relating to the combined Wisconsin return. As described below, the members can choose any member of the combined group to be the designated agent as long as the designated agent's taxable year is the same as the combined group's taxable year.
The designated agent is not required to identify itself as the designated agent until the first combined return is filed.
Determining the Combined Group's Taxable Year
The same taxable year will apply for the entire combined group. If two or more corporations in the group file in the same federal consolidated return (and there is not more than one federal consolidated return), the group's taxable year must be the same as the taxable year on that federal consolidated return.
If a corporation is on a different taxable year than the rest of the group, it may choose to convert its records to the combined group's taxable year or simply use the amounts from the year that ends during the combined group's taxable year. (Note: If a corporation is on a fiscal year beginning before January 1, 2009, it is not required to use combined reporting until its first fiscal year beginning on or after January 1, 2009.)
Estimated Tax Requirements
Generally, the designated agent is required to make estimated payments on behalf of the entire combined group. The amount of required estimated payments is determined for the combined group as a whole. Thus, the $250,000 Wisconsin net income threshold for purposes of basing estimated payments on the preceding year's tax applies to the group as a whole. Also, the threshold for applying underpayment interest ($500 in net tax liability) applies to the group as a whole.
Section Tax 2.66 of the Department's Administrative Rules provides more details on how to determine the required estimated tax payments. This Administrative Rule section also provides more details on the transitional rules discussed below.
Transitional Rules for Estimated Payments
The following transitional rules apply:
- For the first year that a combined group files a combined return, a member of the group that is not the designated agent may make estimated payments on its own behalf, provided the payments are reported on Form 4M as described in the next section.
- A combined group member's credit for a prior year overpayment may be applied to the combined return, provided it is reported on Form 4M as described in the next section.
- For the first year that a combined group files a combined return, estimated payments based on the preceding year's tax liability are based on the sum of the tax liabilities of the combined group members for the preceding year. However, estimated payments may only be based on the preceding year's liability if all combined group members filed returns in their preceding taxable year and that preceding taxable year was 12 months.
- The law (s. 71.255(10), Stats.) provides a grace period for estimated payments that are due less than 45 days after March 6, 2009. The due date of these payments is extended to the next subsequent installment due date.
How to Pay and Report Estimated Payments
As mentioned above, the designated agent is not required to register as the designated agent in order to submit estimated payments on behalf of the group. The designated agent is also not required to identify the members of the group at the time that it makes an estimated payment on behalf of the group.
The designated agent should use electronic funds transfer or a Form 4-ES, Corporation Estimated Payment Voucher, to make the estimated payments in the same manner as it would under separate entity filing.
If any combined group member other than the designated agent applies a separate estimated payment or a credit from a prior year overpayment to the combined return, the designated agent must report that payment or credit amount on the Form 4M, Combined Group Member-Level Data, that it completes for that member. (The designated agent is required to prepare and submit with the combined return a Form 4M for each combined group member, regardless of whether the member had separate estimated payments or prior year overpayments).
Last updated August 14, 2009