AN ACT RELATING TO ECONOMIC ADVANCEMENT TAX INCENTIVES AND ECONOMIC DEVELOPMENT
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 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).
(2) 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.
(3) The amount of costs, participation, and performance from the EATI Program Summary 1998-2004 (revised April 5, 2005) 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Total credits rescinded or cancelled: 26.4 million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Total rescinded or cancelled: 4.7 million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Total credits rescinded or cancelled: 13.4 million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Total rescinded or cancelled: 2.8 million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Total credits rescinded or cancelled: 13.0 million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Total rescinded or cancelled: 1.9 million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
(4) 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.
(5) 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.
(6) 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.
(7) 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. Description, Evaluation, and
Recapture of Prior Awards * * *
Sec. 2. 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 R&D expenditures, qualified expenditures for workforce development, or investments in plant and equipment multiplied by the applicable rate or the difference between double-weighted and
(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. 3. RECAPTURE AND DISALLOWANCE OF PRIOR EATI AWARDS
(a) The Attorney General shall consult with the Department of Taxes and the Vermont Economic Progress Council on legal strategies for recapturing or disallowing awards authorized by the council both prior to and subsequent to July 1, 2000.
(b) If the Attorney General concludes that legal action to recapture or disallow any awards is warranted, the Attorney General shall pursue appropriate legal action for the purpose. The Attorney General may take legal actions in support of or independent of any administrative action taken by the Department of Taxes and the Vermont Economic Progress Council to recapture or disallow awards.
(c) On or before November 1, 2005, the Attorney General shall report to the Joint Fiscal Committee and the Economic Development Study Committee established by Sec. 9 of this act regarding any legal actions taken pursuant to subsection (b) of this section. This report shall include recommendations by the Attorney General for statutory changes for recapturing or disallowing awards.
(d) For the purposes of this section, and notwithstanding any other provision of law, the Attorney General shall have access to all records and documents pertaining to the EATI awards subject to this section in the possession of the Vermont Economic Progress Council and the Department of Taxes, and shall in turn be subject to the confidentiality requirements and applicable penalties for any breach of confidentiality.
Sec. 4. RETROACTIVE APPLICATION OF DEFERRAL AND
MITIGATION TO PRIOR AWARDS
The deferral and mitigation of disallowance and recapture provisions of section 5930h of Title 32 shall continue in effect to defer and mitigate disallowance or recapture of any economic advancement tax incentive award granted prior to July 1, 2005, with the following modifications:
(1) The deferral and mitigation provisions of subsection 5930h(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.
(2) An application to the council for a deferral relating to an award granted prior to July 1, 2005 must be made within 90 days of the effective date of this act or within 90 days of receipt of written determination of recapture or disallowance, whichever is later.
(3) The deferral period shall be for a nonrenewable period of 36 months, notwithstanding the 12‑month provision prescribed in subsection 5930h(f) of Title 32.
(4) the minimum level of restoration of employment necessary within the recapture period shall be seventy-five percent of the highest annual average number of full-time employees of the applicant during any year in a period of six years after the initial authorization of an incentive by the council.
(5) The deferral and mitigation provisions of subsection 5930h(f) of Title 32 shall apply to credits which have been applied against tax liabilities and to carryforward of credits granted but not yet taken. The council may in its discretion mitigate the disallowance or recapture of credits applied against tax liabilities. With respect to disallowance of carryforward of credits, the council shall determine a mitigated amount based on the cost-benefit model analysis of the taxpayer’s actual job creation and performance, and any mitigated amount shall take account of credits applied against tax liabilities. For the purposes of this section, the three‑year time limit on notices of deficiency and assessment of penalty and interest under section 5882 of Title 32 shall commence upon conclusion of the 36‑month deferral period allowed by this section.
* * * Part III. Termination and Replacement of EATI program * * *
Sec. 5. TERMINATION AND TRANSITIONAL PROVISIONS
(a) On July 1, 2005, the authority of the Vermont Economic Progress Council and the Department of Taxes to grant Economic Advancement Tax Incentive awards pursuant to the provisions of 32 V.S.A §§ 5930a and 5930b is terminated.
(b) Any unused credits or incentives granted before July 1, 2005 shall remain in effect, including all carry-forwards, but shall be subject to the evaluation, disallowance, and recapture directives of Sec. 2 of this act and the deferral and mitigation provisions of Sec. 3 of this act.
(c) For the fiscal years beginning July 1, 2005 but before July 1, 2007, the Vermont Economic Progress Council is authorized to grant the awards pursuant to the single, payroll-based incentive program established by Sec. 7 of this act. Unless extended by act of the General Assembly, Sec. 7 of this act is repealed effective July 1, 2007, and any unused authorizations granted before July 1, 2007 shall remain in effect.
