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H.880

Introduced by   Committee on Ways and Means

Date:

Subject:  Education finance; taxation

Statement of purpose:  This bill proposes to combine the prebate and rebate programs and to replace the property tax adjustment payment with an

income-adjusted property tax bill; expand property tax adjustment benefits for claimants with household income under $10,000.00; cap the annual property tax adjustment amount at $6,000.00, limit the annual adjustment of the applicable percentage, and reduce the fiscal year 2007 education property tax rates; amend the definition of “household income”; and create a fiscal model to aid in analysis of a proposal to move to a simpler, income-tax based, education finance system.

AN ACT RELATING TO EDUCATION FINANCE SIMPLIFICATION

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


* * * Combining Prebate and Rebate Programs * * *

Sec. 1.  32 V.S.A. § 6061(14) is added to read:

(14)  “Statewide education tax rate” means the municipality’s adjusted homestead education property tax rate for taxes assessed in the municipal fiscal year which began in the taxable year.        

Sec. 2.  32 V.S.A. § 6066(a) 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 determined as follows:

* * *

(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 an additional adjustment amount equal to the amount by which the property taxes for the municipal fiscal year which began in the taxable year upon the claimant’s 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:

* * *


* * * Payment of Income Sensitivity Plus any Optional Withholding Amounts Directly to Towns;

Notice to Taxpayers; Income-Adjusted Property Tax Bills * * *

Sec. 3.  32 V.S.A. § 6066a is amended to read:

§ 6066a.  PAYMENT OF PROPERTY TAX ADJUSTMENTS

(a)  Annually, the commissioner shall pay to each claimant the property tax adjustment amount determined under subdivisions 6066(a)(1) and (2)(3) of this title.  The payment shall be made by the latest of: August 1, for claims filed by April 15; 45 days after the claim is filed, for claims filed after April 15; or 30 days prior to the first education property tax installment date for the claimant’s municipality in the fiscal year which begins in the calendar year in which the claim is filed under section 6068 of this title; or 25 days after the grand list has been transmitted in accordance with section 5404(b) of this title to the municipality in which the housesite is located, for credit to the claimant for homestead property tax liabilities, on July 1 for timely-filed claims and on September 15 for late claims filed by September 1.  The tax adjustment of a claimant who was assessed property tax by a town which revised the dates of its fiscal year, however, is the excess of the property tax which was assessed in the last 12 months of the revised fiscal year, over the adjusted property tax of the claimant for the revised fiscal year as determined under subdivisions 6066(a)(1), (2), and (3) of this title.

(b)  The commissioner shall also pay to the municipality, for credit to the taxpayer for homestead property tax liabilities, any income tax overpayment remaining after allocation under section 3112 of this title and setoff under section 5934 of this title, which the taxpayer has directed to be used for payment of property taxes. 

(c)  Claim and refund amounts unresolved by September 15 shall be paid to the municipality at the time of final resolution, including adjudication if any.

(d)  For late claims, filed after April 15, the property tax adjustment amount shall be reduced by $15.00, which shall be paid by the commissioner to the municipality for the cost of issuing a new property tax bill to the claimant.

(e)  At the time of payment to the municipality, the commissioner shall notify the taxpayer of the property tax adjustment amount determined under subdivision 6066(a)(1) of this title; the amount determined under subdivision 6066(a)(3) of this title; the amount of income tax refund, if any, paid to the town for homestead property tax liabilities; and any late-claim reduction amount.

(f)  Property tax bills.

(1)  For amounts paid to municipalities on July 1, municipalities shall include on the homestead property tax bill notice to the taxpayer of the total amount allocated to payment of homestead property tax liabilities and notice of the balance due.

(2)  For amounts paid to municipalities on or after September 15, municipalities shall issue a new homestead property tax bill with notice to the taxpayer of the total amount allocated to payment of homestead property tax liabilities and notice of the balance due.

(3)  The payment received by the municipality from the state for credit to the taxpayer shall be credited first to current-year property tax on the homestead parcel, next to current‑year homestead parcel penalties and interest, next to any prior year homestead parcel penalties and interest, and last to any prior year property tax on the homestead parcel.  No payment shall be allocated to a property tax liability for any year after the year for which the claim or refund allocation was filed.  If the payment received by the municipality exceeds the amount allocated under this subsection, the municipality shall refund the excess to the taxpayer, without interest, within 60 days of receipt by the municipality.  No tax-reduction incentive for early payment of taxes shall apply to any payment made to a municipality by the state under this chapter.

