The Tax Commission can require that records be kept, and failure to comply with such a demand is subject to a penalty. No specific method of book-keeping is prescribed. The accounts ordinarily submitted for tax purposes contain the same information as that required by the Federal Government. Supporting evidence is required on certain items such as depreciation, amortisation, bad debts, capital gains or losses, taxes, dividends received, repairs, interest paid, etc. Balance-sheets (based on the books of the enterprise), profit and loss statements, and proof of surplus are required, as well as a statement explaining the difference between the income shown by the books and the income declared on the tax returns. Where it is necessary, the foreign company has to submit to a field audit of the general books of account in order that its return may be verified.


The provisions of the statute governing the methods of allocation for enterprises engaged in business within and without this State are as follows:

“71.02 (3) (c). — For the purposes of taxation, income from mercantile or manufacturing business not requiring apportionment under paragraph 71.02 (3) (d) shall follow the situs of the business from which derived. Income derived from rentals and royalties from real estate or tangible personal property, or from the operation of any farm, mine or quarry, or from the sale of real property or tangible personal property shall follow the situs of the property from which derived. All other income, including royalties from patents,1 income derived from personal services, professions and vocations and from land contracts, mortgages, stocks, bonds and securities or from the sale of similar intangible personal property, shall follow the residence of the recipient, except, as provided in section 71.095.”


(d). — Persons engaged in business within and without the State shall be taxed only on such income as is derived from business transacted and property located within the State. The amount of such income apportionable to Wisconsin may be determined by an allocation and separate accounting thereof, when, in the judgment of the Tax Commission, that method will reasonably reflect the income properly assignable to this State, but otherwise in the following manner: There shall first be deducted from the total net income of the taxpayer such part thereof (less related expenses, if any) as follows the situs of the property or the residence of the recipient; provided that, in the case of income which follows the residence of the recipient, the amount of interest and dividends deductible under this provision shall be limited to the total interest and dividends received in excess of the total interest (or related expenses, if any) paid and allowable as a deduction under section 71.03 during the income year. The remaining net income shall be apportioned to Wisconsin on the basis of the ratio obtained by taking the arithmetical average of the three following ratios:

“Where, in the case of any person engaged in business within and without the State of Wisconsin and entitled to an apportionment of his income as herein provided, it shall be shown, to the satisfaction of the Tax Commission, that the use of any one of the three ratios above provided for gives an unreasonable or inequitable final average ratio, because such person does not employ, to any appreciable extent in his trade or business in producing the income taxed, the factors made use of in obtaining such ratio, this ratio may, with the approval of the Tax Commission, be omitted in obtaining the final average ratio to be applied to the remaining net income.

“As used in this section, the word ‘sales’ shall extend to and include exchange, and the word ‘manufacturing’ shall extend to and include mining and all processes of fabricating or of curing raw materials. If the income of any such person properly assignable to the State of Wisconsin cannot be ascertained with reasonable certainty by either of the foregoing methods, then the same shall be apportioned and allocated under such rules and regulations as the Tax Commission may prescribe.”

Briefly, it is the practice of the Wisconsin Tax Commission first to ascertain whether or not the foreign corporation maintains adequate separate accounts for the activities carried on by its establishment within Wisconsin. If not satisfied with this separate accounting, the Tax Commissioner applies a general apportionment fraction. When a foreign corporation does not maintain adequate separate accounts and refuses to submit the general accounts necessary for the application of the apportionment fraction, the authorities are entitled to make a “doomage” or estimated assessment based on the best information available. This estimated assessment may also be made if the foreign corporation refuses to file a return in the formal manner prescribed by the Commission.

If not satisfied with the books of account of the local corporation, the Commission is empowered to ask for all the information it wants. In the case of a foreign corporation selling through a branch in Wisconsin and invoicing to this branch at a wholesale price, the Commission tries to make a comparison with the price at which a corporation would sell the same article to an independent distributor. In cases of doubt, resort is had to apportionment.

If the corporation has a monopoly of the product which it sells through its own branch, the Commission usually resorts to apportionment. Where there is no sound basis of comparison with sales to independent distributors, the tendency is more and more to apply the apportionment fraction.

