Guidance Provided for Corporations Electing to Include or Exclude Extension Property from Election to Claim Increased Research and AMT Credits in Lieu of Bonus Depreciation (Rev. Proc. 2009-33)

An IRS revenue procedure provides guidance on the election by corporations not to claim the 50-percent additional depreciation allowance (bonus depreciation) (Code Sec. 168(k)) on property acquired after March 31, 2008 (eligible qualified property), and instead to claim accelerated research and/or alternative minimum tax (AMT) credit carryforwards from tax years that began before January 1, 2006. The guidance specifically deals with the special elections for "extension property" contained in Code Sec. 168(k)(4)(H). The guidance covers property eligible for the elections, the time and manner for making elections, and the computation of the bonus depreciation amount (i.e., the amount by which the Code Sec. 38(c) business credit and Code Sec. 53(c) AMT credit limitations are increased if the elections are or are not made.

CCH Comment. Extension property is property that is eligible for bonus depreciation solely by reason of the extension of the bonus depreciation provision by the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). Thus, extension property generally consists of property placed in service in 2009 that is eligible for bonus depreciation.

The special rules for extension property allow a corporation that made the Code Sec. 168(k)(4) election in its first tax year that ended after March 31, 2008, with respect to bonus depreciation property placed in service after that date to elect not to have the election apply to extension property. If the corporation does not elect to exclude extension property, then a "bonus depreciation amount" is computed separately for bonus depreciation property which is extension property and for bonus depreciation property which is not extension property.

CCH Comment. The amount of additional research credit and/or AMT credit that a corporation may claim if it elects to forgo bonus depreciation is determined by increasing the Code Sec. 38(c) business credit and Code Sec. 53(c) AMT credit limitations by the bonus depreciation amount for the tax year.

The second special rule for extension property allows a corporation that did not make a Code Sec. 168(k)(4) election for its first tax year ending after March 31, 2008, to make the election for its first tax year ending after December 31, 2008. If this election is made a bonus depreciation amount is only computed with respect to extension property.

Definitions relating to extension property. Under the guidance, eligible qualified property is not extension property if:

--The eligible qualified property is acquired by the taxpayer after March 31, 2008, and placed in service by the taxpayer before January 1, 2009;

--The eligible qualified property meets the requirements of Code Sec. 168(k)(2)(B), is acquired by the taxpayer after March 31, 2008, and is placed in service by the taxpayer before January 1, 2010; or

--The eligible qualified property meets the requirements of Code Sec. 168(k)(2)(C), is acquired by the taxpayer after March 31, 2008, and is placed in service by the taxpayer before January 1, 2010.

Extension property is eligible qualified property that:

--Is acquired by the taxpayer after March 31, 2008, is placed in service by the taxpayer after December 31, 2008, and before January 1, 2010, and is not described in items (2) and (3) above;

--Meets the requirements of Code Sec. 168(k)(2)(B), is acquired by the taxpayer after March 31, 2008, and is placed in service by the taxpayer after December 31, 2009, and before January 1, 2011; or

--Meets the requirements of Code Sec. 168(k)(2)(C), is acquired by the taxpayer after March 31, 2008, and is placed in service by the taxpayer after December 31, 2009, and before January 1, 2011.

Election not to apply the Code Sec. 168(k)(4) election to extension property. The election not to apply the Code Sec. 168(k)(4) election to extension property must be made by the due date (including extensions) of the income tax return for the corporation's first tax year ending after December 31, 2008. If a corporation has already filed that return and did not make the election not to apply the Code Sec. 168(k)(4) election to extension property it may make a late election by following the procedures contained in Sec. 4.04 of Rev. Proc. 2009-33. The corporation must attach a statement indicating that is is making the election not to apply its Code Sec. 168(k)(4) election to extension property. Separate written notification of the election must be made to any partnership in which the corporation is a partner on or before the due date (including extensions) of the corporation's return for its first tax year ending after December 31, 2008, or by the date it files its return containing a late election.

If all members of a controlled group are members of an affiliated group that files a consolidated return, the common parent of the consolidated group makes the election for the group on the consolidated return. Special rules apply when separate federal income tax returns are filed by some or all members of a controlled group.

