NO. 207. AN ACT RELATING TO MISCELLANEOUS TAX POLICY AMENDMENTS.
It is hereby enacted by the General Assembly of the State of Vermont:
* * * Nonresident estimated tax payments by pass-through entities * * *
Sec. 1. 32 V.S.A. § 5914(c) is amended to read:
(c) With respect to each of its
nonresident shareholders, an S corporation shall for each taxable period be
liable for all income taxes, together with related interest and penalties,
imposed on the shareholder by Vermont with respect to the income of the S
corporation. An S corporation shall declare estimated tax, and shall pay
estimated tax, including applicable interest and penalties, on such liability
in the manner and at the times specified for individuals in subchapter 5 of
this chapter; provided, however, that an S corporation with a single
shareholder and a tax liability under this section of $250.00 or less in the
prior year, and an S corporation with two or more shareholders and a tax
liability under this section of $500.00 or less in the prior year, may file the
entire estimated amount on or before the fourth payment date, January 15. For
purposes of this subsection, “estimated tax” means an amount equal to the
next-to-lowest marginal tax rate prescribed under section 5822 of this
title multiplied by the shareholder’s pro rata share of the income attributable
Sec. 2. 32 V.S.A. § 5920(c) is amended to read:
(c) With respect to each of its
nonresident partners or nonresident members, a partnership or limited liability
company shall for each taxable period be liable for all income taxes, together
with related interest and penalties, imposed on the partner or member by Vermont with respect to the income of the partnership or limited
liability company. A partnership or limited liability company shall declare
estimated tax, and shall pay estimated tax, including applicable interest and
penalties, on such liability in the manner and at the times specified in
subchapter 5 of this chapter; provided, however, that a partnership or limited
liability company with a single partner or member and a tax liability under
this section of $250.00 or less in the prior year, and a partnership or limited
liability company with two or more partners or members and a tax liability
under this section of $500.00 or less in the prior year, may file the entire
estimated amount on or before the fourth payment date, January 15. For
purposes of this subsection, “estimated tax” as used in subchapter 5 of this
chapter shall mean an amount equal to the
next-to-lowest marginal tax rate prescribed under section 5822 of this title, multiplied by the partner’s or member’s pro rata share of the income attributable to Vermont.
* * * Cigarette tax on unstamped cigarettes * * *
Sec. 3. 32 V.S.A. § 7771 is amended to read:
§ 7771. Imposition and rate of tax
(a) A tax is imposed on all cigarettes held in this state by
any person for sale
or by any person in possession of more than 10,000
cigarettes, unless such cigarettes shall be:
(1) in the possession of a licensed wholesale dealer;
(2) in the course of transit and consigned to a licensed wholesale dealer or retail dealer; or
(3) in the possession of a retail dealer
who has held the cigarettes for 24 hours or less.
Such tax shall be at the
rate of 59.5 mills for each cigarette and the payment thereof to Payment
of the tax under this subsection shall be evidenced by the affixing of
stamps to the packages containing the cigarettes, as hereinafter provided. Any
cigarette on which the tax imposed by this chapter subsection has
been paid, such payment being evidenced by the affixing of such stamp, shall
not be subject to a further tax under this chapter. Nothing contained in this
chapter shall be construed to impose a tax on any transaction the taxation of
which by this state is prohibited by the constitution of the United States. The amount of taxes advanced and paid
by a licensed wholesale dealer or a retail dealer as herein provided shall be
added to and collected as part of the retail sale price on the cigarettes. All
taxes upon cigarettes under this chapter are declared to be a direct tax upon
the consumer at retail and shall conclusively be presumed to be precollected
for the purpose of convenience and facility only.
(b) A tax is also imposed on all cigarettes possessed in this state by any person for any purpose other than sale, as follows:
(1) This tax shall not apply to:
(A) cigarettes bearing a stamp affixed pursuant to this chapter; or
(B) cigarettes bearing a cigarette tax stamp affixed pursuant to the laws of another jurisdiction with a cigarette tax rate equal to or greater than the rate set forth in subsection (c) of this section; or
(C) cigarettes purchased outside the state by an individual in quantities of 400 or less and brought into the state for that individual’s own use or consumption. Cigarettes that are ordered from a source outside the state and delivered into this state are not “purchased outside the state” within the meaning of this subsection.
