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March 2, 2021

Wisconsin Court of Appeals affirms circuit court decision allowing dividends received deduction for distribution received from foreign limited partnership treated as a corporation for federal income tax purposes

On February 25, 2021, the Wisconsin Court of Appeals (court) affirmed an order of the circuit court that the Wisconsin Tax Appeals Commission (WTAC) correctly held that a corporation could claim a Wisconsin dividends received deduction (DRD) for certain distributions that it received from a foreign limited partnership (LP) in which it held an interest.1 Wisconsin Department of Revenue v. Deere and Company, Appeal No. 2020AP726 (February 25, 2021) (unpublished).

The court affirmed the WTAC's analysis, which began with examining the question of whether LP was a corporation for purposes of the Wisconsin DRD. The WTAC had concluded that LP's classification under federal law was paramount in determining whether it qualified as a "corporation" under Wisconsin law. By electing to be treated as a corporation for US federal income tax purposes, LP was also a corporation for Wisconsin tax law purposes. As such, the recipient corporation's interest in LP was deemed to be common stock, thereby making LP's distributions dividends for which the recipient corporation could claim a Wisconsin DRD.

The court focused its analysis on the "contrary to guidance issue" upon which the WTAC had based its decision. Wis. Stat. 73.16(2)(a) provides that, "in the course of any determination, or in the course of any proceeding appealing any determination, the department shall not take a position that is contrary to any rule promulgated by the department that was in effect during the period related to the determination or that is contrary to any guidance published by the department prior to that period and not subsequently retracted, altered, or amended by the department or the legislature or by a final and conclusive decision of the tax appeals commission or courts." The WTAC had pointed to previously published WI DOR guidance, namely its Publication 119, which states that an LLC electing to be treated as a corporation for federal purposes is treated as such for Wisconsin purposes, including the LLC interest being treated as common stock. The WTAC concluded there was no basis to treat the LP interest differently; as such, the WI DOR had to adhere to its own guidance in effect during the audit period as required under Wis. Stat. 73.16(2)(a). The court agreed with the WTAC and concluded that the WI DOR could not advance its current position on the DRD because that interpretation is contrary to the pertinent language of the guidance. In addition, the court concluded that the WI DOR failed to develop its argument that it could contradict its own guidance.


It is unknown at this time whether the WI DOR will appeal this latest decision on this matter to the Wisconsin Supreme Court. Taxpayers that paid assessments on this issue may consider applicable statutes of limitations in claiming refunds. Taxpayers with appeals before the WI DOR's Resolution Unit should also consider the effects of this decision on their appeals.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Bill Nolan (
   • Tiffany Davister ( )


1 For more on the circuit court and WTAC's rulings, see Tax Alerts 2020-0819 and 2019-1535.