Sec. 6. AMENDMENTS AND REPEALS OF CURRENT EATI
(a) Vermont Economic Progress Council.
(1) 32 V.S.A. § 5930a (Vermont Economic Progress Council) (b), (c), (d), (e), (i), (j), (k), (l), and (m) are repealed.
(2) 32 V.S.A. § 5930a (Vermont Economic Progress Council) (f), (g), and (h) are relettered to be subsections (b), (c), and (d) respectively.
(b) Economic Advancement Tax Incentive program:
(1) 32 V.S.A. § 5930c (Economic advancement payroll tax credit) is repealed.
(2) 32 V.S.A. § 5930d (Economic Advancement Research and Development Tax Credit) is repealed.
(3) 32 V.S.A. § 5930e (Workforce development incentive tax credit) is repealed.
(4) 32 V.S.A. § 5930f (Vermont export tax incentive) is repealed.
(5) 32 V.S.A. § 5930g (Capital investment tax credit) is repealed.
(6) 32 V.S.A. § 5930h (Carry-forward, carry-back, and recapture) is repealed.
(7) 32 V.S.A. § 5930i (credit allocation) is repealed.
(8) 32 V.S.A. § 5930k (high tech growth incentives) is repealed.
(9) 32 V.S.A. § 5930w (sustainable technology research and development) is repealed.
(10) 32 V.S.A. § 5930x (export tax credit) is repealed.
(c) This section shall take effect July 1, 2005, except that those provisions repealed by subsections (a) and (b) of this section shall remain in effect to govern economic advancement tax incentive awards granted prior to July 1, 2005. Economic incentives awarded prior to July 1, 2005 but not yet earned, may be earned and applied to the tax liability of the award recipient in a subsequent year for which approval was granted under the law in effect prior to July 1, 2005.
Sec. 7. 32 V.S.A. § 5930b is amended to read:
ADVANCEMENT TAX INCENTIVES PAYROLL
BASED TAX CREDIT AGAINST WITHHOLDING
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) 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) “Award period” means the consecutive five years during which a business may add qualifying jobs and qualifying capital investments eligible for payroll‑based credits under this section.
(4) “Base number of jobs” means the total number of full-time Vermont jobs held by nonowners on an annualized basis.
(5) “Base payroll” means the total Vermont gross wages and salaries actually paid to full-time, nonowner employees.
(6) “Credit percentage” means the percentage applied to qualifying payroll in order to calculate earned credits.
(7) “Full-time employee” means an employee who works at least 37 hours each week.
(8) “Incentive ratio” set at 70 percent is the percentage applied to the net fiscal benefit in order to calculate the maximum award that may be authorized under this section.
(9) “Incremental payroll” means the portion by which current year base payroll exceeds prior year base payroll.
(10) “Job threshold” means the number of jobs representing expected growth as determined by the council using the cost-benefit model, above which otherwise qualifying jobs can earn credits under this section.
(11) “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.
(12) “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 parent, siblings, and children.
(13) “Qualifying capital investment” means projected investment in new facilities, machinery and equipment the value of which is an input to the cost‑benefit model in evaluating applications.
(14) “Qualifying jobs” means the number of full-time Vermont jobs performed by non-owners in excess of the base number of jobs and the job threshold that meet or exceed wage thresholds established by the council.
(15) “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.
(16) “Utilization period” means the period during which credits can be claimed, and includes each year of the award period plus the four years immediately following each year of the award period.
(17) “Vermont gross wages and salaries” means Medicare wages as reported on Federal Tax Form W2 to the extent those wages are Vermont wages.
(18) “Wage threshold” means the minimum annualized Vermont gross wages and salaries paid, as determined by the council, but not less than sixty percent above the minimum wage, in order for a new job to be a qualifying job under this section.
(b) A business may apply to the council for approval of a payroll-based credit against its withholding tax liability. In addition to any other information that the Vermont economic progress council may require in order to fulfill its obligations under this section, an application shall include all the following information:
(1) Application base number of jobs at time of application.
(2) Total payroll at time of application.
(3) Application base payroll.
(4) Projected number of qualifying jobs in the award period.
(5) Projected qualifying payroll for each year in the award period.
(6) Projected qualifying capital investment to be made in the award period.
(7) 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 credits remaining to be earned shall be limited, and any credits taken shall be subject to complete or partial reversal, pursuant to subsection (g) of this section.
