AN ACT RELATING TO THE VERMONT ECONOMIC PROGRESS COUNCIL, CREATION OF THE VERMONT ECONOMIC GROWTH INCENTIVE PROGRAM, TAX INCREMENT FINANCING DISTRICTS AND THE TOWN OF MILTON
It is hereby enacted by the General Assembly of the State of Vermont:
* * * Part I. Legislative Findings and Purpose * * *
Sec. 1. LEGISLATIVE FINDINGS; ECONOMIC ADVANCEMENT TAX
The general assembly finds:
(1) The general assembly supports a strong economic development policy for Vermont which is fiscally responsible and targeted for actual development results and should result in well-paying jobs with benefits including health insurance.
(2) A vibrant economic climate promotes the growth of existing businesses and the attraction of new businesses crucial for the state’s future prosperity.
(3) A broad consensus on the future direction of Vermont’s economic development is essential for the state’s political and economic well‑being, and achieving this consensus requires the input from a broad spectrum of Vermont’s citizens.
(4) The general assembly intends to fulfill the state’s pending obligations to businesses which have been granted economic advancement tax incentives.
(5) The economic advancement tax incentive (EATI) program was enacted by the legislature in 1998 (No. 71 of the Acts of the 1997 Adj. Sess. (1998)) to accomplish general economic policy goals of investment and job growth through economic advancement tax incentive awards. In 2000, the legislature amended the program to increase accountability and condition EATI awards upon specific performance expectations (No. 159 of the Acts of the 1999 Adj. Sess. (2000)), and in 2003, to further strengthen the performance expectation requirements by establishing clear and quantifiable benchmarks upon which awards shall be allowed or denied (No. 69 of the Acts of 2003).
(6) Many businesses have participated in the EATI program in good faith and have, in return, contributed and produced significant numbers of additional jobs and capital investment in Vermont.
(7) The amount of costs, participation, and performance from the EATI Program Summary 1998–2004 are the following:
Total authorizations: 129.7 million
Total credits rescinded or cancelled: 26.4 million
Total property tax authorizations: 16.4 million
Total rescinded or cancelled: 4.7 million
Total reduction in education fund: 2.7 million
Total credits earned: 32.0 million
Total applied: 15.4 million
Total carried forward: 16.6 million
Total unearned: 54.9 million
Authorizations Prior to July 1, 2000
Total authorizations: 69.9 million
Total credits rescinded or cancelled: 13.4 million
Total property tax authorizations: 10.3 million
Total rescinded or cancelled: 2.8 million
Total credits earned: 27.9 million
Total applied: 13.4 million
Total carried forward 14.5 million
Total unearned: 18.3 million
Authorizations After July 1, 2000
Total authorizations: 59.8 million
Total credits rescinded or cancelled: 13.0 million
Total property tax authorizations: 6.1 million
Total rescinded or cancelled: 1.9 million
Total credits earned: 4.1 million
Total applied: 2.0 million
Total carried forward 2.1 million
Total unearned: 36.6 million
Recapture and Disallowance
Total credits recaptured (amount paid without P&I): 200,000
Total credits in recapture (billed, without P&I): 1.5 million
Total credits disallowed: 3.4 million
(8) Nevertheless, shortcomings in the EATI program have been identified in the areas of performance measurements and controls, program expenditure controls, state fiscal losses, and adequacy and availability of program information.
(9) The state lacks adequate controls to enforce key performance provisions of the economic advancement tax incentives (EATI) program, and it is incumbent on the legislature to ensure that these and other economic advancement tax incentives achieve the projected economic activity upon which the awards were conditioned.
(10) There is currently no program expenditure cap on the Vermont economic progress council’s (VEPC’s) ability to grant tax credits on behalf of the state which reduce future state revenues. These off-budget tax expenditures are not accounted for in the state’s financial statements or budget, and may constitute a large and growing contingent liability to the revenues of the state not specifically approved by the Vermont legislature during the budget process.
(11) Three audits by two state auditors over a period of six years recommend that there be improved controls and accountability, and that tax incentives be more directly linked to economic performance.
* * * Part II. Tax Increment Financing (TIFs) Districts * * *
Sec. 2. REPLACEMENT OF VEPC AUTHORIZATION OF EDUCATION
As of July 1, 2006, the Vermont economic progress council shall have no further authority to grant approval for education property tax exemptions in the following provisions of law:
(1) 32 V.S.A. § 5401(10)(E) (tax increment financing district property removed from education grand list); (H) (unfinished business property owned by a business which has obtained a VEPC credit, removed from education grand list for up to two years); and (I) (property on eligible brownfields remediation property removed from education grand list); and
(2) 32 V.S.A. § 5404a (f) (expansion of existing tax increment financing district and removal from education grand list).
Sec. 2a. 24 V.S.A. § 1891 is amended to read:
§ 1891. DEFINITIONS
When used in this subchapter:
shall include means a city, town, or
(2) “District” or “TIF” means a tax increment financing district.
“Legislative body” means the mayor and
board of aldermen of a city alderboard,
the city council, the board of selectmen of a town selectboard,
and the president and trustees of an incorporated village, as appropriate. (3)(4)
“Improvements” shall include its ordinary signification, such as installations,
means the installation, new construction, or reconstruction of streets,
utilities, and other infrastructure needed for transportation,
telecommunications, wastewater treatment, and water supply, parks,
playgrounds, land acquisition, parking facilities, brownfield remediation,
and other public improvements necessary for carrying out the objectives of this
(5) “Original taxable property” means all taxable real property located within the district on the day the district was created under this subchapter.
(6) “Related costs” means expenses, exclusive of the actual cost of constructing and financing improvements, as defined in subdivision 1751(3) of this title, that are directly related to creation of the tax increment financing district and reimbursement of sums previously advanced by the municipality for those purposes, and attaining the purposes and goals for which the tax increment financing district was created, as approved by the Vermont economic progress council. As used in this subdivision, related costs are “improvements” as defined in subdivision 1751(3) of this title.
Sec. 2b. 24 V.S.A. § 1893 is amended to read:
§ 1893. PURPOSE
purpose of tax increment financing districts
shall be is to
provide revenues for improvements, located wholly or partly within the
district and related costs, which will encourage stimulate
development or redevelopment within the district, provide for employment
opportunities, improve and broaden the tax base, or enhance the general economy
economic vitality of the municipality, the region, or the state.
Sec. 2c. 24 V.S.A. § 1894 is amended to read:
§ 1894. POWER AND LIFE OF DISTRICT
municipality may incur indebtedness against revenues of the tax increment
financing districts for a period of
ten up to 20 years following
the creation of the district. The ten-year 20-year borrowing period
of the district shall commence at 12:01 a.m. on
April 1 of the year so voted , and shall end at midnight on
March 31 ten years thereafter. Any indebtedness incurred
during the ten-year borrowing period may be retired over any
period authorized by the legislative body of the municipality under section
1898 of this title. The district shall continue until the date and hour all
such the indebtedness is retired.
(b) Notwithstanding subsection (a) of this section, any district created to use education tax increment financing that has not incurred indebtedness within five years following the creation of the district, shall request reapproval from the Vermont economic progress council in order to utilize education tax increment financing following that period.
