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NO. 68.  AN ACT RELATING TO EDUCATION FUNDING.

(H.480)

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

* * * Part I.  EDUCATION TAXATION AND COLLECTION * * *

* * * Town school districts * * *

Sec. 1.  16 V.S.A. § 428 is amended to read:

§ 428.  AMOUNT OF MONEY BUDGET TO BE VOTED AND

             COLLECTED

(a)  At each annual town school district meeting, the electorate shall vote such sums of money as it deems necessary for the support of schools.  If such sums are not approved or acted upon at the annual meeting, the electorate shall vote such questions at a duly warned special school district meeting.  A district may vote money necessary for the support of schools therein to the end of the full school year next ensuing.

(b)  Following adoption of a budget by the electorate and calculation of the yield amount pursuant to section 4027 of this title, if the district has voted a budget with local education spending in excess of the general state support grant amount, the commissioner of education shall determine the district’s local share property tax percentage.  The selectboard shall then bill each property taxpayer for the local share property tax amount, and may use tax classifications if authorized.  Homesteads shall be billed without regard to the income sensitivity calculation under chapter 154 of Title 32.

(c)  Local share property tax amount is the education property tax liability due under section 5402 of Title 32, times the local share property tax percentage, minus any amount of education property tax assessed for that year on an electric generating plant subject to tax under chapter 213 of Title 32.  Local share property tax percentage means the percentage of the liability under chapter 135 of Title 32 necessary to raise per equalized pupil local education spending in excess of general state support amount, divided by the yield amount.  Local education spending shall have the same meaning that it has in subdivision 4001(6) of this title.

(d)  The treasurer of each school district which has voted a budget with local education spending in excess of the general state support grant and which can raise more than the yield amount shall, on December 1 in the year in which the tax is levied and on June 1 of the following year, pay to the state treasurer for deposit into the education fund one-half of the municipality’s education property tax liability net payment, as determined by the commissioner of education.  Payment shall be accompanied by a return prescribed by the state treasurer in consultation with the commissioner of education.  Any portion of local share property tax liability due to the treasurer and paid before the due date shall be discounted on a per diem basis at an annual rate of six percent.  A district which has not voted a budget and for which the commissioner has used the most recently adopted budget in calculating the yield amount under section 4027 of this title, shall be subject to this subsection, based on its most recently adopted budget and shall borrow the funds necessary to make payments to the state treasurer.

(e)  The payment provisions of section 5403 of Title 32, and the administrative provisions of section 5409 of Title 32 shall apply to the local share property tax.  Taxes assessed and collected by a municipality shall be assessed and collected in accordance with chapter 133 of Title 32.

(f)  If the electorate of a school district votes for its budget by Australian ballot, it shall do so using ballot language jointly developed by the commissioner and secretary of state and adopted by the commissioner, by rule.

* * * Incorporated school districts * * *

Sec. 2.  16 V.S.A. § 511 is amended to read:

§ 511.  BUDGET

(a)  At a meeting legally warned for that purpose, an incorporated school shall vote such sums of money as it deems necessary for the support of schools.  If such sums are not approved or acted upon at the annual meeting, the electorate shall vote such questions at a duly warned special school district meeting.  A district may vote money necessary for the support of schools therein to the end of the full school year next ensuing.

(b)  Following adoption of a budget by the electorate and calculation of the yield amount pursuant to section 4027 of this title, if the incorporated district has voted a budget with local education spending in excess of the general state support grant amount, the commissioner of education shall determine the district’s local share property tax percentage.  The prudential committee shall then bill each property taxpayer for the local share property tax amount, and may use tax classifications if authorized.  Homesteads shall be billed without regard to the income sensitivity calculation under chapter 154 of Title 32.  The prudential committee shall have the same authority to enforce collection and payment of this tax, including the collection of interest on overdue taxes, as selectmen have in enforcing collection and payment of town taxes.

(c)  Local share property tax amount is the education property tax liability due under section 5402 of Title 32, times the local share property tax percentage, minus any amount of education property tax assessed for that year on an electric generating plant subject to tax under chapter 213 of Title 32.  Local share property tax percentage means the percentage of the liability under chapter 135 of Title 32 necessary to raise per equalized pupil local education spending in excess of general state support amount, divided by the yield amount.  Local education spending shall have the same meaning that it has in subdivision 4001(6) of this title.

(d)  The treasurer of an incorporated district which has voted a budget with local education spending in excess of the general state support grant and which can raise more than the yield amount shall, on December 1 in the year in which the tax is levied and on June 1 of the following year, pay to the state treasurer for deposit into the education fund one-half of the municipality’s education property tax liability net payment, as determined by the commissioner of education.  Payment shall be accompanied by a return prescribed by the state treasurer in consultation with the commissioner of education.  Any portion of local share property tax liability due to the treasurer and paid before the due date shall be discounted on a per diem basis at an annual rate of six percent.  An incorporated district which has not voted a budget and for which the commissioner has used the most recently adopted budget in calculating the yield amount under section 4027 of this title, shall be subject to this subsection, based on its most recently adopted budget and shall borrow the funds necessary to make payments to the state treasurer.

(e)  The payment provisions of section 5403 of Title 32, and the administrative provisions of section 5409 of Title 32 shall apply to the local share property tax.  Taxes assessed and collected by a municipality shall be assessed and collected in accordance with chapter 133 of Title 32.

(f)  If the electorate of an incorporated school district votes for its budget by Australian ballot, it shall do so using ballot language jointly developed by the commissioner and secretary of state and adopted by the commissioner, by rule.

 

 

* * * Statewide Education Tax * * *

Sec. 3.  32 V.S.A. § 5401(7) is amended and (12) and (13) are added to read:

(7)  “Homestead” means the principal dwelling owned and occupied by a resident individual, as defined in section 5811 of this title, in which the individual claims residence for purposes of income tax liability and rights and privileges of residency.  A homestead also includes a dwelling owned by a farmer as defined under section 3752 of this title, and occupied as the permanent residence by a parent, sibling, child, grandchild or shareholder of the farmer-owner, provided that the shareholder owns more than 50 percent of a corporate farmer-owner, including attribution of stock ownership of a parent, sibling, child or grandchild.  A homestead includes as much of the parcel of land surrounding the dwelling as is reasonably necessary for use of the dwelling as a home, but in no event more than two acres per dwelling unit, up to a maximum of 10 acres per parcel, determined without regard to any road which intersects the land.  If two or more homestead dwellings are located on a single parcel, the value of the parcel allocated to each homestead shall be the total value of the parcel divided by the number of principal dwellings, unless otherwise determined by ownership of record of the land.  A homestead may consist of a part of a multi-dwelling or multi-purpose building, including cooperative property occupied as a permanent residence by a member of a cooperative housing corporation incorporated under 11 V.S.A. chapter 14, and a pro rata part of the land upon which it is built.  A mobile home may constitute a principal dwelling for purposes of this chapter.  A homestead does not include buildings or improvements detached from the home except for a building used as a garage for personal passenger vehicles and any sheds used for noncommercial purposes.  A homestead and used for business purposes; and does not include that portion of a principal dwelling used for business purposes if the portion used for business purposes includes more than 25 percent of the floor space of the building.

(12)  “Excess spending” means the per-equalized pupil amount of the district’s education spending minus the portion of education spending which is approved school capital construction spending; in excess of 125 percent of the statewide average district education spending per equalized pupil in the prior fiscal year, as determined by the commissioner of education.

(13)  “District spending adjustment” means the greater of:  one or a fraction in which the numerator is the district’s education spending plus excess spending, per equalized pupil, for the school year; and the denominator is the base education payment for the school year, as defined in section 4001 of Title 16.

Sec. 4.  32 V.S.A. § 5402 is amended to read:

§ 5402.  STATEWIDE EDUCATION PROPERTY TAX LIABILITY

(a)  A statewide education property tax is imposed on all nonresidential and homestead property at a rate of $1.10 at the following rates:

(1)  the tax rate for nonresidential property shall be $1.59 per $100.00, and

(2)  the tax rate for homestead property shall be $1.10 multiplied by the district spending adjustment for the municipality, per $100.00,

of equalized education property value as most recently determined under section 5405 of this title; but the homestead property tax liability shall not exceed the adjusted liability for eligible claimants under chapter 154 of this title.

(b)  Calculation of education tax.

(1)  The commissioner of taxes shall determine the education property tax liability for to be collected by each municipality for the following school year by multiplying the tax rate adopted rates under subsection (a) of this section by the municipality’s most recent equalized education tax grand list for the previous year nonresidential and homestead values.  On or before June 30 each year, the commissioner of taxes shall inform each municipality of its the education property tax liability to be collected

          (2)  If a district has not voted a budget by May 1, the commissioner shall determine a preliminary amount of nonresidential and homestead education taxes to be collected by the municipality, by multiplying the minimum tax rates under subsection (a) of this section by the municipality’s most recent equalized nonresidential and homestead values, and shall inform the municipality by June 30 of the preliminary amount to be collected.  Upon receipt of the municipality’s budget information from the commissioner of education, the commissioner shall determine and inform the municipality of the full amount of nonresidential and homestead education taxes to be collected by the municipality under subdivision (b)(1) of this section.

(3)  The legislative body in each municipality shall then bill each property taxpayer for the nonresidential and homestead amounts of education property tax on the education property tax grand list, and the legislative body may use tax classifications, if authorized, to raise that amount the amounts determined under this section.  Each homestead property tax bill shall include notice of the education spending per equalized pupil in the taxpayer’s district and its relation to the base education payment; and the effect of the education spending in the district upon the homestead tax rate and the applicable percentage for income sensitivity; and shall also include an insert supplied by the commissioner of taxes which explains the relationship of district education spending to homestead property tax rates.  Tax bills shall show the tax due as the rate determined under subsection (a) of this section, multiplied by the current listed value of the property to be taxed, multiplied by a factor which accounts for grand list equalization.  The grand list equalization factor shall be the ratio of the municipality’s most recent equalized education grand list value divided by its current year education grand list value.

(4)  Taxes assessed under this section shall be assessed and collected in the same manner as taxes assessed under chapter 133 of this title.  Taxes assessed on homesteads shall be assessed without regard to the adjustment for eligible claimants under chapter 154 of this title. 

(c)  Notwithstanding section 426 of Title 16, the The treasurer of each municipality shall by December 1 of the year in which the tax is levied and on June 1 of the following year pay to the state treasurer for deposit in the education fund one-half of the municipality’s statewide nonresidential tax and one‑half of the municipality’s homestead education property tax liability net payment, as determined by the commissioner of taxes, as determined under subdivision (b)(1) of this sectionPayment The commissioner of education shall determine the municipality’s net nonresidential education tax payment, and its net homestead education tax payment to the state, and payment shall be accompanied by a return prescribed by the director in consultation with the commissioner of education.  The municipality may also retain one-half one‑eighth of one percent of the net payment amount to the state, as determined by the director of property valuation and review.  Notwithstanding sections 182 and 461 of this title, any remaining balance shall be paid to the school district total education tax collected, only upon timely remittance of net payment to the state treasurer

(d)  An owner of a building containing qualified rental units shall be entitled to a percentage reduction in the education property tax due under this section.  The reduction percentage shall be 10 percent, multiplied by the ratio of qualified rental units to total rental units in the building.

(1)  “Qualified rental units” under this subsection means units which are at the time of the claim under this subsection, and were for the entire preceding calendar year, subject to rent restriction under provisions of state or federal law, but excluding units subject to rent restrictions under only one of the following programs:  Section 8 moderate rehabilitation, Section 8 housing choice vouchers, or Section 236 or Section 515 rural development rental housing.

(2)  A municipality shall allow a percentage reduction under this subsection upon presentation by the taxpayer to the municipality of a certificate of education tax reduction, obtained from the commissioner of taxes.  The commissioner of taxes shall issue a certificate of education tax reduction upon presentation by the taxpayer of information which the commissioner shall require.

(3)  A percentage reduction granted by a municipality under this subsection shall not affect the amount of statewide education property tax to be collected by the municipality, and the municipality shall be deemed to have paid to the state treasurer the amount of tax reduced in accord with this subsection.

Sec. 5.  32 V.S.A. § 5402b is added to read:

§ 5402b.  STATEWIDE EDUCATION TAX RATE ADJUSTMENTS 

     (a)  Annually, by December 1, the commissioner of taxes shall recommend to the general assembly, after consultation with the department of education, the secretary of administration and the joint fiscal office, the following adjustments in the statewide education tax rates under subdivisions 5402(a)(1) and (2) of this title:

          (1)  If there is a projected balance in the education fund budget stabilization reserve in excess of the five percent level authorized under section 4026 of Title 16, the commissioner shall recommend a reduction, for the following fiscal year only, in the statewide education tax rates which will retain the projected education fund budget stabilization reserve at the five percent maximum level authorized and raise at least 34 percent of projected education spending from the tax on nonresidential property; and

          (2)  If there is a projected balance in the education fund budget stabilization reserve of less than the three and one‑half percent level required under section 4026 of Title 16, the commissioner shall recommend an increase, for the following fiscal year only, in the statewide education tax rates which will retain the projected education fund budget stabilization reserve at no less than the three and one‑half percent minimum level authorized under section 4026 of Title 16, and raise at least 34 percent of projected education spending from the tax rate on nonresidential property. 

          (3)  In any year following a year in which the nonresidential rate produced an amount of revenues insufficient to support 34 percent of education fund spending in the previous fiscal year, the commissioner shall determine and recommend an adjustment in the nonresidential rate sufficient to raise at least 34 percent of projected education spending from the tax rate on nonresidential property.

          (4)  If in any year in which the nonresidential rate is less than the statewide average homestead rate, the commissioner of taxes shall determine the factors contributing to the deviation in the proportionality of the nonresidential and homestead rates and make a recommendation for adjusting statewide education tax rates accordingly.

     (b)  If the commissioner makes a recommendation to the general assembly to adjust the education tax rates under section 5402 of this title, the commissioner shall also recommend a proportional adjustment to the applicable percentage base for homestead income based adjustments under section 6066 of this title.

 

Sec. 6.  32 V.S.A. § 5410 is amended to read:

§ 5410.  DECLARATION OF HOMESTEAD

(a)  A resident may shall declare one ownership of a homestead for purposes of this chapter education property tax.

(b)  Annually on or before the due date for filing the Vermont income tax return, with without extension, each resident individual may shall, on a form prescribed by the commissioner, which shall be verified under the pains and penalties of perjury, declare his or her homestead, if any, as of, or expected to be as of, April 1 of the year in which the declaration is made.

(c)  [Repealed.]

(d)  The commissioner shall provide a list of homesteads in each town to the town listers by May 15.  The listers shall notify the commissioner by June 1 of any residences on the commissioner’s list which do not qualify as homesteads.  The listers shall separately identify homesteads in the grand list.

(e)  The commissioner shall adopt rules governing the eligibility requirements for declaring a homestead and rules governing waiver of penalty for late filing of a homestead declaration in cases of hardship.

