Instructions for 2023 
                                         Schedule RT-1: 
                     Statement of Disallowed Related Entity Expense 
  
  Purpose of Schedule RT-1 
  
 If a taxpayer cannot deduct an expense it paid, accrued, or incurred to a related entity because the expense did not 
 meet one of the conditions described in Schedule RT, Part II, the related entity may subtract the income that 
 corresponds to the expense that was disallowed. The related entity uses Schedule RT-1 to substantiate the subtraction 
 from income. 
  
 In these instructions, the “payer” is the taxpayer whose related party expense deduction was disallowed and the 
 related entity reporting the subtraction from income is called the “payee.” 
  
 Both the payer and payee must complete the appropriate section of the same Schedule RT-1. The payee must file the 
 completed Schedule RT-1 with its Wisconsin income or franchise tax return on which it is claiming the subtraction from 
 income. 
  
 The subtraction from income may apply even if the disallowed expense was below the filing threshold for Schedule RT. 
 However, see the important limitation of the subtraction below. 
  
 Limitation of Schedule RT-1 Subtraction 
  
 Even if the payer did not file Schedule RT or failed to report all expenses it was required to report on Schedule RT, the 
 payee cannot claim a subtraction from income if the payer’s expense meets all three of the criteria below: 
 •  The primary motivation for the transaction was one or more business purposes other than the avoidance or 
    reduction of state income or franchise taxes; 
 •  The transaction changed the economic position of the taxpayer in a meaningful way apart from tax effects; and 
 •  The expenses were paid, accrued, or incurred using terms that reflect an arm’s length relationship. 
    
 In other words, Schedule RT-1 cannot be used to create a subtraction for the payee if the expense is deductible to the 
 payer using the criteria given above, even if the Schedule RT disclosure requirements are not met. For additional 
 information about whether the payer’s expense is deductible to the payer, see the Schedule RT instructions. 
    
  Pass-Through Entities: 
  
 If the payee is a pass-through entity, the pass-through entity must file Schedule RT-1 with its Wisconsin return at the 
 entity level and must report the Schedule RT-1 information with Schedule 2K-1, 3K-1, or 5K-1, as appropriate, using the 
 line on Schedule 2K-1, 3K-1, and 5K-1, designated for “Other items and amounts” (or, for Schedule 2K-1, “Other 
 information”). 
 
 On the supporting schedule provided to the shareholder, partner, member, or beneficiary, indicate the name and 
 federal employer identification number (or social security number if an individual) of the payer of the expense, and the 
 partner’s, member’s, shareholder’s or beneficiary’s allocable share of the subtraction amount. 

   IC-176 (R. 12-23)                              1 

                                         2023 Schedule RT-1 Instructions 
 
 Specific Instructions for Schedule RT-1 
 
Part I. Information for Payer – Part I must be completed by the payer. Complete all information requested in items 
A. through D. After completing Part I, submit the Schedule RT-1 to the payee. Do not submit Schedule RT-1 to the 
Department of Revenue because the payee will do so after completing Part II. 
 
Part II. Information for Payee – After receiving the Schedule RT-1 from the payer with Part I completed, the payee 
completes Part II. In Part II, item A., the payee enters the line(s) of its federal income tax return where it reported the 
income eligible for the subtraction (or  from its  pro forma federal income tax return  if it’s a member of  a federal 
consolidated group). This confirms that the amount to be subtracted was originally included in the income that was the 
starting point for the Wisconsin income or franchise tax return. 
  
The payee must then submit the completed Schedule RT-1 as an attachment to its Wisconsin income or franchise tax 
return. 
  
 Additional Information and Assistance 
 
 Web Resources 
 
 The Department of Revenue’s web page, available at revenue.wi.gov, has a number of resources to provide addi- 
 tional information and assistance, including: 
 • Related forms and their instructions 
 • Common questions 
 • Publications on specific tax topics 
 • The Wisconsin Tax Bulletin 
 • A home page specifically for combined reporting topics 
 • Links to the Wisconsin Statutes and Administrative Code 
 
 Contact Information 
 
 If you cannot find the answer to your question in the resources available on the Department of Revenue’s web page, 
 contact the Department using any of the following methods: 
 • E-mail your question to: DORFranchise@wisconsin.gov 
 • Call (608) 266-2772 
   (Telephone help is also available using TTY equipment. Call the Wisconsin Telecommunications Relay System 
   at 711 or, if no answer, (800) 947-3529. These numbers are to be used only when calling with TTY equipment.) 
 • Send a fax to (608) 267-0834 
 • Write to the Audit Bureau, Wisconsin Department of Revenue, Mail Stop 3-107, PO Box 8906, Madison, WI 
   53708-8906 
 
                                         Applicable Laws and Rules 
 This document provides statements or interpretations of the following laws and regulations in effect as of the revision 
 date:  Chapter 71 Wis. Stats., and Chapter Tax 2, Wis. Adm. Code 

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