Sec. 2d. 24 V.S.A. § 1896 is amended to read:
§ 1896. TAX INCREMENTS
each subsequent year, the
lister listers or assessor shall
include no more than the original taxable value of such real property in the
assessed valuation upon which he the listers or assessor computes
the rates of all taxes levied by the municipality, the school district,
and every other taxing district in which the tax increment financing district
is situated; but he the listers or assessor shall extend all
rates so determined against the entire assessed valuation of such real property
for that year. In each year for which the assessed valuation exceeds the
original taxable value, the municipality treasurer shall hold apart, rather
than remit to the taxing districts, that proportion of all taxes paid that year
on the real property in the district which such excess valuation bears to the
total assessed valuation. The amount so held apart each year is referred to in
this act as the "tax increment" for that year. So much of the tax
increments received with respect to the district and pledged and appropriated
under section 1897 of this title for the payment of debt service on bonds
issued for improvements and related costs shall be segregated by the
municipality in a special account on its official books and records until all
capital indebtedness of the district has been fully paid. Such The
final payment shall be reported to the lister or assessor, who shall thereafter
include the entire assessed valuation of the district in the assessed
valuations upon which tax rates are computed and extended and taxes are
remitted to all taxing districts.
(b) Adjustment upon reappraisal. In the event of a reappraisal of twenty percent or more of all parcels in the municipality, the value of the original taxable property in the district shall be changed by a multiplier, the denominator of which is the municipality’s education property tax grand list in the year prior to the reappraisal or partial reappraisal and the numerator of which shall be the municipality’s reappraised or partially reappraised education property tax grand list. In such a district, the state education property tax revenues in the first year following a town-wide reappraisal or partial town-wide reappraisal shall not be less than the dollar amount of the state education property tax revenues in the prior year.
Sec. 2e. 24 V.S.A. § 1897 is amended to read:
§ 1897. TAX INCREMENT FINANCING
legislative body may pledge and appropriate any part or all of the tax increments
received from properties contained
wholly or partly within the tax
increment financing district for the payment of the principal of and interest
on bonds issued for improvements contained wholly or partly within the district .
Such bonds and for related costs; provided, that if any tax increment
utilization is approved pursuant to 32 V.S.A. § 5404a(g), no more than 75
percent of the state property tax increment and no less than 75 percent of the
municipal tax increment may be used to service this debt. Bonds shall only
be issued if the legal voters of the municipality, by a majority vote of all
voters present and voting on the question at a special or annual municipal
meeting duly warned for the purpose, shall give authority to the legislative
body to pledge the credit of the municipality for the purpose these
(b) A municipality’s pledge of credit for the purpose of issuing a bond under this subchapter shall include notice that if the tax increment received by the municipality from any property tax source is insufficient to pay the principal and interest on the debt in any year, for whatever reason, including a decrease in property value or repeal of a state property tax source, unless determined otherwise at the time of such repeal, the municipality shall remain liable for full payment of the bond principal and interest for the term of indebtedness.
Sec. 2f. 24 V.S.A. § 1898(e) is amended to read:
Prior to the resolution or ordinance of the local governing body authorizing
the bonds issued under this section, the legislative body of the municipality
shall hold one or more public hearings, after public notice, on a financial
plan for the proposed improvements and related costs to be funded,
including a statement of costs and sources of revenue, the estimates of
assessed values within the district, the portion of those assessed values to be
applied to the proposed improvements, the resulting tax increments in each year
of the financial plan, the amount of bonded indebtedness to be incurred, other
sources of anticipated revenues, and the duration of financial plan. A
municipality that has approved the creation of a district under this chapter
may designate a coordinating agency to administer the district to ensure
compliance with this chapter and any other statutory or other requirements.
Sec. 2g. 24 V.S.A. § 1900 is amended to read:
§ 1900. DISTRIBUTION
addition to all other provisions of this chapter, with respect to any tax
increment financing district, any municipal tax increment received
in any tax year that exceeds the amounts pledged for the payment on
principal and interest on the bonds issued for improvements and related
costs in the district shall be distributed to the city, town, or
village budget and school district budget, in proportion that each
budget bears to the combined total of both the budgets unless
otherwise negotiated by the city, town, or village and school
district. Any state education tax increment received in any tax year
that exceeds the amount pledged for the payment on principal and interest on
the bonds issued for improvements and related costs in the district shall not
be remitted to the municipality but shall be used only for prepayment of
principal and interest on the bonds issued, placed in escrow for bond payment,
or otherwise used for defeasance of the bonds.
Sec. 2h. 32 V.S.A. § 5404a is amended to read:
§ 5404a. TAX STABILIZATION AGREEMENTS; TAX INCREMENT
* * *
A municipality on behalf of a person may apply to the Vermont economic
progress council for an allocation of the education grand list value for up to
ten years, of a portion of the increase in the value and liability assessed
under section 5402 of this title on new economic development that is
subsequently approved by the Vermont economic progress council pursuant to this
section 5930a subsections 5930a(c) and (d) of this
title. Allocation to a municipality pursuant to this subsection shall be in
addition to any other payments to the municipality under chapter 133 of Title
16. If allocated, the allocated portion of the education fund liability shall
be used by the municipality to support economic development through the
purchase or financing of for infrastructure including, but not
limited to that includes wastewater treatment, water supply,
transportation, and telecommunications and utility connections.
which have existing tax increment financing districts under subchapter 5 of
chapter 53 of Title 24 shall have the authority to expand those districts and
to collect all state and local property taxes on properties within the tax
increment financing district and apply those revenues to repayment of debt
issued to finance improvements within the tax increment financing district to
the extent approved for this purpose by the Vermont economic progress council
upon application by the district under procedures for approval of tax
stabilization agreements under this section, and that any such action shall be
included in the annual authorization limits provided in section 5930a(d)(1) of
this title. A municipality that establishes a tax increment financing
district under subchapter 5 of chapter 53 of Title 24 shall collect all
property taxes on properties contained within the district and apply up to 75
percent of the tax increment as defined in 24 V.S.A. §1896 to repayment of debt
issued to finance the improvements and related costs for up to 20 years, if
approved by the Vermont economic progress council pursuant to this section.
(g) Any allocation approved pursuant to subsection (e) of this section or utilization of tax increment approved under subsection (f) of this section shall be in addition to any other payments to the municipality under chapter 133 of Title 16. Allocations and tax increment utilizations approved pursuant to subsections (e) and (f) of this section shall affect the education property tax grand list and the municipal grand list of the municipality under this chapter beginning April 1 of the year following approval and shall remain available to the municipality for the full period authorized and restricted only to the extent that the real property development giving rise to the increased value to the grand list fails to occur within the authorized period.
(h) Criteria for approval. To approve utilization of incremental revenues pursuant to subsection (f) of this section, the Vermont economic progress council shall do all the following:
(1) Review each application to determine that the new real property development would not have occurred or would have occurred in a significantly different and less desirable manner but for the proposed utilization of the incremental tax revenues. A district created in a designated growth center under 24 V.S.A. § 2793c shall be deemed to have complied with this subdivision. The review shall take into account:
(A) The amount of additional time, if any, needed to complete the proposed development within the tax increment district and the amount of additional cost that might be incurred if the project were to proceed without education property tax increment financing.
(B) How the proposed development components and size would differ, if at all, without education property tax increment financing.
(C) The amount of additional revenue expected to be generated as a result of the proposed development; the percentage of that revenue that shall be paid to the education fund; the percentage that shall be paid to the municipality; and the percentage of the revenue paid to the municipality that shall be used to pay the municipal tax increment bonds.
(2) Process requirements. Determine that each application meets all of the following four requirements:
(A) The municipality held public hearings and established a tax increment financing district in accordance with 24 V.S.A. §§ 1891–1900.
(B) The municipality has developed a tax increment financing district plan, including: a project description; a development financing plan; a pro forma projection of expected costs; a projection of revenues; a statement and demonstration that the project would not proceed without the allocation of a tax increment; evidence that the municipality is actively seeking or has obtained other sources of funding and investment; and a development schedule that includes a list, a cost estimate, and a schedule for public improvements and projected private development to occur as a result of the improvements.
