Disclosure of Reportable Transactions - Material Advisor Requirements

  1. Who is a "material advisor"?
  2. What is a material advisor required to disclose to Wisconsin?
  3. What form does a material advisor use to disclose a reportable transaction to Wisconsin?
  4. When does a material advisor have to make the disclosure to Wisconsin?
  5. Where does a material advisor send Wisconsin disclosure statements?
  6. What penalties apply to material advisors if they fail to follow these requirements?
  7. Are there other consequences that may apply to material advisors relating to abusive tax shelters?

  1. Who is a "material advisor"?

    Any person who provides material aid, assistance or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction and who derives income from these services in an amount that exceeds the following:

    • If the services are provided to an individual, $50,000. This threshold reduces to $10,000 if the reportable transaction is a listed transaction.
    • If the services are provided to an entity and not an individual, $250,000. This threshold reduces to $25,000 if the reportable transaction is a listed transaction.

  2. What is a material advisor required to disclose to Wisconsin?

    A material advisor is required to disclose to Wisconsin any reportable transaction for which the material advisor provided services to a taxpayer who is required to file a Wisconsin income or franchise tax return.

    Additionally, a material advisor must maintain a list identifying the name and taxpayer identification number of each Wisconsin taxpayer for whom the advisor provided services as a material advisor regarding a reportable transaction, and must provide the list at the Wisconsin Department of Revenue's written request. This list must be maintained for seven years after the date the services were provided.

  3. What form does a material advisor use to disclose a reportable transaction to Wisconsin?

    The material advisor should submit a copy of the federal form used to disclose the transaction to the IRS. Currently that form is Form 8918, Material Advisor Disclosure Statement. There is no specific form required for the list of Wisconsin taxpayers affected by the reportable transaction.

  4. When does a material advisor have to make the disclosure to Wisconsin?

    The IRS currently requires these disclosures by the last day of the month following the end of the applicable calendar quarter in which the advisor became a material advisor with respect to the reportable transactions or in which the circumstances occur to require an amended disclosure statement. The deadline for sending a copy to Wisconsin is 60 days after the federal due date for the form.

  5. Where does a material advisor send Wisconsin disclosure statements?

    Material advisors should send the Wisconsin disclosures to:

    Wisconsin Department of Revenue
    Tax Shelters Program
    PO Box 8958
    Madison, WI 53708-8958

  6. What penalties apply to material advisors if they fail to follow these requirements?

    • $100,000 for a material advisor's failure to disclose a listed transaction.
    • $15,000 for a material advisor's failure to disclose a reportable transaction that is not a listed transaction.
    • $10,000 for each day the material advisor does not provide the list of affected Wisconsin taxpayers, beginning with the 21st day after receipt of the department's request for the list.

  7. Are there other consequences that may apply to material advisors relating to abusive tax shelters?

    Any person who organizes or assists in organizing a tax shelter or participates in the sale of any interest in a tax shelter, and who makes a statement that the person knows or has reason to know is false or fraudulent regarding the allowability of tax benefits to be achieved with the tax shelter, is subject to a penalty in an amount of 50% of the person's gross income derived from such act.

FOR MORE INFORMATION PLEASE CONTACT:

WISCONSIN DEPARTMENT OF REVENUE
Tax Shelters Program
PO Box 8958
Madison, WI 53708-8958
Phone: (608) 266-2772
Fax: (608) 267-0834
Email additional questions to DORFranchise@revenue.wi.gov

January 22, 2014