Sec. 4.  32 V.S.A. § 3108(b)(4) is added to read:

(b)  Whenever the commissioner is authorized or directed to pay interest on an overpayment of any taxes, nevertheless no interest shall be paid on such overpayment:

* * *

(4)  to the extent the overpayment is paid at the direction of the taxpayer to a municipality for credit against the taxpayer’s homestead property tax liabilities.

* * *

* * * Filing Deadlines; Late-Filing Penalties * * *

Sec. 5.  32 V.S.A. § 6068 is amended to read:

§ 6068.  APPLICATION AND TIME FOR FILING

(a)  A tax adjustment claim or a request for allocation of an income tax refund to homestead property tax payment shall be filed with the commissioner on or before the due date for filing the Vermont income tax return, without extension, and shall describe the school district in which the homestead property is located and shall particularly describe the homestead property for which the adjustment or allocation is sought, including a parcel identification number if the town has assigned one.

(b)  Late-filing penalties.  If the claimant fails to file a timely claim, the amount of the property tax adjustment under this chapter shall be reduced by $15.00, but not below $0.00, which shall be paid to the municipality for the cost of issuing an adjusted homestead property tax bill.  No benefit shall be allowed in the calendar year unless the claim is filed with the commissioner on or before December 1 September 1.

(c)  No request for allocation of an income tax refund to homestead property tax payment may be made after April 15.

Sec. 6.  32 V.S.A. § 5410(h) and (i) are amended to read:

(h)  The filing of a new or corrected declaration or rescission of an erroneous declaration, on or before July 15 September 1 of the property tax year, that is not reflected in the first education fund payment under 16 V.S.A.

§ 4028 for that fiscal year or in a municipality’s first payment to the education fund under subsection 5402(c) of this title for that fiscal year, shall be reflected in the final net payment to or from the education fund for that fiscal year.  The municipality may retain one-eighth of one percent of the tax collected.  Any reduction in tax paid to a municipality due to a new, revised, or rescinded declaration shall be paid by the municipality to the taxpayer no later than May 15 of the fiscal year.  No later than June 1, each municipality shall provide to the state treasurer a list of taxpayers who filed late or corrected declarations or rescinded declarations, the amount of the change in education tax, and the amount of any interest and penalty billed the taxpayer.

(i)  An owner filing a new or corrected declaration, or rescinding an erroneous declaration, after July 15 September 1 shall not be entitled to a refund resulting from the correct property classification; and any additional property tax and interest which would result from the correct classification shall not be assessed as tax and interest, but shall instead constitute an additional penalty, to be assessed and collected in the same manner as penalties under subsection (g) of this section.  Any change in property classification under this subsection shall not be entered on the grand list.

Sec. 7.  32 V.S.A. § 6061(13) is amended to read:

(13)  “Homestead” means a homestead as defined under subdivision 5401(7) of this title and declared on or before July 15 September 1 in accordance with section 5410 of this title.

Sec. 8.  APPROPRIATION

There is appropriated from the general fund to the department of taxes in fiscal year 2007 for implementation of this act the sums of $240,000.00 for notification to tax filers and to town officials, $120,000.00 for changes to the New England Municipal Resource Center property tax software system, and $182,000.00 for costs of the tax department, including computer hardware, software redesign, and production of new forms.

* * * Property Tax Adjustments:  Homestead Declaration in Another State; Cap on Total Adjustment * * *

Sec. 9.  32 V.S.A. § 6067 is amended to read:

§ 6067.  Credit limitations

Only one individual per household per taxable year shall be entitled to a benefit under this chapter.  An individual who received a homestead exemption or adjustment with respect to property taxes assessed by another state for the taxable year shall not be entitled to receive an adjustment under this chapter. No taxpayer shall receive total adjustments under this chapter in excess of $6,000.00 related to any one property tax year.