(C) The municipality has approved or pledged the utilization of incremental municipal tax revenues for purposes of the district in the same proportion as the utilization of education property tax revenues approved by the Vermont economic progress council for the tax increment financing district.
(D) The proposed infrastructure improvements and the projected development or redevelopment are compatible with approved municipal and regional development plans, and the project has clear local and regional significance for employment, housing, and transportation improvements.
(3) Location criteria. Determine that each application meets one of the following criteria:
(A) The development or redevelopment is compact, high density, and located in or near existing industrial areas.
(B) The proposed district is within an approved growth center, designated downtown, designated village center, or new town center.
(C) The development will occur in an area that is economically distressed, which for the purposes of this subdivision means that the area has experienced patterns of increasing unemployment, a drop in average wages, or a decline in real property values.
(D) The development or redevelopment is compact, high density, and located in or near existing commercial or residential areas.
(4) Project criteria. Determine that the proposed development within a tax incentive financing district will accomplish at least three of the following five criteria:
(A) The development within the tax increment financing district clearly requires substantial public investment over and above the normal municipal operating or bonded debt expenditures.
(B) The development includes new housing that is affordable to the majority of the residents living within the municipality and is developed at a higher density than at the time of application. “Affordable” has the same meaning as in 10 V.S.A. § 6001(29).
(C) The project will affect the mitigation and redevelopment of a brownfield located within the district. For the purposes of this section, “brownfield” means an area in which a hazardous substance, pollutant, or contaminant is or may be present, and that situation is likely to complicate the expansion, development, redevelopment, or reuse of the property.
(D) The development will include at least one entirely new business or business operation or expansion of an existing business within the district, and this business will provide new, quality, full-time jobs that meet or exceed the prevailing wage for the region as reported by the department of labor.
(E) The development will enhance transportation by creating improved traffic patterns and flow or creating or improving public transportation systems.
(i) The Vermont economic progress council and the department of taxes shall make an annual report to the Senate Committee on Economic Development, Housing and General Affairs, the Senate Committee on Finance, the House Committee on Commerce and the House Committee on Ways and Means of the General Assembly on or before January 15. The report shall include, in regard to each existing tax increment financing district, the year of approval, the scope of the planned improvements and development, the equalized education grand list value of the district prior to the TIF approval, the original taxable property, the tax increment, and the annual amount of tax increments utilized.
Sec. 2i. TAX INCREMENT FINANCING DISTRICTS; CAP
Notwithstanding any other provision of law, the Vermont economic progress council may not approve the use of education tax increment financing for more than ten tax increment financing districts and no more than one newly created tax increment financing district in any municipality within the period of five state fiscal years beginning July 1, 2006. Thereafter, no tax increment financing districts may be approved without further authorization by the General Assembly.
Sec. 2j. EXISTING TAX INCREMENT FINANCING DISTRICTS;
Notwithstanding the limitations under 32 V.S.A. § 5404a, the town of Milton may extend for an additional ten years beyond the initial ten years approved for the two existing tax increment financing districts identified and known as the Husky campus and the Catamount Industrial Park, and collect all state and local property taxes on properties contained wholly or partly within the tax increment financing districts beyond the original taxable value of those properties at the time of the initial approval of the tax increment financing districts and apply 75 percent of the increase in the value and liability assessed under 32 V.S.A. § 5402 on new real property improvements to repayment of debt issued to finance improvements within the tax increment financing district and for related costs, upon application by the town of Milton.
* * * Part III. EATI Transition to VEGI * * *
Sec. 3. TRANSITIONAL ECONOMIC INCENTIVE PROVISIONS
(a) On January 1, 2007, the authority of the Vermont economic progress council to grant and the department of taxes to administer new economic advancement tax incentive awards pursuant to the provisions of 32 V.S.A §§ 5930a and 5930b is terminated. Any credits or incentives granted before January 1, 2007 shall remain in effect, including all carry-forwards, until used.
(b) Until April 1, 2009, when such authority and administrative functions are transferred to the economic incentive review board under section 13 of this act, the Vermont economic progress council shall have authority to administer the Vermont employment growth incentive (VEGI) program established in 32 V.S.A. §5930b by section 9 of this act, the tax stabilization and allocation programs established in 32 V.S.A. §5404a(a) and (e), and the tax increment financing program created in 32 V.S.A. §5404a established in section 2h of this act.
(c) Beginning April 1, 2009, the economic incentive review board is authorized to grant payroll-based growth incentives pursuant to the Vermont employment growth incentive program established by Sec. 9 of this act. Unless extended by act of the General Assembly, as of January 1, 2012, no new Vermont employment growth incentive (VEGI) awards under 32 V.S.A. § 5930b may be made. Any VEGI awards granted prior to January 1, 2012 may remain in effect until used.
Sec. 3a. TERMINOLOGY; PRE-JULY 2005 ECONOMIC
ADVANCEMENT TAX INCENTIVES
For the purpose of providing common terminology for administrators, participants, and officials overseeing the economic advancement tax incentive award program, the following terms shall mean:
(1) “Applied” means the amount of earned credit allowed after review of performance expectations and used to reduce tax liability. This may be an amount carried forward from an earlier year or an amount earned in the same year.
(2) “Authorized” means the amount approved by the council and the maximum amount which can be earned.
(3) “Carried forward” means the amount earned not yet applied and available to be applied in future years. The amount carried forward is available to be applied for five years after the end of the earning period.
(4) “Disallowed” means the amount not yet applied and no longer available because recapture provisions of subsection 5930h(c) or 5930a(m) of Title 32 have been triggered.
(5) “Earned” means the amount of authorized credit that is available for the year without regard to the tax liability. For each year, this is the amount of payroll increase, qualified research and development expenditures, qualified expenditures for workforce development, or investments in plant and equipment multiplied by the applicable rate or the difference between double-weighted and single-weighted apportionment.
(6) “Recaptured” means an amount payable as liabilities of a current year because of the recapture provisions of subsection 5930h(c) or 5930a(m) of Title 32. This would be all or a portion of credits applied in earlier years.
(7) “Rescinded” means a formal act by the council to cancel an authorization due to inactivity or other circumstances.
(8) “Unearned” means the amount authorized either not yet earned or no longer available to be earned because the specified activity did not take place during the five-year earning period.
Sec. 4. REPEAL OF CURRENT EATI PROVISIONS
(a) As of January 1, 2007, no new credits or incentives may be granted under the following provisions, and, as of January 1, 2017, the following provisions are repealed:
(1) The economic advancement tax incentive program, including:
(A) 32 V.S.A. § 5930c (economic advancement payroll tax credit).
(B) 32 V.S.A. § 5930d (economic advancement research and development tax credit).
(C) 32 V.S.A. § 5930e (workforce development incentive tax credit).
(D) 32 V.S.A. § 5930f (Vermont export tax incentive).
(E) 32 V.S.A. § 5930g (capital investment tax credit).
(F) 32 V.S.A. § 5930h (carry-forward, carry-back, and recapture for substantial curtailment of business).
(G) 32 V.S.A. § 5930i (credit allocation).
(H) 32 V.S.A. § 5930k (high technology growth incentives).
(I) 32 V.S.A. § 5930w (sustainable technology research and development).
(J) 32 V.S.A. § 5930x (export tax credit).
(2) Additional incentives under:
(A) 32 V.S.A. § 9741(39)(i) (sales and use on building materials).
(B) 32 V.S.A. § 9741(47) (sales and use of new personal computers and included software).
