[co-author: Jonathan Hague, Law Clerk]

The Wisconsin Court of Appeals, District IV, issued its decision in Wisconsin Department of Revenue v. Deere & Company, regarding the treatment of distributions from foreign partnerships that are treated as corporations for federal tax purposes. There were two questions presented in the case. The first issue was whether distributions received by John Deere qualified as “dividends received from [the foreign partnership] with respect to its common stock” under Wis. Stat. § 71.26(3)(j). The state argued that this distribution was not made with respect to common stock because the entity was a foreign partnership. Unlike the Tax Appeals Commission, the Court of Appeals did not address this issue.

The second issue was whether previous Wisconsin Department of Revenue guidance, in effect during the period at issue, which stated that if a non-corporate entity is classified as a corporation, a non-corporate interest is treated in the same matter as stock, was binding on the Department under Wis. Stat. § 73.16(2)(a). The court held for the taxpayer, finding that the guidance applied and was binding on the Department. The Department has since modified that guidance, thus limiting the applicability of the decision to earlier tax years. This decision leaves open the issue, which will matter to taxpayers for later years, of whether similar distribution events will be eligible for dividends received deduction treatment.

The case is Wisconsin Department of Revenue v. Deere & Company, Appeal No. 2020AP726, in the Wisconsin Court of Appeals, District IV (Feb. 25, 2021).

[View source.]