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2024 Wisconsin Schedule ESBT Instructions Purpose of Schedule A trust that makes the election to be an electing small business trust (ESBT) and has Wisconsin sourced income from one or more tax-option (S) corporations must use Schedule ESBT to compute the Wisconsin tax on the Wisconsin sourced income from the tax-option (S) corporation(s). Note: If the trust is an ESBT, check the appropriate box on page 1 of the trust's Form 2, Wisconsin fiduciary income tax for estates or trusts, under the information section indicating the trust is an electing small business trust. Result of Making the Election Electing small business trusts must separate the income from tax-option (S) corporations and treat it as a separate trust from other trust income. The net income for the tax-option (S) corporation portion is determined under federal law, as modified by Wisconsin addition and subtraction items as provided on Schedule A of Form 2 and Schedule 2M. The separate trust is taxed on its Wisconsin taxable income at the highest rate for fiduciaries (7.65%). The ESBT must include with Form 2 a copy of the Schedule 5K 1 from the tax-option (S) ‑ corporation (or the Schedule K 1 from the federal S corporation if the tax-option (S) corporation ‑ was not required to file a Wisconsin tax return) that includes the name and federal employer identification number (FEIN) of the tax-option (S) corporation. Caution: If the ESBT receives a Schedule 5K-1 with box 3 in Part B checked, indicating the tax- option (S) corporation made the entity-level tax election according to sec. 71.365(4m)(a), Wis. Stats., the following reporting requirements apply: • All items of income, gain, loss, or deduction from the electing tax-option (S) corporation must be removed from the ESBT’s Wisconsin income or loss. • The ESBT may not claim a credit for taxes paid to another state on income taxed on the electing tax-option (S) corporation’s Wisconsin tax return. In addition, a resident ESBT may not claim a credit for taxes paid to another state on income taxed at the tax-option (S) corporation's entity level in Wisconsin. • The manufacturing and agriculture credit can only be used to offset tax liability for the tax imposed on a shareholder's prorated share of a tax-option corporation's income, as provided in sec. 71.07(5n)(c)3., Wis. Stats. Since a shareholder of an electing tax-option (S) corporation does not have income and resulting tax from the tax-option (S) corporation in the year of the election, the shareholder (ESBT) cannot use the credit to offset income tax liability from other sources of income. The ESBT may carry forward the credit for 15 years and use the credit to offset tax liability resulting from the ESBT's prorated share of taxable income from the tax- option (S) corporation for a year in which the election is not made. • The ESBT may not claim Wisconsin pass-through withholding from a tax-option (S) corporation if the corporation elected to be taxed at the entity level and claimed a refund of the pass-through withholding or submitted a written request to apply the pass-through withholding against the tax liability at the entity level. I-037 (R. 12-24) 1
