Download this document in MS Word 97 format

NO. 67. AN ACT RELATING TO VERMONT INCOME TAXATION.

(H.508)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. STATEMENT OF INTENT

This act responds to the income tax rate changes enacted by the Federal Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). It is the intent of this act that (1) taxpayers pay Vermont income tax in 2001 and 2002 as though the EGTRRA income tax rate changes had not been enacted, (2) no taxpayer pay greater Vermont income tax in 2001 and 2002 solely as a result of the EGTRRA income tax rate changes, and (3) the impact of EGTRRA on Vermont income tax revenues be minimized.

Sec. 2. 32 V.S.A. § 5811(4) is amended to read:

(4) "Federal income tax liability" means, for any taxpayer and for any taxable year, the federal income tax which would be payable by the taxpayer for that taxable year using the federal income tax rates which were in effect immediately prior to enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001; or the federal income tax which would *[have been payable]* be payable using the federal income tax rates which were in effect immediately prior to enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 and using adjusted gross income as defined in subdivision (1) of this section; after the allowance of the following federal credits: retirement income credit, investment credit, child care and dependent care credits and alternative minimum tax credit, but no other federal credit. For purposes of this subdivision, the federal income tax rate tables which were in effect immediately prior to enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall be adjusted for inflation for taxable year 2002 by the commissioner of taxes in the manner prescribed for adjustment for taxable year 2002 by the Commissioner of Internal Revenue in 26 U.S.C. § 1(f).

Sec. 3. 32 V.S.A. § 5811(7) is amended to read:

(7) "Laws of the United States" means, for any taxable year, the statutes of the United States relating to federal income taxes, whether enacted before or after this chapter effective for the taxable year, unless otherwise provided.

Sec. 4. 32 V.S.A. § 5822 is amended to read:

§ 5822. TAX ON INCOME OF INDIVIDUALS, ESTATES AND TRUSTS

A tax is imposed for each calendar year or fiscal year ending during that calendar year upon the income earned or received in that taxable year by every individual, estate and trust. The amount of this tax shall be measured by 24 percent of the federal income tax liability of the taxpayer as defined in subdivision 5811(4) of this title, reduced by a percentage equal to the percentage of the taxpayer’s adjusted gross income for the taxable year which is not Vermont income; provided, however, that if a taxpayer’s Vermont income exceeds the taxpayer’s adjusted gross income, no reduction shall be made and provided, further, that if a taxpayer has zero or negative Vermont income and the taxpayer’s Vermont income computed without regard to the reductions in section 5823(a) of this chapter does not equal or exceed the taxpayer’s adjusted gross income, no tax shall be due under this section. Except with respect to income from United States Government obligations, this reduction of federal income tax liability by the percentage of the taxpayer’s adjusted gross income which is not Vermont income shall be the exclusive method of calculating Vermont income tax liability; a taxpayer with adjusted gross income that is not Vermont income may not recompute the taxpayer’s federal income tax liability to determine the taxpayer’s Vermont income tax liability. With respect to income from United States Government obligations, a taxpayer may either reduce the taxpayer’s federal tax liability by the percentage of the taxpayer’s adjusted gross income that by federal law is exempt from state taxation or recompute what the taxpayer’s federal tax liability would be without that income.

Sec. 5. 32 V.S.A. § 5824 is amended to read:

§ 5824. CREDIT FOR CHANGES IN FEDERAL LAW

If, for any taxable year, the tax liability of an individual, estate or trust under this chapter exceeds, by any amount, what that liability would have been had the "laws of the United States" been defined, under this chapter, as "the statutes of the United States relating to federal income taxes in effect on *[December 31, 1999]* December 31, 2000," the taxpayer shall be entitled to a credit equal to that excess amount plus six percent of such amount, against the taxpayer’s tax liability under this chapter for the next succeeding taxable year. In the event the tax liability of the taxpayer under this chapter for the next succeeding taxable year is less than the amount of such credit, the difference between such liability and such credit shall be refunded to the taxpayer by the commissioner. Any taxpayer claiming a credit under this section shall establish and verify that claim in such manner, and by use of such forms or schedules, as the commissioner shall by regulation prescribe.

Sec. 6. REPEAL

32 V.S.A. § 5824 (credit for changes in federal law) is repealed, effective for taxable years 2001 and after.

Sec. 7. FEDERAL INCOME TAX LIABILITY

"Federal income tax liability", as defined in 32 V.S.A. § 5811(4), shall be calculated without regard to the Acceleration of Tax Bracket Credit under 26 U.S.C. § 6428.

Sec. 8. EFFECTIVE DATES

This act shall take effect upon passage, and:

(1) Secs. 2, 3 and 4 of this act shall apply to taxable years beginning on or after January 1, 2001, but before January 1, 2003, and shall sunset on January 1, 2003;

(2) Sec. 5 of this act shall apply to taxable years beginning on or after January 1, 2000, but before January 1, 2001.

Approved: June 16, 2001