(c) The council shall review each application and ascertain, to the best of its judgment, that but for the credit provided for in this section, the proposed economic development would not occur or would occur in a significantly different and significantly less desirable manner. Applications that do not meet the “but for” test are not eligible for the credit and shall not be further considered by the council. If the “but for” test is answered in the affirmative, then prior to approving any application, the council shall evaluate the overall consistency of each application with the following guidelines:
(1) The enterprise should create new, full-time jobs to be filled by individuals who are Vermont residents. The new jobs shall not include jobs or employees transferred from an existing business in the state, or replacements for vacant or terminated positions in the applicant’s business. The new jobs include those that exceed the applicant’s average annual employment level in Vermont during the two preceding fiscal years. The enterprise should provide opportunities that increase income, reduce unemployment, and reduce facility vacancy rates. Preference should be given to projects that enhance economic activity in areas of the state with the highest levels of unemployment and the lowest levels of economic activity.
(2) The new jobs should make a net positive contribution to employment in the area, and meet or exceed the prevailing compensation level, including wages and benefits, for the particular employment sector. The new jobs should offer opportunities for advancement and professional growth consistent with the employment sector.
(3) The enterprise should create positive fiscal impacts on the state, the host municipality, and the region as projected by the cost-benefit model applied by the council under subsection (d) of this section.
(4) The enterprise should be welcomed by the host municipality, and should conform to all appropriate town and regional plans and to all permit and approval requirements.
(5) The enterprise should protect or improve Vermont’s natural, historical, and cultural resources, and enhance Vermont’s historic settlement patterns.
(6) It is desirable for the enterprise to make use of Vermont resources.
(7) It is desirable for the enterprise to strengthen the quality of life in the host municipality, and to foster cooperation within the region.
(8) It is desirable for the enterprise to use existing infrastructure or to locate in an existing downtown redevelopment project.
(9) If the enterprise proposes to expand within a limited local market, then the enterprise should not be given an unfair competitive advantage over other Vermont businesses in the same or similar line of business and in the same limited local market as a result of the economic incentive granted.
(d) The council shall apply a cost-benefit model in reviewing a business application 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 of proposed economic development activities. Any modification of the cost-benefit model shall be subject to the approval of the joint fiscal committee. The council shall perform the cost‑benefit analysis in consultation with the commissioner of economic development. The cost-benefit analysis shall include consideration of the effect of the passage of time and inflation on the value of multiyear fiscal benefits and costs.
(e) Except as provided in subsection (h) of this section, the value of the credit 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 shall establish appropriate job and wage thresholds and minimum qualifying capital investment for individual applications the council wishes to approve. The council shall calculate a credit percentage for each approved application as follows:
Authorized award amount ÷ [Projected average wage × 5 (number of years in award period) × projected number of qualifying jobs over the award period]
(f) The council shall approve or deny an application in writing within 45 days of receipt of a completed application. An approval shall specify the application base jobs at the time of the application; application base payroll; total payroll at the time of application; job thresholds for each year of the award period; the projected number of qualifying jobs for each year of the award period; projected qualifying payroll for each year of the award period; the credit percentage; the minimum amount and description sufficient for application of subsection (g) 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 tax department along with a copy of the application submitted by that applicant.
(g) A business whose application is approved and meets or exceeds its award year thresholds may claim as a credit against its withholding tax liability under section 5841 of this title an amount equal to the qualifying payroll multiplied by the credit percentage for each year of the utilization period, not to exceed the total award approved by the council. The tax department shall deny applications for credits in each year during the utilization period in which the award year thresholds are not maintained or have not been reestablished. The credit is refundable and must be claimed annually on a credit return available from the tax department filed no later than February 28 of each year of the utilization period. 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 credits taken, plus interest, to the extent credits 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 credit return for the last year of the award period and no further credits may be earned. The repayment shall be calculated as follows:
Credits taken minus [(qualifying capital investments made ÷
minimum qualifying capital investment) × total award ]
To the extent the minimum qualifying capital investment is not met by the end of the award period but no repayment is triggered, the total award against which future credits 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.
(h) Notwithstanding subsection (e) of this section, the council may authorize credits in excess of the incentive ratio multiplied by the net fiscal benefit or credits resulting in a net fiscal cost. In either case, credits under this section shall not exceed an annual authorization established by law.
(i) It is the intention of the general assembly to review the incentive ratio every two years and adjust it as necessary to ensure an appropriate positive fiscal impact to the state. Legislative adjustments to the incentive ratio shall not apply to maximum awards approved prior to the effective date of any such adjustment.