If a corporation that made the Code Sec. 168(k)(4) election for its first tax year ending after March 31, 2008, elects not to have that election apply to extension property, the election will exclude extension property placed in service in its first tax year ending after December 31, 2008 and in any subsequent tax year. Even if the corporation does not place any extension property in service in its first tax year ending after December 31, 2008, it must make the election not to apply the Code Sec. 168(k)(4) election to extension property for that tax year if it wishes to apply such election to extension property placed in service in a subsequent tax year.

Bonus depreciation amount for extension property. If a corporation does not elect to not to apply its Code Sec. 168(k)(4) election to extension property, a separate bonus depreciation amount is computed for eligible qualified property that is not extension property (non-extension property) and eligible qualified proeprty that is extension property (extension property). In general, the computation rules described in Rev. Proc. 2008-65, I.R.B. 2008-44, 1082, are used to determine these amounts by applying the rules separately to non-extension and extension property. The maximum bonus depreciation amounts is limited to $30 million for non-extension property and $30 million for extension property. Similar rules apply to controlled groups except that the computation rules described in Rev. Proc. 2009-16, I.R.B. 2009-6, 449, for controlled groups are used.

Election to apply Code Sec. 168(k)(4) election only to extension property. A corporation that did not make the Code Sec. 168(k)(4) election for its first tax year ending after March 31, 2008, may make the election to apply the election only to extension property (the "extension property election").

The extension property election must be made by the due date (including extensions) of the income tax return for the corporation's first tax year ending after December 31, 2008. A late election may be made by a corporation that filed its return for its first tax year ending after December 31, 2008, pursuant to section 6.06 of this Rev. Proc. 2009-33.

A C corporation makes the election by:

--Claiming the refundable AMT and/or research credit on the appropriate line of Form 1120, U.S. Corporation Income Tax Return, for the its first tax year ending after December 31, 2008;

--Filing, with the Form 1120, the Form 3800, General Business Credit, or Form 8827, Credit for Prior Year Minimum Tax --Corporations, or both, as applicable, for its first tax year ending after December 31, 2008;

--Filing, with the Form 1120, Form 4562, Depreciation and Amortization (Including Information on Listed Property), for its first tax year ending after December 31, 2008, indicating that it used the straight-line method and did not claim the bonus depreciation deduction for any extension property; and

--Providing written notification to any partnership in which it is a partner that it is making the Code Sec. 168(k)(4) extension property election on or before the due date (including extensions) of its federal income tax return for its first tax year ending after December 31, 2008, or by the date it files its income tax return containing a late election.

An S corporation makes the election by:

Making appropriate adjustments to the appropriate line of the Form 1120S, U.S. Income Tax Return for an S Corporation, for its first tax year ending after December 31, 2008, to reflect the results from making the extension property election;

Attaching a statement to the return indicating that it is making the extension property election and a statement showing the computation of the increases to the business credit and AMT credit limitations that result from making the election;

Filing, with the Form 1120S, Form 4562 indicating that the taxpayer used the straight-line method and did not claim the bonus depreciation deduction for all extension property; and

Providing written notification to any partnership in which it is a partner that it is making the extension property election on or before the due date (including extensions) of its federal income tax return for its first tax year ending after December 31, 2008, or by the date it filed its income tax return containing a late election.

If the extension property election is made, it applies to all extension property placed in service by the corporation in the its first tax year ending after December 31, 2008, and in any subsequent tax year. Even if the corporation does not place any extension property in service in its first tax year ending after December 31, 2008, it must make the extension property election for that tax year if it wishes to apply the election to extension property placed in service in a subsequent tax year.

If all members of a controlled group are members of a consolidated group, the common parent makes the extension property election. If a controlled group includes members of a consolidated group, the consolidated group is treated as a single member of the controlled group and the election is made by the common parent. Special election procedures apply to a member of a controlled group that makes the extension property election. The guidance also explains the manner of determining the members of a controlled group for the first tax year ending after December 31, 2008 and subsequent tax years.

The bonus depreciation amount is generally computed in the manner provided in Rev. Proc. 2008-65 by only taking into account extension property. S corporations will generally follow the rules previously issued for S corporations in Rev. Proc. 2009-16. If a corporation making the extension property eletion is a partner in a partnership, the partnership must provde the corporation with sufficient information to determine its appropriate distributive share of partnership items relating to any extension property placed in service during the tax year.