(2) There is allowed a credit against the tax under this subsection for cigarette tax paid to another jurisdiction and evidenced by cigarette tax stamps affixed to the subject cigarettes pursuant to the laws of that jurisdiction.
(3) A person taxable under this subsection shall, within 30 days of first possessing the cigarettes in this state, file a return with the commissioner, showing the quantity of cigarettes brought into the state. The return must be made in the form and manner prescribed by the commissioner and be accompanied by remittance of the tax due.
(c) The tax imposed under this section shall be at the rate of 59.5 mills per cigarette. The interest and penalty provisions of section 3202 of this title shall apply to liabilities under this section.
* * * Sales tax on electronic transfer of software * * *
Sec. 4. PRIORITY OF ENACTMENTS
Sec. 3 of this act (amending 32
V.S.A. § 7771 relating to the cigarette tax) shall be subject to and further
amended by any amendments to section 7771 in H.861 which are enacted in 2006,
except that the repeal of the sentence at the end of subdivision (a)(3) of Sec.
3 of this act, which reads “
All taxes upon cigarettes under this chapter
are declared to be a direct tax upon the consumer at retail and shall
conclusively be presumed to be precollected for the purpose of convenience and
facility only.” shall remain repealed.
Sec. 5. 32 V.S.A. § 9775(a) is amended and (f) added to read:
Except as otherwise provided in this section, 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 such information as the
commissioner may require.
(f) A person registered under the Multistate Streamlined Sales and Use Tax Agreement that does not have a legal requirement to register in this state and is not a Model 1, 2 or 3 seller may file a return within one year of the month of initial registration and may file annual returns in the same month for succeeding years; provided, however, that such person must file a return on the 25th of the month following any month in which the taxpayer accumulated state and local taxes in the amount of $1000.00 or more.
Sec. 6. 32 V.S.A. § 5825a is amended to read:
§ 5825a. CREDIT FOR VERMONT HIGHER EDUCATION
INVESTMENT PLAN CONTRIBUTIONS
taxpayer of this state, including each spouse filing a joint return, shall be
eligible for a nonrefundable credit against the tax imposed under section 5822
of this title of
five ten percent of the first $2,000.00 $2,500.00
per beneficiary, contributed by the taxpayer during the taxable year to a
Vermont higher education investment plan account under subchapter 7 of chapter
87 of Title 16.
taxpayer who has received a credit under subsection (a) of this section shall
repay to the commissioner
five ten percent of any distribution
from a higher education investment plan account, which distribution is not
excluded from gross income in the taxable year under Section 529 of the
Internal Revenue Code, as amended, up to a maximum of the total credits
received by the taxpayer under subsection (a) of this section minus any amount
of repayment of such credits in prior tax years. Repayments under this
subsection shall be subject to assessment, notice, penalty and interest,
collection, and other administration in the same manner as an income tax under
Sec. 7. 32 V.S.A. § 3701(1)(A) is amended to read:
(1) “State-owned property” means:
state-owned buildings, including buildings of the Vermont state colleges
which are tax-exempt under section 2178 of Title 16; buildings of the
University of Vermont and State Agricultural College used for educational and
not commercial purposes; and buildings of the agency of transportation
and the department of the military; but excluding the value of land on which
the buildings are located, and excluding all highways and bridges and any land
pertaining thereto; and
Sec. 8. 16 V.S.A. § 2178 is amended to read:
§ 2178. TAX EXEMPTION
All real and personal property owned by the corporation and used for educational and not commercial purposes shall be exempt from taxation.