1. Method of Separate Accounting.

Persons who report on a separate accounting basis are required to fill in a separate schedule designated Form 4C. This is a summarised income statement consisting of three columns: the first column designated as “Wisconsin business”, the second column, “outside business”, and the third column, “total business”. This schedule is used for the purpose of comparing different items of income and expense in order to detect any large variations in the amounts or ratios thereof. Should any large variations occur, they may be due to diversions of income from Wisconsin, or unwarranted loading of expenses against this State, and will be made the subject of office correspondence or field audit, if necessary. The reverse side of Form 4C affords a reconciliation between the books and the tax returns, in the same columnar order, and total book-income is checked against the balance-sheet, which forms a part of the return. In some cases, the administration requires balance-sheets drawn up in the same columnar plan, but it has not as yet become a standard requirement.

2. Empirical Methods.

The income of a branch may be determined on the basis of the percentage of turnover, but it would only be used as a last resort due to lack of records. If a company doing business in Wisconsin refuses to file a tax return, the company is assessed on an estimated income, called a “doomage” assessment. The assessments are generally so high that little difficulty is experienced in subsequently getting returns.

3. Method of Fractional Apportionment.

By far the larger number of the important corporations which transact a portion of their business or own property in this State are required to file on the apportionment basis. That is to say, they file a complete return showing the results of the operations of their business everywhere. They are also required to fill in Form 4B, “Apportionment Data”, which supplies the data used for the computation of an apportionment fraction.

The first section of Form 4B is designed to supply the information concerning the “non-apportionable income” — that is, those types of income with a fixed situs; such income is first excluded from the total income before applying the apportionment fraction.

The second section of this form provides space for information concerning the amounts of Tangible Property, Cost of Manufacturing, and Sales pertaining to Wisconsin, and pertaining to the total business everywhere. From the property element must be excluded, of course, property which produces non-apportionable income, such as is reported in the first section of Form 4B.

A separate ratio or percentage is computed for each of the three elements as they apply to Wisconsin, and the arithmetic average of these three ratios is then used as representing the percentage of the total apportionable income attributable to the business activities of the corporation in Wisconsin. To or from the amount of income so apportioned to Wisconsin is added or deducted, as the case may be, any non-apportionable income or loss having a definite situs in Wisconsin. This information is set forth in the upper section of Form 4B. The result thus obtained represents the total income taxable by Wisconsin.

In determining the property factor, property which produces non-apportionable income is eliminated before getting the average of property within and without the State. From the viewpoint of inventories, the tangible property in the apportionment fraction includes raw material, goods in process and finished goods on hand and in the total inventory at the end of the fiscal year. Cost of manufacturing would include such raw materials as went into manufacturing during the year. The schedule of tangible property separates finished goods, goods in process and raw materials merely for comparative purposes. The finished product, until sale, is included in tangible property because, being in the inventory, it is part of tangible property.

The element of cost of manufacturing is to be construed in the light of the best accounting procedure, and includes:

It has been the experience of Wisconsin that manufacturing activities are usually identified with specific units of property and that cost records for such units are usually maintained if separate financial records are not maintained for each unit.

No difficulties arise in computing the cost of manufacturing within and without the State, unless processing is begun in one State and completed in another. Where substantial processing is done in the State of Wisconsin, the Tax Commission has held that all raw material which goes into the processing done in this State is part of the cost of manufacturing in Wisconsin. It would seem, therefore, that any further processing outside the State would include only the direct labour, overhead and such additional material as is used in the further processing of the item. This would also seem to be the rule when the original processing was started outside the State. However, care must be taken not to give undue weight to the original processing outside the State when expensive raw material is used but little additional work is done, after which the item is brought into Wisconsin for the major processing.

The factor of sales includes such sales as would come under the common definition of the term. Ordinarily, it would seem that incidental disposals, such as sales of scrap and the like, would be a reduction of the cost of manufacturing rather than a sales element, for the reason that ordinarily the sales organisation does not come into play in disposing of such products. On the other hand, a sale of a by-product would constitute a sale under the classification, for the reason that it would no doubt be consummated by the selling organisation.

The Wisconsin Tax Commission has held that, wherever the sale is consummated through a regularly established office, that place is the situs of the sale. For example, a Wisconsin corporation which does all its manufacturing in Wisconsin has sales branches in several States of the union. If the managers at the sales branches are able and have the power to consummate a sale without having the approval of the central office, then the Tax Commission holds that the sale is outside the State. On the other hand, in a similar business, if travelling salesmen of the Wisconsin plant merely go out and solicit trade, this is considered a Wisconsin sale. In other words, whether a sale is considered within or without the State depends entirely on whether the Wisconsin company has a regular sales office outside the State and whether the sales office has the power and authority to consummate sales.

