Related Party Leases in Wisconsin…..Big TAX Law Change!

Addback of Related Party Interest and Rent Expenses (From Wis DOR email today)

Provisions of 2007 Wisconsin Act 226 require interest and rent expenses paid, accrued, or incurred to a related party to be added back to income. However, the Act allows a deduction for those expenses if certain requirements are met.

This law change applies to corporations, tax-option (S) corporations, partnerships, LLCs, individuals, fiduciaries, and insurance companies. The change is effective for taxable years beginning on or after January 1, 2008.

An article on this topic has been posted to the Department of Revenue’s web page. The article may be accessed at http://www.revenue.wi.gov/taxpro/news/080619.html. The article provides:

• A description of transactions affected by this law change
• Requirements that must be met in order to deduct related party interest and rent expenses
• Details and examples of what is considered a “related entity”

Note that taxpayers affected by this new law will be required to complete Wisconsin Schedule RT. More guidance will be provided in the near future