* * * Annual Adjustment of Applicable Percentage * * *

Sec. 10.  32 V.S.A. § 5402b(b) is amended to read:

 (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, but the applicable percentage base shall not be adjusted below 1.8 percent.

* * * Education Property Tax Rates for Fiscal Year 2007 * * *

Sec. 11.  FISCAL YEAR 2007 REDUCTION OF EDUCATION PROPERTY

               TAX RATES AND APPLICABLE PERCENTAGE

(a)  For fiscal year 2007 only, the education property tax imposed under subsection 5402(a) of Title 32 shall be reduced from the rate of $1.59 and $1.10 and shall instead be at the following rates:

(1)  the tax rate for nonresidential property shall be $1.47 per $100.00; and

(2)  the tax rate for homestead property shall be $0.98 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 Title 32.

(b)  For claims filed for fiscal year 2007 only, “applicable percentage” in subdivision 6066(a)(2) of Title 32 shall be reduced from 2.0 percent and instead shall be 1.80 percent multiplied by the fiscal year 2007 district spending adjustment for the municipality in which the homestead residence is located; but in no event shall the applicable percentage be less than 1.80 percent.

* * * Expansion of Homeowner and Renter Rebate Benefit Tables * * *

Sec. 12.  32 V.S.A. § 6066(a)(3) and (b) are amended to read:

(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 an additional adjustment amount equal to the amount by which the property taxes for the municipal fiscal year which began in the taxable year upon the claimant’s 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:

If household income (rounded to              then the taxpayer is entitled

to the nearest dollar) is:                            credit for the reduced property tax in

                                                               excess of this percent of that income:

$0 – 4,999.00                                                                         3.5

$5,000.00   - 9,999.00                                                             4.0 2.0

$10,000.00   -  24,999.00                                                       4.5

$25,000.00 - 47,000.00                                                           5.0  

In no event shall the credit exceed the amount of the reduced property tax.

(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 housesite exceeds a percentage of the claimant’s household income for the taxable year as follows:

If household income (rounded to              then the taxpayer is entitled

the nearest dollar) is:                                to credit for rent constituting property

                                                               tax paid in excess of this percent of

                                                               that income:

$0 – 4,999.00                                                                          3.5

$5,000.00   - 9,999.00                                                             4.0  2.0

$10,000.00   24,999.00                                                          4.5

$25,000.00 - 47,000.00                                                           5.0  

In no event shall the credit exceed the amount of the rent constituting property tax.

* * * Household Income Amendments * * *

Sec. 13.  32 V.S.A. § 6061(5) is amended to read:

(5)  “Modified adjusted gross income” means “federal adjusted gross income”:

(A)  before the deduction of any trade or business loss, loss from a partnership, loss from a small business or “subchapter S” corporation, loss from a rental property, or capital loss, except that in the case of a business which sells a business property with respect to which it is required, under the Internal Revenue Code, to report a capital gain, a business loss incurred in the same tax year with respect to the same business may be netted against such capital gain;

(B)  with the addition of the following, to the extent not included in adjusted gross income: alimony, support money other than gifts, gifts received by the household in excess of a total of $6,500.00 in cash or cash-equivalents, cash public assistance and relief (not including relief granted under this subchapter), cost of living allowances paid to federal employees, allowances received by dependents of servicemen and women, the portion of Roth IRA distributions representing investment earnings and not included in adjusted gross income, railroad retirement benefits, payments received under the federal Social Security Act, and all benefits under Veterans’ Acts, and federal pension and annuity benefits not included in adjusted gross income; nontaxable interest received from the state or federal government or any of its instrumentalities, workers’ compensation, the gross amount of “loss of time” insurance, and the amount of capital gains excluded from adjusted gross income, less the net employment and self-employment taxes withheld from or paid by the individual (exclusive of any amounts deducted to arrive at adjusted gross income or deducted on account of excess payment of employment taxes) on account of income included under this section, less any amounts paid as child support money if substantiated by receipts or other evidence that the commissioner may require; and

(C)  without the inclusion of:  any gifts from nongovernmental sources other than those described in subdivision (B) of this subdivision (5), surplus food or other relief in kind supplied by a governmental agency, or the first $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 $6,500.00 of income received by a parent person who qualifies as a dependent of the claimant under the Internal Revenue Code and who is the claimant’s parent or disabled adult child, or payments made by the state for foster care of a juvenile, or the first $6,500.00 of payments made by the state under contract with a member of the claimant’s household for the care of a disabled adult who is a member of the claimant’s household, or payments made by the state or to a family for the support of an eligible person with a developmental disability as defined in subdivision 8722(2) of Title 18.   