(b) The deferral and mitigation provision of subsection 5930(f) of Title 32 shall be available whether or not the curtailment of trade or business resulting in the notice of recapture or disallowance occurred prior to July 1, 2003, the effective date of No. 67 of the Acts of 2003.
* * * Part IV. Vermont Employment Growth Incentives (VEGI) * * *
Sec. 5. 32 V.S.A. § 5930a(b) is amended to read:
economic progress council, within
45 60 days of receipt of a
complete application, shall approve or deny the following economic incentives:
(1) tax stabilization agreements and exemptions under subdivision 5404a(a)(2) of this title;
the economic advancement tax incentives set forth in section 5930b of this
title, the high-tech growth incentives set out in section 5930k of this title,
and the sustainable technology incentives set out in sections 5930w and 5930x
of this title; (3)
sales and use tax exemptions provided in section 9741 of this title that
require the approval of the Vermont
economic progress council; (4)
property tax exemptions that require the approval of the Vermont
economic progress council under subdivision 5404a(c)(1) of this title; and (5)(2)
applications for allocation to municipalities of a portion of education grand
list value and municipal liability from new economic development under subsections
5404a(e) and (f) of this title subsection 5404a(e) of this title.
(3) the Vermont employment growth incentives (VEGI) under section 5930b of this title.
(4) the tax increment financing (TIF) district program as established in section 5404a of this title.
Sec. 6. 32 V.S.A. § 5930a(d) is amended to read:
reviewing the application of a business or municipality under subdivision
(c)(3) of this section to determine whether the applicant is eligible for the
economic incentives under subsection (b) of this section, the council shall
apply a cost-benefit model to determine the return on investment to the state,
relative to other applicants, and to assist in establishing appropriate award
levels for individual applicants. The council shall apply the cost‑benefit
model in reviewing applications under subdivisions (b)(1), (2) and (3) of this
section to determine the net fiscal benefit to the state. The cost-benefit
model shall be a uniform and comprehensive methodology for assessing and
measuring the projected net fiscal benefit or cost to the state of
proposed economic development activities over the five-year award period.
Any modification of the cost‑benefit model shall be subject to the
approval of the joint fiscal committee. The council shall perform
cost-benefit analysis in consultation with the commissioner of economic
development. The cost‑benefit analysis may shall
include consideration of the effect of the passage of time and inflation on the
value of multi-year fiscal benefits and costs.
determining the projected net fiscal benefit or cost of the incentives considered
(b)(1), (4), and (5) (b)(1) and (2) of this
section, the council shall calculate the net present value of the enhanced or
forgone statewide education tax revenues, reflecting both direct and indirect
economic activity. If the council approves an incentive pursuant to this
section, the net fiscal costs, if any, to the state shall be counted as
if all those costs occurred in the year in which the council first approved the
incentive and that cost shall reduce the amount of the annual authorization for
such approvals established by the legislature for the applicable fiscal calendar
determining the projected net fiscal benefit or cost of the incentives
subdivisions (b)(2) and (3) subdivision (b)(3)
of this section, the council shall calculate the net present value of the
enhanced or forgone state tax revenues attributable to the incentives,
reflecting both direct and indirect economic activity over the five‑year
award period. If the council approves an incentive, the net fiscal
costs, if any, to the state shall be counted as if all of those costs occurred
in the year in which the council first approved the incentive and that cost
shall reduce the amount of the council’s annual authorization for approval of
economic incentives as established by the legislature for the applicable fiscal
Sec. 7. 32 V.S.A. § 5930a(e) is amended to read:
business or municipality may apply to the economic progress council to receive
the economic incentives available under subsection (b) of this section, except
that only a municipality may apply for approval of a tax stabilization
agreement as allowed under subdivision 5404a(a)(2) of this title, education
fund revenue sharing under subsection 5404a(e) of this title, and tax increment
financing districts under subsection 5404a(f) of this title Only a
business may apply for approval under subdivision 5930a(b)(3) of this title. A
municipality and a business must apply jointly for approval of a tax
stabilization agreement pursuant to subdivisions 5930a(b)(1) and (2).
Sec. 8. 32 V.S.A. § 5930h(f) is amended to read:
and mitigation of disallowance and recapture. Within 90 days of receipt of
written determination of recapture or disallowance under subsection (e) of this
section, a person may apply to the council for a deferral of the disallowance
or recapture for a nonrenewable period of
12 36 months.
* * *
Sec. 9. 32 V.S.A. § 5930b is amended to read:
ECONOMIC ADVANCEMENT TAX INCENTIVES VERMONT
EMPLOYMENT GROWTH INCENTIVE
business may request approval of not more than three of the five economic
incentives provided in sections 5930c, 5930d, 5930e, 5930f, and 5930g of this
title. A high-tech business may, in the alternative, request approval of not
more than three of the five economic incentives as provided in section 5930k of
this title. A sustainable technology business may, in the alternative, request
approval of the sustainable technology research and development tax credit in
section 5930w of this title in lieu of the research and development tax credit
in section 5930d of this title, or request approval of the sustainable
technology export tax credit in section 5930x in lieu of the export tax credit
in section 5930f of this title. Approval of the Vermont
economic progress council pursuant to this subchapter may be for up to five
(a) Definitions. For the purposes of this section:
(1) “Application base number of jobs” means the total number of full‑time Vermont jobs, on an annualized basis, held by nonowners at the time of application, including employees that have been laid off or otherwise terminated within six months of the date of application.
(2) “Application base payroll” means the total Vermont gross wages and salaries paid to full-time, nonowner employees on an annualized basis at the time of application, including employees who have been laid off or otherwise terminated within six months prior to the date of application.
(3) “Authorized award amount” means the amount of the incentive award as determined by the Vermont economic progress council pursuant to this section.
(4) “Award period” means the consecutive five years during which a business may add qualifying jobs and qualifying capital investments eligible for employment growth incentives under this section.
(5) “Base number of jobs” means the total number of full-time Vermont jobs held by nonowners on an annualized basis.
(6) “Base payroll” means the total Vermont gross wages and salaries actually paid to full-time, nonowner employees.
(7) “But-for” means the determination of whether, in the absence of the economic incentive sought, the proposed economic development would not occur or would occur in a significantly different and significantly less desirable manner.
(8) “Capital investment target” means qualifying capital investment in an award period year as represented on the Vermont employment growth incentive application.
(9) “Full-time job” means a permanent position filled by an employee who works at least 37 hours each week.
(10) “Incentive percentage” means the percentage applied to qualifying payroll in order to calculate earned incentives.
(11) “Incentive ratio,” set at 80 percent, is the percentage applied to the preincentive net fiscal benefit in order to calculate the maximum award that may be authorized under this section.
(12) “Incremental payroll” means the portion by which the payroll target exceeds the payroll threshold.
(13) “Jobs target” means the projected number of new qualifying jobs in an award period year as reported on the Vermont employment growth incentive application.
(14) “Net fiscal benefit” means the excess of the present value benefit to the state over the present value cost to the state as calculated by the cost‑benefit model.
(15) “Nonowner” means an employee with no more than 10 percent ownership interest, including attribution of ownership interests of the employee’s spouse, parents, spouse’s parents, siblings, and children.
(16) “Payroll target” means the projected qualifying payroll in an award period year as reported on the Vermont employment growth incentive application.
(17) “Payroll threshold” means base payroll or application base payroll (if year 1), plus expected average industry payroll growth as determined by the cost-benefit model.
(18) “Projected average wage” means the total payroll targets divided by the total jobs targets.
(19) “Qualifying capital investment” means projected investments in Vermont in new facilities, machinery, and equipment, the value of which is an input to the cost‑benefit model in evaluating applications.
