Once the dust settled on the 2017-2019 biennial state budget, several good tax reforms for the industry and our customers were signed into law by Governor Scott Walker. One of the major legislative pushes by a coalition of over 30 organizations representing over 400,000 businesses in Wisconsin was to repeal the personal property tax.
The Personal Property Tax (PPT) is a tax imposed on "tangible" personal property, consisting of that which can be touched and moved, i.e. equipment and furniture. Personal property taxes are assessed and collected by local governments, including cities, villages, and towns.
Businesses in Wisconsin pay corporate taxes, income taxes, labor and employment taxes, and real estate property taxes, in addition to the PPT, which places Wisconsin on the top of many lists ranking state tax obligations. Eliminating the personal property tax creates an equitable tax code – treating everyone equally under the property tax law.
Due to the large cost of repealing this tax, the legislature made the decision to make a "down payment" on eliminating the tax altogether and begin by exempting "non-manufacturing machinery." The legislature did not define what this machinery is.
WBA, along with other partners, has met with the Department of Revenue since the budget passed. Here has what we have learned so far:
- DOR will not be issuing guidance to assessors on the new exemption. During the meeting with Secretary Rick Chandler, he believed that anything previously reported under Schedule C: Machinery, Tools & Patterns would now be exempt. He was advised that many businesses filed under Schedule C or Schedule D: Furniture & Fixtures regardless of whether it was machinery or furniture because the tax ramifications were the same and they didn't need to spend the time classifying items as long as it was reported. DOR restated that they are not issuing guidance and that these situations will need to be addressed by the local assessors.
- We have confirmed with an accountant and an attorney that businesses can "re-classify" machinery that may have been previously reported as Furniture as exempt (meaning that it will not be reported on their Statement of Personal Property).
Based on this information, please be advised of the following, with a disclaimer to work with your accountant and attorney.
- Statements of Personal Property will be due March 1, 2018 and will no longer include schedules for Machinery, Tools & Patterns or Computers and Related Equipment.
- Start compiling and reviewing your personal property/fixed asset list now.
- Each individual item/personal property owned will need to be individually evaluated to determine whether it is "Furniture & Fixtures," "Other" or "Machinery." If it falls under the definition of machinery, it does not need to be included on your Statement of Personal Property. The definition of machinery is: a structure or assemblage of parts that transmits forces, motion, or energy from one part to another in a predetermined way by electrical, mechanical, or chemical means.
- By law, assessors have the right to view personal property based on the Statement, so be prepared to justify items previously reported as taxable that are now exempt.
From an economic development perspective, repeal of the personal property tax will incite businesses to reinvest in their employees and communities and will help attract businesses to Wisconsin. Seven states have no personal or tangible property tax, including our closest neighbors: Minnesota, Iowa, Illinois, North Dakota, and South Dakota, with Michigan most recently phasing out the personal property tax in 2014.
Turke is WBA director – government relations.
Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution’s attorney for special legal advice or assistance.