(j) By May 1, 2006, and by May 1 each year thereafter, the council and the department of taxes shall file a joint report on the payroll‑based tax 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 information received from written reports in accordance with subsection 5930a(n) of this title, the gross and net value of incentives granted during the preceding year, an account of each incentive granted, 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 economic activity, benefits to the state, and recipient performance in the fiscal year in which the credit was applied. The council and department may use measures to protect confidential financial information, such as reporting information in an aggregate form or masking the identity of the tax award recipient.
Sec. 7a. 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 the
, 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 commissioner.
Sec. 8. FISCAL YEAR 2006 CAPS
(a) Net and excess fiscal cost annual authorization. In fiscal year 2006, the annual authorization for credits in excess of the incentive ratio multiplied by the net fiscal benefits or credits resulting in a new fiscal cost, which the council may approve under 32 V.S.A. § 5930b(h), and property tax allocations and tax increment financing districts under 32 V.S.A. § 5404a(e) and (f), shall not exceed $1,000,000.00 from the general fund and education fund combined. Incentives approved within this annual authorization amount for the total net and excess fiscal cost 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 determined by the department of employment and training.
(b) Total credit and benefit annual authorization. In fiscal year 2006, the total amount of payroll-based job credits the Vermont Economic Progress council is authorized to approve under 32 V.S.A. § 5930b and property tax allocations and tax increment financing districts under 32 V.S.A. § 5404a(e) and (f) shall not exceed $17,500,000.00 from the general fund and education fund combined. This maximum annual amount may be exceeded by the Vermont Economic Progress Council upon application to and approval of the Emergency Board.
* * * Part IV. Study and Oversight * * *
Sec. 9. ECONOMIC DEVELOPMENT STUDY COMMITTEE
(a) There is created an Economic Development Study Committee to be composed of six members of the General Assembly, three from the Senate appointed by the Senate Committee on Committees, one each from the Committees on Appropriations, Finance, and Economic Development, Housing and General Affairs; and three members of the House appointed by the Speaker, one each from the Committees on Appropriations, Commerce, and Ways and Means.
(b) The committee may meet following adjournment of the 2005 session of the general assembly as it deems necessary to perform its duties, and for attendance at meetings members shall be entitled to reimbursement for expenses and compensation for services as provided in 2 V.S.A. § 406.
(c) The Economic Development Study Committee shall have the assistance of the Joint Fiscal Office, the Legislative Council, the Department of Taxes, the Agency of Commerce, and the Vermont Economic Progress Council. With the approval of the Joint Fiscal Committee, the Economic Development Study Committee may retain or contract for expert consulting assistance.
(d) The study committee shall:
(1) Receive and review the legal opinion of the Attorney General required by Sec. 3 of this act, and review any resulting actions by the Department of Taxes to recapture or disallow pre-July 2000 EATI awards.
(2) review the implementation of the payroll‑based tax credit program established by Sec. 7 of this act and recommend whether the program should be extended beyond fiscal 2007 with any revisions the committee deems appropriate.
(3) Review and recommend to the General Assembly appropriate parameters and objectives of any tax-based economic incentive program, and for this purpose shall specifically consider appropriate means:
(A) to target economic advancement incentives to regions and labor market areas of the state with high unemployment, low per capita wages, or other indications of need for economic development and job creation; and
(B) to focus upon and provide incentives to ensure net economic benefit to the state and for additional economic growth, whether that be through the application of a “but for” test or through the application of an annual cap or other limitation on the amount awards, to require priorities for awards, a combination of such means, or other methods; and
(C) to develop and link economic advancement tax incentives to municipal awards and incentives to municipalities and to account for the same.
(D) to extend the wood products manufacturer credit created in 32 V.S.A. §5930y, as added by Sec. 13 of this act, to other counties or areas in the state in addition to those specified in subsection (a) of that section, specifically to counties or areas in which the average wage is less than the state-wide average.
(4) Create a framework, articulate objectives, and recommend means by which a long-term economic development plan can be generated and recommend provisions for revising the long-term economic development planning process in the state.
(e) The Economic Development Study Committee shall report its findings and recommendations to the Senate Committees on Economic Development, Housing and General Affairs, Finance, and Appropriations; and the House Committees on Commerce, Ways and Means, and Appropriations no later than January 15, 2006.
* * * Part V. Miscellaneous Provisions * * *
* * * Film Industry * * *
Sec. 10. 10 V.S.A. § 291 is amended to read:
§ 291. VERMONT SEED CAPITAL FUND; AUTHORIZATION;
* * *
(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 Vermont
economic development 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 fund.