(20) “Qualifying jobs” means new, full-time Vermont jobs held by nonowners that meet the wage threshold.
(21) “Qualifying payroll” means actual Vermont gross wages and salaries paid for qualifying jobs in a utilization period year, provided incremental payroll in that year equals or exceeds such gross wages.
(22) “Utilization period” means the period during which incentives can be claimed, and includes each year of the award period plus the four years immediately following each year of the award period.
(23) “Vermont gross wages and salaries” means Medicare wages as reported on Federal Tax Form W2 to the extent those wages are Vermont wages.
(24) “Wage threshold” means the minimum annualized Vermont gross wages and salaries paid, as determined by the council, but not less than 60 percent above the minimum wage at the time of application, in order for a new job to be a qualifying job under this section.
(b) Authorization process.
(1) A business may apply to the Vermont economic progress council for approval of a performance-based employment growth incentive to be paid out of the business’s withholding account upon approval by the department of taxes pursuant to the conditions set forth in this section. Businesses shall not be permitted to deduct approved incentives from withholding liability payments otherwise due. In addition to any other information that the council may require in order to fulfill its obligations under section 5930a of this title, an employment growth incentive application shall include all the following information:
(A) Application base number of jobs.
(B) Total jobs at time of application.
(C) Application base payroll.
(D) Total payroll at time of application.
(E) Jobs target for each year in the award period.
(F) Payroll target for each year in the award period.
(G) Capital investment target for each year in the award period.
(H) A statement signed by the president or chief executive officer or equivalent acknowledging that to the extent the applicant fails to meet the minimum capital investment by the end of the award period, any incentives remaining to be earned shall be limited, and any incentives taken shall be subject to complete or partial reversal, pursuant to subdivisions (c)(10) and (11) of this section.
(2) The council shall review each application in accordance with section 5930a of this title, except that the council may provide for a preliminary approval pursuant to the conditions set forth in subsection 5930a(c), followed by a final approval at a later date, before the economic activity commences.
(3) Except as provided in subdivision (5) of this subsection, the value of the incentives will be dependent upon the net fiscal benefit resulting from projected qualifying payroll and qualifying capital investment. An incentive ratio shall be applied to the net fiscal benefit generated by the cost-benefit model in order to determine the maximum award the council may authorize for each application it approves. The council may establish a threshold for wages in excess of, but not less than, the wage threshold, as defined in subsection (a) of this section for individual applications the council wishes to approve. The council shall calculate an incentive percentage for each approved application as follows:
Authorized award amount ÷ the five‑year sum of all payroll targets
(4) An approval shall specify: the application base jobs at the time of the application; total jobs at time of application; the application base payroll; total payroll at time of application; the incentive percentage; the wage threshold; the payroll thresholds; a job target for each year of the award period; a payroll target for each year of the award period; a capital investment target for each year of the award period and description sufficient for application of subdivisions (c)(10) and (11) of this section of the nature of qualifying capital investment over the award period upon which approval shall be conditioned; and the amount of the total award. The council shall provide a copy of each approval to the department of taxes along with a copy of the application submitted by that applicant.
(5) Notwithstanding subdivision (3) of this subsection, the council may authorize incentives in excess of net fiscal benefit multiplied by the incentive ratio not to exceed an annual authorization established by law.
(c) Claiming an employment growth incentive.
(1) A business whose application is approved and, in any year during the award period, meets or exceeds its payroll target and either its jobs or capital investment target may file an annual return claiming incentives pursuant to this section. Upon approval by the department of taxes, incentive payments will be issued by the department of taxes for each of the five award period years in equal annual installments over consecutive five-year periods, beginning with each award period year, provided that the incentive-triggering award period year payroll and job targets are maintained in each utilization period year for which an installment is claimed.
(2) Incentive installments shall be calculated as follows: Qualifying payroll for the utilization period year, not to exceed the payroll target or targets for the incentive-triggering award period year or years shall be multiplied by the incentive percentage.
(3) The department of taxes shall permanently deny claims for incentive installments in any utilization period year in which the award‑year qualifying jobs and qualifying payroll levels are not maintained or have not been reestablished to 100 percent of award‑year levels.
(4) Qualifying jobs, qualifying capital investment, and qualifying payroll in excess of the jobs, capital investment, and payroll targets for an award year shall be carried forward and counted toward future award period year targets.
(5) A business whose application is approved and, in the first award period year, fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets shall forfeit all authority to earn and claim incentives under this section. The department of taxes shall notify the Vermont economic progress council that the first year award period targets have not been met, and the council shall rescind the incentive authorization in its entirety. A business whose incentive authorization is rescinded for failure to meet first‑year award period targets may reapply to the Vermont economic progress council for a new authorization pursuant to this section.
(6) A business whose application is approved and, in the second or third year of the award period, fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets may not claim incentives in that year. To the extent such business reaches its second or third year award period targets within the succeeding two calendar year reporting periods immediately succeeding year two or three of the award period, which ever is applicable, such business may claim incentives in five-year installments as provided in subdivisions (1) through (4) of this subsection. A business which fails to meet of exceed its payroll target and one of its two jobs and capital investment targets within this time-frame shall forfeit all authority under this section to earn and claim incentives for award period year two or three, as applicable, and any future award period years. The department of taxes shall notify the Vermont economic progress council that the second or third year award period targets have not been met within the prescribed period, and the council shall rescind authority for the business to earn incentives for the activity in year two or three, as applicable, and any future award period years.
(7) A business whose application is approved and, in the fourth year of the award period, fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets may not claim incentives in that year. To the extent such business reaches its fourth year award period targets within the next calendar year reporting period, such business may claim incentives in five-year installments as provided in subdivisions (1) through (4) of this subsection. A business which fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets within this time-frame shall forfeit all authority under this section to earn and claim incentives for award period years four and five. The department of taxes shall notify the Vermont economic progress council that fourth year award period targets have not been met within the prescribed period, and the council shall rescind authority for the business to earn incentives for activity in award period years four and five.
(8) A business whose application is approved and, in the fifth year of the award period, fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets may not claim year five award period incentives in that year or any subsequent year.
(9) Incentives must be claimed annually on an incentive return available from the department of taxes filed no later than the last day of February of each year of the utilization period. Incomplete returns shall not be considered to have been timely filed. The incentive return shall be subject to all provisions of this chapter governing the filing of tax returns. No interest shall be paid by the department of taxes for any reason with respect to incentives allowed under this section.
(10) A business that fails to invest the minimum qualifying capital investment specified by the council by the end of the award period shall be liable for repayment of incentives taken, plus interest, to the extent incentives taken exceed the total award after it is reduced in proportion to the deficiency by which the applicant fails to meet its minimum qualifying capital investment. The repayment, if any, shall be calculated and remitted with the incentive return for the last year of the award period, and no further incentives may be earned. The repayment shall be calculated as follows:
Incentives taken minus [qualifying capital investments made ÷ minimum qualifying capital investment] × authorized award amount
(11) To the extent the minimum qualifying capital investment is not met by the end of the award period but no repayment is triggered, the authorized award amount against which future incentives may be earned shall be reduced in proportion to the level of deficiency by which the applicant fails to meet the minimum qualifying capital investment.
(d) Recapture. To the extent a business authorized to earn employment growth incentives under this section experiences a 90 percent or greater drop below application base jobs during any utilization year, all authority to earn and claim incentives pursuant to this section shall be revoked, and such business shall be subject to recapture of all incentives previously claimed, including interest. Notwithstanding any other statute of limitations provisions, for purposes of recapture under this section, the department of taxes shall issue a recapture bill any time within three years from the receipt date of written notification from the business of the triggering drop in payroll or employment or three years from the last day of the end of the utilization period, whichever occurs first.
