Manufacturing and Agriculture Credit

  1. What is the manufacturing and agriculture credit?
  2. What happened to the Wisconsin qualified production activities credit?
  3. Who is eligible to claim the credit?
  4. Who may not claim the credit?
  5. What is the rate of credit?
  6. Is there a maximum amount of credit that may be claimed?
  7. How do I know if my property is assessed as either manufacturing or agricultural?
  8. Am I required to determine if my property is assessed as manufacturing or agricultural on a yearly basis?
  9. How is the credit computed?
  10. How is the qualified production activities income limited for corporations?
  11. What income producing activities do not qualify for the credit?
  12. Does income received from producing and installing real property qualify for the credit?
  13. Can a person who rents his or her farmland to another person claim the credit?
  14. What form is used to claim the credit?
  15. Am I required to submit documentation with my tax return?
  16. Is the credit refundable or nonrefundable?
  17. Is the credit includable in taxable income?
  18. Can the credit be shared with other members of a Wisconsin combined group?
  19. When must the credit be claimed?
  20. Where can I find this credit in the Wisconsin Statutes?
  1. What is the manufacturing and agriculture credit?

    The manufacturing and agriculture credit is available to claimants that derive qualified production activities income from property located in Wisconsin that is assessed as either manufacturing or agricultural.

  2. What happened to the Wisconsin qualified production activities credit?

    The qualified production activities credit was renamed the manufacturing and agriculture credit as a result of 2011 Act 232.

  3. Who is eligible to claim the credit?

    An individual, estate, trust, partnership, limited liability company (LLC), or corporation can compute the credit if the claimant owns or rents and uses in Wisconsin, real property and improvements assessed as agricultural property under s. 70.32(2)(a)4., Wis. Stats., or owns or rents and uses in Wisconsin, real and personal property assessed under s. 70.995, Wis. Stats.

  4. Who may not claim the credit?

    Insurance companies cannot claim the credit. Partnerships, LLCs treated as partnerships, and tax-option (S) corporations cannot claim the credit; however, the eligibility for claiming the credit and the computation of the credit is based on the amount of qualified production activities income generated by the pass-through entity. The credit computed by those entities can pass through to the partners, members, or shareholders. Additionally, trusts and estates may pass the credit through to their beneficiaries based on the income allocable to each.

  5. What is the rate of credit?

    The credit is a percentage of eligible qualified production activities income. The credit is calculated by multiplying eligible qualified production activities income by one of the following percentages:

    • For taxable years beginning after December 31, 2012, and before January 1, 2014, 1.875 percent
    • For taxable years beginning after December 31, 2013, and before January 1, 2015, 3.75 percent
    • For taxable years beginning after December 31, 2014, and before January 1, 2016, 5.526 percent
    • For taxable years beginning after December 31, 2015, 7.5 percent
  6. Is there a maximum amount of credit that may be claimed?

    There is no maximum dollar limit; however, the maximum amount of credit that may be claimed is up to the gross tax on the corporate franchise or income tax return.

  7. How do I know if my property is assessed as either manufacturing or agricultural?

    Manufacturing:

    To find out if your property is assessed as manufacturing, visit the department's online manufacturing assessment role lookup at:  https://ww2.revenue.wi.gov/RETRWebRolls/application.

    For questions, contact the regional office located on page 2 of the following document: revenue.wi.gov/forms/manuf/pa-750R.pdf or contact the Department of Revenue's Manufacturing Bureau at 608-266-8662 or email: mfgtelco@revenue.wi.gov.

    Agricultural:

    To find out if your property is assessed as agricultural and for more information, find the local assessor assigned to the county and municipality you reside at: revenue.wi.gov/training/assess/assrlist.pdf.

  8. Am I required to determine if my property is assessed as manufacturing or agricultural on a yearly basis?

    Yes. Property assessments change on a yearly basis so a claimant must first verify that the property where the qualified production activities income is generated is assessed as manufacturing or agricultural.

  9. How is the credit computed?

    If a claimant is eligible for the credit based on both manufacturing and agricultural activities, the credit must be computed separately for each activity.

