On June 20, 2023, Wisconsin enacted significant legislation pertaining to the repeal of the personal property tax and certain filing requirements associated with the tax. These measures aim to ease the burden on businesses and streamline compliance procedures.
Here are the key aspects of these legislative changes and their implications for both businesses and the state.
Changes for all Wisconsin businesses
The repeal takes effect for property tax assessments applicable for January 1, 2024, and applies to manufacturing and other business personal property alike.
The act further clarifies that manufactured and mobile homes, not otherwise exempt from taxation under section 66.0435 (3), will be assessed as real property. Buildings, improvements and fixtures are also considered real property if they are on:
- Leased lands
- Exempt lands
- Forest croplands
- Managed forest lands
Businesses remain liable for personal property taxes relating to reports filed for the January 1, 2023, date of assessment and should continue to monitor their current year assessments for accuracy.
Moving forward, the distinction between real and personal property will become even more critical. Additionally, leasehold improvements and other improvements may require review if previously treated as personal property.
Changes for manufacturers
The Wisconsin Department of Revenue (WDOR) will continue to assess all real property of manufacturing establishments, except property that is not contiguous with or located within 1,000 feet of the parcel on which the production process occurs.
WDOR will also continue to receive and review requests for manufacturing classification of real property.
This classification is a requirement for manufacturers who wish to claim the Wisconsin manufacturing and agriculture credit. Manufacturers will continue to file property tax returns to report each real estate parcel classified as manufacturing.
Requests for manufacturing classification are due in writing on or before July 1 of the year for which the classification is desired. For requests received after July 1, the department may, but is not required to, issue a notice of determination by December 31.
Prior to the enactment of the bill, certain manufacturers were assessed by WDOR with respect to the personal property used in manufacturing operations, while the real estate was assessed by the local assessor.
Concerns over the manufacturing and agriculture credit
Because a manufacturing assessment by WDOR is required to qualify for the Wisconsin manufacturing and agriculture credit, concern was raised that those manufacturers whose real estate was assessed locally would lose the benefit of the income tax credit.
The act addresses those concerns in newly created section 70.995(5n), which states that any establishment classified as manufacturing prior to January 1, 2024, is presumed to be engaged in manufacturing and does not need to reapply.
The act also makes several changes to the credit rules. The definition of qualified production property is amended to clarify that:
“Tangible personal property manufactured in this state may only be qualified production property if it is manufactured on property approved to be classified as manufacturing real property for purposes of s. 70.995, even if it is not eligible to be listed on the department's manufacturing roll until January 1 of the following year.”
The act also clarifies that manufacturers are not required to reduce the credit if a portion of their real property is not assessed as manufacturing, provided all their manufacturing activities occur in Wisconsin.
How Wipfli can help
The repeal of the personal property tax has clear benefits for the business community. However, future questions will likely arise on issues such as the distinction between real and personal property and its impact on the real estate assessment.
Wipfli’s team of state and local professionals are here to assist you as your business monitors the classification of its property and the impact of the new law on its operations. Contact us to learn more about how we can help you navigate these changes and minimize your tax exposure.
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