Border-line cases must always be determined in view of the circumstances and on the merits of each case; no uniform rule can be adopted to fit all cases.

4. Requirements for Selection of Methods and Relative Value of the Various Methods.

It will be noted from Section 71.02(3)(d), cited on pages 241 et seq., that “the amount of such income apportionable to Wisconsin may be determined by an allocation and separate accounting thereof, when, in the judgment of the Tax Commission, that method will reasonably reflect the income properly assignable to this State, but otherwise in the following manner: …”

It appears, therefore, that the separate accounting method should be used if acceptable to the Tax Commission and, if not acceptable, the apportionment method, as outlined in the above section of statute, is the only alternative.

It is Wisconsin’s experience that an acceptable method of separate accounting is possible only in a limited number of types of business. The following represent the principal types to which it has been found to be adaptable:

Trading companies can usually report on a separate basis, because the scope of their activity is, as a rule, limited to the trading area adjacent to the establishment. Usually, the only items of apportionment will be the purchase department expense, if the purchases are made by a central purchasing agent; allocation of some administrative overhead expense, and perhaps of some nominal accounts, such as federal income-tax payments and interest payments on general loans incurred on behalf of more than one establishment. The operating results of a trading concern are very closely dependent upon the character of the population, the buying habits and resources of the particular territory served, and, for this reason, separate accounting tends to reflect more accurately the true profits earned.

A construction company engaged in construction schemes, such as buildings, dams, concrete roads and bridges, sewers, etc., almost invariably keeps accurate job and construction cost records for each scheme or undertaking, and, with the exception of a few general items of administrative overhead, the costs are applied directly and the profits on each are determined separately from the other. This situation is ideal for separate accounting. It also reflects a more accurate picture of the profits realised than a general apportionment, since the latter tends to average profits over all schemes executed, whereas construction business by its very nature is such that large variations in profits between different projects will and do occur.

We also meet with certain manufacturing concerns which maintain a complete and integrated organisation, incorporating all elements of an independent concern; that is, owning and employing their own property, performing all their own manufacturing or assembling operations, maintaining their own sales organisation, doing their own financing, and keeping separate and distinct books of account. A few instances of this occur within this State. Where the establishment is a branch or subsidiary of a larger company employed in the same general line of business, and when such branch or subsidiary is conducted and operated as a distinct and self-sustaining unit, it will lend itself to an accurate separate accounting.

The question will naturally be asked: Why has the Tax Commission found it necessary to require the apportionment method of reporting more generally than the separate accounting method? The answer is that most of our important foreign corporations are engaged in some form of manufacturing or processing, and, generally, only part of the whole business organisation is maintained in Wisconsin; the balance is maintained or situated without the State. That is to say, a manufacturing or assembling unit may be situated in Wisconsin, but the general office and sales organisation, together with other manufacturing units, are entirely outside the State. Or the converse may be true. A selling agency or branch may be all that is situated in the State, while the balance of the activities are outside; or it may happen that only a storage warehouse, either owned or leased, is situated in Wisconsin with no sales department or agency attached thereto. The question then arises: How can you determine, on a separate accounting basis, the profits of one of a number of manufacturing or assembling units independent of the rest of the business, especially when the product is only partially manufactured or assembled in Wisconsin and is then transferred outside the State for completion and sale?

Or, again, if a selling agency is all that is situated within the State, how can its profit be accurately determined on a separate accounting basis, when the product is such that no definite market price or transfer price from manufacturer to selling agency can be determined? Or, if the only activity is a storage warehouse within this State, used for convenience in filling orders, on what basis can the profits arising from the use of this storehouse be accounted for separately? It has been found impracticable, if not impossible, to account separately for any single activity or phase of an interrelated business structure; in this case, only one method has been found practicable, and that is to take a percentage of the total ultimate net profits realised, the said percentage to be determined by an analysis of the principal elements of the business. Under the statutes of this State, the basic elements of a manufacturing business consist of the tangible property employed in the business, the cost of manufacturing and the sales. Whether these three factors should be given equal weight, as in our computation, or whether relatively different weights should be given, is a matter of opinion. The method used in Wisconsin has proved very satisfactory and many leading manufacturers employing it have expressed their approval and satisfaction with the results.