(e) Reporting. By May 1, 2008 and by May 1 each year thereafter, the council and the department of taxes shall file a joint report on the employment growth incentives authorized by this section with the chairs of the house committee on ways and means, the house committee on commerce, the senate committee on finance, the senate committee on economic development, housing and general affairs, the house and senate committees on appropriations, and the joint fiscal committee of the general assembly and provide notice of the report to the members of those committees. The joint report shall contain the total authorized award amount of incentives granted during the preceding year, amounts actually earned and paid from inception of the program to the date of the report, including the date and amount of the award, the expected calendar year or years in which the award will be exercised, whether the award is currently available, the date the award will expire, and the amount and date of all incentives exercised. The joint report shall also include information on recipient performance in the year in which the incentives were applied, including the number of applications for the incentive, the number of approved applicants who complied with all their requirements for the incentive, the aggregate number of new jobs created, the aggregate payroll of those jobs and the identity of businesses whose applications were approved. The council and department shall use measures to protect proprietary financial information, such as reporting information in an aggregate form.
Sec. 10. 32 V.S.A. § 3102(e)(11) is amended to read:
to the joint fiscal office or its agent, provided that the disclosure relates
to a successful business applicant under section 5930a of this title and the
tax incentive it has claimed and is reasonably necessary for the joint fiscal
office or its agent to perform the duties authorized by the joint fiscal
committee or a standing committee of the general assembly under subsection
5930a(h); to the auditor of accounts for the performance of duties under
section 163 of this title; to the department of economic development for the
purposes of subsection 5922(f) of this title; and to the Vermont economic
progress council, provided that the disclosure relates to a successful business
section sections 5930a and 5930b of this
title and the tax incentive it has claimed and is reasonably necessary for the
council to perform its duties under section sections 5930a and
Sec. 11. VEGI; ANNUAL CALENDAR YEAR CAPS
(a) Net negative awards cap. Notwithstanding any other provision of law, in any calendar year, the annual authorization for the total net fiscal cost of Vermont employment growth incentives that the Vermont economic progress council or the economic incentive review board may approve under 32 V.S.A. § 5930b(b)(5) shall not exceed $1,000,000.00 from the general fund.
(b) Restrictions to labor market area. Employment growth incentives within the annual authorization amount in subsection (a) of this section shall be granted solely for awards to businesses located in a labor market area of this state in which the rate of unemployment is greater than the average for the state or in which the average annual wage is below the average annual wage for the state. For the purposes of this section, a “labor market area” shall be as determined by the department of labor.
(c) Overall gross cap on total employment growth incentive and education tax incentive authorizations. For any calendar year, the total amount of employment growth incentives the Vermont economic progress council or the economic incentive review board is authorized to approve under 32 V.S.A. § 5930b and property tax stabilizations and allocations under 32 V.S.A. § 5404a(a) and (e) shall not exceed $10,000,000.00 from the general fund and education fund combined each year. This maximum annual amount may be exceeded by the Vermont economic progress council upon application to and approval by the Emergency Board.
* * * PART V. VEPC Board Membership; Transition to EIRB * * *
Sec. 12. 32 V.S.A. § 5930a(a) is amended to read:
There is created
a Vermont economic progress council an economic
incentive review board which shall be attached to the department of
economic development for administrative support, including an executive
director who shall be appointed by the council governor with the
advice and consent of the Senate, who shall be knowledgeable in subject
areas of the council’s board’s jurisdiction, and hold the status
of an exempt state employee, and administrative staff employed in the state
classified service. The council board shall consist of nine
citizens of the state eleven members, nine of whom shall be residents of
the state appointed by the governor with the advice and consent of the
Senate. The governor shall appoint citizens residents to the council
board who are knowledgeable and experienced in the subjects of community
development and planning, education funding requirements, economic development,
state fiscal affairs, property taxation, or entrepreneurial ventures, and shall
make appointments to the council board insofar as possible as to
provide representation to the various geographical areas of the state and
municipalities of various sizes. Members of the council board
appointed by the governor shall serve initial staggered terms with three
five members serving three year four-year terms, three
members serving two-year terms, and three four members
serving one-year two-year terms. All council board
members’ terms shall be three-year four-year terms upon the
expiration of their initial terms and council board members may
be reappointed to serve successive terms. All terms shall commence on April
1 of each odd-numbered year. The governor shall select a chair from among
the council’s board’s members. In addition to the nine
members appointed by the governor, there the board shall include one
member selected by the speaker of the house, who shall be a member of the
house; and one member selected by the committee on committees of the senate,
who shall be a member of the senate. Legislative members shall be voting
members. There shall also be two regional members from each region of the
state; one shall be designated by the regional development corporation of the
region and one shall be designated by the regional planning commission of the
region. Regional members shall be nonvoting members and shall serve during
consideration by the council board of applications from their
respective regions. For attendance at meetings and for other official duties all,
appointed members shall be entitled to compensation for services and
reimbursement of expenses as provided in section 1010 of this title, except
that members who are members of the legislature shall be entitled to
compensation for services and reimbursement for expenses as provided in section
406 of Title 2. A regional member who does not otherwise receive
compensation and reimbursement for expenses from his or her regional
development or planning organization shall also be entitled to compensation and
reimbursement of expenses for attendance at meetings and for other official
duties as provided in section 1010 of this title.
Sec. 13. REPEAL AND TRANSITION
(a) Section 12 of this act, establishing the economic incentives review board shall take effect January 1, 2009. As of April 1, 2009, upon appointment of the economic incentives review board, the Vermont economic progress council shall cease to exist, except that members shall continue in office until members of the economic incentives review board are appointed and confirmed.
(b) On April 1, 2009, the economic incentives review board shall assume the responsibilities and authority of the Vermont Economic Progress Council with respect to administering and monitoring the Vermont employment growth incentives (VEGI) program created by section 9 of this act, and the tax increment financing program and property tax allocations under sections 2a through 2h of this act. The Legislative Council is directed to make necessary revisions to the Vermont Statutes Annotated to reflect the changes made by this act.
Sec. 14. 21 V.S.A. § 1314(e)(1) is amended to read:
Subject to such restrictions as the board may by regulation prescribe, information
from unemployment insurance records may be made available to any public officer
or public agency of this or any other state or the federal government dealing
with the administration of relief, public assistance, unemployment
compensation, a system of public employment offices, wages and hours of
employment, or a public works program for purposes appropriate to the necessary
operation of those offices or agencies. The commissioner may also make
information available to colleges, universities, and public agencies of
, for use in connection with research projects of a public
service nature, and to the Vermont economic progress council with regard to
the administration of subchapter 11E of chapter 151 of Title 32; but no
person associated with those institutions or agencies may disclose that
information in any manner which would reveal the identity of any individual or
employing unit from or concerning whom the information was obtained by the
* * * Part VI. Audits and Reports * * *
Sec. 15. 32 V.S.A. § 163 (12) is amended to read:
(12)(A) Biennially audit the economic advancement tax incentives program established under chapter 151, subchapter 11E of this title to determine compliance with that subchapter and all other applicable statutes and regulations. The auditor’s report shall be made available to the general assembly during the fourth quarter of the second year of each biennium. The auditor shall include in this biennial audit verifications of any of the inspections done by the tax department of awardees of economic advancement tax incentives to determine the relationship between performance and credits claimed.