Code Sec. 168(k)(4) election by corporation with short succeeding tax year. The new guidance also modifies section 3.02(1)(a)(ii) of Rev. Proc. 2009-16 to address how a corporation whose first tax year ending after March 31, 2008, ends before December 31, 2008, makes the Code Sec. 168(k)(4) election when the corporation's succeeding tax year is a short tax year. That section generally provides that if a taxpayer's first tax year ending after March 31, 2008, ends before December 31, 2008, the corporation must file an amended federal income tax return on or before the due date (without regard to extensions) of the corporation's original federal income tax return for the succeeding tax year in order to claim the refundable credit resulting from a Code Sec. 168(k)(4) election. The modified guidance provides that if the succeeding tax year is a short tax year, the amended return must be filed on or before the earlier of (1) 30 days after the due date (excluding extensions) of the corporation's income tax return for its first tax year ending after March 31, 2008 or (2) 180 days after the due date (excluding extensions) of the corporation's income tax return for the succeeding tax year.

Rev. Proc. 2009-33, 2009FED ¶46,419

Other References:

Code Sec. 168

CCH Reference - 2009FED ¶11,279.058

CCH Reference - 2009FED ¶11,279.19

Tax Research Consultant

CCH Reference - TRC DEPR: 3,600

CCH Reference - TRC DEPR: 3,606

LLP, LLC and Tenancy-in Common Interests Not Limited Partnership Interests Under Passive Loss Rules (Garnett, TC)

A husband and wife who owned, directly or through other entities, interests in seven limited liability partnerships (LLPs), two limited liability companies (LLCs), and two tenancies in common (TICs) were not limited partners in limited partnerships with respect to such interests; accordingly, the couple was not subject to Code Sec. 469(h)(2) and companion temporary regulations, which presumptively treat losses from certain limited partnerships as passive.

CCH Comment. Code Sec. 469(h)(2), enacted in 1986, and Temporary Reg. §1.469-5T(e)(1) and (2), adopted in 1988, predate the existence of LLPs, and the widespread availability of LLCs. Thus, they only contemplate limited or general partnership interests in a limited partnership entity, the nature of which is dependent on an identity between the management rights and liability exposure of the entity's owners. Limited partners of a limited partnership do not participate in the management of the business and do not have personal liability for the debts of the partnership. Entities such as LLPs and LLCs, however, offer owners the ability to materially participate in the management of the business, while at the same time enjoying limited liability for its obligations.

Although the couple may have had limited liability with respect to all of the LLC and LLP investments, this did not preclude them under state law, as limited partners in a limited partnership would have been, from materially participating in the entities' businesses. Accordingly, in applying the material participation tests under the passive loss rules, the taxpayers were considered to be general partners, not limited partners. Similarly, the TIC properties were not limited partnerships, and the couple's interests in the TIC properties were not limited partnership interests.

While the couple was identified on certain Schedules K-1, Partner's Share of Income, Deductions, Credits, etc, for the LLPs and one of the TIC properties as being a "limited partner" with respect to such investments, and the couple might have thereby potentially avoided self-employment tax because limited partner distributive shares are not considered self-employment income, this did not require that the couple be regarded as limited partners for purposes of the passive loss rules. The Schedule K-1 form did not provide the option of identifying their interests in the LLPs as that of a "limited liability partner," and the description on the K-1s did not conclusively establish the nature of their interests.

P.D. Garnett, 132 TC No. 19, Dec. 57,875

Other References:

Code Sec. 469

CCH Reference - 2009FED ¶21,966.028

CCH Reference - 2009FED ¶21,966.53

Tax Research Consultant

CCH Reference - TRC BUSEXP: 33,160

CCH Reference - TRC BUSEXP: 33,160.10

Commission Rate Adjustments for Related Customer Were Deductible Expenses; Penalty Not Imposed (Manning, TCM)

An individual acting as a branch manager and a member of a broker-dealer company's branch office servicing day traders could deduct as ordinary and necessary business expenses commission rate adjustments paid to his brother's limited liability company (LLC). The taxpayer negotiated the commission rate adjustments with all the customers, including his brother's LLC, which was the branch office's biggest customer, at arm's-length to keep the customers when they complained of the untimeliness of the broker-dealer company's commission rebates. It was a common practice in the day trading industry to lower commissions to attract and retain customers, and the broker-dealer company offered commission rebates to customers upon requests by branch managers. Whether the taxpayer or the broker-dealer company paid the commission rebates did not change the economics. Because the commission rate adjustments were expenses that would be expected of someone trying to increase and maintain business in the highly competitive world of day trading and were appropriate and helpful to keep customers trading through the branch office, they qualified as ordinary and necessary business expenses.