To summarise: Separate accounting is used in about 50 per cent of cases, involving mostly trading and construction companies and some manufacturing companies whose Wisconsin income can be readily segregated; the apportionment formula is strictly followed in about 49 per cent of cases, including purely trading companies, for which the factor of manufacturing cost does arise. In the other 1 per cent apportionment is effected on the basis of the factors most appropriate in the circumstances.

Recourse to a “doomage” assessment is usually made only when a corporation refuses to file a return. If notice is sent to the taxpayer that a “doomage” assessment is contemplated, such assessment will not be made provided the taxpayer makes a satisfactory declaration of income within a fixed time-limit — twenty days, unless extended.


1. Apportionment of Gross Profits of Branch to Real Centre of Management abroad.

The fact of merely having the directors’ meeting in another State, or having there the real centre of management, would not be regarded as doing business there, and consequently there would be no occasion to allocate to such centre of management any of the profits realised in Wisconsin. This same answer applies whether the branch in Wisconsin is the principal business or is of secondary importance to the enterprise as a whole. If a company has a general office in one State and no other property or activities in that State, such as manufacturing and selling, it would seem that no income should be assignable to that State. A situation such as this would, however, seldom exist, since, ordinarily at least, a sales office is connected with the central office.

2. Apportionment of Expenses of Real Centre of Management to Branch.

Interest Charges. — Where the local branch of a foreign corporation pays tax on the basis of separate accounts, the Tax Commission allows a deduction of a proportion of the total interest actually paid on general indebtedness. This part is usually determined in the ratio of property in Wisconsin to total property, Wisconsin sales to total sales, or some other factor depending upon the circumstances of the case. The interest must actually be paid to outsiders, and not represent interest arbitrarily imputed to the use of property within the business.

General Overhead. — This is distributed in much the same way as interest. The general overhead may be apportioned to the local branch, the factor of sales being employed more frequently than that of property. If the local branch is taxed by employing an allocation fraction, there is generally no occasion to make a specific allocation for overhead purposes, as it will be automatically included in the fraction, unless the branch is engaged in manufacturing, collecting, assembling or processing, in which case the part of the overhead assignable to activities in Wisconsin may be computed in order to serve as a factor in the allocation fraction.

3. Apportionment of Net Profits of Branch to Deficitary Parent or vice versa.

If the branch in Wisconsin is taxed on the basis of its separate accounts, its liability is measured by its profit or loss without regard to the profit or loss of the enterprise as a whole. If, however, the Wisconsin branch should continually show losses and the entire business substantial profits, the Tax Commission would no doubt investigate as to the repeated losses within Wisconsin, and, if it had reason to believe that the loss was not real, it would demand accounts of the head office in order to check the accounts of the branch, and, if necessary, effect an apportionment.

In cases where the local branch is taxed by applying the apportionment fraction, it might result that a part of the profit of the branch would be assigned to the deficitary parent, or vice versa, inasmuch as the effect of the fraction is to apportion to the branch its share in the profit or loss of the entire enterprise, in the ratio of the business transacted and property situated within the State to total business and property.


In general, a local corporation, even though controlled by a foreign company, is treated as an independent entity and taxed on the basis of its own accounts. If, however, profits are diverted from the local company to the foreign parent company, then Section 71.25 (1) of the Income Tax Act may be invoked. This provision reads as follows:

“When any corporation liable to taxation under this act conducts its business in such a manner as either directly or indirectly to benefit the members or stockholders thereof or any person interested in such business, by selling its products or the goods or commodities in which it deals at less than the fair price which might be obtained therefor, or where a corporation a substantial portion of whose capital stock is owned either directly or indirectly by another corporation acquires and disposes of the products of the corporation so owning a substantial portion of its stock in such a manner as to create a loss or improper net income, the Commission may determine the amount of taxable income of such corporation for the calendar or fiscal year, having due regard to the reasonable profits which, but for such arrangement or understanding, might or could have been obtained from dealing in such products, goods or commodities.

“For the purpose of this chapter, whenever a corporation which is required to file an income-tax return is affiliated with or related to any other corporation through stock ownership by the same interests or as parent or subsidiary corporations, or whose income is regulated through contract or other arrangement, the Tax Commission may require such consolidated statements as in its opinion are necessary in order to determine the taxable income received by any one of the affiliated or related corporations.”

