Faced with a $5.7 billion state budget deficit, on Thursday, February 19th, Governor Jim Doyle signed a budget-repair bill (Senate Bill 62) into law. The new law cuts the state’s shortfall by $700 million by reducing government spending by $125 million and increasing taxes by $1.2 billion. In addition, several new and revised tax credit provisions were included in the law that aims to create jobs and increase entrepreneurial development. A number of real estate provisions were also included addressing foreclosures in Wisconsin. Finally, the law provides legislative oversight of federal stimulus funding and pre-approves $300 million in federal spending for transportation and infrastructure projects.
Key tax provisions of the new law include:
- Authorizes combined reporting of corporate income. The change would tax businesses with multistate operations as one entity; now, each subsidiary is taxed individually. This tax change is expected to bring in $215 million over the next two years.
- Imposes a hospital tax that would bring in $900 million in new federal revenues to fund a Medicaid rate increase for hospitals and pay to expand state health coverage to 41,000 childless adults.
- Adopts uniform national sales tax collection rules and applies a sales tax on specialized computer software. Last year, the state Supreme Court, in the Menasha computer sales tax case, ruled some software is exempt from the state sales tax. This law subjects all prewritten computer software packages to the sales tax. The tax is expected to generate $9.4 million. Also, digital products would be incorporated into the law and are expected to raise $10.9 million.
- Expands job creation and entrepreneurial development through new and revised tax credits, including:
- Enhances the Accelerate Wisconsin tax credit for angel and venture investors.
- Increases the aggregate per business cap to $8 million and caps angel investments from $1 million to $4 million.
- Deletes the per angel investment cap for an individual business.
- Expands eligibility to several “leading edge technologies and related processes.”
- Allocates $500,000 annually for investments in nanotechnology businesses.
- Allows a one-time transfer of early stage seed credits to a larger group of potential investors.
- Improves utilization of tax credits by authorizing the Department of Commerce to pre-qualify the amount of creditable investment allowed in each business.
- Allows early stage seed credits to be claimed against gross premiums tax.
- Allows more of the credits to be claimed in the year the investment is made.
- In January 2011, increases the angel and early stage seed investment tax credit annual allocations.
- Consolidates five existing tax credit programs (development zones, enterprise development zones, agricultural development zones, technology zones and airport development zones) which increases the ability to target those credits.
- Encourages growth of the agricultural economy by creating two new income tax credits: dairy cooperative credit for dairy manufacturing modernization and meat processing facility credits for modernization and expansion costs.
- Expands access to capital for scientific, medical and technological research by allowing WHEFA to issue federal tax-free bonds to finance projects and outstanding debt.
Key real estate provisions of the new law include:
- Provides a $200,000 grant for statewide foreclosure education and assistance to tenants.
- Requires plaintiffs in a residential rental property foreclosure to notify tenants with notices of actions and permits tenants to recover damages if not notified. Permits tenants to retain residency up to two months after sale of a foreclosed property.
- Authorizes WHEDA to issue bonds and make loans for refinancing qualified sub-prime loans for single-family residential mortgages made after Dec. 31, 2001 and before Jan. 1, 2008.
- Modifies the loan program administered by the Board of Commissioners of Public Lands to expand the prepayment period for local government borrowers; increases access to funds to counties for energy efficiency; clarifies conditions under which schools may receive short-term loans.
- Increases regulation of foreclosure reconveyances, foreclosure purchasers and foreclosure consultants.
- Complies with the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 by conforming to certain nationwide standards and establishes minimum annual fees for loan originators and loan solicitors.
- Provides $4 million to WHEDA to establish a loan loss reserve fund to leverage private investment in single-family residential first-mortgage refinancing programs.
Although the budget repair measure enacted this week begins to erase the deficit, lawmakers must still resolve a budget shortfall of more than $5 billion through mid-2011. On Tuesday, February 17th, the Governor introduced his biennial budget bill which outlined his plans to eliminate the remaining deficit. Additional alerts will be forthcoming throughout the budget process.
This client alert is one of a series designed to provide summaries of the American Recovery and Reinvestment Act of 2009 ("The Act") and information and guidance regarding opportunities and relief made available through The Act. All of The Act client alerts are available on Michael Best's Stimulus and Economic Recovery Team publications page. For additional information on this topic, please feel free to contact the authors of this alert, Michael S. Green at 608.257.7482, or email@example.com, William F. White at 608.283.2246, or firstname.lastname@example.org or Laura L. Riske at 608.283.2265 or email@example.com, or your Michael Best attorney.
If you are interested in learning about other provisions included in the Act, the Michael Best Stimulus and Economic Recovery Team is prepared to assist you in understanding the implications and in developing and implementing a strategy to secure the benefits of this unprecedented legislation. Specifically, we will assist you to identify opportunities, prepare appropriate proposals and make targeted contacts to secure funds. We will also work with you to ensure that your applications are tailored to meet your needs and that your funded projects proceed in compliance with award requirements and applicable laws.