The insanity has ended. Wisconsin Governor Jim Doyle signed 2009 Act 161 into law March 15, 2010. Wisconsin residents are now able to convert traditional IRAs into Roth IRAs without penalty, even if their adjusted gross income exceeds $100,000.
Also, Wisconsin residents have the option of paying all the tax on conversion in 2010 or half in each tax year of 2011 and 2012.
2009 Act 161 includes some provisions of the federal Heroes Earnings Assistance and Relief Tax Act of 2008. Details are available here.
Wisconsin taxpayers that made Schedule I adjustments on their 2008 or 2009 tax return should amend these returns to reflect the benefits of 2009 Act 161.