Wyoming Tax & Trust Benefits
Wyoming has ranked #1 for business-friendly taxation on Tax Foundation’s State Business Tax Climate Index every year since 2003.
- No state income tax
- No state corporate income tax
- No state gift tax
- No state estate tax
- No excise tax
- No intangibles tax
- No inventory tax
- No tax on mineral ownership
- Low real estate tax
- Sales and use tax base rate of 4% with 2% county optional tax
- Sales and use tax exemption on equipment used directly and predominantly in the manufacturing process, for manufactures in the 31-33 NAICS Classifications.
Looking for small business tax incentives? Wyoming does not have tax incentives because Wyoming already has very low taxes. According to the Wyoming Taxpayers Association, Wyoming’s personal tax burden is the second lowest in the nation. Wyoming’s major yearly personal taxes are about 4 percent of income, while the regional average ranges from 7 percent to 9 percent. The national average varies from 8 percent to 10 percent, depending on income level.
Who pays taxes in Wyoming?
Wyoming’s largest source of revenue is mineral extraction with the second being the tourism industry. This means citizens and businesses have one of the lowest tax burdens in the country.
In 2002, Mining and Extraction contributed $4.49 billion to Wyoming Gross State Product or 26.74% of all private industry in Wyoming. Mineral Production is taxed as property tax, although it is in fact a severance tax based on market value of the natural resource being severed. Wyoming taxes minerals at 100% of value, unlike “other” property taxes, which are taxed at rates between 9.5 and 11.5%. In the end, because of higher valuations than other lands and higher tax rates, mineral production ends up paying 94.4% of all “property taxes” paid to the State of Wyoming.
In 2003, Tourism contributed $87.6 million to state and local tax receipts, with money coming from state and local sales tax, local sales, lodging tax and gasoline.
Wyoming’s property taxes are low compared to most other states. The state assesses agricultural lands at 9.5% of agricultural value; residential and commercial at 9.5% of fair market value; industrial at 11.5% of fair market value; and minerals at 100% of fair market value. To calculate residential and commercial taxes, use the following equation: (Fair Market Value x 9.5%) x Local Mill Levy Rate = Property Tax
For-profit corporations, limited liability corporations, limited partnerships and registered limited liability partnerships do pay an annual license tax/franchise fee to the Wyoming Secretary of State. This fee is based on a company’s assets located and employed in Wyoming. Non-profit corporations pay a flat fee of $25.
By Gonnella Adamson, PC
Wyoming has frequently been cited as one of the best states for wealthy individuals to reside or as a situs for entities or trusts. Besides taxes, some of the reasons include the following:
Dynasty Trusts: Wyoming has enacted a 1,000 year term limit on multigenerational trusts. As a result, a properly formed and administered Wyoming Dynasty Trust can be exempt from gift, estate, and generation skipping transfer taxes for up to 1,000 years.
Private Trust Companies: A private trust company provides the potential to centralize control and management of family trusts and assets, establish trust situs in Wyoming, and provide continuity of trusteeship, the opportunity for greater investment flexibility, and the ability to educate and involve younger generations. Unlike many states, Wyoming allows both regulated and unregulated private trust companies, and the regulated trust company capital requirement is lower than most states.
Anonymity: Wyoming has made an effort to provide privacy for the identity of individuals and families.
- Limited Liability Companies: The Wyoming Secretary of State does not require the identities or addresses of the managers or owners to be filed in the public record.
- Trusts: The state of Wyoming does not require the disclosure of trust agreements, trust assets, or trust beneficiaries.
- Qualified Spendthrift Trust: In 2007, Wyoming enacted statutes for a self-settled asset protection trust, specifically known as a Wyoming Qualified Spendthrift Trust (QST). In a properly drafted and administered Wyoming QST, the grantor of the QST and the grantor’s family can be the beneficiaries of the QST, but still maintain creditor and liability protection.
- Charging Order Protection for Limited Liability Companies: The Wyoming statutes provide that a creditor’s sole remedy against a limited liability company (LLC) member is a charging order against the debtor’s LLC interest. This means the creditor may only attach distributions from the LLC, the creditor cannot force a dissolution of the LLC, and the debtor’s voting rights are not affected.
State Income Tax Liability Protection: For residents of states that impose an income tax, transferring assets to a Wyoming Incomplete Gift Non-Grantor (WING) trust could substantially decrease state income tax liability. The Internal Revenue Service recently issued a private letter ruling (PLR 201310002) allowing such a structure for a Nevada Trust. A properly drafted WING trust will allow the grantor to retain a beneficial interest in the assets and avoid state income tax in the grantor’s home state without gift tax consequences. In addition, a WING Trust can combine state income tax savings with the asset protection benefits of a Wyoming Qualified Spendthrift Trust. Only Wyoming, Nevada, and possibly South Dakota have enacted trust laws that comply with IRS requirements for a valid Incomplete Gift Non-Grantor trust.
Modern Trust Statutes:
- Trust Protectors: Wyoming has enacted trust protector statutes, which allow a disinterested party to make certain modifications to irrevocable trusts that would otherwise require court approval.
- Virtual Representation: The Wyoming statutes allow certain parties to represent and bind minor or unborn trust beneficiaries.
- Modification of Irrevocable Trusts: The terms of an irrevocable trust, generally unchangeable, may be modified with the consent of the beneficiaries and grantor, if living.
- Decanting: Effective July 1, 2013, Wyoming has enacted a decanting statute allows a trust’s assets to be transferred to another trust with substantially the same dispositive terms.