The court rejected the IRS's alternative argument that the commission rate adjustments were illegal payments under Code Sec. 162(c)(2) made in violation of federal law implemented by NASD Rule 2110. The payments were not commission-sharing payments made in return for referrals of business, and the IRS failed to show that they would be classified as such by the NASD or that the payments would result in the taxpayer's being subject to a civil or criminal penalty or losing his license. Such payments were also not illegal per se since the IRS could not cite any statute or regulation specifically prohibiting them.

The IRS's argument that the taxpayer's payments to his brother's LLC lacked economic substance since they were returned to the taxpayer in later years was also rejected since the later payments represented repayment of a principal and interest on a loan extended by the taxpayer to the LLC and a share of the LLC's profits made in the years when the taxpayer became responsible for operating and maintaining a new trading software at the LLC. The IRS also could not establish that the commission rate adjustment arrangement was not an arm's-length arrangement. These payments were necessary and legitimate business expenses, indistinguishable from those made to unrelated parties, and resulted in net commissions to the LLC comparable to those the LLC could have negotiated directly with the broker-dealer company or any other broker-dealer.

Further, the taxpayer did not have to include in gross income trading gains generated from a subaccount with his brother's LLC since he had no ownership interest in, or rights to, the subaccount and never received any funds from the subaccount. The taxpayer did not have an agreement with the LLC giving him rights to a share of the subaccount gains while traders who were entitled to subaccount gains had written agreements with the LLC setting the terms of the profit splits and also received Schedules K-1 reflecting their portions of the subaccount gains. The subaccount belonged to the LLC and all the gains generated in the subaccount were ultimately passed to the taxpayer's brother.

Since all of the taxpayer's records were accurate and thorough, except for two commission rate adjustments that were mistakenly deducted in the tax year at issue even though they were not, in fact, paid until the following year, the taxpayer was not liable for the accuracy-related penalty for negligence under Code Sec. 6662(a).

J.T. Manning, TC Memo. 2009-157, Dec. 57,876(M)

Other References:

Code Sec. 61

CCH Reference - 2009FED ¶5504.198

CCH Reference - 2009FED ¶5504.20

Code Sec. 162

CCH Reference - 2009FED ¶8520.517

CCH Reference - 2009FED ¶8858.01

Code Sec. 6662

CCH Reference - 2009FED ¶39,651G.31

Tax Research Consultant

CCH Reference - TR INDIV: 6,050

CCH Reference - TRC BUSEXP: 3,100

CCH Reference - TRC PENALTY: 3,106

New Jersey --Multiple Taxes: Governor Signs State Spending Plan

The $29 billion state budget signed by New Jersey Gov. Jon S. Corzinebudge on June 29, 2009, imposes additional corporation (business) taxes (CBTs) and personal income taxes; increases taxes on cigarettes and alcohol, except beer; and eliminates property tax rebates for certain individuals. The budget includes funding that is dependant upon the passage of separate legislative measures, as indicated, below. A.B. 4102, A.B. 4103, and A.B. 4104 also were signed by the governor on June 29, 2009.

 Surcharge Extension

The spending plan extends the 4% surcharge imposed on corporations that are subject to the CBT. The surcharge is due to expire for privilege periods ending before July 1, 2009. It will be extended to apply to privilege periods ending before July 1, 2010 (A.B. 4105).

 Decoupling of Recovery Act

The measure decouples the CBT from the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) provision allowing taxpayers to defer the recognition of discharge of indebtedness income arising from a qualified reacquisition in 2009 and 2010 of corporate or business debt instruments issued by the taxpayer or a related person. Any amount excluded from federal taxable income would have to be added back for CBT purposes. However, for tax years beginning after 2014 and before 2019, the amounts deferred for federal purposes may be excluded for purposes of the CBT to prevent double taxation by the state (A.B. 4105).

 Income Tax Increase for High-Income Taxpayers

The budget increases the gross (personal) income tax rate. For tax years beginning after 2008 and before 2010, the top personal income tax rates for taxpayers with taxable income exceeding $400,000 will be (1) 8% if taxable income is over $400,000 but not over $500,000; (2) 10.25% if taxable income is over $500,000 but not over $1 million; and (3) 10.76% if taxable income is over $1 million. No additions to tax or penalties will be imposed for insufficient payment of estimated tax that otherwise would be due on salaries, wages, and other remuneration received before October 1, 2009, upon which the new tax rates will be imposed. In addition, employers will not be subject to interest, penalties, or other costs that otherwise would be imposed for insufficient withholding as a result of the new tax rates (A.B. 4102).