(B) Biennially audit the Vermont employment growth incentive program established under 32 V.S.A. §5930b and other applicable statutes and regulations. The audit shall include a comparative examination of the economic advancement tax incentive program and the Vermont employment growth incentives program with respect to performance measurements, program expenditure controls, the adequacy and availability of program information, and recommendations for improved accountability and fiscal controls. The auditor shall develop benchmarks, known as “best management practices” that in the judgment of the auditor need to be met so that the Vermont employment growth incentives program may be administered in the most fiscally sound and well-managed manner. The auditor’s report shall be submitted during the first quarter of the second year of each biennium to the department of taxes and the economic incentive review board established by 32 V.S.A. §5930a(a) (except that in the second year of the 2007-2008 biennium the auditor’s report shall be submitted to the Vermont economic progress council). The department and the board (and in the 2007-2008 biennium, the council) shall review the auditor’s report and in the fourth quarter of each biennium report to the Senate Committee on Economic Development, Housing and General Affairs, the Senate Committee on Finance, the House Committee on Commerce and the House Committee on Ways and Means in response to the findings and recommendations of the auditor together with any recommendations for improvements or amendments.
* * * Part VII. Economic Planning * * *
Sec. 16. Repeal; Transfer of Economic Planning Funds
(a) 32 V.S.A. § 5930j (Vermont economic progress council; long-term economic development planning) is repealed effective July 1, 2006.
(b) Sec. 271b of H. 881 of the 2006 session, amending 32 V.S.A. §5930j (relating to Long Term Economic Development Planning) is deleted. The amount of $60,000 appropriated by Sec. 272(e) (11) of H. 881 of the 2006 session to the Vermont Economic Progress Council to fund economic planning is appropriated for this purpose to the Commission on the Future of Economic Development established by Sec. 17 of this act.
Sec. 17. 10 V.S.A. § 1 is added to read:
§ 1. COMMISSION ON THE FUTURE OF ECONOMIC DEVELOPMENT
(a) There is established a Commission on the Future of Economic Development. The commission shall consist of twelve members. The Governor shall appoint five members, including a chair of the commission; the Speaker of the House shall appoint one member, who shall be a member of the House of Representatives; and the Committee on Committees shall appoint one member, who shall be a member of the Senate. The Vermont labor council shall appoint one member representing labor; the Vermont association of non-profit organizations shall appoint one member representing non-profit organizations, and the governor shall appoint a self-employed person. In addition, the Secretary of Commerce and Community Development and the Executive Director of the Economic Incentive Review Board shall serve as ex officio members.
(b) The first commission shall serve a term from the date of appointment through June 30, 2012, and beginning July 1, 2012, appointed commission members shall serve for four-year terms. Board members shall be entitled to payments per diem and expenses as provided under section 1010 of Title 32; and legislative members shall be entitled to payments for per diem and expenses as provided in 2 V.S.A. §406.
(c) On September 15, 2007, and thereafter, every five years beginning December 1, 2011, the commission shall report to the Senate Committee on Economic Development, Housing and General Affairs, the Senate Committee on Finance, the House Committee on Commerce, the House Committee on Ways and Means and the governor a proposed five-year economic development plan for the state of Vermont. The commission may contract with a consultant for purposes of developing the plan, and shall apply to the Emergency Board for any expenses the commission may incur in its official duties.
(d) The commission shall report to the Joint Fiscal Committee at such times as the committee shall request on the progress of the commission’s economic planning.
(e) Each commission’s five-year plan shall identify the long-term goals for Vermont economic development and job retention in light of the local and global economic climate and for increasing the well-being of Vermonters and their communities. The plan shall identify prioritized criteria by which to evaluate legislative proposals for economic development programs in the coming five years which will best serve the goals of the five-year plan .
(f) In fulfilling its economic development planning responsibilities, the commission shall:
(1) Conduct a planning process that is open and inclusive, with broad-based public engagement ensuring participation that is demographically and geographically representative of the state and includes input from a wide range of perspectives, expertise and interests, including the general assembly, state agencies and the administration, regional and local planning and development organizations, municipalities, the private sector, and business organizations, including owners, knowledgeable in the areas of economic interest such as agriculture, social and human services, energy, education, child care, environmental issues, science and technology, arts and culture, transportation, telecommunications, housing, workforce development, and tourism and recreation.
(2) Build a plan by coordinating and considering existing economic development information and strategic plans produced by other organizations and agencies, such as regional economic development strategic plans, comprehensive economic development strategies (CEDS), legislative initiatives, and research and reports by organizations such as the Vermont business roundtable, the Vermont council on rural development, the Vermont technology council, the Vermont sustainable jobs fund, and the University of Vermont.
(3) Include an examination of the issues critical to encouraging business to develop in Vermont, including workforce development, development of higher education institutions, infrastructure development, quality of life issues and tax policy.
(4) Discuss and develop possible working definitions of the creative economy in the state, identifying and aggregating the creative, artistic, inventive and cultural enterprises, and other sectors of the economy, including media design, sustainable technologies, added value manufacturing, natural resource industries, and environmental technologies that comprise part of the state’s creative technology and review possible measures and indicators of economic benefit, costs, and contributions to the state from the creative economy sector.
(5) Include the development of a meaningful benchmark process that sets economic development goals appropriate for Vermont and measures the state’s position relative to those goals.
(6) Consider and make recommendations to the legislature on any other aspect of economic development that the commission deems appropriate.
(g) The plan shall also consider:
(1) The cost-effectiveness of targeted business incentive grants and nonmonetary business aid such as permit and regulatory assistance or other assistance and increased development of infrastructure.
(2) Whether targeting incentives to regions of the state with high unemployment, low wages, or other indications of need for economic development and job creation would better advance the long-term goals.
(3) Whether Vermont tax policies place Vermont businesses at a competitive disadvantage and how best to address these policies and mitigate their effects.
(4) The specific needs for development or improvement of transportation and telecommunications systems.
(5) The types of post-secondary institution expansion of development which would attract research and technology firms.
(6) The advantages and disadvantages of privatizing all or a portion of economic development functions of the state.
* * * Part VIII. Miscellaneous Tax Amendments * * *
Sec. 17a. 10 V.S.A. § 291 is amended to read:
§ 291. VERMONT SEED CAPITAL FUND; AUTHORIZATION;
formation of Vermont economic development authority shall cause
to be formed a private investment fund to be named "the Vermont seed
capital fund" or "the fund" is authorized for the purpose of
increasing the amount of investment capital provided to new Vermont firms or to
existing Vermont firms for the purpose of expansion. The authority may
contract with one or more persons for the operation of the fund.
(b) The Vermont seed capital fund shall be formed as either a business corporation or a limited partnership pursuant to Title 11 and shall be subject to all the following:
* * *
(2) Before the fund makes any investments, the fund shall:
organized as a corporation, have and thereafter maintain a board of nine
, seven of whom shall to be elected by the shareholders and
two of whom shall be appointed by the governor with the advice and consent of
the senate and shall represent the public interest of the state.
organized as a partnership, have and maintain a board of three advisors
appointed by the
governor with the advice and consent of the senate authority.
The board of advisors shall represent solely the public economic
interest of the state with respect to the management of the fund and shall have
no civil liability for the financial performance of the fund. The board of
advisors shall be advised of investments made by the fund and shall have access
to all information held by the fund with respect to investments made by the
* * *
$2 $5 million of capitalization of the Vermont seed capital
fund raised from Vermont taxpayers on or before January 1, 2014, shall be
eligible for partial tax credits as specified in 32 V.S.A. § 5830b.
(7) All investments and related business dealings using funds that qualify for partial tax credits under 32 V.S.A. § 5830b shall be subject to the following restrictions:
(A) The investments shall be restricted to Vermont firms, which for the purposes of this chapter means that their Vermont apportionment equals or exceeds 50 percent, using the apportionment rules under 32 V.S.A. § 5833, and they maintain headquarters and a principal facility in Vermont. Any funds invested in Vermont firms shall be used for the purpose of enhancing their Vermont investments. Investment shall be restricted to firms that export the majority of their products and services outside the state or add substantial value to products and materials within the state. In its investments, the fund shall give priority to new firms and existing firms that are developing new products.
