United States: Wisconsin Adopts Changes To Business Tax Incentive Programs

On July 13, Wisconsin Governor Scott Walker signed legislation making sweeping changes to existing state income tax credit programs.1 Specifically, the state enacted the Business Development Tax Credit program to replace the Economic Development Tax Credit and the Job Creation Tax Credit, eliminated the Job Creation Deduction, and made changes to the Research Expense Tax Credit and Manufacturing and Agricultural Tax Credit programs.

Business Development Tax Credit Enacted

Effective for taxable years beginning on or after January 1, 2016, the Business Development Tax Credit is created as a refundable income tax incentive program.2 The credit is available to eligible businesses3 that operate or intend to operate a business in Wisconsin, and enter into a contract with the Wisconsin Economic Development Corporation (WEDC).4 The WEDC may provide a refundable credit to a qualified business that includes some or all of the following amounts:

  • Up to 15 percent of the wages paid to an eligible employee.5 Generally, a 10 percent credit is available, but an additional 5 percent credit may be available if the eligible employee is employed in an economically distressed area;6
  • Up to 50 percent of the training costs incurred to enhance an eligible employee's knowledge and skills in the workplace;7
  • Up to 3 percent of capital investment in personal property and up to 5 percent of eligible capital investment in real property provided the investment is at least $1,000,000 or, if less than $1,000,000, the investment is equal to at least $10,000 per eligible employee employed on the project;8 and
  • An amount equal to a percentage of wages paid to an eligible employee created or retained in connection with the claimant's location or retention of its corporate headquarters in Wisconsin.9

The credit will be awarded by the WEDC on a case-by-case basis, and the combination and amount of benefits will be determined based on the level of capital investment, the number of jobs created and/or retained, project location, and the strategic importance of the business. In the event the applicant does not have sufficient Wisconsin income tax liability to absorb the entire credit, any excess credits will be refunded to the company.10

Other Legislative Updates

Jobs Tax Credit and Economic Development Tax Credit. The Jobs Tax Credit and Economic Development Tax Credit are no longer available on or after January 1, 2016.11 However, these credits may still be claimed if the company has executed a contract or a letter of intent to enter into a contract prior to January 1, 2016.12

Job Creation Deduction. The subtraction from federal taxable income based on the increase in the number of full-time employees that are employed in Wisconsin is no longer available for taxable years beginning on or after January 1, 2015.13

Research Expense Tax Credit. For tax years beginning on or after January 1, 2015, the Research Expense Tax Credit is increased to 5.75 percent from 5 percent of qualified expenses (the credit is increased to 11.5 percent from 10 percent for internal combustion engine activities and energy efficient products). The credit is based on the amount by which qualified research expense exceeds 50 percent of the average qualified research expense for the previous 3 years.14

Manufacturing and Agriculture Credit. For taxable years beginning after December 31, 2014 and before January 1, 2016, the Manufacturing and Agriculture Credit is reduced to 5.025 percent from 5.526 percent.15 For taxable years beginning on or after January 1, 2016, the credit percentage remains at 7.5 percent.16 In addition, the following changes are effective retroactively to January 1, 2013:

  • "Direct costs" and "indirect costs" are defined as any ordinary and necessary business expenses that are deductible under the Internal Revenue Code;17 and
  • Once approved, taxpayers may claim the credit for classification as a manufacturer even if they are not eligible for listing on the Wisconsin Department of Revenue's manufacturing roll until the following year.18


The Business Development Tax Credit was created with the intention of encouraging job creation and capital investment in Wisconsin. It is important to note that the benefits associated with the new Business Development Tax Credit program are negotiated with the WEDC and are not available "as of right." If the company meets the program criteria, the company is able to initiate negotiations with the WEDC. Once approved, the company must enter into a formal contract with the WEDC. The Business Development Credit is limited to 10 cumulative years.19

Also, the ability to first apply the enhanced Manufacturing and Agriculture Tax Credit against their tax liabilities may potentially allow eligible companies to sufficiently reduce their liabilities and receive Business Development Tax Credit refunds. Due to the modifications to the requirements for eligibility which are retroactive to 2013, taxpayers who were previously ineligible for this credit may now qualify.


1 Act 55 (S.B. 21), Laws 2015.

2 WIS. STAT. § 238.308.

3 WIS. STAT. § 238.308(3). A person is eligible to receive the credit if, in each year for which the person claims the credit, the person increases net employment in Wisconsin in the person's business above its net employment in the previous year. Unlike similar programs offered by other states, the Business Development Tax Credit Program does not specify a minimum amount of increased employment.

4 WIS. STAT. § 238.308(2).

5 An "eligible employee" is any full-time employee of a WEDC certified business. WIS. STAT. § 238.308(1).

6 WIS. STAT. § 238.308(4)(a).1, .2.

7 WIS. STAT. § 238.308(4)(a).3.

8 WIS. STAT. § 238.308(4)(a).4.

9 WIS. STAT. § 238.308(4)(a).5.

10 Act 55 (S.B. 21), Laws 2015, §§ 2183, 2316, and 2432. WIS. STAT. §§ 71.07(3y)(d)(2); 71.28(3y)(d)(2); 71.47(3y)(d)(2). Note that the total amount of credit available to be allocated by the WEDC for grants is limited to $17 million for tax year 2016, with an annual limit of $22 million thereafter. Unused amounts may be carried forward. WIS. STAT. § 238.308(4)(b).

11 WIS. STAT. §§ 238.16(6); 238.303(4).

12 Id.

13 WIS. STAT. § 71.05(6)(b)47m.

14 WIS. STAT. § 71.28(4)(ad)4, 5, 6.

15 WIS. STAT. § 71.28(5n)(b)3.

16 WIS. STAT. § 71.28(5n)(b)4.

17 Act 55 (S.B. 21), Laws 2015, § 9437(1); WIS. STAT. § 71.28(5n)(a)3, 4. Previously, the expenses had to qualify as deductible under IRC § 162.

18 Act 55 (S.B. 21), Laws 2015, § 9437(1); WIS. STAT. § 71.28(5n)(a)5.d.

19 WIS. STAT. § 238.308(2)(b).

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