Photo of WI state capital building

Photo by Connor Betts on Unsplash 

Wisconsin made significant strides in tax reform on June 20, 2023, with Governor Tony Evers signing a revenue reform bill (AB245, 2023 Wisconsin Act 12) repealing the business personal property tax. Effective January 1, 2024, this repeal aims to alleviate the tax burden on businesses while also providing increased funding to municipalities from the state. 

History of personal property taxes in Wisconsin

Before this legislative change, personal property was subject to taxation unless explicitly exempted. Over time, various exemptions for personal property taxes were introduced, including exemptions for household personal property, manufacturing machinery, inventories, and computers. The accumulation of these exemptions limited the revenue local governments could collect. Moreover, businesses increasingly needed help to meet the filing deadlines for personal property tax returns. The effort required to comply often outweighed the actual tax amounts owed. 

What’s changing?

In the past, improvements on leased lands could be assessed as real or personal property. As part of this legislation, a new section (Wis. Stats. § 70.17(3)) requires buildings, fixtures, and improvements on leased property to be assessed as real property. This change will also go into effect starting January 1, 2024. In addition, the new section permits assessors to establish separate tax parcels for buildings, fixtures, and improvements owned by someone other than the landowner, enabling these properties to be assessed as real property to the respective owners. The revised regulation applies to property improvements made by any owner on exempt land or land owned by the United States within Wisconsin. 

What does this mean for businesses and landlords?

Landlords and tenants should review their lease agreements, considering the potential impact of this new law. Wisconsin businesses, on the other hand, can look forward to retaining the funds previously allocated to personal property taxes. Equally significant, they can redirect resources previously devoted to complying with the personal property tax law to other essential business operations. 

What every Wisconsin business owner needs to know

The repeal of the business personal property tax takes effect from January 1, 2024, and applies to all manufacturing and business personal property in Wisconsin. However, it is important to note that businesses are still liable for personal property taxes related to reports filed for the January 1, 2023, assessment. They should also continue to monitor their current year assessments for accuracy. 

As the implementation date approaches, businesses should prepare for the increased importance of distinguishing between real and personal property. Furthermore, any leasehold improvements or other enhancements previously categorized as personal property may require review and potential reclassification under the new regulations. 

Overall, these legislative changes will simplify compliance procedures and provide relief for businesses.