Wis. Gas & Elec. Co. v. Wis. Dep't of Taxation

• Decision Date: 16 June 1943
• Citation: 243 Wis. 216,10 N.W.2d 140
• Parties: WISCONSIN GAS & ELECTRIC CO. v. WISCONSIN DEPARTMENT OF TAXATION. WISCONSIN ELECTRIC POWER CO. v. SAME. WISCONSIN MICHIGAN POWER CO. v. SAME. MILWAUKEE ELECTRIC RAILWAY & LIGHT CO. v. SAME.
• Court: Wisconsin Supreme Court

243 Wis. 216

10 N.W.2d 140

WISCONSIN GAS & ELECTRIC CO.

v.WISCONSIN DEPARTMENT OF TAXATION.

WISCONSIN ELECTRIC POWER CO.

v.SAME.

WISCONSIN MICHIGAN POWER CO.

v.SAME.

MILWAUKEE ELECTRIC RAILWAY & LIGHT CO.

v.SAME.

Supreme Court of Wisconsin.

June 16, 1943.

Appeals from orders of the Circuit Court for Dane County; August C. Hoppmann, Judge.

Affirmed.

These were appeals by Wisconsin Gas & Electric Company, Wisconsin Electric Power Company, Wisconsin Michigan Power Company, and The Milwaukee Electric Railway and Light Company, pursuant to section 73.015, Stats. to the Circuit Court for Dane County from orders of the Wisconsin Board of Tax Appeals dated November 16, 1939 to the effect that appellants are not permitted by the terms of section 71.03(4), Stats. to deduct from gross income privilege dividend taxes on dividends declared and paid out of net earnings during 1936. On September 14, 1942 the trial court entered orders affirming decisions dated November 16, 1939 of the Wisconsin Board of Tax Appeals. From these orders the taxpayers appeal.

Shaw, Muskat & Paulsen, of Milwaukee, for appellant.

John E. Martin, Atty. Gen., and Harold H. Persons, Asst. Atty. Gen., for respondent.

Stroud, Stebbins & Wingert, Ela, Christianson & Ela, and Thomas, Orr & Isaksen, all of Madison, amici curiae.

WICKHEM, Justice.

The taxpayers are public service corporations. The privilege dividend tax involved in this case has to do with the income year 1936 in the case of the Milwaukee Electric Railway and Light Company, Wisconsin Electric Power Company, Wisconsin Gas & Electric Company, and that of 1938 of the Wisconsin Michigan Power Company. The situation in respect of the first three companies named is different from that of the last in that the first three companies withheld the privilege dividend tax from the shareholders whereas Michigan Power Company paid out the dividends and absorbed the tax itself. The contention of the taxpayers is that privilege dividend taxes are deductible from gross income because they are taxes on necessary business and corporate activities. Sec. 71.03(4), Stats. authorizes the following deductions from the gross income of the corporation:

“Taxes other than special improvement taxes paid during the year upon the business or property from which the income tax is derived, including therein taxes imposedby the state of Wisconsin and the government of the United States as income, excess or war profits and capital stock taxes * * *.”

Article 507, Regulations of the Tax Commission, provides: “In general, only taxes, other than special improvement taxes paid during the year upon the business or property from which the income tax is derived, may be deducted from gross income.”

Article 507.5 of the same regulations read: “Import or tariff duties and business, license, privilege, excise, and stamp taxes, are deductible if incurred in connection with the operation of the taxpayer's trade or business.”

Article 520 of such Regulations declares: “Fees for transferring and registering capital stock are deductible, since such expenses are necessary and related to the production of taxable income.”

In the Uniform Classification of Accounts for Electric Utilities prescribed by the Railroad Commission, effective January 1, 1923 operating expenses are thus defined: “The term operating expenses, as used in this classification, means such expenses as are necessary to the maintenance of the corporate organization, the rendering of service required or authorized by law. * * *”

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