Sec. 14.  APPLICATION OF AMENDMENT          

     The amendment to 32 V.S.A. § 6061(5)(C) in Sec. 13 of this act, which reads:  “of a juvenile, or the first $6,500.00 of payments made by the state under contract with a member of the claimant’s household for the care of a disabled adult who is a member of the claimant’s household, or payments made by the state or” shall apply only to claims filed in 2006 and 2007, and is repealed January 1, 2008.  In order to reflect the new exclusion for disability payments in 2006, any person may file, on or before September 1, 2006, an amendment of a property tax adjustment claim already filed in 2006, or a late property tax adjustment claim if the sole reason for failure to timely file was the inclusion of such disability payments in household income.

Sec. 15.  FURTHER STUDY OF ADULT DISABILITY CARE PAYMENTS

               IN HOUSEHOLD INCOME

The commissioner of  disabilities, aging, and independent living shall research further, including discussions with providers, the issue of whether household income for purposes of property tax adjustment claims should include state payments for care of disabled adults, or should include any portion of such payments, or whether there is another mechanism for increasing the benefit from the state to persons who contract to care for disabled adults.  The commissioner shall report his recommendations to the house committee on ways and means and the senate committee on finance by January 15, 2007.

Sec. 16.  STATE DISABILITY CARE PAYMENT EXCLUSION FROM

               HOUSEHOLD INCOME IN CLAIMS RELATED TO

               HOUSEHOLD INCOME IN 2004

     (a )  The assessment against any taxpayer for repayment of a property tax adjustment or rebate amount related to household income in 2004, on account of payments made by the state under contract with a member of the claimant’s household for the care of a disabled adult who is a member of claimant’s household and which payments were not made to a family as defined in

18 V.S.A. § 8722(2), is hereby abated, including penalties and interest; and any amount of such assessment, penalties, or interest which have been paid by the taxpayer shall be refunded to the taxpayer without interest.

     (b)  Any person may file, on or before September 1, 2006, a late or amended property tax adjustment claim related to household income in 2004, solely to reflect the household income calculated with the exclusion of payments made by the state under contract with a member of the claimant’s household for the care of a disabled adult who is a member of the claimant’s household and which payments were not made to a family as defined in 18 V.S.A. § 8722(2).

* * * Request for Fiscal Modeling of  Proposal #1 in the Report of the House Legislative Study Committee on Income-Based Education Property Tax  for Vermonters * * *

Sec. 17.  ANALYSIS OF INCOME-BASED EDUCATION TAX PROPOSAL The joint fiscal office, with the assistance of legislative council, shall create a fiscal model of Proposal #1 as presented in the December 15, 2005, Report of the House Legislative Study Committee on Income-Based Education Property Tax for Vermonters to the general assembly, with the ability to vary property and income tax rates and compare outcomes.  The joint fiscal office shall also

          (1)  analyze the distribution of income and property tax burdens under Proposal #1 as compared to current income and property tax burdens;

          (2)  analyze the effect of the proposal on towns’ common levels of appraisal;

          (3)  estimate the administrative costs of transition to a new system;

          (4)  estimate the ongoing administrative costs of such a system, as compared to administrative costs of the current education property tax system.

The joint fiscal office shall present its model and report its findings to the general assembly by December 1, 2006.

Sec. 18.  EFFECTIVE DATES

     This act shall take effect upon passage except as follows:

(1)  Secs. 1 through 7 of this act (property tax adjustment amendments) shall take effect January 1, 2007 and shall apply to claims filed in 2007 and after.

(2)  Sec. 9 (homestead declaration in another state and annual cap on property tax adjustment benefits) shall apply to claims filed in 2007 and after.

(3)  Sec. 12 (increased rebate benefit for claimants with household income under $10,000.00) shall apply to claims filed in 2007 and after.

(4)  Sec. 13 (household income amendments) shall apply to claims filed in 2007 and after.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us