An Act to amend 71.07 (5) (a) 3.; to create 71.05 (6) (b) 57. of the statutes; Relating to: individual income tax subtraction for certain theft losses. (FE)
Summary
AB685 creates a new Wisconsin individual income tax subtraction for losses caused by financial exploitation. For taxable years beginning after December 31, 2023, a taxpayer may subtract the amount lost from an individual financial account if the loss resulted from financial exploitation as defined in state law, was reported to law enforcement, and there is no reasonable prospect of recovery through legal action, insurance, or other compensation. The subtraction is limited to amounts that were otherwise subject to tax under the income tax chapter and applies in the year the withdrawal or disbursement occurred.
The bill also creates a corresponding inclusion rule for later recoveries: if a taxpayer later receives a recovery, reimbursement, or compensation for an amount previously subtracted under this provision, that recovered amount must be included in income. The bill is designed to prevent double tax benefits by prohibiting the same loss from being deducted, excluded, or credited under any other provision of the income tax code.
Impact
AB685 amends Wisconsin’s individual income tax statutes by adding a targeted subtraction for theft-related losses tied to financial exploitation, and a matching rule for taxing later recoveries. It affects taxpayers who suffer account losses from exploitation, especially vulnerable adults and other victims of fraud or abuse, and it interacts with the state definition of financial exploitation in s. 46.90. The bill narrows relief to losses that were included in federal gross income and that are not reasonably recoverable, thereby creating a specific state tax remedy rather than a broad theft-loss deduction.
Sentiment
The available voting history shows strong bipartisan support and no recorded opposition: the Assembly passed the bill 99-0 and the Senate concurred 33-0. No committee transcripts are available, but the unanimous votes suggest the bill was viewed favorably as a narrow taxpayer relief measure aimed at victims of financial exploitation.
Contention
No major points of contention are evident in the available record. The main policy choices embedded in the bill are the limits on eligibility—reporting to law enforcement, no reasonable prospect of recovery, and only amounts otherwise subject to tax—which appear intended to prevent abuse and duplicate tax benefits. Any debate would likely center on how broadly to define qualifying financial exploitation and whether the reporting and recovery requirements are too restrictive for some victims, but no such objections are documented in the provided materials.
Crossfiled
An Act to amend 71.07 (5) (a) 3.; to create 71.05 (6) (b) 57. of the statutes; Relating to: individual income tax subtraction for certain theft losses. (FE)