(e)(f)  Intention to establish a permanent residence is a factual determination to be made in the first instance by the commissioner.  No one factor is conclusive of whether a dwelling is a permanent residence; the commissioner may consider any relevant factors, including but not limited to the following: formal and informal statements of the declarant; the location of residences owned or leased by the declarant; where the declarant spends time; the declarant’s place of employment and business connections; the location of items of significant value (either monetary or sentimental) to declarant; where the declarant’s family lives, place of voter registration, place of issuance of automobile registration and driver’s license; previous permanent residency of the declarant; and address listed on federal and state income tax returns filed by the declarant.

(f)(g)  If the property identified in a declaration under subsection (b) of this section is not the taxpayer’s homestead, or if the owner of a homestead fails to declare a homestead as required under this section, the commissioner shall notify the municipality and the municipality shall assess the taxpayer a penalty in an amount equal to eight percent three percent if the municipality’s nonresidential tax rate is higher than the municipality’s homestead tax rate for the tax year to which the declaration pertains, or in any other case shall assess the taxpayer a penalty in an amount equal to eight percent, of the education tax assessed on the property, ; or if the declaration was filed or failure to declare was with fraudulent intent, then the commissioner municipality shall assess the taxpayer a penalty in an amount equal to 100 percent of the education tax assessed on the property, plus any property tax due with interest from the original due date of the property tax on the property, at the applicable rate established in section 3108 of this title.  A taxpayer may appeal the assessment under this subsection to the commissioner, in the same manner as an appeal under chapter 151 of this title.  Any penalty imposed under this subsection may be recovered by assessment and enforcement and with appeal rights in the same manner as an income tax under chapter 151 of this title and any additional property tax and interest due shall be assessed and collected by the municipality in the same manner as a property tax under chapter 133 of this titleAmounts collected under this subsection shall be credited to the education fund.  The commissioner may waive or reduce the eight percent penalty under this subsection for good cause.  Education taxes assessed in the fiscal year upon property identified in a declaration of homestead, but which was not the taxpayer’s homestead, shall remain payable to the commissioner.  Upon the filing of a new or corrected declaration by an owner subject to this subsection, any additional tax, penalty, and interest collected by the municipality shall be remitted to the state treasurer upon collection; and the municipality may retain one-eighth of one percent of the total remitted.  Any reduction in tax shall be refunded from the education fund to the municipality, and by the municipality to the taxpayer; and any change in property tax under this subsection shall have no retroactive effect upon the education tax rates for the municipality.

 

* * * PART II.  HOMESTEAD TAX ADJUSTMENT* * *

Sec. 7.  32 V.S.A. § 6061(3) and (7) are amended and (11) is added to read:

(3)  “Household” means, for any individual and for any taxable year, the individual and such other persons as resided with the individual in the homestead at any time during the taxable year.  A person who is not related to any member of the household and who is residing in the household under a written homesharing agreement pursuant to a nonprofit homesharing program or a person residing in a household who is hired as a bona fide employee to provide personal care to a member of the household and who is not related to the person for whom the care is provided shall not be considered to be a member of the household.

(7)  “Rent constituting property taxes” means for any homestead and for any taxable year, at the claimant’s option, (A) 21 percent of the gross rent or (B) that portion of the gross rent which equals the property tax assessed for payment in the calendar year allocable to the claimant’s rental unit for the period rented by the claimant.  “Gross rent” means the rent actually paid during the taxable year by the individual or other members of the household solely for the right of occupancy of the homestead during the taxable year.  If a claimant’s rent is government-subsidized, the property tax allocable to the claimant’s rental unit shall be reduced in the same proportion as the rent is reduced by the subsidy.  “Rent constituting property taxes” shall not include payments made under a written homesharing agreement pursuant to a nonprofit homesharing program, or payments for a room in a nursing home in any month for which Medicaid payments have been made on behalf of the claimant to the nursing home for room charges.

(11)  “Housesite” means that portion of a homestead, as defined under subdivision 6061(2) of this title, which includes the principal dwelling and as much of the land surrounding the dwelling as is reasonably necessary for use of the dwelling as a home, but in no event more than two acres per dwelling unit; and in the case of multiple dwelling units, no more than two acres per dwelling unit up to a maximum of 10 acres per parcel.

Sec. 8.  32 V.S.A. § 6061(5)(C) is amended to read:

(5)  “Modified adjusted gross income” means the sum of “federal adjusted gross income” as defined in section 5811 of this title:

* * *

(C)  without the inclusion of gifts from nongovernmental sources, surplus food or other relief in kind supplied by a governmental agency, or the first $4,000.00 $6,500.00 of income earned by a full-time student who qualifies as a dependent of the claimant under the federal Internal Revenue Code, or the first $4,000.00 $6,500.00 of income received by a parent who qualifies as a dependent of the claimant under the Internal Revenue Code, or payments made by the state for foster care or to a family for the support of an eligible person with a developmental disability as defined in subdivision 8722(2) of Title 18.  If the commissioner determines, upon application by the claimant, that a person resides with a claimant who is disabled or was at least 62 years of age as of the end of the year preceding the claim, for the primary purpose of providing attendant care services (as defined in section 6321 of Title 33) or homemaker or companionship services, with or without compensation, which allow the claimant to remain in his or her home or avoid institutionalization, the commissioner shall exclude that person’s modified adjusted gross income from the claimant’s household income.  The commissioner may require that a certificate in a form satisfactory to the commissioner be submitted which supports the claim.

Sec. 9.  32 V.S.A. § 6061(6) is amended and (11) is added to read:

(6)  “Property tax” means the amount of ad valorem taxes, exclusive of special assessments, interest, penalties, and charges for service, assessed on real property in this state used as the claimant’s homestead housesite.

(A)  “Statewide property tax” means the tax assessed under chapter 135 of this title on real property in this state used as the claimant’s homestead.

(B)  “Local share property tax” means the tax assessed under section 428 or 511 of Title 16 on real property in this state used as the claimant’s homestead.

(11)  “Claim year” means the year in which a claim is filed under this chapter.

Sec. 10.  32 V.S.A. § 6066 is amended to read:

§ 6066.  COMPUTATION OF ADJUSTMENT

(a)  An eligible claimant who owned the homestead on April 1 of the year in which the claim is filed shall be entitled to an adjustment amount equal to the amount determined under subdivision (1) of this subsection plus the amount in subdivision (2), determined as follows:

(1)  Statewide property tax adjustment:

(A)  For a claimant with household income of $75,000.00 or more:

(i)  the statewide property education tax rate as adjusted under section subdivision 5402(a)(2) of this title, multiplied by the equalized value of the homestead in the taxable year housesite;

(ii)  minus (if less) the sum of

(I)  two percent the applicable percentage of household income for the taxable year, plus

(II)  the statewide property education tax rate as adjusted under section subdivision 5402(a)(2) of this title, multiplied by the equalized value of the homestead housesite in the taxable year in excess of $160,000.00.

(B)  For a claimant with household income of less than $75,000.00 but more than $47,000.00:

(i)  the statewide property education tax rate as adjusted under of section 5402 subdivision 5402(a)(2) this title, multiplied by the equalized value of the homestead in the taxable year; housesite

(ii)  minus the lesser of:

(I)  two percent the applicable percentage of household income for the taxable year; or

(II)  the statewide property tax rate under section 5402 of this title, multiplied by the equalized value of the homestead in the taxable year reduced by $15,000.00.

(C)  For a claimant whose household income does not exceed $47,000.00 the statewide education tax rate as adjusted under subdivision 5402(a)(2) of this title, multiplied by the equalized value of the housesite minus the lesser of:

(i)  the applicable percentage of household income for the taxable year; or

(ii)  the statewide education tax rate under subdivision 5402(a)(2) of this title, multiplied by the equalized value of the housesite in the taxable year reduced by $15,000.00.

(D)  A claimant whose household income does not exceed $75,000.00 shall also be entitled to an additional adjustment amount under this section of $10.00 per acre, up to a maximum of five acres, for each additional acre of homestead property in excess of the two-acre housesite.  The adjustment amount under this section shall be shown separately on the notice of property tax adjustment to the claimant.

(2)  Local share property tax adjustment.  The adjustment amount determined under subdivision (1) of this subsection shall be increased by:  the local share percentage rate established under Title 16 for the claim year for the municipality in which the homestead is located, multiplied by the adjustment amount determined under subdivision (1).  “Applicable percentage” in this section means two percent, multiplied by the district spending adjustment under subdivision 5401(13) of this title for the property tax year which begins in the claim year for the municipality in which the homestead residence is located; but in no event shall the applicable percentage be less than two percent.

(3)  a claimant whose household income does not exceed $47,000.00 shall also be entitled to a credit against the claimant’s tax liability under chapter 151 of this title equal to the amount by which the property taxes for the municipal fiscal year which began in the taxable year upon the claimant’s homestead housesite owned on December 31 of the taxable year, reduced by the adjustment amount determined under subdivisions (1) and (2) of this subsection, exceeds a percentage of the claimant’s household income for the taxable year as follows:

* * *

(b)  An eligible claimant who rented the homestead on the last day of the taxable year, whose household income does not exceed $47,000.00, and who submits a certificate of rent constituting property taxes shall be entitled to a credit against the claimant’s tax liability under chapter 151 of this title equal to the amount by which the rent constituting property taxes upon the claimant’s homestead housesite exceeds a percentage of the claimant’s household income for the taxable year as follows:

* * *

(e)  Property taxes paid by a cooperative, not including a mobile home park cooperative, allocable to property used as a homestead, shall be attributable to the co-op member for the purpose of computation of adjustment of property tax liability of the co-op member under this section.  Property owned by a cooperative declared as a homestead may only include the homestead and a pro rata share of any common land owned or leased by the cooperative, not to exceed two acres per homestead the two‑acre housesite limitation.  The share of the cooperative’s assessed value attributable to the homestead housesite shall be determined by the cooperative and specified annually in a notice to the co-op member.  Property taxes paid by a mobile home park cooperative, allocable to property used as a homestead housesite, shall be attributed to the owner of the homestead housesite for the purpose of computation of adjustment of property tax liability of the homestead housesite owner under this section.  Property owned by the mobile home park cooperative and declared as a homestead housesite may only include common property of the cooperative contiguous with at least one mobile home lot in the park, not to exceed two acres per homestead, and without regard to the overall ten-acre limitation of section 5401(7) of this title the two-acre housesite limitation.  The share attributable to any mobile home lot shall be determined by the cooperative and specified in the cooperative agreement.

Sec. 11.  PER-ACRE PROPERTY TAX ADJUSTMENT; LEGISLATIVE

              INTENT

It is the intent of the General Assembly that at such time as sufficient funds are available, the per-acre property tax adjustment limitation of five acres be increased, so that an adjustment amount may be paid for up to 25 acres in excess of the two-acre housesite.

Sec. 12.  AMENDMENT OF RELATED INCOME SENSITIVITY

              PROVISIONS

The legislative council shall replace the word “homestead” with the word “housesite” where the context requires in chapter 154 of Title 32.

Sec. 13.  AMENDMENT OF RELATED INCOME SENSITIVITY

               PROVISIONS

(a)  The baseline amount for determining an education tax rate under Sec. 50a(3) of No. 60 of the Acts of 1997, as amended, shall be for fiscal year 2005 and thereafter the greater of $7,602.00 per equalized pupil or the base education payment as defined in 16 V.S.A. § 4001(14) for the fiscal year.

(b)  For purposes of a claim for property tax adjustment under chapter 154 of Title 32 by a taxpayer in a municipality which has upon its grand list an operating electric generating plant subject to the tax under section 5402a, the adjusted property tax rate shall be the municipality’s total education property tax rate imposed under subdivisions (2) and (3) of Sec. 50a of No. 60 of the Acts of 1997, as amended; and the applicable percentage factor shall be:  one plus a fraction, the numerator of which is the tax rate imposed under Sec. 50a(3), and the denominator of which is the tax rate imposed by the municipality under Sec. 50a(2).

Sec. 14.  Sec. 50a(2) of No. 60 of the Acts of 1997, as amended, is amended to read:

(2)  A municipality which has upon its grand list an operating electric generating plant subject to the tax under section 5402a of Title 32, shall be subject to the education property tax under chapter 135 of Title 32 at one‑half the rate provided in section subdivision 5402(a)(1) and one-half the base rate provided in subdivision 5402(a)(2) of Title 32; and

* * * PART III.  EDUCATION PAYMENTS AND SPENDING * * *

* * * Base and Adjusted Education Payment Amounts * * *

Sec. 15.  16 V.S.A. § 4001(6) is amended and (13) and (14) are added to read:

(6)  “Local education Education spending” means the amount of the school district budget, any assessment for a union school or joint contract school, technical center payments made on behalf of the district under subsection 1561(b) of this title, and any amount added to pay a deficit pursuant to 24 V.S.A. § 1523(b) which is paid for by the school district from the general state support grant and from local share property tax revenues.  Local education spending does not include, but excluding any portion of the school budget paid for by from any other sources such as endowments, parental fund raising, federal funds, nongovernmental grants or other state funds such as special education funds paid under chapter 101 of this title.

(13)  “Base education payment” means $6,800.00 per equalized pupil, adjusted as required under section 4011 of this title.

(14)  “Adjusted education payment” means the district’s education spending per equalized pupil.

Sec. 16.  16 V.S.A. § 4011 is amended to read:

§ 4011.  GENERAL STATE SUPPORT GRANTS EDUCATION

              PAYMENTS

     (a)  Annually, the general assembly shall appropriate funds to pay for a general state support grant an adjusted education payment for each equalized pupil and a portion of a general state support grant base education payment for each adult diploma student.  In fiscal year 2002, the general state support grant for each equalized pupil shall be $5,448.00. 

(b)  For each following fiscal year, the general state support grant base education payment shall be $6,800.00, increased by the most recent New England Economic Project cumulative price index, as of December 1 November 15, for state and local government purchases of goods and services from fiscal year 2002 2005 through the following fiscal year, as provided through the state’s participation in the New England Economic Project for which the payment is being determined, plus an additional one‑tenth of one percent.

(b)(c)  Annually, each school district shall receive a general state support grant an adjusted education payment for support of basic education costs.  Funds distributed under this section shall be allocated on the basis of the equalized pupils in each school district, except for unorganized towns and gores.  An unorganized town or gore shall receive an amount equal to its adjusted education payment for that year for each student based on the weighted average daily membership count which shall not be equalized. However, no school district shall receive more than its local education spending amount If the district’s adjusted education payment is less than the base education payment, then in fiscal years 2005 and 2006 only, the district shall receive its education spending per equalized pupil plus 40 percent of the excess of the base education payment over the district’s adjusted education payment, but only for deposit in a district’s education reserve fund, authorized in accord with section 2804 of Title 24, for expenditure on legitimate items of education expense.  In fiscal years 2007 and after, no district shall receive more than its education spending amount.

(d)  Funds received under this section which are attributable to an increase in student count due to the poverty ratio of the district shall be used by the district to provide learning readiness experiences for preschool age children or early reading and math experiences for school age children.  These services shall be provided to children who are at risk of not succeeding in the general education environment.  School districts are authorized to work collaboratively to share resources or otherwise find ways to maximize use of funds received under this section.  However, due to the difficulty of determining how much of these funds to attribute to an individual student, this subsection shall not apply to tuition funds received by a receiving school.