    The credit is computed as follows:

    Production Gross receipts1
    Less: Cost of goods sold2
    Direct Costs3
    Indirect Costs4 multiplied by production gross receipts factor5
    = Qualified production activities income6
    Multiplied by manufacturing property factor 7 or agriculture property factor8
    = Eligible qualified production activities income9
    Multiplied by credit rate in effect for the taxable year10
    = Total credit

    1 Production gross receipts are the receipts from the lease, rental, license, sale, exchange, or other disposition of qualified production property. Footnotes 7 and 8 describe what is qualified production property.
    2 Cost of goods sold are the production costs associated with the production gross receipts.
    3 Direct costs are the costs associated with the production gross receipts and include all the claimant's ordinary and necessary expenses paid or incurred during the taxable year to carry on a trade or business that are deductible under section 162 of the Internal Revenue Code and identified as direct costs in the claimant's managerial or cost accounting records.
    4 Indirect costs are the costs associated with the production gross receipts and include all the claimant's ordinary and necessary expenses paid or incurred during the taxable year to carry on a trade or business that are deductible under section 162 of the Internal Revenue Code, other than cost of goods sold and direct costs, and identified as indirect costs in the claimant's managerial or cost accounting records.
    5 The production gross receipts factor is a fraction consisting of the production gross receipts (numerator) divided by the gross income from all sources except those specifically excluded under the Internal Revenue Code or excluded under Wisconsin law (denominator). Items included in the denominator include: gross sales, gross dividends, gross interest income, gross rents, gross royalties, the gross sales price from the disposition of capital and business assets, gross income from pass-through entities, and all other gross receipts that are included in income before apportionment.
    6 Qualified production activities income is the amount of the claimants production gross receipts for the taxable year that exceeds the sum of the cost of goods sold that are allocable to the receipts, the direct costs allocable to the receipts, and the indirect costs, with the result multiplied by the production gross receipts factor.

    Qualified production activities income does not include any of the following:

    1. Income from film production
    2. Income from producing, transmitting, or distributing electricity, natural gas, or potable water
    3. Income from constructing real property
    4. Income from engineering or architectural services performed with respect to constructing real property
    5. Income from the sale of food and beverages prepared by the claimant at a retail establishment
    6. Income from the lease, rental, license, sale, exchange, or other disposition of land
    7 The manufacturing property factor is the average value of the claimant's real and personal property assessed under s. 70.995, Wis. Stats., that is owned or rented and used in Wisconsin by the claimant to manufacture qualified production property (numerator), divided by the average value of all the claimant's real and personal property owned or rented during the taxable year and used by the claimant to manufacture qualified production property (denominator).

    Qualified production property is tangible personal property manufactured in whole or in part by the claimant on property that is assessed as manufacturing property under s. 70.995, Wis. Stats.

    The property owned by the claimant is valued at its original cost and property rented by the claimant is valued at an amount equal to the annual rent paid by the claimant, less any annual rental received by the claimant for sub-rentals, multiplied by 8.

    The average value of the property is determined by averaging the values at the beginning and ending of the taxable year.
    8 The agriculture property factor is the average value of the claimant's real property and improvements assessed under s. 70.32(2)(a)4., Wis. Stats., that is owned or rented and used in Wisconsin by the claimant during the taxable year to produce, grow, or extract qualified production property (numerator) divided by the average value of all the claimant's real property and improvements owned or rented during the taxable year and used by the claimant to produce, grow, or extract qualified production property.

    Qualified production property is tangible personal property produced, grown, or extracted in whole or in part by the claimant on or from property assessed as agricultural property under s. 70.32(2)(a)4., Wis. Stats.

    The property owned by the claimant is valued at its original cost and property rented by the claimant is valued at an amount equal to the annual rental paid by the claimant, less any annual rental received by the claimant from sub-rentals, multiplied by 8.

    The average value of the property is determined by averaging the values at the beginning and ending of the taxable year.
    9 The amount of the eligible qualified production activities income that a claimant may claim in computing the credit is the lesser of the following:

    1. The eligible qualified production activities income determined using the computation above
    2. Income apportioned to this state under s. 71.25(5)(6), and (6m), or
    3. Income determined to be taxable under s. 71.255(2)
    10 The manufacturing and agriculture credit rate is as follows:

    1.875% for taxable years beginning on or after January 1, 2013 and before January 1, 2014.
    3.75% for taxable years beginning on or after January 1, 2014 and before January 1, 2015.
    5.526% for taxable years beginning on or after January 1, 2015 and before January 1, 2016.
    7.5% for taxable years beginning on or after January 1, 2016.

  10. How is the qualified production activities income limited for corporations?

    For a corporation, the eligible qualified production activities income is the lesser of:

    • Eligible qualified production activities income,
    • Income apportioned to Wisconsin, or
    • Income taxable to Wisconsin as determined by Wisconsin's combined reporting law, if the corporation is a member of a Wisconsin combined group
  11. What income producing activities do not qualify for the credit?