Sec. 9. 32 V.S.A. § 5811(21) is amended to read:
(21) “Taxable income” means federal taxable income:
(A) Increased by the following items of income (to the extent such income is excluded from federal adjusted gross income):
(i) interest income from non-Vermont state and local obligations; and
(ii) dividends or other distributions from any fund to the extent they are attributable to non-Vermont state or local obligations;
(iii) any amount of capital gain income which was
deferred in a prior year under subdivision (B)(iii) of this subdivision (21),
to be added in the taxable year of disposition of the taxpayer’s interest in
the qualified business; and
(B) Decreased by the following items of income (to the extent such income is included in federal adjusted gross income):
(i) income from United States government obligations; and
(ii) 40 percent of adjusted net capital gain income
as defined in Section 1(h) of the Internal Revenue Code
; (iii) 60 percent of capital gain income that is
invested in the taxable year, or (through filing an amended return) within two
years of receipt, in an eligible venture capital investment under section 5930v
of this title.
Sec. 10. 32 V.S.A. § 5930v is amended to read:
5930v. Angel venture capital
capital gain rollover
(a) A qualified taxpayer of this state shall be
taxation of capital gain income under subdivision 5811(21) of
this title resulting from a credit of three percent of capital gain
income from an eligible venture capital investment under this section made
by the taxpayer during the taxable year. If the taxpayer is a partnership,
limited liability company, or S corporation, the treatment of capital gain
income under this section shall be allocated ratably among the partners, members,
or shareholders of the entity.
(b) In this section:
* * *
(3) “Eligible venture capital investment” means at least $50,000.00 and up to $200,000.00 of total investment by one person, which is equity or at-risk debt investment in one qualified business, for expenditure by the qualified business on the plant, equipment, research, and development or as working capital in Vermont.
* * *
Sec. 11. INVESTMENTS DEFERRED UNDER PRIOR LAW
Capital gain income, the taxation of which was deferred pursuant to 32 V.S.A. § 5811(21)(B)(iii), must be included in the qualified taxpayer’s taxable income no later than five years after the taxable year in which the investment that gave rise to the deferral was made.
Sec. 12. REPEAL
32 V.S.A. § 5930t (tax credit for training employees) is repealed.
Sec. 13. 32 V.S.A. § 9701(9)(H) is amended to read:
(H) A person who provides telecommunications
provider as defined in 30 V.S.A. § 7501 subdivision (19)
of this section, except that “vendor” shall not include a person whose
activities in this state are limited to the performance of any activities
which, without more, would not constitute nexus for sales tax collection
purposes, plus any or all of the following necessary to create or maintain a
worldwide web page or internet site for the person:
(i) ownership of data or programming code in this state, or use of that data or programming code by another person or by a person not in this state;
(ii) ownership of, or receipt of services from, computer servers in this state;
(iii) receipt of computer processing or web hosting services from a computer service provider or web hosting service in this state.
Sec. 14. 32 V.S.A. § 5832(1) is amended to read:
Vermont net income of the corpo-
ration for the taxable year allo-
cated or apportioned to Vermont
under section 5833 of this title Tax
$ 10,001.00-25,000.00 $600.00 plus 7.0% of the
excess over $10,000.00
25,001.00-250,000.00 $1,650.00 plus 8.75% of the
excess over $25,000.00
250,001.00 and over
8.90% of the excess over
* * *
Sec. 15. 32 V.S.A. § 5811(25) is added to read:
§ 5811. Definitions
The following definitions shall apply throughout this chapter unless the context requires otherwise:
* * *
(25) “Vermont net operating loss” means any negative income after allocation and apportionment of Vermont net income pursuant to section 5833 of this chapter.
Sec. 16. 32 V.S.A. § 5832 is amended to read:
§ 5832. TAX ON INCOME OF CORPORATIONS
A tax is imposed for each calendar year, or fiscal year ending during that calendar year, upon the income earned or received in that taxable year by every taxable corporation, reduced by any Vermont net operating loss allowed under section 5888 of this title, such tax being the greater of
* * *
Sec. 17. 32 V.S.A. § 5888(4)(B) is amended to read:
(4) Notwithstanding any other provision of law:
* * *
(B) The amount of any Vermont net operating
, or net operating loss carryback or carryforward, which is available to
a taxpayer under the laws of the United States, shall be available to a
taxpayer in the determination of his Vermont tax, provided, however, that
the amount of any refund due to a net operating loss carryback shall not exceed
$5,000.00 for any taxable year as a carryforward in the ten years
following the loss year. Such amount shall not be adjusted in any
manner for any reason, and, particularly shall not be increased in any amount
on account of the fact that the taxpayer’s income under the laws of the United
States included amounts of income which are not subject to taxation by the
Sec. 18. TRANSITION
The transition rules for implementation of Secs. 15, 16 and 17 of this act shall be:
(1) For losses occurring in taxable year 2007, the amount of net operating loss carryforward available under 32 V.S.A. § 5888(4)(B) shall be the same proportion of the Vermont net operating loss as the proportion of the federal net operating loss that was carried forward in determining federal taxable income increased by ten percent of remaining Vermont net operating loss.