(e)  The commissioner shall pay an amount equal to the general state support grant, 82 percent of the base education payment to the Vermont Academy of Science and Technology for each Vermont resident, 12th grade student enrolled.

(f)  Annually, the commissioner shall pay to a department or agency which provides an adult diploma program, an amount equal to 0.3 times the general state support grant, 25 percent of the base education payment for each student who completed the diagnostic portion of the program in the previous year, based on an average of the previous two years.

(g)  On or before December 15, the commissioner shall recommend to the general assembly an appropriate level of general state support grants to school districts for the next ensuing school year.  The commissioner shall pay to a school district a percentage of the base education payment for each resident student for whom the district is paying a technical tuition to a regional technical center but who is not enrolled in the district and therefore not counted in the average daily membership of the district.  The percentage of the base education payment to be paid shall be the percentage of the student’s full-time equivalent attendance at technical center multiplied by 82 percent.

     (h)  Annually, by October 1, the commissioner shall send to school boards for inclusion in town reports and publish on the department website the following information:

(1)  the statewide average district spending per equalized pupil for the current fiscal year, and 125 percent of that average spending; and

(2) a statewide comparison of student-teacher ratios among schools which are similar in number of students and number of grades.

Sec. 17.  16 V.S.A. § 4031 is added to read:

§ 4031.  UNORGANIZED TOWNS AND GORES

     (a)  For an unorganized town or gore, if education spending per pupil is in excess of the base education payment, its district spending adjustment shall be zero for purposes of determining the tax rate under subdivision 5402(a)(2) of Title 32, and there shall be imposed on its education property tax grand list the tax rate necessary to raise the excess amount.

     (b)  A tax imposed under this section shall be administered and collected in the same manner as an education property tax in accord with the provisions of chapter 135 of Title 32.  For purposes of a claim for property tax adjustment under chapter 154 of Title 32 by a taxpayer in a municipality affected under this section, the applicable percentage shall not be multiplied by a district spending adjustment, but shall be multiplied by a fraction, the numerator of which is the unorganized town’s or gore’s education spending per pupil and the denominator of which is the base education payment.

* * * Technical Centers  * * *

Sec. 18.  16 V.S.A. § 1561(b) and (c) are amended to read:

(b)  A On behalf of a sending school district within Vermont, a technical center shall receive from the education fund for each full‑time equivalent student sent from a school district within Vermont, 100 percent of the per equalized pupil general state support grant from the district 82 percent of the base education payment and an equivalent amount shall be subtracted from the amount due to the sending district under section 4011 of this title.  The amount sent to the technical center and subtracted from the sending district shall be considered a revenue and an expenditure of the district and shall be reported as such in appropriate accounts and in the district’s annual budget.

(c)  Annually, the general assembly shall appropriate funds to pay for a supplemental assistance grant per full-time equivalent student.  The amount of the grant shall be equal to 40 percent of the per equalized pupil general state support grant, 33 percent of the base education payment for that year. 

* * * Fund Payments * * *

Sec. 19.  16 V.S.A. § 4027 is amended to read:

§ 4027.  DETERMINATION OF YIELD AMOUNT AND AMOUNTS DUE

              TO OR FROM THE EDUCATION FUND

               EDUCATION  FUND TRANSFER AMOUNTS

(a)  On September 15 of each year, the commissioner of education shall determine a predictable yield for the following fiscal year, based upon the allocation, if any, to the yield pool by the General Assembly for the following fiscal year, and upon projected local education spending and projected local share income sensitivity costs for the following fiscal year.  The commissioner shall calculate the predictable yield so that the estimated amount due into the yield pool, plus the amount allocated to the yield pool by the General Assembly, equals the estimated amount due out of the yield pool.  By October 1, the commissioner shall report to the General Assembly the data and the calculation used to determine the predictable yield under this subsection.

(b)  Annually, on or before June 30, the commissioner of education shall use the predictable yield amount established in subsection (a) of this section to determine:

(1)  the local share property tax percentage a school district which adopts a budget with local education spending in excess of the general state support grant shall collect on properties in the district; and

(2)  how much the district shall pay into or receive from the education fund.

(c)  [Deleted.]

(d)(a)  On or before June 30, the commissioner of education shall inform each school district which, by May 1, voted a budget with local education spending in excess of the general state support grant and for which no petition for reconsideration has been filed, how much it will owe to the education fund or how much it will receive from the fund of the net amount of its nonresidential education tax and its homestead education tax under section 5402 of Title 32, and its adjusted education payment receipts under section 4011 of this title.  If a petition for reconsideration has been filed, or the district municipality has not voted a budget by May 1, and subsequently votes a budget with local education spending in excess of the general state support grant, the commissioner shall inform the district how much it will owe to or receive from the fund municipality of the net amount of its nonresidential education tax and its homestead education tax, and its adjusted education payment receipts, within 10 days of receiving a report from the superintendent pursuant to subsection (e) of this sectionThe commissioner shall notify the commissioner of taxes of the information reported to municipalities under this subsection.

(e)(b)  Annually, on or before June 1, each superintendent shall report to the department of education, on a form prescribed by the commissioner, each local education budget which was adopted by May 1 for the following fiscal year by the member districts of the supervisory union and for which no petition for reconsideration has been filed.  A superintendent shall report a budget adopted following May 1, to the department of education, between 30 to 40 days following adoption, or, if a petition for reconsideration has been filed, within 10 days of final adoption of the budget.

Sec. 20.  16 V.S.A. § 4028 is amended to read:

§ 4028.  FUND PAYMENTS TO SCHOOL DISTRICTS

(a)  On or before September 10, December 10, and April 30 of each school year, each school district shall receive funds equal to one-third of the adjusted education payment under section 4011 of this title shall become due to school districts; except that districts which have not adopted a budget by 30 days before the date of payment under this subsection shall receive one-quarter of the base education payment, and upon adoption of a budget shall receive additional amounts due under this subsection.

(1)  the general state support grants due under section 4011 of this title;

(2)  the amount due to a district which adopts a budget with local education spending in excess of the general state support grant and which is able to raise less than the yield amount.

(b)  Payments made for special education under chapter 101 of this title, for technical education under chapter 37 of this title and for other aid and categorical grants paid for support of education shall also be from the education fund.

(c)  The commissioner of education shall determine a school district’s net payment amount due the fund, which is the amount due under subsection 5402(b) of Title 32 in excess of the payments due the district under subdivision (a)(1) of this section and the net payment due the state under section 4027 of this title.  If a school district fails to deposit the net amount due under section 5402 of Title 32, or fails to deposit the amount due under section 4027 of this title, on or before the due date therefor, then in addition to any other penalties prescribed by law, payments to be made under this section shall be reduced by a percentage equal to the unpaid portion of the amount due.  However, in no case shall payments to the school district equal more than 80 percent of the payments due the school district under this section until the municipality has paid in full.

 

 

 

Sec. 21.  32 V.S.A. § 5409 is amended to read:

§ 5409.  DUTIES OF MUNICIPALITIES AND ADMINISTRATION

The following shall apply with regard to the statewide education tax imposed under this chapter and to the local share tax imposed under section 428 or 511 of Title 16:

(1)  Late payments of the tax by a municipality to the state shall be assessed interest at a per diem rate of eight percent per annum of the amount due.  If a payment is more than 90 days overdue, any state funds due the municipality shall be withheld.

(2)  If  by August 1 a municipality has failed to issue notices of assessment of the statewide property or local share property tax education tax; or if the municipality fails for more than 90 days after the due date for any installment payment of either tax to enforce the tax in the municipality; then the commissioner of taxes shall either issue notices of assessment or collect the tax or both, or bring appropriate court action to require the municipal officials to issue notices and collect the tax, as the commissioner deems necessary.

(3)  In any case of administration under subdivision (2) of this section by the commissioner of taxes of local share education property tax:

(A)  Sections 5868, 5869, 5873, 5875, 5881, 5882, 5883, 5884, 5885, 5886, 5887, 5891, 5892, 5893, 5894 and 5895 of Title 32, as amended, shall apply in the same manner as to income tax.

(B)  Persons aggrieved by decisions of the listers may appeal in the manner provided for property tax appeals in chapter 131 of Title 32; and the commissioner of taxes shall have all the powers described in chapter 133 of Title 32.

(C)  The commissioner may abate in whole or in part the statewide or local share property education taxes of a taxpayer who has been granted an abatement of municipal taxes under section 1535 of Title 24.

(4)  [Deleted.]

(5)  In case of insufficient property tax payment by a taxpayer to a municipality, payments shall be allocated first to municipal property tax, and next to local share property tax, and last to statewide education property tax.  In case of insufficient payment by a taxpayer to the department of taxes, payments shall be allocated first to liabilities other than education property taxes, and next to local share property tax, and last to statewide education property tax.

(6)  In case of overpayment by a taxpayer who has an income tax liability under chapter 151 of this title and a homestead property tax liability, a refund of the overpayment, after accounting for any benefit amount allowed under chapter 154 of this title, shall be deemed to be a refund of income tax for purposes of debt setoff under subchapter 12 of chapter 151 of this title.

(7)  Notwithstanding section 435 of this title, the commissioner shall deposit the revenue from taxes imposed under this chapter and the local share property tax under Title 16 in the education fund, credited to the account of the municipality for which it was received.

(8)  A municipality’s liability to the state for education property taxes shall not be reduced by any early payment property tax discount or similar discount offered by the municipality.

* * * Education Spending - Use of Funds * * *

Sec. 22.  16 V.S.A. § 4029 is amended to read:

§ 4029.  USE OF FUNDS FOR LOCAL EDUCATION SPENDING

(a)  Funds for local education spending received by a school district may be used by a school district only for legitimate items of current education expense and shall not be used for municipal services. 

(b)  Funds raised under section 2664 of Title 17, section 2601 of Title 20 or section 1309 of Title 24 shall be used only for municipal services and shall not be used for educational expenses received by a municipality other than a school district may not be used directly or indirectly for education expenses.

(c)  If the commissioner of education determines that a school district has spent funds paid under section 4028 of this title for an item that is not a legitimate item of current education expense, the treasurer of the municipality shall, within 90 days, remit the amount of the expenditure to the education fund.  The treasurer shall use funds raised pursuant to section 2664 of Title 17, section 2601 of Title 20 or section 1309 of Title 24 for this purpose.  If the commissioner of education determines that a municipality other than a school district has spent funds raised under section 2664 of Title 17, section 2601 of Title 20 or section 1309 of Title 24 for an item that is a legitimate item of current education expense, the treasurer of the municipality shall transfer the amount of the expenditure from the local education fund to the municipal fund.

* * *

* * * Small Schools * * *

Sec. 23.  16 V.S.A. § 4015(b), (c), and (d) are amended and (e) is added to read:

(b)  Small schools support grant:  Annually, the commissioner shall pay a small schools support grant to any eligible school district.  The amount of the grant shall be the greater of

(1)  the amount determined by multiplying the two-year average enrollment in the district by $500.00 and subtracting the product from $50,000.00, with a maximum grant of $2,500.00 per enrolled student; or

(2)  the amount of the general state support grant 82 percent of the base education payment for the current year, multiplied by the two-year average enrollment, multiplied by the AGS factor.

(c)  Small schools financial stability grant:  In addition to a small schools support grant, an eligible school district whose two-year average enrollment decreases by more than ten percent in any one year shall receive a small schools financial stability grant.  However, a decrease due to a reduction in the number of grades offered in a school or to a change in policy regarding paying tuition for students shall not be considered an enrollment decrease.  The amount of the grant shall be determined by multiplying the general state support grant amount 82 percent of the base education payment for the current fiscal year, by the number of enrollment, to the nearest one-hundredth of a percent, necessary to make the two-year average enrollment decrease only ten percent.

(d)  Funds for both grants shall be appropriated from the education fund and shall be added to payments for the general state support grant base education payment or deducted from the amount owed to the education fund in the case of those districts that must pay into the fund under section 4027 of this title.

(e)  In the event that a school or schools which have received a grant under this section merge in any year following receipt of a grant, and the consolidated school is not eligible for a grant under this section, the consolidated school shall continue to receive a grant for three years following consolidation.  The amount of the annual grant shall be:

(1)  In the first year following consolidation, an amount equal to the amount received by the school or schools in the last year of eligibility.

(2)  In the second year following consolidation, an amount equal to two‑thirds of the amount received in the previous year.

(3)  In the third year following consolidation, an amount equal to one‑third of the amount received in the first year following consolidation.

* * * Technical Amendments * * *

Sec. 24.  REORGANIZATION OF CHAPTER 133 OF TITLE 16

16 V.S.A. chapter 133 is redesignated as follows:

(1)  The chapter title shall be amended to read:

Chapter 133.  State and Local Funding of Public Education

(2)  The title of subchapter 2 shall be amended to read:

Subchapter 2.  General State Support Funding of Public Education

(3)  The title and designation of subchapter 3 shall be repealed, and the contents of subchapter 3 shall become a part of subchapter 2.

Sec. 25.  REPEALS

The following sections of Title 16 are repealed:

(1)  § 11(29) (local education spending).

(2)  § 4000(b) (policy regarding local education spending).

(3)  § 4001(4) and (5) (yield amount and general state support grant).

Sec. 26.  16 V.S.A. § 4026(e) is amended to read:

(e)  The enactment of this chapter and other provisions of the Equal Educational Opportunity Act of which it is a part have been premised upon estimates of balances of revenues to be raised and expenditures to be made under the act for such purposes as general state support grants for education, adjusted education payments, categorical state support grants, provisions for property tax income sensitivity, payments in lieu of taxes, current use value appraisals, tax stabilization agreements, the stabilization reserve established by this section and for other purposes.  If the stabilization reserve established under this section should in any fiscal year be less than 3.5 percent of the prior fiscal year’s appropriations from the education fund, as defined in subsection (b) of this section, the joint fiscal committee shall review the information provided pursuant to section 5402a of Title 32 and provide the general assembly its recommendations for change necessary to restore the stabilization reserve to the statutory level provided in subsection (b) of this section.

Sec. 27.  16 V.S.A. § 4030 is amended to read:

§ 4030.  DATA SUBMISSION; CORRECTIONS

(a)  Upon discovering an error or change in data submitted to the commissioner for the purpose of determining payments to or from the education fund, a school district shall report the error or change to the commissioner as soon as possible.  In this subsection, an error in data is a clerical mistake.  A change in data due to new information or a change in situation is not an error under this subsection, and any resultant Any budget deficit or surplus due to the error or change shall be carried forward to the following year.  A ruling of the commissioner as to whether a change in data is due to error or to new information or a change in situation shall be final.

(b)  The commissioner shall use data submitted on or before January 15 prior to the fiscal year which begins the following July 1, in order to calculate the amounts due each school district for any fiscal year for the following:

(1)  the general state support grant adjusted education payments due under section 4011 of this title;

(2)  transportation aid due under Sec. 98 of Act No. 71 of 1998; and

(3)  the small school support grant due under section 4015 of this title.

(c)  The commissioner shall use data corrections regarding local education budget amounts submitted on or before June 15 prior to the fiscal year which begins the following July 1, in order to calculate the amounts due each school district under section 4027 of this title.

