Wisconsin Court of Appeals Rules That Department Cannot Deny John Deere DRD Because of the Department’s Prior Guidance on Foreign Distributions

By , and on February 26, 2021

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).

Jane Wells May
Jane Wells May focuses her practice on state and local tax matters. She represents businesses in connection with tax controversies at the audit, administrative and judicial levels around the United States. Her clients include companies in manufacturing, retailing, pharmaceuticals, financial services, agribusiness, food and beverage, health care, energy, technology and insurance industries. Jane heads the Firm's State & Local Tax Practice and sits on the Firm's Executive, Management and Compensation Committees. Read Jane Wells May's full bio.


Richard C. Call
Richard C. Call focuses his practice on state and local tax litigation before administrative and judicial bodies, at all levels and in multiple states, with respect to income, franchise, gross receipts, and sales and use taxes. He also advises clients on the state and local tax consequences of business restructurings, as well as the impact of new state legislation on current business operations. Read Richard C. Call's full bio.


Jonathan C. Hague
Jonathan C. Hague focuses his practice on state and local tax matters. He assists businesses and individual taxpayers with state and local tax controversies, compliance and multistate planning opportunities across a variety of tax types, including income, sales and use, and tax credits. Jonathan also works closely with several of the Firm’s taxpayer coalitions focused on specific state tax policy issues such as the taxation of digital goods and services. Read Jonathan Hague's full bio.

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