(2) For losses occurring in taxable year 2008, the amount of net operating loss carryforward available under 32 V.S.A. § 5888(4)(B) shall be the same proportion of the Vermont net operating loss as the proportion of the federal net operating loss that was carried forward in determining the federal taxable income increased by 30 percent of remaining Vermont net operating loss.
(3) For losses occurring in taxable year 2009, the amount of Vermont net operating loss carryforward available under 32 V.S.A. § 5888(4)(B) shall be the same proportion of the Vermont net operating loss as the proportion of the federal net operating loss that was carried forward in determining the federal taxable income increased by 40 percent of the remaining Vermont net operating loss.
(4) For losses occurring in taxable years 2009 and after, the full amount of the Vermont net operating loss may be carried forward.
Sec. 19. FARM EMPLOYEE HOUSING STUDY
(a) The director of property valuation and review and the secretary of agriculture, food and markets shall study the proposal to expand the use value definition of “farm buildings” to include the following language:
“With respect to a dwelling used to house farm employees, the dwelling shall be on a parcel of no more than two acres situated on enrolled land or surrounded by enrolled land, or surrounded by enrolled land interrupted only by road frontage, as long as the ownership of the dwelling and the enrolled land is in the same family.”
(b) The director and secretary shall analyze the possible effects of the proposed new definition, including:
(1) the number and types of buildings which could be enrolled in the use value program, and possible land configurations which could be affected by the new definition;
(2) the potential benefits to the agricultural community; and
(3) the potential costs to the state’s education fund and general fund.
(c) The director and secretary shall report their analysis and any recommendations to the chairs of the house and senate committees of jurisdiction by January 15, 2007.
Sec. 20. PROPERTY TAXATION OF TRAILER COACHES
The legislative council, in consultation with the division of property valuation and review, the Vermont Association of Listers and Assessors, and the Vermont Campground Association, Inc., shall draft a proposal to amend the property tax laws to allow taxation or tax-exemption of trailer coaches in a fair and equitable manner, which can be applied uniformly across the state. The legislative council shall present its draft to the house committee on ways and means and the senate committee on finance by January 15, 2007.
Sec. 21. 32 V.S.A. § 5930u(c), (d), and (g) are amended to read:
(c) Amount of credit. A taxpayer who makes an eligible cash contribution shall be entitled to claim against the taxpayer’s individual income, corporate, franchise, or insurance premium tax liability a credit in an amount specified on the taxpayer’s credit certificate. The first-year allocation of a credit amount to a taxpayer shall also be deemed an allocation of the same amount in each of the following four years.
Availability of credit.
Affordable The amount of affordable
housing tax credits credit allocated with respect to a project
shall be available to the taxpayer in each of every year for five
consecutive tax years, beginning with the tax year in which the eligible cash
contribution is made. Total tax credits available to the taxpayer shall be
the amount of the first-year allocation plus the succeeding four years’ deemed
calendar fiscal year, the allocating agency shall not
award a total amount of tax credits may award up to $400,000.00 in total
first-year credit allocations to all applicants under this subchapter in
excess of $150,000.00. In any fiscal year, total first-year
allocations plus succeeding-year deemed allocations shall not exceed
Sec. 22. ADMINISTRATION REPORT ON NEW AFFORDABLE
HOUSING TAX CREDIT
(a) The agency of commerce and community development and the department of taxes, in consultation with the Vermont housing finance agency and the affordable housing coalition, are requested to study whether an additional tax credit or other alternative form of incentive would enable more low and moderate income individuals to become first-time homebuyers in Vermont. The study should include:
(1) a description of possible recipients of the credit, for example, whether the credit would be available to employers who provide homebuying assistance to employees, to income-eligible homebuyers, or others;
(2) any limits on the credit;
(3) a description of those who would be eligible for homebuying assistance under the proposal;
(4) a description of the goals of the credit, including the homebuying assistance which would be provided, how and by whom, and the costs of the assistance provided;
(5) an analysis of the annual cost of the proposal to the revenues of the state beginning in fiscal year 2008;
(6) an analysis of the effectiveness of existing tax credits in other states for employer assistance to low and moderate income employees on first-home purchases; and
(7) detailed information on the number of first-time homebuyers currently aided by VHFA, including income levels, the form of aid received, the price of homes purchased, whether this initial aid is sufficient to allow continued ownership, and, if not, what additional issues need to be addressed.