(d)  Errors in data submitted to the commissioner following the dates required for calculations under subsections (b) and (c) of this section shall be used to adjust payments to or from the education fund in the fiscal year following the fiscal year in which the error was reported.  The commissioner shall not use data corrected due to an error submitted following the deadlines to recalculate the equalized pupil ratio under subdivision 4001(3) of this title, or the equalized yield under section 4027 of this title in any year.  The commissioner shall not adjust payments to or from the education fund if an error or change is reported more than three fiscal years following the date that the original data was due.  Adjustments to payments to or from the education fund under this section shall be made on the earliest date possible after the fiscal year in which the error was reported, and in accordance with the schedules set forth in subsections subsection 4028(a), 428(d) and 511(d) of this title and section 5402 of Title 32, and after the necessary appropriation by the general assembly.

(e)  The board may adopt rules as necessary to implement the provisions of this section.

Sec. 28.  32 V.S.A. § 5401(8) is amended to read:

(8)  “Local education Education spending” means “local education spending” as defined in subdivision 4001(6) of Title 16.

Sec. 29.  32 V.S.A. § 5404(a) is amended to read:

(a)  Municipalities shall determine the education property tax grand list by calculating one percent of the listed value of nonresidential and homestead real property as provided in this section.  The listed value of all nonresidential and homestead real property in a municipality shall be its fair market value, its value established under a stabilization agreement described in section 5404a of this title, or the use value of property enrolled in a use value program under chapter 124 of this title.  If a homestead is located on a parcel of greater than two acres, the entire parcel shall be appraised at fair market value; the homestead housesite shall then be appraised as if it were situated on a separate parcel and the value of the homestead housesite shall be subtracted from the value of the total parcel to determine the value of the remainder of the parcel.

 

 

 

* * * Additional Education Tax Revenue * * *

* * * Sales Tax * * *

Sec. 30.  SALES AND USE TAX; LEGISLATIVE INTENT

It is the intent of the General Assembly by this act to reduce reliance on the property tax for education funding, and to provide some of the necessary additional state funding for education through the sales and use tax.  It is also the intent of the General Assembly to conform the state’s sales and use tax laws to the requirements of the interstate Streamlined Sales Tax Agreement so that the state may realize increased sales and use tax revenues from interstate and internet sales as soon as that agreement takes effect, and that the General Assembly may use additional revenues resulting from participation in the Streamlined Sales Tax Agreement to reduce sales and use tax rates.

Sec. 31.  32 V.S.A. § 9771 is amended to read:

§ 9771.  IMPOSITION OF SALES TAX

Except as otherwise provided in this chapter, there shall be paid a tax of five six percent upon the receipts from:

(1)  The sale of tangible personal property sold at retail in this state.

(2)  The sale at retail of public utility services including gas and electricity, but excluding water and transportation.

(3)  The charge for producing, fabricating, printing or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, printing or imprinting.

(4)  Amusement charges.

(5)  The sale at retail of telecommunications service provided to a Vermont service address, except that the rate of the tax on telecommunications services, shall be 4.36 percent.

(6)  The sale at retail of a prepaid telephone calling card or prepaid telephone authorization number; or the reauthorization of a prepaid telephone calling card or a prepaid telephone authorization number.  If the sale or recharge of a prepaid telephone calling card or authorization number does not take place at the vendor’s place of business, it shall be conclusively determined to take place at the customer’s shipping address, or if there is no item shipped, then at the customer’s billing address.

(7)  The sale of tangible personal property to an advertising agency for its use in providing advertising services or creating advertising materials for transfer in conjunction with the delivery of advertising services.

Sec. 32.  32 V.S.A. § 9772 is amended to read:

§ 9772.  TAX BRACKET SCHEDULE

For the purpose of adding and collecting the tax imposed by this chapter, or an amount equal as nearly as possible or practicable to the average equivalent thereof, to be reimbursed to the vendor by the purchaser, the following formula shall be in force and effect as follows:

Amount of Sale                                        Amount of  Tax

   $0.01-0.10                                                 No Tax

     0.11-0.20 0.16                                              $.01

     0.21-0.40 0.17-0.33                                       .02

     0.41-0.60 0.34-0.50                                       .03

     0.61-0.80 0.51-0.66                                       .04

     0.81-1.00 0.67-0.83                                       .05

                 0.84-1.00                                                        .06

In addition to a tax of $ 0.05 $0.06 on each full dollar, a tax shall be collected on each part of a dollar in excess of a full dollar in accordance with the following formula:

   $ 0.01-0.20 0.16                                                   $ .01

      0.21-0.40 0.17-0.33                                             .02

      0.41-0.60 0.34-0.50                                             .03

      0.61-0.80 0.51-0.66                                             .04

      0.81-1.00 0.67-0.83                                             .05

     0.84-0.99                                                               .06

When several taxable articles are purchased together at the same time, the tax shall be computed on the total amount of the sale of the several taxable items.

Sec. 33.  32 V.S.A. § 9773 is amended to read:

§ 9773.  IMPOSITION OF COMPENSATING USE TAX

Unless property has already been or will be subject to the sales tax under this chapter, there is imposed on every person a use tax at the rate of five six percent for the use within this state, except as otherwise exempted under this chapter:

* * *

Sec. 34.  32 V.S.A. § 9774(c), (d), and (e) are amended to read:

(c)  For purposes of section 9773(1) of this title the tax shall be at the rate of five percent of under that section, multiplied by the consideration given or contracted to be given for the property or for the use of the property adjusted in the same manner as is the sales price under the sales tax to arrive at “receipts.”

(d)  For purposes of section 9773(2) of this title the tax shall be at the rate of five percent of under that section, multiplied by the price at which items of the same kind of tangible personal property are offered for sale by the user.

     (e)  For purposes of section 9773(3) of this title the tax shall be at the rate of five percent of under that section, multiplied by the consideration given or contracted to be given for the service, including the consideration for any tangible personal property transferred in conjunction with the performance of the service adjusted in the same manner as is the charge for services under the sales tax to arrive at “receipts.”

* * *  Use Tax Collection – PIT * * *

Sec. 35.  32 V.S.A. § 5870 is added to read:

§ 5870.  REPORTING USE TAX ON INDIVIDUAL INCOME TAX

              RETURNS

     The commissioner of taxes shall provide that individuals report use tax on their state individual income tax returns.  Taxpayers are required to attest to the amount of their use tax liability under chapter 233 of this title for the period of the tax return.  Alternatively, they may elect to report an amount that is .04 percent of their Vermont adjusted gross income, as shown on a table published by the commissioner of taxes; and use tax liability arising from the purchase of each item with a purchase price in excess of $1,000.00 shall be added to the table amount.

* * * Education Fund; Dedication of Revenues * * *

Sec. 36.  16 V.S.A. § 4025(a) is amended to read:

§ 4025.  EDUCATION FUND

(a)  An education fund is established to be comprised of the following:

(1)  All revenue paid to the state from the education property tax statewide education tax on nonresidential and homestead property under chapter 135 of Title 32.

(2)  Local share property tax revenues from those school districts which adopt budgets with local education spending in excess of the general state support grant and which are able to raise more than the yield amount.

(3)(2)  Funds appropriated or transferred by the general assembly, and in fiscal year 2006 and thereafter there is appropriated and transferred from the general fund to the education fund the amount appropriated and transferred in the prior fiscal year adjusted by the percentage change in general fund base spending in the current fiscal year.  For each fiscal year, the governor shall present a budget to the legislature providing for a general fund appropriation and transfer to the education fund in this amount, and the legislature shall appropriate and transfer this amount adjusted as necessary to reflect the actual amount of general fund base spending enacted by the legislature for that fiscal year.

(4)(3)  Revenues from state lotteries under chapter 14 of Title 31, and from any multijurisdictional lottery game authorized under that chapter.

(4)  Revenue from the electric generating plant education property tax under section 5402a of this title.

(5)  Twenty percent of the revenues raised by the tax imposed by chapter 225 of Title 32 on meals, rooms and alcoholic beverages, less an annual amount equal to $1,560,000.00 which shall remain in the general fund dedicated to the purposes of promotion of tourism and marketing.

(6)  Nineteen percent of the tax on income of corporations, including S corporations, partnerships, and limited liability companies raised by chapter 151 of Title 32.

(7)  Fifty-eight and three-tenths percent of the revenues raised by the bank franchise tax imposed by section 5836 of Title 32.

(8)  Revenues raised by the tax on telecommunications services imposed by Secs. 76 through 84 of Act No. 60 of the Acts of 1997.

(9)  Revenues raised by the increase in brokerage fees imposed by Sec. 85 of Act No. 60 of the Acts of 1997.

(10)  Twenty-one percent of the revenues raised by the motor fuel tax on gasoline in fiscal year 1999, and 16 percent of the revenues raised by the motor fuel tax on gasoline in fiscal year 2000 and thereafter. 

(11)  One-sixth (5)  One-third of the revenues raised from the purchase and use tax imposed by chapter 219 of Title 32, notwithstanding 19 V.S.A. § 11(1).  Notwithstanding the provisions of this subdivision, only 12 percent of the revenue generated from the tax on short-term motor vehicle rentals, established in 32 V.S.A. § 8903(d), shall be deposited in the education fund.

(12)(6)  One-third of the revenues raised from the sales and use tax imposed by chapter 233 of Title 32.

(13)(7)  Medicaid reimbursement funds pursuant to subsection 2959a(f) of this title.

* * * General Fund; Dedication of Revenues * * *

Sec. 37.  32 V.S.A. § 435(b)(11) is amended to read:

(b)  The general fund shall be composed of revenues from the following sources:

* * *

(11)  Sales Two-thirds of the revenue from sales and use taxes levied pursuant to chapter 233 of this title;

* * * JTOC Allocation * * *

Sec. 38.  19 V.S.A. § 11a is amended to read:

§ 11a.  TRANSPORTATION FUNDS APPROPRIATED FOR SUPPORT

            OF GOVERNMENT

The maximum amount of transportation funds that may be appropriated for the support of government, other than for the agency of transportation, transportation pay act funds, the cost of maintaining and staffing rest areas, construction of transportation capital facilities used by the agency of transportation, and transportation debt service, shall not exceed 20.5 19 percent of the total of the prior fiscal year transportation fund appropriations.

* * * Other School Funding Provisions * * *

Sec. 39.  16 V.S.A. § 4010(b) is amended to read:

(b)  The commissioner shall determine the long-term membership for each school district for each student group described in subsection (a) of this section.  The commissioner shall use the actual average daily membership over two consecutive years, the latter of which is the current school year.  If, however, in one year, the actual average daily membership of kindergarten through twelfth grade increases by at least 20 students over the previous year, the commissioner shall compute the long‑term membership by adding 80 percent of the actual increase, to a maximum increase of 45 equalized pupils.

Sec. 40.  Sec. 38(3) of No. 159 of the Acts of the 1999 Adj. Sess. (2000) is amended to read:

(3)  The excess valuation of property within a tax increment financing district organized and created pursuant to Sec. 37 of this act, to the extent that taxes generated on the excess property valuation are pledged and appropriated for debt service on bonds issued under section 1897 of Title 24 or the funding of reserves under subdivision (2) of this section, shall not be included within the education property tax grand list provided for in section 5404 of Title 32 as taxable property, nor shall the excess valuation of the property be subject to the education property tax imposed under section 5402 of Title 32 until bonds issued under section 1897 of Title 24 are released, discharged, paid, defeased, or fully reserved; provided, however, that 5 percent of the education taxes imposed annually on the excess valuation of the residential property within the district shall be paid to the education fund.  The tax rate assessed on the excess value of property within the district shall be the same rate assessed on property outside the district.  Until the bonds are paid in full or have been fully redeemed or defeased through fully funded reserves and accounts, 100 percent of the municipal taxes assessed against the excess valuation of property within the district shall be pledged and appropriated solely for debt service on the bonds.  For purposes of this act, “excess valuation” means the difference between the current grand list value and the grand list value at commencement of the development on April 1 immediately preceding the date of issuance of bonds under Sec. 38(1) of this act.

Sec. 41.  32 V.S.A. § 5405(d) is amended to read:

(d)  Any determination of fair market value made by the commissioner under this section shall be based upon such methods, as in the judgment of the commissioner, and in view of the resources available for that purpose, shall be appropriate to support that determination.  If the common level of appraisal is calculated using the weighted mean of ratios, any outlier shall be carefully reviewed and deleted if it will significantly affect the weighted mean, particularly if the outlier is a high-value property.

Sec. 42.  Sec. 10(a) of No. 117 of the Acts of the 1999 Adj. Sess. (2000) is amended to read:

(a)  The general assembly hereby establishes the following targets for limiting increases in statewide total education expenditures as that term is used in 16 V.S.A. § 2967(b):

* * *

(3)  in for fiscal year 2004 and each year thereafter until a new special education funding formula is enacted, the average annual change in the actual nominal Vermont State Domestic Product for the preceding five years as published by the United States Department of Commerce, plus two percentage points.

Sec. 43.  EDUCATION MANDATES; REMOVAL OF BURDENSOME                                         REQUIREMENTS

(a)  The commissioner of education shall request that the Vermont school boards association, the Vermont superintendents association and the Vermont principals association develop a list of all requirements placed on local school districts which are believed to be unnecessarily burdensome or redundant.  The list shall be finished by November 1, 2003 and should be in the form of a request to remove or revise the requirements.

(b)  For each requirement listed, on or before January 15, 2004, the commissioner shall either remove or revise the requirement, promptly initiate any process necessary to removing or revising the requirement, state that the requirement is statutory and recommend legislative change which would remove or revise the requirement, or state that the requirement should remain because it serves a fundamental need.

Sec. 44.  3 V.S.A. § 832b is added to read:

§ 832b.  ADMINISTRATIVE RULES AFFECTING SCHOOL DISTRICTS

     If a rule affects or provides for the regulation of public education and public schools, the agency proposing the rule shall evaluate the cost implications to local school districts and school taxpayers, clearly state the associated costs, and report them in a local school cost impact statement to be filed with the economic impact statement on the rule required by subsection 838(c) of this title.  An agency proposing a rule affecting school districts shall also consider and include in the local school cost impact statement an evaluation of alternatives to the rule, including no rule on the subject, which would reduce or ameliorate costs to local school districts while achieving the objectives or purposes of the proposed rule.  The legislative committee on administrative rules may object to any proposed rule if a local school cost impact statement is not filed with the proposed rule, or the committee finds the statement to be inadequate, in the same manner in which the committee may object to an economic impact statement under section 842 of this title.

Sec. 45.  SPECIAL EDUCATION; COST CONTAINMENT

                IMPLEMENTATION PLAN

(a)  The commissioner of education and the secretary of human services shall prepare a plan to establish a cost‑effective system for delivery of special education services to children served by both agencies, including those in transition from school to adult services.  The plan shall describe appropriate roles for each agency and how the two agencies will coordinate service delivery in a way that will ensure high quality, seamless, efficient, and cost‑effective services to special education students. 

(b)  The plan prepared under this section shall be based on a thorough review of existing reports, activities, and efforts pertaining to special education services.  Following the review, the secretary and commissioner shall make a recommendation based on the review and the following:

(1)  The provisions of the federal No Child Left Behind Act.

