State & Local Tax Impacts of COVID-19 for Wisconsin – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: Dec 16, 2021

Information current as of November 30, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Wisconsin

  • Wisconsin updated guidance on PPP loans and expenses to clarify that both federal and Wisconsin laws provide an exclusion from income for forgiveness of debt on the original PPP loans. However, expenses incurred that are paid with the forgivable PPP funds (original) aren’t deductible for Wisconsin income/franchise tax purposes and must be added back to Wisconsin income in the year incurred or paid. With respect to subsequent PPP loan proceeds that are forgiven and excluded from gross income for federal purposes, the guidance notes that taxpayers must include in Wisconsin gross income any subsequent PPP loan proceeds forgiven. However, taxpayers may deduct expenses paid with subsequent PPP loan proceeds that would otherwise be deductible.
    • Wisconsin Department of Revenue, News for Tax Professionals; January 22, 2021, and Wisconsin DOR Tax Bulletin No. 212; February 1, 2021.
  • Wisconsin adopted certain provisions of the 2021 Consolidated Appropriations Act (CAA), including the federal tax treatment of income and expenses relating to original and subsequent PPP loans. Taxpayers may exclude from income the forgiveness of debt on PPP loan proceeds and deduct expenses paid with PPP loan proceeds that are otherwise deductible. Wisconsin also adopted the CAA provisions that relate to tax treatment of income and expenses relating to certain federal grants, loans, and subsidies including EIDL loans and targeted EIDL advances, grants for shuttered venue operators, and subsidy for certain loan payments. Act 1 also created an exemption from income and franchise tax income received from state grant programs used for purposes including food insecurity initiatives, lodging industry grants, farm support programs, and nonprofit grant programs. For Wisconsin, this income should be excluded from federal adjusted gross income by making a subtraction modification on the appropriate line of the tax return. Expenses paid for with these programs and deducted in the computation of federal adjusted gross income aren’t required to be added back on the Wisconsin return. Lastly, Act 2 provides that S corporations that make an entity-level tax election are limited to a capital loss deduction of $500 and are entitled to the 30 percent or 60 percent long-term capital gain exclusion.
    • A.B. 2 (Act 1) and A.B. 3 (Act 2), Laws 2021, effective February 20, 2021.
  • Wisconsin issued information on the taxability of state grant programs for corporate income, individual income, and property tax purposes. Income received from allocations issued by Wisconsin with money received from the Coronavirus Relief Fund and used for certain purposes is exempt from income and franchise tax under the 2021 Wisconsin Act 1. An individual who received a cash grant can’t exclude it from household income when computing their homestead credit. The guidance also includes an agency list with the purpose, contact information, and program. The DOR suggests that taxpayers who received a grant and are unsure whether it’s from one of the programs should contact the responsible agency.
    • Wisconsin DOR, Guidance Document 100280; March 2, 2021.
  • Wisconsin has extended the individual income tax return filing and payment due dates to May 17, 2021. Interest and late filing fees will apply beginning May 18, 2021. This relief doesn’t apply to 2021 estimated tax payments for individuals, the first payment of which is due April 15, 2021, or to any other returns or tax payments due to the Wisconsin Department of Revenue.
    • Wisconsin DOR, News Release; March 18, 2021.
  • Wisconsin announced that its temporary COVID-19-related modification to nexus requirements is to end on December 31, 2021. Under the temporary relief which took effect on March 13, 2020, no nexus is created for out-of-state businesses that do not otherwise have activity in Wisconsin when their employees temporarily work remotely from homes in Wisconsin. The state’s standard treatment of nexus is to apply as of January 1, 2022, which means that out-of-state employers will have nexus in Wisconsin if their employees work from homes in Wisconsin.
    • Wisconsin DOR, Withholding Tax Update 2021-1; November 3, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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