 Property Tax Deduction Limitation

For the tax year beginning January 1, 2009, the deduction of up to $10,000 for property taxes paid will be limited for high-income taxpayers. The deduction will be limited to a maximum of $5,000 for a taxpayer who has gross income over $150,000, but not over $250,000, if the taxpayer is not 65 years old or older, blind, or disabled. For such a taxpayer who has gross income exceeding $250,000, no deduction will be allowed (A.B. 4102).

 Taxation of Lottery Winnings

Currently, winnings from the New Jersey lottery are exempt from personal income tax. For tax years beginning after 2008, New Jersey lottery winnings will be included in gross income if the prize exceeds $10,000. Withholding will be required on such winnings as would be determined by the director of taxation (A.B. 4102).

 Insurance Tax Increase

The rate of tax on all insurers, other than marine insurers, will be increased to 2.25% of taxable premiums for taxes payable in 2009, and will revert back to 1% for taxes payable in 2010 and thereafter. However, an additional 0.05% will be imposed on taxable premiums, which will be effective upon enactment. Comparable rates also will be imposed on accident, health, and legal insurance companies. The tax rate imposed for surplus line coverage and the tax rate imposed on gross premiums levied on every insured in the state procuring or renewing insurance with any unauthorized foreign or alien insurer will both increase from 3% to 5%, effective upon enactment. Additionally, for 2009, "insurance company" will include dental service corporations, which thus will be subject to the 2.25% tax imposed on insurance companies (A.B. 4108).

 Cigarette Tax Rate Increase

The measure increases the cigarette tax rate by 12.5 cents per pack of 20 cigarettes to $2.70 per pack (A.B. 4103). It also increases the tax rate imposed on liquor, wine, vermouth, sparkling wine, and hard cider, but not beer, by 25% (A.B. 4104).

 Property Tax Rebates

The measure eliminates property tax rebates for non-senior citizen, non-disabled homeowners with incomes over $75,000, with seniors and disabled individuals still qualifying with incomes up to $150,000. Two-thirds of last year's rebate amount will be provided to homeowners earning between $50,000 and $75,000. Households earning up to $50,000 will receive last year's rebate amount. The legislation also will maintain the Senior and Disabled Citizens' Property Tax Freeze Program and eliminate non-senior tenants from the homestead rebate program in fiscal year 2010 (A.B. 4100).

A.B. 4100, Laws 2009, effective July 1, 2009; A.B. 4102, Laws 2009, effective June 29, 2009; A.B. 4103, Laws 2009, effective July 1, 2009; A.B. 4104, Laws 2009, effective July 1, 2009; Press Release, Office of Gov. Jon S. Corzine, June 26, 2009

Wisconsin --Corporate, Personal Income Taxes: Numerous Tax Changes Enacted in Budget Legislation

The 2009-2011 Wisconsin budget act, signed by Gov. Jim Doyle on June 29, 2009, contains numerous provisions affecting the Wisconsin personal income and corporation franchise and income taxes. As indicated in more detail below, some provisions were modified by the governor's vetoes. Separate stories discuss sales and use tax (TAXDAY, 2009/07/01, S.58) and other tax changes (TAXDAY, 2009/07/01, S.56) contained in the legislation.

Personal income tax brackets: The legislation creates a fifth tax bracket with a rate of 7.75%, applicable to taxable income exceeding $300,000 for joint filers, $150,000 for married separate filers, and $225,000 for other filers. The new bracket and increased rate apply to tax years beginning after 2008. Previously, the rate for the highest bracket was 6.75%.

Capital gains exclusion: The existing capital gains exclusion is reduced from 60% to 30%, except for gains on certain assets used in farming (i.e., farm livestock, farm real property, depreciable farm property, or farm equipment). The reduction applies to tax years beginning after 2008.

Capital gains reinvestment: The law is amended to allow a claimant to defer the payment of taxes on up to $10 million of gain realized from sales of capital assets held for more than one year, if reinvested in a qualified new business venture. The provision first applies to tax years beginning after 2010.

