WICPA Career Center

Post Job Openings l Upload Your Resume l Apply For Jobs

Whether you’re looking for a new career or a new employee, the WICPA’s Career Center can help you make the most of your search.

By Victoria Thayer,

hroughout the last decade, Wisconsin has enacted several programs to attract and incentivize entrepreneurs. Some of these programs have not been well advertised and have gone under the radar of both CPAs and business owners. Two of these overlooked programs are the Qualified Wisconsin Business program (QWB) (for which only 284 business owners registered businesses in 20211) and the Qualified New Business Venture program (QNBV).

Qualified Wisconsin Business program

The QWB is an annual business certification offered by the Wisconsin Department of Revenue (DOR) and is designed to increase labor opportunities in the community. This certification offers the following two valuable benefits for existing and future investors.

1. Deferral of Wisconsin long-term capital gains for investment in a QWB

An individual who realizes a long-term capital gain and reinvests the gain in a QWB may, on his or her Wisconsin return, subtract from federal adjusted gross income the amount of the gain if all of the following apply:

• Within 180 days after the sale of the asset that generated the gain, the individual invests all or part of the long-term capital gain in a QWB.

• The individual attaches a completed Wisconsin Schedule CG2 income tax return for the taxable year in which the deferral of gain is claimed.

2. Exclusion of long-term capital gain on the sale of a QWB

Individuals who sell an interest in a QWB are eligible to exclude long-term capital gain on the sale if all of the following apply:

1 https://www.revenue.wi.gov/dorreports/qualwibus2021.pdf

2 https://www.revenue.wi.gov/TaxForms2022/2022-ScheduleCGf.pdf o The excludable gain cannot include any amount of deferred gain from #1 above (if applicable). o The excludable gain may not exceed the fair market value of the investment on the date sold less the fair market value of the investment on the date acquired.3

• The business must have been registered as a QWB in the year the investment was acquired and in at least two of the four subsequent years.

• The investment was the purchase of stock or other ownership interest in a partnership, corporation, taxoption (S) corporation or limited liability company (LLC) treated as a partnership or corporation.

• Investment in a single-member LLC that has elected to be taxed as an S-corporation after Jan. 1, 2011, may also be eligible.

3 https://www.revenue.wi.gov/TaxForms2022/2022-ScheduleQI-Inst.pdf

To register a business in 2023, a business needs to file within the Wisconsin My Tax Account website4 by Jan. 2, 2024. The registration does not have a cost, but it needs to be filed every year the business desires to be considered a QWB. New businesses must wait a year before registering. For example, businesses that are started in 2023 will need to wait until Jan. 3, 2024, to register.

A business may register with the DOR if all of the following apply.5

• The business has at least two full-time employees.

• The amount of payroll compensation paid by the business in Wisconsin is at least 50% of all payroll compensation paid by the business.

• The value of real and tangible personal property owned or rented and used by the business in Wisconsin is equal to at least 50% of the value of all real and tangible personal property owned or rented and used by the business.

In addition, a real estate investment may not be considered an eligible business. Even if the business meets the requirements stated above, the Wisconsin DOR will evaluate whether the business has potential to create jobs, since this program’s purpose is to increase labor opportunities in the community.

When evaluating a business’s eligibility, it is important to keep in mind that a business does not have to be newly established to qualify for this certification.

Qualified New Business Venture program

The second program offered by Wisconsin is the QNBV certification, which incentivizes investment in technologybased businesses. The QNBV certification offers eligible angel and venture fund investors income tax credits equal to 25% of the value of the investment in the taxable year the investment is made.

To register for this certification, the business needs to email the Wisconsin Economic Development Corporation.6 The applicant should be prepared to submit an up-to-date business plan or executive summary during the registration process. Each business must be recertified in each taxable year in which it desires certification. Therefore, a business can apply in a single year or consecutive years. There is no cost to register, and it should be noted that QWBs can be part of the QNBV program. The requirements for certification are as follows:

• The business must be headquartered in Wisconsin.

• At least 51% of employees must be employed in Wisconsin.

• The business must have the potential to increase jobs in the state, increase capital investment or both.

• The business (such as manufacturing, biotechnology, communications, agriculture, clean energy, pharmaceuticals, processing or assembling products) must be engaged in innovation.

• Less than 50% of revenue may come from real estate developments, insurance, banking, lending or professional services.

• The organization may not have more than 100 employees at the time of initial certification.

• The business must have been in operation in the state for not more than 10 consecutive years.

• For years after Dec. 31, 2017, the business may not have received more than $12M in investments that have qualified for tax credits under the program.

• Other factors that will be considered include high growth potential, management team experience, financial need, percentage of funds that will be spent in Wisconsin and barriers to entry.

• The business cannot have received aggregate private equity investment funds of more than $10 million in cash at the time of initial certification.

Since the 25% tax credit benefit is claimed in the same taxable year as the investment is made, the certified company is required to maintain its Wisconsin presence during the three years after it receives an investment under which a tax credit may be claimed. Otherwise, the state will apply a penalty based on the timing of the relocation to another state. Penalties will apply as follows:

Relocation within 12 months — penalty will equal 100% of the tax credit.

Relocation between 12 and 24 months — penalty will equal 80% of the tax credit.

Relocation after 24 months — penalty will equal 60% of tax credit.

Conclusion

The QWB and QNBV programs are key initiatives aimed at incentivizing entrepreneurship in Wisconsin and serve as great opportunities for businesses to secure new investment and accelerate their potential for growth and job creation in the state.

Victoria Thayer, CPA, is a manager at Berndt CPA in Madison. Contact her at 608-274-7473 or vthayer@berndtcpa.com.

Stephan Mesdjian, CPA, EA, is a partner at Berndt CPA. Contact him at smesdjian@berndtcpa.com.