View the complete text of Act 50

ACT NO. 50
(H.539)

Miscellaneous Tax Act

Sec. 1. 9 V.S.A. 2480e is a consumer protection law which provides that a person shall not obtain the credit report of a consumer without either the consumer’s consent or a court order. Exceptions to the law allow Vermont Student Assistance Corporation to obtain credit reports in collecting on education loans, and allow the Office of Child Support to obtain reports when investigating child support cases. Sec. 1 adds an exception to the law for the tax department, allowing access to credit reports in pursuing delinquent taxes and in collection of a debt owed to the State.

Secs. 2, 3. Creates a funeral services trust account, for insurance of prepaid funeral contracts in case of default by the funeral home. The fee increases with the size of the business, and is imposed only in years when the trust fund balance is below $200,000.00.

Secs. 4, 5, 6, 7. Increases the guarantee fee for Vermont Home Mortgage Guarantee loans, and decreases the property transfer tax on property subject to a VHMG loan. The property transfer tax reduction sunsets July 1, 2000. Increases the limit on total loan guarantees the VHMG board may make. Requires quarterly financial statements from the board.

Sec. 8. Limited liability companies are now recognized in Vermont. This section expands thedefinition of "person" in Title 32 to include limited liability companies. Part 2 of Title 32 governs property taxation; part 4, estate tax; and part 5, all other taxes except income.

Sec. 9. A person must be in good standing with regard to taxes in order to obtain most trade or business licenses in Vermont. This section expands the definition of "good standing" to require that all tax returns which are due have been filed. (Currently, a person could pay an estimated bill sent by the department, but continue to refuse to file a return showing the actual tax due, and still qualify as in "good standing".)

Sec. 10. The date January 12 was erroneously put into last year’s budget adjustment bill as the due date for the director of Property Valuation and Review's annual report to the legislature. The date should be January 15, when most other legislative reports are due.

Sec. 11. Under current law, unorganized towns and gores must deliver their bills for the state tax to the commissioner of taxes. This section changes "commissioner" to "director" of Property Valuation and Review, since he is the one who transmits the tax warrants. (In the following section (4963) "commissioner" was changed to "director" in 1977. It was apparently an oversight not to change this section.)

Sec. 12. Clarifies that interest on property tax delinquency is imposed for a fraction of a month as if it were an entire month.

Sec. 13. Creates an income tax exemption for the first $1500.00 of National Guard pay to persons with Federal adjusted gross income less than $47,000.00.

Sec. 14. Clarifies that nonresidents who derive income from a Vermont business entity are subject to Vermont tax on that income, regardless of whether the nonresident has an ownership interest in the business.

Sec. 15. Annual update of the "piggyback" provision, tying Vermont income tax to Federal tax liability under current Federal law.

Sec. 16. Provides that income from intangibles is deemed to be sourced in the state of a taxpayer's domicile. The result of the source rule is that the state of domicile may tax the income, and Vermont will give the taxpayer a credit for tax paid on that income to the other state (but only if that other state provides a similar credit to its residents for income sourced to and taxed by Vermont). This section implements a domicile agreement among Northeastern States Tax Officials Association states.

Sec. 17. Officers and agents of corporations who fail to withhold or remit income tax withholding may be held personally liable for the withholding. This section extends the personal liability law to officers and agents of other business entities besides corporations.

Sec. 18. When a nonresident owner of Vermont real estate sells that property, the buyer must withhold a portion of the sale price, and remit it to the tax department, to ensure that the income tax on the nonresident seller's Vermont income is paid, at least in part. This section expands the definition of "nonresident" to include limited liability companies.

This section gives the nonresident seller the option, in an installment sale, of reporting the entire gain in the year of sale regardless of federal treatment. Under this option, the seller would pay tax at 6% of the gain, and would not need to file numerous Vermont returns, reporting small amounts of tax.

Sec. 19. Currently, section 5861a exceeds the State's taxing authority, by requiring any partnership with a resident partner to file a partnership return, regardless of whether the partnership has any Vermont income. This section eliminates that requirement, and clarifies when partnership filing is triggered (receipt of more than $100 of Vermont income or $1000 of gross income from any of the sources listed in section 5823(b)).

Sec. 20. Fixes the income tax appeal date more exactly – to thirty days after the date of the commissioner's determination, not receipt of the decision. Conforms to current rule for sales and use tax appeals.

Sec. 21. Subchapter 10B of Title 32 was added last year to require a partnership or a limited liability company to make mandatory payments of tax on behalf of nonresident partners or members (who receive credit for these payments when they file their Vermont tax returns). The word "nonresident" was inadvertently omitted, and is added to the statute here.

Sec. 22. Partnerships and limited liability companies (LLCs) which operate affordable housing projects are in most cases subject to Federal regulations which restrict their ability to make disbursements. As a result, these entities are unable to make the estimated tax payments on behalf of nonresident partners and members described in Sec. 21 of this summary. Sec. 22 exempts these entities from the estimated payments required by section 5920. The nonresident partners and shareholders are still liable for income tax, and Sec. 22 also requires the entity to file information with the commissioner, to enhance compliance.

Sec. 23. A new IRS regulation provides that a business entity with only 1 owner is either classified as a corporation or disregarded. If the entity is disregarded, its activities are treated in the same manner as a sole proprietorship, branch or division of the owner. Reg. 301.7701-2. Vermont law currently provides that an LLC with only one member will be taxed as a corporation. Sec. 23 provides that an LLC will be treated as the same type of taxable entity for Vermont tax as it is for Federal tax.