IRC conformity: The legislation generally updates Wisconsin's IRC conformity date to December 31, 2008, for taxable years beginning after that date. However, the conformity specifically excludes a number of recent federal laws, including the following: Mortgage Forgiveness Debt Relief Act of 2007 (P.L. 110-142); Tax Increase Prevention Act of 2007 (P.L. 110-166); Tax Technical Corrections Act of 2007 (P.L. 110-172); Economic Stimulus Act of 2008 (P.L. 110-185); Heroes Earnings Assistance and Relief Tax Act of 2008 (P.L. 110-245); Housing Assistance Tax Act of 2008 (P.L. 110-289); Emergency Economic Stabilization Act of 2008 (P.L. 110-343); and Fostering Connection to Success and Increasing Adoptions Act of 2008 (P.L. 110-351).

Domestic production activities deduction: In addition, the legislation decouples Wisconsin from the IRC §199 qualified domestic production activities deduction, for taxable years beginning on or after January 1, 2009.

Throwback: The legislation amends provisions previously requiring 50% of certain sales and gross receipts to be included in the sales factor (e.g., sales of property shipped from Wisconsin to a destination state not having jurisdiction over the taxpayer). Specifically, the legislation requires 100% of such sales and gross receipts to be included in the sales factor, applicable to taxable years beginning on or after January 1, 2009. In addition, certain throwback provisions related to sales of items other than tangible personal property are repealed.

Combined group tax credit sharing: For tax years beginning after 2008, if a corporation that is a member of a combined group has an unused research credit or research facilities credit, or credit carryforward, the unused amount can be used to offset the tax liability of other members of the combined group.

Election to include controlled group members in combined report: The legislation authorizes the designated agent of a combined group to elect to include in the combined group every corporation in its commonly controlled group, regardless of whether such corporations are engaged in the same unitary business as the designated agent. The provision applies to tax years beginning after 2008.

Consolidated tax statements: If a corporation is affiliated with or related to another corporation through stock ownership by the same interests or as a parent or subsidiary corporation, or has income that is regulated through contract or other arrangement, the legislation authorizes the Department of Revenue to require that the corporation submit consolidated statements as necessary in order to determine whether the corporations are a unitary business.

Pass-through entity withholding: For pass-through entities subject to nonresident withholding, the legislation requires payment to be made in four quarterly installments, rather than annually, effective for taxable years beginning after 2008.

Jobs tax credit: The legislation creates a refundable jobs tax credit equal to 10% of the wages paid to employees earning specified levels of income. The credit can be claimed for tax years beginning after 2009, but credit claims cannot be paid until tax years beginning after 2011.

Super research and development tax credit: For tax years beginning after 2010, the legislation creates a credit equal to the amount of qualified research expenses exceeding 1.25 times the average annual amount of qualified research expenses paid or incurred by a corporation in the previous three tax years.

Beginning farmer credit: The legislation allows a beginning farmer to claim a credit to offset the cost of enrolling in a farm financial management education program. A credit is also allowed to an established farmer who agrees to lease agricultural assets to a beginning farmer. The credits apply for tax years beginning after 2010.

Enterprise zones capital investment tax credit: The legislation creates a refundable capital investment tax credit of up to 10% of the claimant's significant capital expenditures in an enterprise zone.

Financial records matching: The legislation creates a financial records matching program for the collection of delinquent state taxes. This provision was partially vetoed to eliminate the requirement that financial institutions perform the data match. Therefore, according to the governor's veto message, institutions will have the option to forward account holder data to the Department of Revenue for matching.

EITC advance payments: The legislation authorizes individuals who claim the federal earned income tax credit and receive an advance payment of that credit to request that their employer adjust their paycheck so that they receive an advance payment of their state earned income tax credit, applicable to tax years beginning after 2008.

Film credit: The legislation generally replaces the film production services tax credit with a new refundable tax credit. The governor partially vetoed certain provisions with respect to funding and other aspects of the program (e.g., deleting a credit for labor-related payments to nonresidents).

Other credits: The legislation also provides for development opportunity zones in Kenosha and Janesville and makes various modifications to the angel and early stage seed investment credits, the farmland credits, the itemized deduction credit, the ethanol and biodiesel fuel credit, and the historic rehabilitation credit.

In addition, implementation of the following deductions and credits is delayed: the biodiesel fuel production credit; deductions for certain health insurance and medical care insurance premiums; the deduction for child and dependent care expenses; the electronic medical records credit; and the community rehabilitation program credit.

Subscribers can view the legislation and Gov. Doyle's veto message.