One of the principal problems we have encountered is the practice of some of the larger corporations of organising a wholly owned sales corporation in Wisconsin for the purpose of distributing their product. If the only activity of the said corporation in this State consists of selling, and the parent corporation has no property in Wisconsin, and is consequently not licensed to do business there, only the sales corporation will render a report. This report may be either on a separate accounting or on an apportionment basis. However, the profit of the sales corporation is usually limited to a nominal figure by contract or other arrangement made with the parent company without any relation to the fair share of the group’s ultimate profits which should be attributed to the sales activity of the business. When the parent manufacturing company is situated in Wisconsin, the reverse situation has been found to exist. The parent will incorporate a subsidiary sales corporation under the laws of another State, transfer its general office to some important city outside Wisconsin and transfer its product to its sales subsidiary at cost of manufacture or at a nominal profit, thereby reducing the income of the Wisconsin corporation and permitting its sales subsidiary to realise all or most of the profit.

Another method which has recently attracted attention is the transferring of patent rights by a Wisconsin manufacturing corporation to a subsidiary corporation organised under the laws of some other State, the purpose being to reduce the income of the Wisconsin manufacturer by large royalty payments to its foreign subsidiary. These three general methods are, in general, the most outstanding ones employed in attempts to remove income from the confines of Wisconsin for income-tax purposes.

Section 71.25 (corporate-tax evasion prevented), above quoted, grants power to the tax authorities to combat various schemes of income-tax evasion. It has been invoked in cases of corporations reporting on a separate accounting basis as well as those reporting on an apportionment basis. In Cliffs Chemical Co. v. Tax Commission, 193 Wis. 295; 214 N.W. 447, and in Buick Motor Company v. City of Milwaukee (U.S. District Court, E.D. Wis.), the corporations were placed on a correct separate accounting basis, which was feasible and practicable in those two instances. In the case of Palmolive Company v. Conway (43 Fed. (2d) 226), and others, the income of the parent and subsidiary corporations were consolidated and an apportionment fraction determined and applied to the net consolidated income of the two. In the case of Burroughs Adding Machine Co. v. Drew et. al. (U.S. Dist. Ct., E.D. Wis.), an estimated or “doomage” assessment made by the Tax Commission was sustained because of the refusal of the parent corporation to submit consolidated statements covering the operation of the parent and its subsidiary, which the authorities had demanded in order that the income attributable to the companies’ sales activities in this State could be determined.



1. Selling Establishments.

Local Establishments selling in the Wisconsin Market.

The fundamental principle is that when goods are manufactured abroad and sold through an agency or establishment in Wisconsin the assessment is on the basis of the separate accounts of the establishment, provided they show a fair selling profit, and also provided that the fair profit can be arrived at through other than arbitrary methods. A fair selling profit can usually be determined only where there is a well-established market-price for the goods transferred from the foreign manufacturing establishment to the sales branch in Wisconsin. There is seldom an international market, and consequently it is usually necessary, when dealing with this kind of enterprise, to resort to an apportionment fraction.

When an enterprise buys a part of its goods outside and sells in Wisconsin, the Tax Commission recognises that the buying establishment may be considered productive of income. If the method of separate accounting is used, no profit would probably be attributed to that establishment. The statutory allocation formula is not intended primarily for application in the case of enterprises which, buy abroad and sell in Wisconsin, but rather for those which manufacture abroad and sell in Wisconsin. The factors which constitute the fraction of property, cost of manufacture and sales would not permit of much profit being allocated to a purely purchasing establishment. Consequently, the prescribed formula would be abandoned, and the tax authorities would endeavour to formulate another fraction, which would effect a reasonable apportionment to each of the interested establishments.

In substance, although it is recognised that part of the entire profit of an enterprise may be attributed to skill in purchasing, or part to technique in manufacturing, the Tax Commission has not been able to evolve any criteria for fixing the relative profit that should be apportioned to each establishment, and it therefore feels that the application of its formula is the fairest method for effecting such apportionment.

Local Establishments selling abroad.

Where a branch in Wisconsin of a foreign enterprise sends a salesman into neighbouring territory to solicit orders which are filled out of stock at the local branch, the remittances being made to such branch, the profit from such transactions is deemed attributable to the Wisconsin establishment.

When the orders solicited by the salesman from the Wisconsin establishment are filled out of a stock kept in a neighbouring country, it is felt that this business should also be ascribed to the Wisconsin branch.