    The following activities do not qualify as qualified production activities income for purposes of the manufacturing and agriculture credit:

    • Income from film production
    • Income from producing, transmitting, or distributing electricity, natural gas, or portable water
    • Income from constructing real property (except that income from producing real property can qualify for the credit. See example in number 12)
    • Income from engineering or architectural services performed with respect to constructing real property
    • Income from the sale of food and beverages prepared by the claimant at a retail establishment
    • Income from the lease, rental, license, sale, exchange, or other disposition of land
  12. Does income received from producing and installing real property qualify for the credit?

    Income received from producing/manufacturing materials or products on property that is assessed as manufacturing property qualifies for the manufacturing and agriculture credit; however, income received from constructing real property does not qualify for the credit.

    In order to qualify for the manufacturing and agriculture credit, a claimant must derive qualified production activities income from the sale, lease, rental, license, exchange, or other disposition of tangible personal property that is located in Wisconsin and assessed as manufacturing or agricultural. However, qualified production activities income does not include income from any of the following activities: film production; producing, transmitting, or distributing electricity, natural gas, or portable water; constructing real property, engineering or architectural services performed with respect to constructing real property; food and beverages prepared by the claimant at a retail establishment; and income from the lease, rental, license, sale, exchange, or other disposition of land.

    In situations where a claimant receives gross receipts from manufacturing the property and installing the manufactured product as real property, the claimant must maintain adequate records in order to allocate the receipts between the manufacturing and installation of the property. In addition, the pricing used to determine the value of the product manufactured must be the fair market value that unrelated third party would pay for the same material.

    For a detailed example, see the tax release in Wisconsin Tax Bulletin #179:  revenue.wi.gov/ise/wtb/index.html

  13. Can a person who rents his or her farmland to another person claim the credit?

    No, only the person renting the farmland is eligible to claim the credit. One of the requirements to claim the credit is that qualified production activities income is generated from property that is assessed as either manufacturing or agricultural. Since the person renting and farming the land is the one generating the qualified production activities income, only the renter is eligible to claim the credit.

  14. What form is used to claim the credit?

    Wisconsin Schedule MA— Wisconsin Manufacturing and Agriculture Credit, will be used to claim the credit. The schedule will be posted to the department's website by December 1, 2013.  http://www.revenue.wi.gov/html/taxforms13.html

  15. Am I required to submit documentation with my tax return?

    For claimants not receiving the credit passed through from a partnership, tax-option (S) corporation, limited liability company, estate, or trust: The only documentation you are required to submit with your tax return is Wisconsin Schedule MA—Wisconsin Manufacturing and Agriculture Credit.

    For claimants receiving the credit passed through from a partnership, tax-option (S) corporation, limited liability company, estate, or trust:  You are required to submit Wisconsin Schedule MA—Wisconsin Manufacturing and Agriculture Credit, and a copy of the Wisconsin Schedule 3K-1, Schedule 5K-1, and/or Schedule 2K-1.

  16. Is the credit refundable or nonrefundable?

    The credit is nonrefundable so any amount not used to offset the current Wisconsin income or franchise tax liability may be carried forward for 15 years.

  17. Is the credit includable in taxable income?

    The amount of credit computed is income and must be reported as income on the claimant's Wisconsin franchise or income tax return for the taxable year immediately after the taxable year in which the credit is computed.

  18. Can the credit be shared with other members of a Wisconsin combined group?

    The credit may not be shared with other members of the combined group.

  19. When must the credit be claimed?

    The credit must be claimed within four years of the unextended due date of the tax return.

  20. Where can I find this credit in the Wisconsin Statutes?

    The credit is in the following sections of Chapter 71—Income and Franchise Taxes for State and Local Revenues:

    Section 71.07(5n), Wis. Stats., at https://docs.legis.wisconsin.gov/document/statutes/71.07(5n)

    Section 71.28(5n), Wis. Stats., at https://docs.legis.wisconsin.gov/document/statutes/71.28(5n)

FOR MORE INFORMATION PLEASE CONTACT:

WISCONSIN DEPARTMENT OF REVENUE
Corporation Franchise/Income Tax Assistance
Mail Stop 5-144
PO Box 8906
Madison, WI 53708-8906
Phone: (608) 266-2772
Fax: (608) 267-0834
Email Additional Questions

Last updated April 17, 2013