(2)  The impending reauthorization of the federal Individuals with Disabilities Education Act.

(3)  The results of the Vermont special education Medicaid audit currently being conducted by the federal government.

(4)  The proposed special education formula requested in No. 117 of the Acts of the 1999 Adj. Sess. (2000) which will be presented to the General Assembly by January 2004.

(c)  The plan shall include provisions to contain growth in special education costs and shall be written with enough detail to enable the senate and house appropriations and education committees to prepare legislation to implement the plan for introduction in January 2004.  The secretary and the commissioner shall present the plan to the senate and house committees on appropriations and education no later than November 15, 2003.

Sec. 46.  16 V.S.A. § 165(a)(2) is amended to read:

(2)  The school, at least annually, reports student performance results to community members in a format selected by the school board.  In the case of a regional technical center, the community means the school districts in the service region.  The school report shall include:

* * *

(I)  if the school is a secondary school, data describing student participation in technical education, regional job opportunities and the number of graduates from the previous year who have entered post-secondary postsecondary education, the military and the job market; and

(J)  information and supporting data presented in a manner designed to protect student confidentiality on the following:

(i)  student attendance, including unexcused absences;

(ii)  student discipline; and

(iii)  if the school is a secondary school, dropout and graduation rates; and

(K)  data provided by the commissioner which enable a comparison with other schools for cost‑effectiveness.  The commissioner shall establish which data are to be included pursuant to this subdivision and, notwithstanding that the other elements of the report are to be presented in a format selected by the school board, shall develop a common format to be used by each school in presenting the data to community members.  The commissioner shall provide the most recent data available to each school no later than October 1 of each year.  Data to be presented may include student‑to‑teacher ratio, administrator‑to‑student ratio, administrator‑to‑teacher ratio, cost per pupil, cost per square foot of building, class sizes, course offerings, and other performance data.

 

 

 

Sec. 47.  TEACHER NEGOTIATIONS; SUPERVISORY UNION  LEVEL;

               APPROPRIATION

(a)  The board of a supervisory union in which the member boards are not jointly negotiating teacher contracts may apply to the commissioner of education for a grant to work with its member districts to enter into an agreement to do so.

(b)  The commissioner is authorized to award one grant of up to $5,000.00 to each supervisory union board which applies for a grant under this section.

(c)  The secretary of administration shall pay a grant awarded under this section upon a warrant issued by the commissioner of education.  Notwithstanding the provisions of subsection 4025(d) of Title 16, funds for this grant shall be drawn from the education fund amounts appropriated to pay for the base education grant and shall not result in the repeal of chapter 135 of Title 32.  The secretary of administration shall submit a request for funds in the annual budget adjustment act to pay for any grants that may have been awarded under this section.

Sec. 48.  16 V.S.A. § 563(11) is amended to read:

(11)  Shall prepare and distribute annually a proposed budget for the next school year according to such major categories as may from time to time be prescribed by the commissioner.  Any proposed budget shall show all revenues and expenses, and shall state the specific amount of any deficit incurred in the most recently closed fiscal year and how the deficit was or will be remedied. The proposed budget shall be prepared and distributed at least ten days before a sum of money is voted on by the electorate.  Any proposed budget shall show the following information in a format prescribed by the commissioner of education:

(A)  all revenues from all sources and expenses, including as separate items any assessment for a union school district or a supervisory union of which it is a member;

(B)  the specific amount of any deficit incurred in the most recently closed fiscal year and how the deficit was or will be remedied;

(C)  the anticipated homestead tax rate and the percentage of household income used to determine income sensitivity in the district as a result of passage of the budget; including those portions of the tax rate attributable to the union school and supervisory union assessments; and

(D)  in the case of a school district other than a union school district, the definition of “education spending,” the number of pupils and number of equalized pupils in the school district, and the district’s education spending per equalized pupil in the proposed budget and in each of the prior three years; or

(E)  in the case of a union school district, the amount of the assessment to each of the member districts and the amount of the assessments per equalized pupil in the proposed budget and for the past three years.

 

 

* * * Capital Construction Aid * * *

Sec. 49.  CONSTRUCTION AID FOR SCHOOL CONSOLIDATION;

               SUNSET

(a)  Notwithstanding 16 V.S.A. § 3448(a)(7) which provides 30 percent construction aid for school buildings, the amount of an award shall be 50 percent of the approved cost of a project, provided that:

     (1)  the project consolidates grades, classes, supervisory or other functions in school buildings and school facilities in a more cost-effective and educationally appropriate manner in a school district; or

     (2)  two or more school districts have formed a joint contract district or a union district for the purpose of building a school to serve the educational needs of the participating districts in a more cost-effective and educationally appropriate manner than would individual projects constructed separately. 

(b)  This section shall apply only to a project which has received preliminary approval by June 30, 2008 and which is eventually approved and funded pursuant to section 3448 of Title 16.

* * * Rescission of Vote to Exclude Capital Construction from Education Spending * * *

Sec. 50.  Sec. 43 of No. 144 of the Acts of the 2001 Adj. Sess. (2002), as amended, is amended to read:

 

 

Sec. 43.  FINANCE OF SCHOOL CONSTRUCTION

     (a)  Notwithstanding any provisions of Titles 16 and 32, a school district, or a Vermont participant in an interstate school district, may vote to remove spending, including capital debt service, for capital school construction costs certified by the commissioner as eligible for approval under 16 V.S.A. § 3448(a)(8), voted after July 1, 2002, and begun in fiscal years 2003, 2004 or 2005, from the calculation of its local education spending for any fiscal year.  A school district, or a Vermont participant in an interstate school district, which has voted a capital school construction project after April 1999, but before July 1, 2002, and which has begun construction before July 1, 2002, may vote to remove spending for capital debt service on costs which the commissioner certifies would be eligible for approval under 16 V.S.A. § 3448(a)(8), from its local education spending for any fiscal year beginning July 1, 2002 or after.  The legislative body in the municipality shall then assess each owner on the municipality’s education property tax grand list at the rate necessary to raise the capital construction spending amount removed from local education spending, and shall identify the amount of that tax separately with the tax bill.  “School district” under this subsection means a district which pays statewide property tax at the rate rates set under 32 V.S.A. § 5402.

     (b)  A school district other than a Vermont participant in an interstate school district, which votes to remove certified capital school construction spending from local education spending under this section shall not be entitled to state school construction aid under chapter 123 of Title 16 for that capital construction.  The education tax rate of a district that is a member of a union district, and that does not vote to remove capital construction spending from its local education spending under this section, shall remain at a rate unaffected by the removal of spending by any other district in the union; and the commissioner of education shall develop a methodology to implement this provision.

     (c)  For each member of a union district that votes as authorized under subsection (a), the state school construction aid of the union school district shall be reduced by the portion allocable to the excluded capital construction spending of that member; and the allocation of expenses under the union district agreement shall be adjusted accordingly.

     (d)  The Department of Education shall study school construction needs, funding equity and methodologies, and propose a school construction aid formula and budget for the fiscal year 2004 capital construction act that restores substantial equity to all Vermont’s children according to 16 V.S.A. § 1.

     (e)  A school district or a Vermont participant in an interstate school district which votes to remove school construction spending from education spending under this section may later vote to rescind the removal of construction spending from education spending for any future fiscal year.

* * * Streamlined Sales Tax Provisions * * *

Sec. 51.  32 V.S.A. § 9701(4) is amended to read:

(4)  Receipt: means the amount of the sales price of any property and the charge for any amusement taxable under this chapter valued in money, whether received as money or otherwise, without any deduction for expenses or early payment discount; but excluding any amount for which credit is allowed by the vendor to the purchaser; and excluding any allowance, including core charges, made for a trade-in of like-kind property; and excluding any allowance in cash or by credit made upon the return of merchandise pursuant to warranty or the price of property returned by customers when the full price thereof is refunded either in cash or by credit; and excluding the price received for labor or services used in installing or applying to repairing the property sold, if separately charged or stated, and the cost of transportation from the retailer’s place of business or other point from which shipment is made directly to the purchaser provided those charges are separately stated and provided the transportation occurs by means of common carrier, contract carrier or the United States mails. Beverage container deposits required to be paid by chapter 53 of Title 10 on beverages subject to tax under this chapter shall constitute receipts for the purposes of this chapter.  Receipt shall also mean the charge for any telecommunications service excluding any amounts added to a purchaser’s bill for federal excise taxes applicable to said services and excluding the surcharge imposed under 30 V.S.A. § 7521.  (A)  Sales price:  means the total amount of consideration, including cash, credit, property, and services, for which personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise, without deduction for the following:

(i)  The seller’s cost of the property sold;

(ii)  The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expenses of the seller;

(iii)  Charges by the seller for any services necessary to complete the sale, other than installation charges;

(iv)  Delivery charges;

(v)  The value of exempt personal property given to the purchaser where taxable and exempt personal property have been bundled together and sold by the seller as a single product or piece of merchandise.

(B)  Sale price shall not include:

(i)  Discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale;

(ii)  Interest, financing, and carrying charges from credit extended on the sale of personal property or services, if the amount is separately stated on the invoice, bill of sale, or similar document given to the purchaser;

(iii)  Any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of sale, or similar document given to the purchaser;

(iv)  Installation charges; and

(v)  Credit for any trade-in.

Sec. 52.  32 V.S.A. § 9701(5) is amended to read:

(5)  Retail sale or sold at retail:  means the sale of tangible personal property or telecommunications service to any person for any purpose, other than for resale (except resale as a casual sale).  Sales of tangible personal property to all contractors, subcontractors or repairmen of materials and supplies for use by them in erecting structures for others, or building on, or otherwise improving, altering, or repairing real property of others are deemed to be retail sales.  Sales of tangible personal property to an advertising agency for its use in providing advertising services or creating advertising materials for transfer in conjunction with the delivery of advertising services are also deemed to be retail sales any sale, lease, or rental for any purpose other than for resale, sublease or subrent.

Sec. 53.  32 V.S.A. § 9701(6) is amended to read:

(6)  Sale, selling or purchase: means any transfer of title or possession or both, exchange or barter, rental, lease or license to use or consume, conditional or otherwise, in any manner or by any means whatsoever for a consideration, or any agreement therefor.  Purchase price:  is the measure subject to use tax and has the same meaning as sales price.

Sec. 54.  32 V.S.A. § 9701(7) is amended to read:

(7)  Tangible personal property:  means personal property which may be seen, weighed, measured, felt, touched or in any other manner perceived by the senses and shall include fuel and electricity, but shall not include rights and credits, insurance policies, bills of exchange, stocks and bonds and similar evidences of indebtedness or ownership“Tangible personal property” includes electricity, water, gas, steam, and prewritten computer software.

Sec. 55.  32 V.S.A. § 9701(10) is amended to read:

(10)  Amusement charges: means the admission charge (including any subsidiary, service or cover charge) to, and any charge for the use of any place of recreation or amusement including athletic events and facilities, exhibitions, dramatic and musical performances, motion picture theaters, golf courses and ski areas and including specifically service charges of cable television systems or other audio or video programming systems that operate by wire, coaxial cable, lightwave, microwave, satellite transmission or by other similar means. Trade-in:  means an allowance, including any core charges, made for like-kind property given to a vendor.

Sec. 56.  32 V.S.A. § 9701(23) - (37) are added to read:

(23)  Alcoholic beverages means:  beverages that are suitable for human consumption and contain one-half of one percent or more of alcohol by volume.

(24)  Clothing means:  all human wearing apparel suitable for general use.  The following list contains examples and is not intended to be an all‑inclusive list.

(A)  “Clothing” shall include:

(i)  Aprons, household and shop;

(ii)  Athletic supporters;

(iii)  Baby receiving blankets;

(iv)  Bathing suits and caps;

(v)  Beach capes and coats;

(vi)  Belts and suspenders;

(vii)  Boots;

(viii)  Coats and jackets;

(ix)  Costumes;

(x)  Diapers, child and adult, including disposable diapers;

(xi)  Earmuffs;

(xii)  Footlets;

(xiii)  Formal wear;

(xiv)  Garters and garter belts;

(xv)  Girdles;

(xvi)  Gloves and mittens for general use;

(xvii)  Hats and caps;

(xviii)  Hosiery;

(xix)  Insoles for shoes;

(xx)  Lab coats;

(xxi)  Neckties;

(xxii)  Overshoes;

(xxiii)  Pantyhose;

(xxiv)  Rainwear;

(xxv)  Rubber pants;

(xxvi)  Sandals;

(xxvii)  Scarves;

(xxviii)  Shoes and shoelaces;

(xxix)  Slippers;

(xxx)  Sneakers;

(xxxi)  Socks and stockings;

(xxxii)  Steel‑toed shoes;

(xxxiii)  Underwear;

(xxxiv)  Uniforms, athletic and nonathletic; and

(xxxv)  Wedding apparel.

(B)  “Clothing” shall not include:

(i)  Belt buckles sold separately;

(ii)  Costume masks sold separately;

(iii)  Patches and emblems sold separately;

(iv)  Sewing equipment and supplies including, but not limited to, knitting needles, patterns, pins, scissors, sewing machines, sewing needles, tape measures, and thimbles; and

(v)  Sewing materials that become part of “clothing” including, but not limited to, buttons, fabric, lace, thread, yarn, and zippers.

(25)  Clothing accessories or equipment means:  incidental items worn on the person or in conjunction with “clothing.” “Clothing accessories or equipment” are mutually exclusive of and may be taxed differently than apparel within the definition of “clothing,” “sport or recreational equipment,” and “protective equipment.”  The following list contains examples and is not intended to be an all-inclusive list.  “Clothing accessories or equipment” shall include:

(A)  Briefcases;

(B)  Cosmetics;

(C)  Hair notions, including, but not limited to, barrettes, hair bows, and hair nets;

(D)  Handbags;

(E)  Handkerchiefs;

(F)  Jewelry;

(G)  Sunglasses, nonprescription;

(H)  Umbrellas;

(I)  Wallets;

(J)  Watches; and

(K)  Wigs and hairpieces.

(26)  Delivery charges:  means charges by the seller of personal property or services for preparations and delivery to a location designated by the purchaser of personal property or services including, but not limited to, transportation, shipping, postage, handling, crating, and packing.  Direct mail charges that are separately stated on an invoice or similar billing document given to the purchaser are excluded from the definition of “delivery charges.”

(27)  Dietary supplement means:  any product, other than tobacco, intended to supplement the diet that:

(A)  Contains one or more of the following dietary ingredients:

(i)  a vitamin;

(ii)  a mineral;

(iii)  an herb or other botanical;

(iv)  an amino acid;

(v)  a dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or

(vi)  a concentrate, metabolite, constituent, extract, or combination of any ingredients described in subdivisions (i) through (v) of this subdivision (31)(A); and

(B)  is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and

(C)  is required to be labeled as a dietary supplement, identifiable by the “supplemental facts” box found on the label and as required pursuant to 21 C.F.R. § 101.36.

(28)  Direct mail:  means printed material delivered or distributed by United States mail or other delivery service to a mass audience or addresses on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items is not billed directly or to the recipients. “Direct mail” includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material.  “Direct mail” does not include multiple items of printed material delivered to a single address.

