1. ​ Is the credit includable in taxable income?
   
   
2. Should the MA credit be included in income in the year following the year of computation even though the credit is not used and is carried forward?
   
   
3. When the MA credit is reported as income is it considered qualified production activities income?
   
   
4. When the MA credit is reported as income is it included in the numerator and denominator of the production gross receipts factor?
   
   
5. Is the manufacturing credit added to income on the pass-through entity's return where the credit was originally calculated, or at the individual level where the credit was claimed?
   
   
6. The credit is income in the year following the year computed. If a partner leaves the partnership in the year following the computation of the credit, is the partner required to include the credit in their income?
   
   
7. If the partnership files a final return, do the partners' need to add the amount of credit computed on the final partnership return in their taxable income in the year after the credit is passed through to them?
   
   
8. If a partners' manufacturing and agriculture credit passed through from a partnership is recomputed because the partner uses qualified production activities income to claim the credit for net taxes paid to other states, is the partner required to include in income the subsequent year a) their share of the credit computed by the partnership in the previous year or b) the amount claimed by the partner on their tax return in the previous year?
   
   
9. If an individual passes away and an MA credit is computed on their final individual income tax return, is the credit amount included in Wisconsin income on their estate's tax return for the following year?
   
   

1. Is the credit includable in taxable income?

   The amount of credit computed (not claimed) 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. This is true even if you cannot use the full amount of the credit computed this year to offset tax liability for this year and must carry over part or all of it to future years.

2. Should the MA credit be included in income in the year following the year of computation even though the credit is not used and is carried forward?

   Yes, the credit computed must be included in income following the year in which it is computed regardless of whether or not the taxpayer uses the credit.

3. When the MA credit is reported as income is it considered qualified production activities income?

   No. Qualified production activities income is only income that results from the sale of tangible personal property.

4. When the MA credit is reported as income is it included in the numerator and denominator of the production gross receipts factor?

   The prior year's M&A credit is not included in the numerator because it is not a production gross receipt.

   The prior year's M&A credit is included in the denominator because all sources of gross income are included in the denominator.

5. Is the manufacturing credit added to income on the pass-through entity's return where the credit was originally calculated, or at the individual level where the credit was claimed?

   The entire credit must be added to the pass-through entity's income for the year following the year in which the credit was computed to the extent not included in federal ordinary business income, regardless of whether the partner, member, or shareholder was able to use the entire amount.

6. The credit is income in the year following the year computed. If a partner leaves the partnership in the year following the computation of the credit, is the partner required to include the credit in their income?

   No. The amount of credit computed is added to the partnership's income. If the partner leaves the partnership following the year the credit is computed, the income from the computation of the credit will never be allocated to the former partner.

7. If the partnership files a final return, do the partners' need to add their share of the credit computed on the final partnership return in their taxable income in the following year?

   Yes. Partners must include in income their share of the credit computed by the partnership in the prior taxable year.

8. If a partners' manufacturing and agriculture credit passed through from a partnership is recomputed because the partner uses qualified production activities income to claim the credit for net taxes paid to other states, is the partner required to include in income the subsequent year a) their share of the credit computed by the partnership in the previous year or b) the amount claimed by the partner on their tax return in the previous year?

   The partnership is required to include in partnership income the amount of manufacturing and agriculture credit computed by the partnership in the previous year, regardless of the amount claimed by its partners. Therefore, the partner must include in their income the share of credit computed and included in income by the partnership in the previous year.

9. If an individual passes away and an MA credit is computed on their final individual income tax return, is the credit amount included in Wisconsin income on their estate's tax return the following year?

   No, the MA credit computed on the final individual income tax return is not required to be included in Wisconsin income on the following year's estate tax return. For the estate to be required to include the MA credit in Wisconsin income, it would have had to compute the MA credit on its Form 2, Wisconsin Fiduciary Income Tax for Estates and Trusts, in the prior year.

Applicable Laws and Rules

This document provides statements or interpretations of the following laws and regulations enacted as of December 27, 2022: secs. 71.05, 71.07, 71.21, 71.26, 71.28 and 71.34, Wis. Stats., and 26 U.S. CFR § 1.199-1.

Laws enacted and in effect after this date, new administrative rules, and court decisions may change the interpretations in this document. Guidance issued prior to this date, that is contrary to the information in this document is superseded by this document, according to sec. 73.16(2)(a), Wis. Stats.

The department welcomes your input on our guidance. Submit comments on this guidance document.

Guidance Document Number: 100164

December 27, 2022