ACT NO. 207
Miscellaneous Policy tax
This act makes various changes to Vermont tax laws, as follows:
Secs. 1, 2. Reduce the rate at which pass-through entities pay tax to Vermont.
Partnerships, limited liability corporations and subchapter S corporations are "pass-through" entities, meaning that they are not taxed at the business level. Instead, their owners are taxed personally on their pro-rata hare of the business income, as if the business income were passed through to the owners.
When a Vermont pass-through entity has nonresident owners, it is difficult for Vermont to track whether these nonresidents are filing income tax returns on their Vermont income. To ensure that Vermont receives the income tax owed by nonresident owners of these entities, Vermont income tax law provides that the entity itself must pay tax to the State on behalf of the owner at our highest marginal tax rate. This rate always results in an overpayment of tax. These sections lower that rate from the highest rate to the second-lowest rate.
Sec. 3. Creates a Vermont tax on remote (e.g., Internet) sales of cigarettes.
Vermont currently imposes a tax on cigarettes at the wholesale and distributor level. The tax is currently $1.19 per pack (but see H. 861 of 2006), and is paid by purchasing stamps and affixing the stamps to the packs.
This section imposes the cigarette tax on anyone who purchases cigarettes from a source which did not pay the Vermont cigarette stamp tax, such as purchases through the Internet or mail order, or in another state which has no cigarette tax. The new law allows up to two cartons of cigarettes to be purchased elsewhere and brought back to Vermont without having to pay the Vermont tax.
The new law would also give credit to the taxpayer for any cigarette tax already paid to another jurisdiction on those cigarettes.
Under the Federal "Jenkins Act", states receive reports of purchasers who purchase cigarettes from remote sellers. This reporting enables states to track sales of unstamped cigarettes.
(Note that cigarettes are also subject to the six percent Vermont sales and use tax.)
Sec. 4. Provides that the amendments in Sec. 3 of the act shall be subject to any cigarette tax amendments in H. 861 of 2006, if that bill is enacted.
Sec. 5. Conforms current law to Streamlined provisions, which provide that a voluntary Streamlined filer may file annual returns, and will not be required to file monthly returns unless it collects more than $1000 in taxes in the month.
Sec. 6. Increases the incentive for investing in the Vermont Higher Education Investment Plan.
Current law gives a 5% credit for the first $2,000 contributed each year. This amendment would increase the credit to 10% of the first $2500, beginning with contributions in 2007.
Secs. 7, 8. Clarify that PILOT payments should be made to a town hosting state college property which is tax-exempt. [All state college property is currently tax-exempt.]
Also, beginning in 2011, state college property will only be tax-exempt if used for education purposes and not for commercial purposes.
Secs. 9, 10, 11. Change "Angel Investment" incentive to a tax credit (instead of a deferral of capital gains taxation).
Sec. 12. Technical amendment: Repeals a tax credit that is never used and is virtually unusable.
Sec. 13. Technical amendment: Corrects a statutory reference to "telecommunications service providers".
Sec. 14. Technical amendment: Corrects an arithmetic error in the 2006 corporate income tax table.
Secs. 15, 16, 17, 18. Create a net operating loss rule specific to Vermont.
Sec. 19. Requires PVR and the Agriculture Secretary to study a proposal to expand current use enrollment to certain farm housing, with a report due January 15, 2007.
Sec. 20. Creates a legislative staff study of how to tax trailer coaches.
Secs. 21, 22, 23, 24. Increase funding for the affordable housing tax credit. Amend annual award cap from $150,000 to $400,000. The amount awarded is awarded for each of five years; so the maximum of outstanding credits in any one year would be $2 million.
Also require an Administration report on a proposed new tax incentive for employers or others who assist low- and moderate-income buyers to buy first houses.
Also require annual reporting on the effect of tax credits on revenues from insurance premiums tax and bank franchise tax.
Sec. 25. Allows a town to vote to increase the veterans' homestead property tax exemption to $40,000.
Sec. 26. Effective dates.
The Vermont General Assembly
115 State Street