(29)  Drug:  means a compound, substance, or preparation, and any component of a compound, substance, or preparation, including blood, blood plasma, insulin, and oxygen, but not including food and food ingredients, dietary supplements, alcoholic beverages, or grooming and hygiene products, that is:

(A)  Recognized in the official United States Pharmacopeia, official Homeopathic Pharmacopeia of the United States, official National Formulary, or in supplements to any of them; or

(B)  Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease; or

(C)  Intended to affect the structure or any function of the body.

(30)  Durable medical equipment:  means equipment including repair and replacement parts for such equipment, but does not include “mobility‑enhancing equipment,” which:

(A)  can withstand repeated use; and

(B)  is primarily and customarily used to serve a medical purpose; and

(C)  generally is not useful to a person in the absence of illness or injury; and

(D)  is not worn on the body.

(31)  Food and food ingredients:  means substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value.  “Food and food ingredients” does not include alcoholic beverages or tobacco.

(32)  Grooming and hygiene products:  means soaps and cleaning solutions, shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and screens.

(33)  Lease or rental:  means any transfer of possession or control of tangible personal property for a fixed or indeterminate term for consideration.  A lease or rental may include future options to purchase or extend.

(A)  “Lease or rental” does not include:

(1)  A transfer of possession or control of property under a security agreement or deferred payment plan that requires the transfer of title upon completion of the required payments;

(2)  A transfer of possession or control of property under an agreement that requires the transfer of title upon completion of required payments and payment of an option price does not exceed the greater of $100.00 or one percent of the total required payments; or

(3)  Providing tangible personal property along with an operator for a fixed or indeterminate period of time.  A condition of this exclusion is that the operator is necessary for the equipment to perform as designed.  For the purpose of this subdivision, an operator must do more than maintain, inspect, or set up the tangible personal property.

(B)  Lease or rental does include agreements covering motor vehicles and trailers where the amount of consideration may be increased or decreased by reference to the amount realized upon sale or disposition of the property as defined in 26 U.S.C. § 7701(h)(1).

(34)  Mobility‑enhancing equipment:  means equipment including repair and replacement parts of such equipment, but does not include “durable medical equipment,” which

(A)  is primarily and customarily used to provide or increase the ability to move from one place to another and which is appropriate for use either in a home or a motor vehicle; and

(B)  is not generally used by persons with normal mobility; and

(C)  does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.

(35)  Prosthetic device:  means a replacement, corrective, or supportive device, including repair and replacement parts for such device worn on or in the body to:

(A)  artificially replace a missing portion of the body;

(B)  prevent or correct a physical deformity or malfunction; or

(C)  support a weak or deformed portion of the body.

(36)  “Protective equipment” means items for human wear and designed as protection of the wearer against injury or disease or as protection against damage or injury of other persons or property but not suitable for general use.  “Protective equipment” is mutually exclusive of and may be taxed differently from apparel within the definition of “clothing,” “clothing accessories or equipment,” and “sport or recreational equipment.”  The following list contains examples and is not intended to be an all-inclusive list. “Protective equipment” shall include:

(A)  Breathing masks;

(B)  Clean room apparel and equipment;

(C)  Ear and hearing protectors;

(D)  Face shields;

(E)  Hardhats;

(F)  Helmets;

(G)  Paint or dust respirators;

(H)  Protective gloves;

(I)  Safety belts;

(J)  Safety glasses and goggles;

(K)  Tool belts; and

(L)  Welders’ gloves and masks.

(37)  “Sport or recreational equipment” means items designed for human use and worn in conjunction with an athletic or recreational activity that are not suitable for general use.  “Sport or recreational equipment” is mutually exclusive of and may be taxed differently than apparel within the definition of “clothing,” “clothing accessories or equipment,” and “protective equipment.”  The following list contains examples and is not intended to be an all-inclusive list.  “Sport or recreational equipment” shall include:

(A)  Ballet and tap shoes;

(B)  Cleated or spiked athletic shoes;

(C)  Gloves, including, but not limited to, baseball, bowling, boxing, hockey, and golf;

(D)  Goggles;

(E)  Hand and elbow guards;

(F)  Life preservers and vests;

(G)  Mouth guards;

(H)  Roller and ice skates;

(I)  Shin guards;

(J)  Shoulder pads;

(K)  Ski boots;

(L)  Waders; and

(M)  Wetsuits and fins.

Sec. 57.  32 V.S.A. § 9707 is amended to read:

§ 9707.  REGISTRATION

(a)  Before commencing business or opening new places of business, every person required to collect any tax imposed by this chapter and every person purchasing tangible personal property for resale shall file with the commissioner a certificate of registration in a form prescribed by him register with the state in the manner prescribed by the commissioner.  The commissioner shall issue, without charge, to each registrant a certificate of authority empowering him or her to collect the tax.  Each certificate shall state the place of business to which it is applicable.  The certificate of authority shall be prominently displayed in the place of business of the registrant.  A registrant who has no regular place of doing business shall attach the certificate to his or her cart, stand truck or other merchandising device, or carry it on his or her person.  The certificates shall be nonassignable and nontransferable and shall be surrendered to the commissioner immediately upon the registrant’s ceasing to do business at the place named.

(b)  Any person who is not otherwise required to collect any tax imposed by this chapter and who makes sales to persons within the state of tangible personal property or services, the use of which is subject to tax under this chapter, may if he so elects file a certificate of registration register with the commissioner who may, in his or her discretion and subject to such conditions as he or she may impose, issue to him or her a certificate of authority to collect the compensating use tax imposed by this chapter.

Sec. 58.  32 V.S.A. § 9741 is amended to read:

§ 9741.  SALES NOT COVERED

Receipts from Retail sales and use of the following shall be exempt from the tax on retail sales imposed under section 9771 of this title and the use tax imposed under section 9773 of this title.

* * *

(2)  Sales of medicines and drugs sold for human use only if sold pursuant to a doctor’s prescription, oxygen for medical purposes, blood, blood plasma, artificial components of the human body, prosthetic devices, medicinal appliances, corrective appliances, corrective optical devices, dentures, hearing aids, seeing eye dogs, crutches, wheelchairs, hospital type beds, medical and dental devices and instruments, medical and dental equipment (including component parts thereof)  Drugs intended for human use, durable medical equipment, mobility enhancing equipment, and prosthetic devices and supplies used in treatment intended to alleviate human suffering or to correct, in whole or in part, human physical disabilities, and stairlift chairs, motorized carts and other devices used primarily to afford mobility to persons with physical disabilities.

* * *

(5)  Sales of malt beverages taxed or exempted under chapter 15 of Title 7.

(6)  Sales of spirituous liquors taxed or exempted under chapter 15 of Title 7.

* * *

(45)  Each article, with a purchase price of $110.00 or less, of clothing intended to be worn or carried on or about the human body, including footwear but excluding special clothing or footwear designed primarily for athletic activity or protective use and not normally worn except when so used; except specially protective steel- or Kevlar-toed footwear labeled as American National Standards Institute-approved under standard Z41 shall be exempt, regardless of price Clothing; but clothing shall not include clothing accessories or equipment, protective equipment, or sport or recreational equipment.

* * *

Sec. 59.  32 V.S.A. § 9745 is amended to read:

§ 9745.  CERTIFICATE OR AFFIDAVIT OF EXEMPTION

Unless a vendor shall have taken from the purchaser a certificate, signed by the purchaser and bearing his name and address and the number of his registration certificate providing such information as the commissioner shall prescribe, to the effect that the property was purchased for resale or the purchaser prior to taking delivery, furnishes to the vendor any affidavit, statement or additional evidence, documentary or otherwise, which the commissioner may require demonstrating that the purchaser is an exempt organization described in section 9743 of this title, the sale shall be deemed a taxable sale at retail.

(a)  The commissioner may require that a vendor obtain an exemption certificate, which may be an electronic filing, with respect to the following sales:  sales for resale; sales to organizations that are exempt under section 9743 of this title; and sales that qualify for a use-based exemption under section 9741 of this title.  Acceptance of an exemption certificate containing such information as the commissioner may prescribe shall satisfy the vendor’s burden under subsection 9813(a) of this title of proving that the transaction is not taxable.  A vendor’s failure to possess an exemption certificate at the time of sale shall be presumptive evidence that the sale is taxable.

(b)  Provided, however, the The commissioner may, in his or her discretion, authorize a purchaser, who acquires tangible personal property or services under circumstances which make it impossible at the time of acquisition to determine the manner in which the tangible personal property or services will be used, to pay the tax directly to the commissioner and waive the collection of the tax by the vendor.  Provided, further, the The commissioner shall authorize any contractor, subcontractor or repairman who acquires tangible personal property consisting of materials and supplies for use by him or her in erecting structures for others, or building on, or otherwise improving, altering, or repairing real property of others, to pay the tax directly to the commissioner and waive the collection of the tax by the vendor.  No such authority shall be granted or exercised except upon application to the commissioner and the issuance by the commissioner of a direct payment permit.  If a direct payment permit is granted, its use shall be subject to conditions specified by the commissioner and the payment of tax on all acquisitions pursuant to the permit shall be made directly to the commissioner by the permit holder.

Sec. 60.  32 V.S.A. § 9771 is amended to read:

§ 9771.  IMPOSITION OF SALES TAX

Except as otherwise provided in this chapter, there shall be paid a tax of six percent upon the receipts from retail sale of is imposed a tax on retail sales.  The tax shall be paid at the rate of six percent of the sales price charged for the following:

(1)  The sale of tangible Tangible personal property sold at retail in this state.

(2)  The sale at retail of public Public utility services including gas and electricity, but excluding water and transportation.

(3)  The charge for producing Producing, fabricating, printing or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, printing or imprinting.

(4)  Amusement charges Admission to places of amusement, including athletic events, exhibitions, dramatic and musical performances, motion pictures, golf courses and ski areas, and access to cable television systems or other audio or video programming systems that operate by wire, coaxial cable, lightwave, microwave, satellite transmission, or by other similar means.

(5)  The sale at retail of telecommunications Telecommunications service provided to a Vermont service address.

(6)  The sale at retail of a prepaid Prepaid telephone calling card cards or prepaid telephone authorization number numbers; or the reauthorization of a prepaid telephone calling card cards or a prepaid telephone authorization number numbersIf the sale or recharge of a prepaid telephone calling card or authorization number does not take place at the vendor’s place of business, it shall be conclusively determined to take place at the customer’s shipping address, or if there is no item shipped, then at the customer’s billing address.

(7)  The sale of tangible Tangible personal property to an advertising agency for its use in providing advertising services or creating advertising materials for transfer in conjunction with the delivery of advertising services.

Sec. 61.  32 V.S.A. § 9771a is amended to read:

§ 9771a.  TELECOMMUNICATIONS SERVICES; CREDITS AND

                LIMITATIONS TAX LIMITATION

(a)  The amount subject to tax under subdivision 9771(5) of this title shall be reduced by the amount of $20.00 per month per line for each residential purchaser or user of local exchange services.

(b)  No purchaser or user shall be subject to tax under subdivision 9771(5) of this title in excess of $10,000.00 in any one calendar year.  A purchaser may apply to the commissioner for a refund of tax paid in excess of $10,000 or for a direct pay permit to avoid paying tax over $10,000.00.

Sec. 62.  32 V.S.A. § 9772 is amended to read:

§ 9772.  Tax bracket schedule Amount of tax to be

              collected

(a)  For the purpose of adding and collecting the tax imposed by this chapter, or an amount equal as nearly as possible or practicable to the average equivalent thereof, to be reimbursed to the vendor by the purchaser, the following formula shall be in force and effect as follows:  vendor shall use either the calculation in subdivision (1) of this subsection or the formula in subdivision (2).  The tax required to be remitted shall be the rate specified in section 9771 of this title multiplied by the total sales price of all the taxable transactions.  The vendor shall be entitled to retain any amount lawfully collected by the person in excess of the tax imposed by this chapter.

(1)  The total sales price of the transaction multiplied by the rate specified in section 9771 of this title carried to the third decimal place and rounded up to the nearest whole cent if the third decimal point is greater than four and rounded down to the nearest whole cent if the third decimal point is four or less.

(2)  Amount of Sale                                        Amount of  Tax

* * *

(b)  The commissioner may adopt transition rules that comply with any applicable multistate agreement in the event of a rate change.

Sec. 63.  32 V.S.A. § 9774 is amended to read:

§ 9774.  Rules for computing receipts and consideration

              compensating use tax

(a)  The retail sales tax imposed under section 9771(1) of this title and the compensating use tax imposed under section 9773 of this title when computed in respect to tangible personal property wherever manufactured, processed or assembled and used by such manufacturer, processor or assembler in the regular course of business within the state, shall be based on the price at which items of the same kind of tangible personal property are offered for sale by him.

(b)(a)  Tangible personal property which has been purchased by a resident of the state outside of this state for use outside of this state and subsequently becomes subject to the compensating use tax imposed under this chapter, shall be taxed on the basis of the purchase price of the property, provided however:

* * *

(c)(b)  For purposes of section subdivision 9773(1) of this title the tax shall be at the rate under that section, multiplied by the consideration purchase price given or contracted to be given for the property or for the use of the property adjusted in the same manner as is the sales price under the sales tax to arrive at “receipts.” the sales price.

(d)(c)  For purposes of section subdivision 9773(2) of this title the tax shall be at the rate under that section, multiplied by the price at which items of the same kind of tangible personal property are offered for sale by the user.

(e)(d)  For purposes of section subdivision 9773(3) of this title the tax shall be at the rate under that section, multiplied by the consideration purchase price given or contracted to be given for the service, including the consideration for any tangible personal property transferred in conjunction with the performance of the service adjusted in the same manner as is the charge for services under the sales tax to arrive at “receipts.” the sales price.

Sec. 64.  32 V.S.A. § 9775 is amended to read:

§ 9775.  RETURNS

(a)  Every person required to collect or pay tax under this chapter shall, where the sales and use tax liability under this chapter for the immediately preceding calendar year has been (or would have been in cases when the business was not operating for the entire year) $500.00 or less, pay the tax imposed by this chapter in one annual payment on or before the 25th day of January of each year.  Every person required to collect or pay tax under this chapter shall, where the sales and use tax liability under this chapter for the immediately preceding calendar year has been (or would have been in cases when the business was not operating for the entire year) more than $500.00 but less than $2,500.00, pay the tax imposed by this chapter in quarterly installments on or before the 25th day of the calendar month succeeding the quarter ending on the last day of March, June, September and December of each year.  In all other cases, except as provided in subsection (e) of this section, the tax imposed by this chapter shall be due and payable monthly on or before the 25th (23rd of February) day of the month following the month for which the tax is due.  Payment by electronic funds transfer does not affect the requirement to file returns.  The return of a vendor of tangible personal property shall show his receipts from sales and also the aggregate value of tangible personal property sold by him, the use of which is subject to tax under this chapter.  The return of a recipient of amusement charges shall show all those charges and the amount of tax thereon.  The return of a telecommunications service provider shall show all receipts on which a tax must be paid by a purchaser and the amount of tax thereon such information as the commissioner may require.

