The Wisconsin Court of Appeals held that guidance issued by the Department of Revenue required the Department to allow a dividends-received deduction for cash distributions received by a taxpayer from a foreign partnership that was classified as a corporation for federal purposes. The taxpayer based its claim to the deduction on published guidance in effect at the time, which provided that an LLC treated as a corporation under the Internal Revenue Code was treated as a corporation for Wisconsin purposes, and if an LLC was classified as a corporation, then an LLC interest was treated in the same manner as stock.

Its guidance notwithstanding, the Department denied the deduction at audit and argued on appeal that the taxpayer was not entitled to a deduction because the foreign entity involved was not organized as a corporation and did not pay out dividends or issue common stock. The Court disagreed, finding the Department’s position was contrary to its guidance and thus precluded by Wisconsin statute. Specifically, the Court concluded that in contrast to the Department’s position, the guidance did not draw a universal distinction between stock-issuing corporations and non-corporations such as LLCs or limited partnerships, and the language of the guidance was broad enough to cover distributions for purposes of the dividends-received deduction.

Wisconsin Dept. of Revenue v. Deere and Company, Case No. 2020AP726 (Feb. 25, 2021).