Sec. 24. Property tax rebate law exempts from the definition of "household income" the income of a relative who lives with an elderly or disabled claimant for the sole purpose of providing attendant care services in order for the claimant to avoid institutionalization. This section expandsthat exemption to include unrelated care givers who provide other services, such as homemaker services or companionship, which allow the claimant to remain in his or her home.

Sec. 25. Property tax rebate law allows claims to be filed as late as October 1 in cases of sickness, disability or other good cause. Since 1983, $50,000 of the rebate appropriation has been earmarked to pay these late claims. In 1983, the maximum rebate was $750; the maximum rebate is now $1,500. This section raises that earmarked amount to $100,000. This does not increase the appropriation by $50,000.

Sec. 26. When the tax department has suspended or revoked the meals and rooms license of a tax-delinquent restaurant or hotel owner, and the delinquent owner continues to operate anyway, the commissioner may post a sign notifying the public that the license of that establishment has been suspended or revoked for failure to collect or remit meals and rooms taxes. This section increases the penalty for removing, covering or defacing that notice, from the current $100 to $500.

Sec. 27. Makes the time limit for appealing a commissioner's decision in a meals and rooms tax contested case the same as the time limit for sales and use tax cases: thirty days after the commissioner's decision. Prior law allowed thirty days from notice of the commissioner's decision, and it was sometimes difficult to ascertain when the notice of the decision was received by the taxpayer.

Sec. 28. Makes the personal liability provisions of the meals and rooms tax parallel to the personal liability provisions of the income tax withholding, for sake of clarity and uniformity. Also, prior meals and rooms tax law referred to civil action in personal liability cases, while all other tax statutes required only an informal commissioner's hearing as a first step. This section makes the procedure for establishing personal liability the same for all three trust taxes.

Sec. 29. Codifies department practice of exempting transfer to children’s spouses as well as children.

Sec. 30. Limited liability companies are recognized in Vermont as of July 1, 1996. This change gives them the same property tax exemption as partnerships and corporations upon formation, provided no gain was recognized on the Federal level.

Sec. 31. Limited liability companies are recognized in Vermont as of July 1, 1996. This change gives them the same property tax exemption as partnerships and corporations upon complete dissolution, provided no gain was recognized at the Federal level.

Sec. 32. Conforms personal liability provisions of sales and use tax to personal liability provision of other trust taxes (withholding tax and meals and rooms tax, as amended).

Sec. 33. This section gives the commissioner authority to compel the filing of sales and use taxreturns. Prior statutory authority extended only to amended returns.

Sec. 34. Grants a sales tax exemption for railroad line improvements on the Rutland-Whitehall rail corridor.

Sec. 35. Provides a sales tax exemption for charitable organizations which sell fresh cut flowers in a once-a-year sale of seven days or less.

Sec. 36. Gives the commissioner or taxes authority to petition in court to require a taxpayer to file sales and use tax returns. Commissioner has this ability with respect to income tax returns. This is necessary because sometimes there are no records available from which to construct an estimate.

Sec. 37. Increases the penalty for removing, covering or defacing a notice posted by the commissioner of taxes, informing the public that the operation has no sales and use tax license or that the license has been revoked or suspended, from $100 to $500. See also Sec. 26.

Secs. 38, 39, 40. Amend provisions of hazardous waste tax to provide appeal rights which are parallel to other taxes and to clarify that these rights are exclusive. Also change time limit for refund claims from three years after the date the tax is paid to three years after the tax is due. (Otherwise, taxpayer could file return at any time and still have three years to file for a refund.) This is the same as the refund provision under the income tax law.

Sec. 41. Repeals the 1997 sunset of the income tax exclusion for income received under the armed forces education loan repayment program.

Sec. 42. Repeals law requiring that foreign limited liability partnerships which do business in Vermont comply with the Vermont partnership law forbidding partnership among individuals of different professions.

Sec. 43. Amends the property transfer tax law to tax housing cooperatives at the same rate as purchasers of a principal residence, if the cooperative's sole purpose is to purchase principal residences for all of its members. Retroactive to July 1, 1993.

Secs. 44, 45. Amend purchase and use tax law on tracked vehicles. Tracked vehicles will no longer be registered by the Department of Motor Vehicles or subject to purchase and use tax; they will be subject to sales tax, with a maximum tax of $900.00. (Purchase and use tax on this equipment was formerly capped at $750.)

Secs. 46. Imposes residence requirements for limited liability companies applying for license to sell malt or vinous beverages.

Sec. 47. Authorizes $100,000 appropriation to the department of taxes for a tax expenditurestudy, with a report due to the legislature December 15, 1997.

Sec. 48. Effective dates:

Sec. 6 is repealed July 1, 2000.

Sec. 7 is repealed July 1, 2002.

Sec. 13 applies to tax years beginning January 1, 1997 and after.

Sec. 15 takes effect January 1, 1996.

Sec. 24 applies to claims for property tax rebates for calendar years 1997 and after.

Sec. 36 applies to sales on or after January 1, 1998.

Sec. 43 applies to transfers of property on and after July 1, 1993.

All other sections take effect from passage.

Sec. 49. Requires that refund requests by housing cooperatives under the new property transfer tax law (see Sec. 43 of the act) must be made by April 15, 1998, and that the total allocated for refunds is $100,000, to be prorated if insufficient to pay all refunds.