(b)  The commissioner may permit or require returns to be made covering other periods and upon such dates as he or she may specify.  In addition, the commissioner may require payments of tax liability at such intervals and based upon such classifications as he or she may designate.  In prescribing the other periods to be covered by the return or intervals or classifications for payment of tax liability, the commissioner may take into account the dollar volume of tax involved and conformity with any applicable multistate agreement with respect to sales and use tax laws as well as the need for insuring the prompt and orderly collection of the taxes imposed.

* * *

Sec. 65.  LIMITATION OF LIABILITY UPON REGISTRATION   

A seller who registers after the effective date of Vermont’s participation in the streamlined sales and use tax agreement to pay or collect and remit sales and use tax on sales made to purchasers in Vermont in accordance with the terms of that agreement shall not be liable for uncollected or unpaid sales or use taxes arising out of sales or uses while the seller was not registered in Vermont, provided that the seller was not so registered in Vermont in the 12‑month period preceding the effective date of Vermont’s participation in the agreement.

Sec. 66.  24 V.S.A. § 138(b) and (c) are amended to read:

(b)  If the legislative body of a municipality by a majority vote recommends, the voters of a municipality may, at an annual or special meeting warned for that purpose, by a majority vote of those present and voting, assess any or all of the following:

(1)  a one percent sales tax excluding tax on telecommunications,

(2)  a one percent meals and alcoholic beverages tax,

(3)  a one percent rooms tax.

(c)  Any tax imposed under the authority of this section shall be collected and administered by the department of taxes, in accordance with state law governing such state tax or taxes; provided however, that a sales tax imposed under this section shall be collected on each sale that is subject to the Vermont sales tax using a destination basis for taxation.  Seventy percent of the costs of administration and collection shall be borne by the municipality, and 30 percent shall be borne by the state to be paid from the pilot special fund.

Sec. 67.  Sec. 38(m) of No. 49 of the Acts of 1999 is amended to read:

(m)  Sec. 34 (sales tax exemption for clothing) shall apply to sales and uses on and after December 1, 1999.  Sec. 34a (sales tax exemption for clothing and footwear) shall apply to sales and uses on and after July 1, 2001The exemption from the sales tax for clothing or footwear shall not apply to any local option tax which a town may enact pursuant to 24 V.S.A. § 138(b)(1).

* * *Local Option Tax* * *

Sec. 68.  24 V.S.A. § 138(a) is amended to read:

§ 138.  LOCAL OPTION TAXES

(a)  Local option taxes are authorized under this section for the purpose of affording municipalities an alternative method of raising municipal revenues to facilitate the transition and reduce the dislocations in those municipalities that may be caused by reforms to the method of financing public education under the Equal Educational Opportunity Act of 1997.  Accordingly,:

(1)  the local option taxes authorized under this section may be imposed by a municipality only during calendar years 1999 through 2004 2008;

(2)  a municipality opting to impose a local option tax may do so prior to July 1, 1998 to be effective beginning January 1, 1999, and anytime after December 1, 1998 a local option tax shall be effective beginning on the next tax quarter following 30 days’ notice to the department of taxes of the imposition; and all authority to opt to impose a local option tax under this section shall terminate September 1, 2003 2007, and all authority to impose a local option tax shall terminate on December 31, 2004 2008; and

(3)  a local option tax may only be adopted by a municipality in which:

(A)  the education property tax rate in 1997 was less than $1.10 per $100.00 of equalized education property value; or

(B)  the equalized grand list value of personal property, business machinery, inventory, and equipment is at least ten percent of the equalized education grand list as reported in the 1998 Annual Report of the Division of Property Valuation and Review; or

(C)  the combined education tax rate of the municipality will increase by 20 percent or more in fiscal year 1999 or in fiscal year 2000 over the rate of the combined education property tax in the previous fiscal year.

* * * Studies * * *

Sec. 69.  EDUCATION QUALITY STUDY AND APPROPRIATION

     (a)  The General Assembly finds that a thorough study of educational quality and efficiency in Vermont will assist it and Vermont schools in improving educational opportunities for Vermont students.  Accordingly, the commissioner of the Department of Education shall contract for the performance of a study to ascertain what funding level or range of funding levels, per pupil or otherwise, is necessary and sufficient to enable a Vermont school district to provide a sound education to its students in compliance with state educational quality standards and other state laws applicable to public schools.  The study shall analyze the educational methods and spending strategies used in the different types and structures of Vermont public schools and school districts to educate students.  The study shall provide also for an evaluation of small schools and their support through small school grants; and evaluate the costs resulting from geographical differences, and possible adjustment to the base education payment for geographical differences.  The study shall include a report with findings and recommendations.  The recommendations shall give due weight to the practical needs of Vermont schools and students and shall promote substantially equal educational opportunities for all Vermont students.

     (b)  The contract firm shall have the assistance of the Department of Education and shall consult with the commissioner, educators, school board members, superintendents, and others.  The contract firm must have extensive consulting and analytical experience in education funding systems.

     (c)  The department shall not award the contract until the Secretary of Administration and the Joint Fiscal Committee issue written approval of the contract and the related work plan.  The department and the contract firm shall submit to the Secretary of Administration, the House and Senate Committees on Education, on Appropriations, on Finance, and on Ways and Means a progress report by October 15, 2003, and a final report by December 15, 2003.

(d)  For the purposes of this study, the amount of $50,000.00 is appropriated for fiscal year 2004 from the education fund to the Department of Education, and is hereby authorized as an expenditure under section 4025 of Title 16.

Sec. 70.  JOINT LEGISLATIVE EDUCATION COST CONTAINMENT

               STUDY

     (a)  To create a sustainable education funding law, the state is committed to work with school boards to target cost drivers and reduce the cost of education.  Accordingly, there is created a joint legislative committee, to be known as the Joint Legislative Education Cost Containment Study Committee to consider ways to contain education costs throughout the system of education finance.  The joint committee shall take testimony on the cost drivers facing public education and the impact of future trends on these cost factors.  The joint committee’s review shall include but not be limited to the following:

          (1)  special education uniform standards of service and litigation reduction strategies;

          (2)  review of district size to identify opportunities for economies of scale in administrative services;

     (3)  review of teacher-student ratios and class size;

     (4)  potential for savings through coordinated staff and teacher recruitment and screening and possible state funded assistance with teacher and staff bargaining support;

          (5)  costs savings resulting from a review of state and local mandates;

          (6)  opportunities for joint purchasing of services or centralized services including insurance products, supplies, materials, uniform computer systems;

          (7)  review of health insurance and workers compensation as to budget impacts, including levels of premiums, copayments and plan quality as compared to that provided to other public sector employees including the state employees;

          (8)  potential for technology related savings, including use of remote communication and video technology to increase class offerings and other initiatives;

          (9)  opportunities for improved facilities utilization strategies including program colocation or other initiatives;

          (10)  opportunities for efficiencies in funding technical education facilities and programs, and alternatives for payment of technical education costs;

          (11)  various costs, incentives and disincentives through the interplay of current state funding provided to special education, technical education, and local schools; and

(12)  alternatives for an inflation index to be applied to the base education payment.

     (b)  The joint committee shall be comprised of four members of the House, not all from the same political party, appointed by the Speaker from each of the House Committees on Ways and Means, Education, and Appropriations, and one additional House member appointed at large; and four members of the Senate, not all from the same political party, appointed by the Senate Committee on Committees, from the Senate Committees on Finance, Appropriations, Education, and one additional Senator appointed at large.

     (c)  The joint committee shall meet no more than eight times and hold at least one public hearing.  The joint committee shall seek comment and participation from the Vermont Association of School Business Officers, the Vermont N.E.A., the Associations of School Superintendents, Principals, School Boards and Directors of Special Education, from representatives of the business community, and the public at large.  It shall submit a report by January 15, 2004, to the Clerk of the House and Secretary of the Senate.  The report shall contain recommendations for education cost containment; no more than 10 key indicators of cost effectiveness; and an inflation index for the base education payment which more accurately reflects the components driving school costs.  For purposes of this subsection, a “key indicator” is a measurement which enables analysis of the cost effectiveness of education services.  Members of the joint committee shall be entitled to compensation and expenses as provided in 2 V.S.A. § 406.  The joint committee shall be entitled to the services of the legislative council and the joint fiscal office, and shall be assisted, upon request, by other state agencies.

Sec. 71.  COUNCIL ON EDUCATION GOVERNANCE

(a)  The Vermont general assembly declares that:

(1)  it is committed to providing all Vermont students the opportunity for a high quality education in an affordable and cost‑effective manner to meet the expectations of local communities and the requirements of state and federal law; and

(2)  it has a keen interest in addressing the matter of education governance in Vermont in a manner that includes participation by citizens and local education officials; and

(3)  increasing concerns about the rising costs of education and declining enrollments, the ongoing quest for educational quality, and the influences of expanding state and federal policy directives, including those of the No Child Left Behind Act and the Individuals with Disabilities Education Act, add to the necessity for examining Vermont’s education governance system.

(b)  There is established a council on education governance to consist of three members of the senate, not all from the same party, chosen by the committee on committees; three members of the house, not all from the same party, chosen by the speaker; the secretary of administration; the secretary of human services, or designee; a member of the state board of education chosen by the chair of the board; two representatives of the business community chosen by the governor; two parents chosen jointly by the governor and the commissioner of education after consultation with organizations representing parents and children; a representative of school boards chosen by the school boards association; a representative of teachers chosen by the Vermont national teachers association; a representative of superintendents chosen by the superintendents association; and a representative of principals chosen by the principals association.  It is the intent of the general assembly that council members, in addition to having knowledge about the needs and challenges facing people working in and served by Vermont’s education system, shall be individuals who have knowledge of organization and systems development and who have the ability to analyze and communicate economic and educational data.  The council shall receive staff services from the legislative council and the joint fiscal office.  Members not otherwise compensated shall be entitled to per diem and expenses.

(c)  The council shall gather information which will enable it to develop a comprehensive description of Vermont’s current education governance system.  Information gathered should include cost information; federal and state requirements and other factors which influence how services are delivered; efforts in other jurisdictions to achieve equity, affordability, and quality; and an examination of elements in the current system which work well, and those which inhibit effective and efficient delivery of education services.

(d)  The council shall use this information to develop and implement a process for engaging a broad spectrum of Vermonters in a discussion of effective governance structures for delivery of public education with consideration of the need to address rising costs while maintaining Vermont’s high quality education system.

(e)  Following widespread public discussion, if the council determines that greater efficiencies and enhanced quality would result from modifications to the governance structure, it shall recommend legislation for consideration by the general assembly.

(f)  The council shall report to the general assembly in January 2004 and 2005 on its progress together with its recommendations for legislation, including steps which are necessary to comply with the No Child Left Behind Act.

(g)  The council shall hold its first meeting by September 15, 2003 and shall finish its work and cease to exist on July 1, 2005.

(h)  The council shall seek private sources of funding to enable it to gather data and develop a process for conducting a statewide discussion about education governance, and for implementing the process it develops. 

Sec. 72.  GRAND LIST ISSUES STUDY

     The Legislative Council and Joint Fiscal Office, in consultation with the department of taxes, the Vermont League of Cities and Towns, and the Vermont Assessors and Listers Association, shall study the issues affecting grand list valuation and their impact on property tax equity, including the following:

(1)  factors contributing to fluctuations in common levels of appraisal and variations in coefficients of dispersion;

(2)  local capacity for appraisal of utility, commercial, and industrial property;

(3)  the fiscal impact of the homestead property tax income sensitivity adjustment, as it may be affected by adjusting the allowable acreage surrounding an eligible homestead from two acres to 25 or 27 acres, or other appropriate acreage;

and shall report to the General Assembly by January 15, 2004 on legislative options to address these issues.

Sec. 73.  PROPERTY TAX ADJUSTMENT STUDY

The Joint Fiscal Office shall study and recommend possible methods and costs of providing all education property tax adjustment through a system based upon percentages of household income, with no limit on household income.  The Joint Fiscal Office shall report its findings and recommendations by December 15, 2003, to the House Committee on Ways and Means.

Sec. 74.  INCOME SENSITIVITY SIMPLIFICATION REPORT

     The Department of Taxes shall study and report to the legislature on methods to simplify the income sensitivity component of education funding by repealing the current income sensitivity program and replacing it with income‑sensitized property tax bills which are issued directly by the state.  The department shall examine the advantages and costs of such a program under which taxpayers first receive an unadjusted property tax bill from the town, and then are required to submit forms to the tax department for a later payment from the state, with this payment from the state being the reimbursement to the taxpayer for the income-based adjustment to the education property tax bill.  The department shall also evaluate replacement of the current income sensitivity program with a system in which the property tax bill itself is adjusted, and shows the correct, income-adjusted amount due, with taxpayers required to submit forms to the tax department to show eligibility for adjusted property tax bills with options for payment to the town or the state.  The department shall report its findings and evaluations to the General Assembly on or before December 15, 2003.

* * * Transitional Provisions * * *

Sec. 75.  Transition Rules for Determining Statewide

               Education Tax Municipal Liabilities for Fiscal

               Year 2005

(a)  Notwithstanding the provisions of chapter 135 of Title 32, the Department of Taxes shall calculate a municipality’s statewide education tax liability (but not individual taxpayers’ education property tax liabilities) for fiscal year 2005 by estimating the equalized value of nonresidential and homestead property, using the equalized grand list published by the Division of Property Valuation and Review in January 2004, as follows:

(1)  Homestead property value shall be deemed in the aggregate to be equal to 90 percent of the value of property listed as R1, R2, MHL, MHU, Farm, or Other (for any properties in the “Other” class which are residential properties), and which is listed as owned by a resident of the municipality;

(2)  Nonresidential property value shall be deemed to be the total equalized grand list value for the municipality minus the homestead value determined under subdivision (1) of this subsection.

(b)  Determinations made by the Department of Taxes in accord with this section shall not be subject to appeal.

* * * Fiscal Year 2004 Provisions * * *

Sec. 76.  32 V.S.A. § 5402(a) is amended to read:

(a)  A statewide education property tax is imposed on all nonresidential and homestead property at a rate of $1.10 per $100.00 of equalized education property value as most recently determined under section 5405 of this title; but the homestead property tax liability shall not exceed the adjusted liability for eligible claimants under chapter 154 of this title.

Sec. 77.  FY 04 PREDICTABLE YIELD; BLOCK GRANT AMOUNT

     (a)  The predictable yield of $45.20, calculated for fiscal year 2004 in accordance with 16 V.S.A. § 4027, shall remain in effect.

(b)  The general state support grant under 16 V.S.A. § 4011 for fiscal year 2004 shall be $5,810.00 for each equalized pupil as established in Sec. 188 of H.464, the Fiscal Year 2004 General Appropriations Act.  

* * * Fund Appropriations and Transfers * * *

Sec. 78.  FY 05 AND 06 FUND APPROPRIATIONS AND TRANSFERS

     (a)  In fiscal year 2005, it is the intention of the General Assembly to appropriate and transfer from the general fund to the education fund the amount of $249,300,000.00.

