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United States: Administrative Agent's Responsibilities With Regard To Wisconsin Income Tax Payable By Out-Of-State Lenders In Connection With A Loan Secured By Wisconsin Property
As noted in prior Real Estate Opinion Updates, an out-of-state
lender may be subject to Wisconsin income tax even in situations in
which their sole contact with the state of Wisconsin is limited to
making one loan secured by Wisconsin real or personal property. In
light of this possibility, Reinhart's real estate and tax team
have been recently asked to examine whether a bank or other
institution serving as the administrative agent for a pool of
lenders would be taking on any withholding or tax filing
obligations on behalf of any of the lenders in the pool who may be
obligated to pay Wisconsin income tax. In this short (but hopefully
reassuring) update, we note that such withholding and filing
obligations do not appear to be required of a bank or other
institution simply due to its role of serving as an administrative
agent for a loan secured by Wisconsin property.
Withholding Obligations of Administrative Agents for
Loans Secured by Wisconsin Property
Wisconsin law does not require a bank or other entity, acting
solely as the administrative agent, to withhold income tax on the
interest and principal amounts collected from the Borrower and
distributed to the Lenders. Withholding tax obligations in
Wisconsin are found in Chapter 71, Subchapter X. In addition,
withholding requirements for pass-through entities are found in
Wisconsin Statutes § 71.775. There is no provision in Chapter
71, Subchapter X that would require a bank or other entity, as
administrative agent, to withhold income tax on amounts distributed
to the Lenders. Further, it is our understanding that an
administrative agent is not considered a pass-through entity for
this purpose under Wisconsin law and, therefore, the withholding
tax requirements under Wisconsin Statutes § 71.775 do not
apply.1
Tax Information Return Obligations of Administrative
Agents for Loans Secured by Wisconsin Property
The requirements for filing tax information returns in Wisconsin
are found in Wisconsin Statutes Chapter 71, Subchapter XI. There is
no provision in Chapter 71, Subchapter XI that would require a
lender to file tax information returns in its role as
administrative agent. Note, this e-alert addresses only information
returns for Wisconsin income taxes and does not address whether
there are any federal income tax or federal or state regulatory
provisions that may require information reports or returns related
to an entity's role as an administrative agent.
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guide to the subject matter. Specialist advice should be sought
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