2. Manufacturing Establishments.

When a Wisconsin corporation does all its manufacturing in Wisconsin and sends salesmen to other States to solicit orders, but has no regular sales agency outside the State, the total income of the company is taxable in the State of Wisconsin, as it is considered that all the business is transacted within the State.

If the Wisconsin corporation invoices goods to the foreign sales establishment at the same price as it sells them to independent dealers, it is probable that the tax authorities will accept such a price as determining the profit allocable to the Wisconsin establishment. On the other hand, if no independent factory price is established, the apportionment fraction will be applied. This is probably an instance where the fraction could be most appropriately employed in apportioning the income between the manufacturing establishment and the foreign sales branch. In a case such as this, it is probable that the formula would result, broadly speaking, in allocating about two-thirds to Wisconsin and one-third to the place of sale abroad, inasmuch as most of the property and all the manufacturing cost would be in Wisconsin, whereas practically all the sales would be outside the State.

3. Processing Establishments.

The maintenance of a processing establishment in Wisconsin would be taxable by using the allocation fraction.

4. Buying Establishments.

A foreign corporation, which purchases products in Wisconsin and has them shipped direct to its establishment outside, would be doing no business in Wisconsin which would produce taxable income. On the other hand, if a foreign company purchased raw products in Wisconsin and processed them before shipping them, there would be business transacted within the State and taxable income would result. The mere buying, without any of the other elements of business in Wisconsin, would not produce taxable income.

For example, certain companies in the east purchase tobacco in Wisconsin and have it stripped and seasoned in that State, and then store it in a warehouse in Wisconsin until it is needed in the east at the manufacturing establishment. In this case, the assessment would be made by apportionment.

5. Research or Statistical Establishments, Display Rooms.

A research bureau would probably be comparable to a manufacturing establishment and the Commission could use the apportionment formula to tax that part of the total profits which this bureau has helped to make. It is doubtful if a statistical bureau would be taxed unless the statistics gathered were sold, and therefore formed an essential part of the business.

It would seem that the maintenance of a mere display room without the consummation of sales within the State would not constitute business within the State.


As foreign banks are not allowed to establish branches in Wisconsin and as there are no Wisconsin banks with branches in neighbouring States, there is no case for apportionment. It is felt, however, that such enterprises would be taxed on the basis of their separate accounts.


Insurance companies do not pay any income-tax on their operating income, but are subject to a special tax on their gross receipts in lieu of all other taxes.


Steam railway companies are not taxed on their income, but on an evaluation of their physical property.

Motor-bus lines are taxed like any other industrial concern. The profits of these lines are generally allocated in proportion to the mileage covered within the State.

The income from operating lake vessels are taxed only when they are registered at a Wisconsin port.

There has not yet been any occasion to tax air navigation companies, as they have so far shown losses. They would probably be taxed in proportion to the number of miles flown in Wisconsin.


Such enterprises report their income for taxation purposes in the same way as an industrial corporation. The assets of the public utilities in this State cannot be owned by a foreign corporation. There is no need, therefore, for apportionment or separate accounting to arrive at the income of these companies, for the reason that the total income is taxable. The stock of a public utility may be owned by a foreign corporation, but the Public Service Commission would not allow unjust expenses to be incurred to the disadvantage of the Wisconsin corporation.


In general, the same methods of apportionment are employed in taxing a Wisconsin enterprise as have been described in connection with foreign enterprises. If the separate accounting of the Wisconsin establishment is satisfactory, it is employed as a basis of assessment, otherwise the Tax Commission resorts to the allocation fraction.

There is no specific provision regarding allocation to a real centre of management in Wisconsin when all the other operations, such as manufacturing, are carried out in another State. If, in such a case, no business is actually transacted in the State, there will be no taxable profit.


If a Wisconsin company has a foreign subsidiary in the same line of business, or vice versa, and there is evidence that, through manipulation, the profits of the Wisconsin company are being diverted to the foreign company, the Tax Commission can force the parent company to file a consolidated return for the parent company and its subsidiaries.

With regard to the case of a holding company which merely holds securities of another company, there is no special legislation. If the holding company is a Wisconsin company, it is taxable on the interest it receives from the foreign company and also of the whole of the dividends, unless 50 per cent of the income of the subsidiary has been subject to tax in Wisconsin, in which case the whole of the dividends is exempt. On the other hand, if the securities of a Wisconsin company are held by a foreign holding company, no liability is incurred by the foreign company in respect of the dividends or interest received, for the reason that the owner of the securities is not resident in the State.