     (b)  In fiscal year 2006 and thereafter, there shall be appropriated and transferred from the general fund to the education fund the amounts prescribed by 16 V.S.A. § 4025(a)(2).

Sec. 79.  TAX DEPARTMENT IMPLEMENTATION

Notwithstanding any other provision of law, there is appropriated from the education fund to the commissioner of taxes in fiscal year 2004, for implementation of the provisions of this bill, the sum of $734,472.00.

* * * Miscellaneous * * *

Sec. 80.  CONSOLIDATION OF SCHOOL DISTRICTS; PLANNING

               GRANTS; SUNSET

(a)  A planning committee created pursuant to 16 V.S.A. § 706 to study the advisability of creating a unified union school district may apply to the commissioner of education for a grant to supplement the planning budget approved under 16 V.S.A. § 706a.

(b)  The commissioner may award $4,000.00 to a planning committee consisting of two school districts and additional $1,000.00 for each additional school district.  However, no planning committee shall receive more than $7,000.00.

(c)  The secretary of administration shall pay a grant awarded under this section upon a warrant issued by the commissioner of education.  Notwithstanding the provisions of subsection 4025(d) of Title 16, funds for this grant shall be drawn from the education fund amounts appropriated to pay for the base education grant and shall not result in the repeal of chapter 135 of Title 32.  The secretary of administration shall submit a request for funds in the annual budget adjustment act to pay for any grants that may have been awarded under this section.

(d)  This section is repealed on June 30, 2006.

Sec. 81.  32 V.S.A. § 5884 is amended to read:

§ 5884.   REFUNDS; PETITIONS FOR REFUNDS

(a)  At any time within three years after the date a return is required to be filed under this chapter, or six months after a refund was received from the United States with respect to an income tax liability, or an amount of taxable income, under the laws of the United States, reported in a return filed under the laws of the United States for the taxable year, with respect to which that return was filed under this chapter, whichever is later, a taxpayer may petition the commissioner for the refund of all or any part of the amount of tax paid with respect to the return.  Unless the period is extended by agreement of the commissioner and the taxpayer, the commissioner shall thereafter, upon notice to the taxpayer, hold a hearing on the claim and shall notify the taxpayer of his determination of the claim within thirty 30 days of the hearing.  The failure of the commissioner to refund the amount claimed by a taxpayer within six months of the date of the petition for the refund, under this paragraph subsection, shall be considered to be a notification to the taxpayer of the commissioner's determination concerning the claim.  The notification shall be considered to have been given on the date of the expiration of the six months period.

(b)  If the commissioner determines, on a petition for refund with respect to a timely filed return or otherwise, that a taxpayer has paid an amount of tax under this chapter which, as of the date of the determination, exceeds the amount of tax liability owing from the taxpayer to the state, with respect to the current and all preceding taxable years, under any provision of this title, the commissioner shall forthwith refund the excess amount to the taxpayer together with interest at the rate per annum established from time to time by the commissioner pursuant to section 3108 of this title.  That interest shall be computed from forty-five 45 days after the date the return was filed or from forty‑five 45 days after the date the return was due, including any extensions of time thereto, with respect to which the excess payment was made, whichever is the later date.

(c)  Notwithstanding subsection (b) of this section, in the case of a refund claimed on a return which is filed after the last date prescribed for filing such return, including any extensions of time thereto, or claimed on an amended return, the interest on the excess amount to be refunded by the commissioner to the taxpayer shall be computed from 45 days after the date the late or amended return is filed.

Sec. 82.  VERMONT TAXATION OF DIVIDEND INCOME

For tax years beginning on or after January 1, 2003, dividend income which, for federal income tax purposes, is excluded from income or treated as capital gain income as a result of federal legislation of the first session of the 108th Congress, shall not be excluded from income or treated as capital gain income for Vermont income tax purposes, but shall be included as ordinary income in Vermont taxable income under subdivision 5811(21)(A) of Title 32.

Sec. 83.  16 V.S.A. § 711a(c) is added to read:

(c)  Beginning in fiscal year 2006, for purposes of this subsection, equalized pupils shall be calculated for a union school district and its member districts by counting the full-time equivalent enrollment in the union school during the census period pursuant to subdivision 4001(1) of this title, weighting that count for elementary and secondary pupils pursuant to subsection 4010(b) of this title, and dividing the weighted count by the ratio of statewide long-term average daily membership to the statewide long-term weighted average daily membership as calculated pursuant to subdivision 4001(3) of this title.  A budget proposed under subsection (a) of this section shall show:

(1)  the spending per equalized pupil for the union school district; and

(2)  the assessment that would be due from each member district if the assessment were based on the equalized pupils from the member district. 

Sec. 84.  TRANSITION TAX RATES

     Beginning in fiscal year 2005, a manufacturing business with at least 1,000 full‑time-equivalent employees at two or fewer business locations in this state in fiscal year 2003, shall, in any municipality in which the combined statewide and local share education property tax rate in fiscal year 2003 was $1.45 or less, be subject to education property tax under 32 V.S.A. § 5402(a)(1) at a rate equal to its 2003 education tax rate plus $0.04 for each year after 2004, until fiscal year 2008; at which time it shall be subject to education property tax in that municipality under subdivision 5402(a)(1) at the rate provided in that subdivision.

Sec. 85.  32 V.S.A. § 5404(g) is amended to read:

     (g)  If the homestead or nonresidential grand list of a municipality drops more than 15 percent from the prior year, due to extraordinary loss in the tax base and not due to any townwide reappraisal, as determined by the director of property valuation and review, then the departments of education and taxes shall use the most current homestead or nonresidential grand list and the most current common level of appraisal to estimate an equalized homestead or nonresidential grand list to use for purposes of state education tax liability.

Sec. 86.  32 V.S.A. § 3757 is amended to read:

§ 3757.  LAND USE CHANGE TAX

(a)  Land which has been classified as agricultural land or managed forest land pursuant to this chapter shall be subject to a land use change tax upon the development of that land, as defined in section 3752 of this chapter.  Said tax shall be at the rate of 20 percent of the full fair market value of the changed land determined without regard to the use value appraisal; or the tax shall be at the rate of 10 percent if the owner demonstrates to the satisfaction of the director that the parcel has been enrolled more than 10 years.  Notwithstanding any other provision of law, if the revenue from this tax reverts to the state, the rate of this tax shall be zero percent.  If changed land is a portion of a parcel, the fair market value of the changed land shall be the fair market value of the changed land prorated on the basis of acreage, divided by the common level of appraisal. Such fair market value shall be determined as of the date the land is no longer eligible for use value appraisal.  This tax shall be in addition to the annual property tax imposed upon such property.  Nothing in this section shall be construed to require payment of an additional land use change tax upon the subsequent development of the same land, nor shall it be construed to require payment of a land use change tax merely because previously eligible land becomes ineligible, provided no development of the land has occurred.

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(c)  The determination of the fair market value of the land as of the date the land is no longer eligible for a use value appraisal, or as of the time of the withdrawal of the land from use value appraisal, shall be made by the assessing officials director.  The determination shall be made within 30 days after the date that the owner petitions or assessing officials petition for the determination and shall be effective on the date of dispatch to the owner.

(d)  The land use change tax shall be due and payable by the owner 30 days after the tax notice is mailed to the taxpayer, and shall be collected in accord with and subject to the penalty, interest and enforcement provisions under chapter 133 of this titleThe tax shall be paid to the commissioner for deposit into the general fund.  The assessing officials commissioner shall issue a form to the owner assessing officials which shall provide for a description of the land developed, the amount of tax payable, and the fair market value of the land at the time of development or withdrawal from use value appraisal.  The owner shall fill out the form and shall sign it under the penalty of perjury.  After receipt of payment, the assessing officials commissioner shall furnish the owner with one copy, shall retain one copy and shall forward one copy to the director local assessing officials and one to the register of deeds of the municipality in which the land is located.  Thereafter, the land which has been developed shall be appraised and listed at its full fair market value in accordance with the provisions of chapter 121 of this title.

(e)  The owner of any classified land receiving use value appraisal under this subchapter shall immediately notify the director and assessing officials of:

(1)  the development of the land, as defined in section 3752 of this chapter;

(2)  of any change or discontinuance of use of the classified land so that it is no longer eligible for use value appraisal or is eligible for a different use value appraisal under this subchapter; and

(3)  of any transfer of ownership.  A transfer of ownership, alone, will not affect eligibility of the parcel, and no new maps will be required solely because of a transfer.

(f)  The application for use value appraisal of agricultural and forest land, once approved by the state, shall be recorded in the land records of the municipality and shall constitute a lien to secure payment of the land use change tax to the municipality state upon development.  The landowner shall bear the recording cost.  The land use change tax and any obligation to repay benefits paid in error shall not constitute a personal debt of the person liable to pay the same, but shall constitute a lien which shall run with the land.  All of the administrative provisions of chapter 151 of this title, including those relating to collection and enforcement, shall apply to the land use change tax.

(g)  Upon application, the assessing officials commissioner may abate a use change tax levy concerning agricultural land found eligible for use value appraisal under section subdivision 3752(1)(A) of this title, if a disposition of such property resulting in a change of use of it takes place within five years of the initial assessment at use value because of the permanent physical incapacity or death of the individual farmer‑owner or farmer-operator of the property.  Upon application, the town board of abatement may abate a use change tax in accordance with the provisions of section 1535 of Title 24.  Abatement of a use change tax shall release that portion of the property that was subject to the tax from the lien imposed under subsection (f) of this section.

(h)  Land condemned as a result of eminent domain or sold voluntarily to a condemning authority in anticipation of eminent domain proceedings is exempt from the levy of a land use change tax under this section.

(i)  Nothing in this section shall be construed as permitting an owner to engage in the development of land in violation of any conservation restriction in effect on said land.

(j)  Land transferred to the United States Forest Service is exempt from the levy of a use change tax under this section, provided all of the following apply:

(1)  land transferred is eligible for use value appraisal at the time of the transfer;

(2)  the transfer is in consideration for the receipt from the United States Forest Service of land of approximately equal value, as determined by the commissioner; and

(3)  the landowner has submitted to the assessing officials commissioner in writing a binding document that would substitute the land received for the land transferred to the Forest Service, for the purposes of this chapter.

(k)  Conservation and preservation rights and interests held by an agency of the United States or by a qualified holder, as defined in chapter 34 of Title 10, shall be exempt from the levy of a use change tax.  Upon request of the agency or qualified holder, the assessing officials commissioner may petition the director to release the conservation and preservation rights and interests from any lien recorded pursuant to this chapter.

* * * Effective Dates * * *

Sec. 87.  EFFECTIVE DATES

This section shall take effect upon passage, and:

(1)  Secs. 1-4, relating to education property tax, shall apply to fiscal years 2005 and after; except that all after the first sentence of 32 V.S.A. § 5402(b)(3) shall apply to tax bills issued after April 1, 2005; and except that in Sec. 3, in 32 V.S.A. § 5401(12), the percentage of the statewide average spending used to calculate the district spending adjustment in fiscal year 2005 shall be 135 percent, and in fiscal year 2006 shall be 130 percent, and in fiscal years 2007 and after shall be 125 percent.

(2)  Sec. 5, relating to education tax rate adjustments, shall take effect upon passage.

(3)  Sec. 6, relating to declaration of homestead, shall take effect January 1, 2004.

(4)  Secs. 7-14, relating to homestead tax adjustments, shall take effect January 1, 2004, and shall apply to claims filed in 2004 and after; except Sec. 11, relating to per-acre adjustment legislative intent, shall take effect upon passage.

(5)  Secs. 15-29, relating to miscellaneous conforming changes to education property tax provisions, shall apply to fiscal years 2005 and after.

(6)  Sec. 30, relating to legislative intent, shall take effect upon passage; and Secs. 31-34, relating to the sales and use tax rate of six percent and taxation of telecommunications at the six percent rate, shall apply to sales and uses on and after October 1, 2003.

(7)  Sec. 35, relating to use tax reporting on income tax returns, shall apply to income tax returns for tax years 2003 and after.

(8)  Sec. 36, relating to the dedication of revenues to the education fund, shall take effect July 1, 2004.

(9)  Sec. 37, relating to the dedication of revenues to the general fund and to property transfer tax allocations, shall take effect July 1, 2004.

(10)  Sec. 38, relating to the JTOC allocation, shall take effect July 1, 2004.

(11)  Sec. 39, relating to student count in rapidly-growing districts, shall take effect July 1, 2004, and shall be used to determine equalized pupil counts in fiscal years 2005 and after.

(12)  Secs. 40-42, relating to other school funding provisions, shall take effect upon passage.

(13)  Secs. 43 through 45 and 47, relating to mandates, administrative rules, special education, and teacher negotiations, shall take effect July 1, 2003; and Sec. 46, relating to reporting of cost effectiveness data, shall take effect July 1, 2004.

(14)  Sec. 48, relating to information in budget reports, shall take effect upon passage, except it shall apply to union school districts and their member districts beginning July 1, 2005.  It is the intent of the General Assembly to ensure that the information requested in this section will be provided to voters.  Therefore, during the next legislative session, the General Assembly shall consider how to assign an equalized pupil count to union school districts, and provide union school districts with direct state aid so that voters will be able to determine exactly how much of their tax revenues are allocated to the union school.  In addition, the General Assembly will be closely monitoring the governance study required under this act to ensure that if school districts are reorganized, voters will be provided with information that will enable them to make informed thoughtful education budgetary decisions.

(15)  Sec. 49, relating to supplemental school construction aid for consolidation, shall take effect July 1, 2004.

(16)  Sec. 50, relating to rescission of vote on capital construction in education spending, shall take effect upon passage.

(17)  Secs. 51-67, relating to streamlined sales tax provisions, including provisions relating to alcoholic beverages, clothing, and $20.00 telecommunications credit, and provisions relating to local option taxation of telecommunications and exemption of clothing, shall take effect on the first day of the second quarter following the date of Vermont’s membership in the multistate streamlined sales and use tax agreement, but no earlier than January 1, 2005.

(18)  Sec. 68, relating to local option taxes, shall take effect upon passage.

(19)  Secs. 69-74, relating to studies, shall take effect upon passage.

(20)  Sec. 75, relating to transition provisions, shall take effect upon passage.

(21)  Secs. 76 and 77, relating to fiscal year 2004 provisions, shall take effect upon passage.

(22)  Secs. 78 and 79, relating to appropriations, transfers, and personnel, shall take effect upon passage.

(23)  Sec. 80, relating to school district consolidation planning grants, shall take effect upon passage.

(24)  Sec. 81, relating to interest on overpayments, shall apply to amended and late returns filed on or after the date of passage.

     (25)  Sec. 82, relating to taxation of dividend income, shall apply to tax years beginning on and after January 1, 2003.

     (26)  Sec. 83, relating to union school district pupil count, shall take effect July 1, 2005.

     (27)  Sec. 84, relating to transition tax rates for certain manufacturing businesses, shall take effect in fiscal year 2005.

(28)  Sec. 85, relating to drop in grand list value, shall take effect in fiscal year 2005.

(29)  Sec. 86, relating to use change tax, shall apply to use change or development occurring on or after July 1, 2003.

Approved:  June 18, 2003



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us