* * *
Sec. 17b. 32 V.S.A. § 5830b (a) is amended to read:
initial capitalization of the Vermont seed capital fund,
comprising a maximum
$2 $5 million raised from Vermont
taxpayers on or before January 1, 2007 2014,
shall entitle those taxpayers to a credit against the tax imposed by sections
5822, 5832, 5836, or 8551 of this title. The credit may be claimed for the
taxable year in which a contribution is made and each of the four succeeding taxable
years. The amount of the credit for each year shall be the lesser of ten
four percent of the taxpayer's contribution or 50 percent of the
taxpayer's tax liability for that taxable year prior to the allowance of this
credit; provided, however, that in no event shall the aggregate credit
allowable under this section for all taxable years exceed 50 20
percent of the taxpayer's contribution to the initial $2 $5
million capitalization of the Vermont seed capital fund. The credit shall be
nontransferable except as provided in subsection (b) of this section.
Sec. 17c. 10 V.S.A. § 293 [Capitalization] is repealed.
Sec. 17d. 10 V.S.A. chapter 26 §§ 644–647 are codified as subchapter 1 to read:
Subchapter 1. Vermont Film Corporation
Sec. 17e. 10 V.S.A. §§ 651–651g are added as subchapter 3 to read:
Subchapter 3. Vermont Film Production Incentive Program
§ 651. Definitions
As used in this subchapter:
(1) "Agency" means the agency of commerce and community development.
(2) “Applicant” means a person that files a notice and application in accordance with this chapter.
(3) "Corporation" means the Vermont film corporation.
(4) “Film” includes a feature film, television film, television pilot, or each episode of a television series which is intended as programming for a national audience. The term does not include a production featuring:
(A) News, current events, and weather and market reports.
(B) Public programming.
(C) Talk shows, game shows, sports events, awards shows, or other gala events.
(D) A production that solicits funds.
(E) A production that primarily markets a product or service.
(F) A production containing material deemed by the corporation to be obscene.
(G) A production primarily for private, political, industrial, corporate, or institutional purposes.
(5) “Production expense” means:
(A) An expense incurred in the production of a film. The term includes:
(i) Wages and salaries of individuals not to exceed $1,000,000.00 per individual employed in the production of the film.
(ii) The costs of construction, operations, editing, photography, sound synchronization, lighting, wardrobe, and accessories.
(iii) The cost of rental facilities and equipment.
(B) The term does not include expenses incurred in purchasing story rights, music rights, development costs, marketing, or advertising a film.
(6) “Program” means the film production grant program established in section 651a of this title (relating to establishment).
(7) “Qualified film production expense” means a Vermont production expense if at least $1,000,000.00 of the film's production cost is certified by the agency to have been spent in Vermont.
(8) “Recipient” means a person who receives a grant under this subchapter.
(9) “Start date” means the first day of principal photography in Vermont.
(10) “Vermont production expense” means a production expense paid in Vermont.
§ 651a. Establishment
There is established within the agency a program to be known as the film production grant program. The program shall be administered by the corporation and the agency to provide grants to persons for certain films produced within Vermont.
§ 651b. Application
(a) Application. Prior to commencing production of a film, a person may submit an application to the corporation informing it of the person’s intention to request a grant for a Vermont film production. The application shall be on the form required by the corporation and shall include or demonstrate all of the following:
(1) An itemized list of production expenses to be incurred.
(2) An itemized list of Vermont production expenses to be incurred.
(3) The start date.
(4) The actual or projected completion date.
(5) A statement of the amount of the grant sought.
(6) Any other information required by the corporation or the agency.
(b) Submissions. Within 60 days of the completion of production of a film, the applicant shall file verification of expenditures with the agency. The application shall be on the form required by the agency and shall include or demonstrate all of the following:
(1) An itemized list of Vermont production expenses actually incurred. Expenses submitted under this section may not in the aggregate exceed the amount of projected expenses submitted to the department under subdivision (a)(2) of this section.
(2) The date of the completion of production of the film.
(3) Any other information required by the corporation or agency.
§ 651c. Review
The corporation shall review the application to determine if the applicant has met all of the criteria set forth in section 651b of this title (relating to application).
§ 651d. Approval
The following shall apply:
(1) Upon being satisfied that all requirements have been met and subject to section 651c (relating to limitations) of this title, the corporation may approve the application and recommend that the secretary award a film production grant.
(2) Prior to providing grant funds to the applicant, the corporation shall enter into a contract with the applicant. The contract shall include provisions requiring the applicant to use the grant to pay costs associated with the production of the film.
(3) The corporation may impose any other terms and conditions on the grants authorized by this chapter as the corporation determines are in the best interests of Vermont.
§ 651e. Penalty
(a) Imposition. Except as provided in subsection (b) of this section, the agency shall impose a penalty upon a recipient for violation of the contract required by section 651d of this title (relating to approval).
(b) Exception. The agency may waive the penalty required by subsection (a) of this section if the corporation determines that the failure was due to circumstances outside the control of the recipient.
(c) Amount. The amount of the penalty shall be equal to the full amount of the grant received plus an additional amount of up to 10 percent of the amount of the grant received. The penalty shall be payable in one lump sum or in installments, with or without interest, as the agency deems appropriate.
§ 651f. Limitations
The following limitations shall apply:
(1) A recipient may receive only one grant under this chapter for the same film.
(2) A grant awarded under this chapter to an applicant for a film may not exceed 10 percent of the qualified film production expenses incurred for the film.
(3) In no case shall the aggregate amount of grants awarded in any fiscal year under this chapter exceed $1,000,000.00.
§ 651g. PROGRAM FUND
The Vermont film production incentive special fund is established in the state treasury and shall be administered by the secretary of the agency of commerce and community development in accordance with the provisions of subchapter 5 of chapter 7 of Title 32, except that interest earned on the fund shall be retained in the fund.
Sec. 17f. APPROPRIATION
(a) To the extent that additional general funds are available at the close of fiscal year 2006 after appropriations and transfers made in Sec. 70(j) of Act No. 93 of the 2006 session, as amended by Sec. 272 of H. 881 of the 2006 session, the sum of $1,000,000.00 is appropriated and transferred from the general fund in fiscal year 2006 to the Vermont film production incentive program fund established by Sec. 17e of this act.
(b) In the event that there are insufficient funds to make the full appropriation under subsection (a) of this section, the difference in an amount up to $1,000,000.00 is appropriated from the general fund for this purpose in fiscal year 2008.
Sec. 18. EFFECTIVE DATES
(a) This act shall take effect July 1, 2006, except that Sec. 4(b) and Sec. 8 (deferral and mitigation for 36 months) shall take effect upon passage, and Secs. 5, 6, 7, 9 and 10 (Vermont employment growth incentive) shall take effect January 1, 2007.
(b) Those provisions of Sec. 2h adding 32 V.S.A. § 5404a(h)(3)(D) [location criteria] are repealed effective July 1, 2008.
(c) Sec. 17a, 17b and 17c [Vermont Seed Capital Fund] shall take effect for tax years beginning January 1, 2006, and thereafter.
(d) Sec. 17d, 17e and 17f of this act (film production incentive) shall take effect upon passage and shall apply to eligible expenses incurred on or after July 1, 2006, as certified by the secretary of the agency of commerce and community development.
The Vermont General Assembly
115 State Street