(b) The agency of commerce and community development and the department of taxes shall report their findings to the standing committees of jurisdiction of the house and senate by December 1, 2006.
Sec. 23. 32 V.S.A. § 312 is amended to read:
§ 312. TAX EXPENDITURE REPORT
(a) For purposes of this section, “tax expenditure” shall mean the actual or estimated loss in tax revenue resulting from any exemption, exclusion, deduction, or credit applicable to the tax.
(b) Tax expenditure reports. Biennially, as part of the budget process, beginning January 15, 2009, the department of taxes shall file with the house committees on ways and means and appropriations and the senate committees on finance and appropriations a report on tax expenditures in the personal and corporate income, sales and use, and meals and rooms tax returns, insurance premium tax and bank franchise tax returns, and education property tax grand lists and such other tax expenditures for which the joint fiscal office and the tax department jointly have produced revenue estimates. The report shall include, for each tax expenditure, the following information:
(1) A description of the tax expenditure.
(2) The most recent fiscal information available on the direct cost of the tax expenditure in the past two years.
(3) The date of enactment of the expenditure.
(4) A description of and estimate of the number of taxpayers directly benefiting from the expenditure provision.
Sec. 24. EFFECTIVE DATE AND TRANSITION RULE
Secs. 21, 22 and 23 of this act (affordable housing tax credits) shall take effect upon passage except that the Sec. 21 increase in the amount available for affordable housing investment tax credits shall take effect July 1, 2006; the total amount of first-year tax credits which may be allocated in fiscal year 2007 under 32 V.S.A. § 5930u(g) shall be limited to $300,000.00; and the total amount of first-year tax credits which may be allocated in fiscal years 2008 and after shall be $400,000.00.
Sec. 25. 32 V.S.A. § 3802(11)(B) is amended to read:
* * *
unremarried widow or widower of a previously qualified veteran shall be
entitled to the exemption provided in this subdivision whether or not he or she
is receiving government compensation or pension. By majority vote of those
present and voting at an annual or special meeting warned for the purpose, a
town may increase the veterans’ exemption under this subsection to up to
$40,000.00 of appraisal value. Any increase in exemption shall take
effect for the taxable year in which it was voted, and shall remain in effect
for future taxable years until amended or repealed by a similar vote.
* * * Effective dates * * *
Sec. 26. EFFECTIVE DATES
This act shall take effect upon passage, except:
(1) Secs. 1 and 2 (estimated tax for pass-through entities) shall apply to taxable years beginning on or after January 1, 2006.
(2) Sec. 3 (cigarette tax) shall apply to sales on and after July 1, 2006.
(3) Sec. 5 (streamlined sales tax agreement conforming language) 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.
(4) Sec. 6 of this act (expanding the higher education investment plan tax credit) shall apply to contributions made in taxable years 2007 and after.
(5) Sec. 7 of this act (payments in lieu of taxes for tax-exempt state college buildings) shall take effect July 1, 2006; and Sec. 8 of this act (limitation on state college property tax exemption to property used for educational and not commercial purposes) shall apply to grand lists of April 1, 2011 and after.
(6) Secs. 9 and 10 of this act (angel venture capital credit) shall apply to taxable years 2006 and after.
(7) Sec. 14 of this act (correcting arithmetic error in tax table) shall apply to taxable year 2006 only.
Approved: May 31, 2006
The Vermont General Assembly
115 State Street