* * *
(5) No person shall be allocated more than 10 percent of the available tax credits. For the purposes of determining allocation, the attribution rules of Section 318 of the Internal Revenue Code in effect as of the effective date of this chapter shall apply.
first $2 million of initial capitalization of the Vermont
seed capital fund raised from Vermont taxpayers by the termination date as
set by the fund, which termination date shall be on or before January 1,
2014, shall be eligible for partial tax credits as specified in 32 V.S.A. §
(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. 10a. 10 V.S.A. § 293 is amended to read:
§ 293. CAPITALIZATION
fund may solicit and receive subscriptions, provided that if total
amounts exceeding $2 the fund exceed $5 million
by the termination date as set by the fund, the tax credit amount available
to taxpayers under 32 V.S.A. § 5830b shall be reduced pro rata among subscribers
subscribing for more than $2 million in the event the issue is oversubscribed
by the termination date as set by the fund subscriber taxpayers so that
the total cost of the tax credits shall be $1 million. The minimum
capitalization shall be $1 million.
Sec. 10b. 32 V.S.A. § 5830b is amended to read:
§ 5830b. TAX CREDITS; VERMONT SEED CAPITAL FUND
The 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
the next taxable years year. The amount of the credit for
each year shall be the lesser of ten percent of the taxpayer's contribution or 50
20 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. The
amount of the credit available under this section will be reduced
proportionally by the provisions of 10 V.S.A. § 293 if fund subscriptions exceed
(b) If the taxpayer
disposes of an interest in the Vermont seed capital fund within
four two years
after the date on which the taxpayer acquired that interest, any unused credit
attributable to the disposed-of interest is disallowed. This disallowance does
not apply in the event of an involuntary transfer of the interest, including a
transfer at death to any heir, devisee, legatee, or trustee, or in the event of
a transfer without consideration to or in trust for the benefit of the taxpayer
or one or more persons related to the taxpayer as spouse, descendant, parent,
grandparent, or child.
Sec. 10c. 32 V.S.A. § 5929b is added to read:
§ 5929b. VERMONT FILM INDUSTRY TAX CREDIT
(a) A film production company shall be entitled to a refundable credit against its current-year withholding tax liability under §5841 of this title in an amount equal to ten percent of its total payroll paid in its most recently-ended taxable year to its employees for services performed in Vermont in a film project, up to a maximum credit of $1,000,000.00 for each film project.
(b) In this section:
(1) “Film production company” means a person engaged in the business of making motion pictures or television or digital images for theatrical, commercial or educational purposes.
(2) “Film project” means a single media or multimedia program produced by a film production company, including but not limited to motion pictures, feature films, shorts and documentaries, television films or episodes or similar programs fixed on film, videotape, computer disk, laser disk, or other similar means that is intended for exhibition in theaters, by television stations or by other means for the home viewing market, but does not include any film production that is produced by or on behalf of a corporation or other person for its own internal use for advertising, educational, training, or similar purposes.
(3) “Total payroll” means salary and wages paid pursuant to an employment contract which provides for payment at not less than the prevailing wage rate in Vermont for services of a similar nature as determined by the commissioner of employment and training. Total payroll shall not include the first $750,000.00 of wages and salary paid.
(c) The credit under this section shall not exceed the tax liability of the film production company for the year in which the company applies for the credit.
* * * Financial Services * * *
Sec. 11. Financial Services Development Tax Credits;
(a) The General Assembly finds:
(1) That the financial services sector is a vital and growing sector of Vermont’s economy which has provided thousands of direct and indirect employment opportunities in the state, most of which are quality jobs providing significant personal income to Vermonters and tax revenues to the state.
(2) Nevertheless, it is difficult to evaluate the benefits and costs to the state of the financial services development tax credit, in as much as:
(A) There is no review of the effectiveness of the financial services development tax credit, including the number of new jobs created, new companies, payroll growth, and the amount of credit claimed.
(B) The financial services development tax credit program does not require companies to hire new workers.
(b) For taxable years beginning on and after July 1, 2005, subchapter 11 of chapter 151 of Title 32, providing authority to grant financial services development tax credit, is repealed and such authority terminated.
* * * Wood Products Manufacturing * * *
Sec. 12. WOOD PRODUCTS MANUFACTURING TAX CREDITS;
The general assembly finds that the economic vitality within certain adjacent counties in the state with the highest unemployment rates is dependent on a limited number of employers that manufacture finished wood products. In order to support the sustainability and vitality of the finished wood products industry, the general assembly further finds that income tax credits will provide financial assistance needed to maintain the economic well‑being of the communities that rely so heavily on this industry for the health of their economies.
Sec. 13. 32 V.S.A. § 5930y is added to read:
§ 5930y. Wood Products Manufacturer Credit
(a) Annually on or before February 1, the secretary of commerce and community development shall designate any two adjacent counties having at least five percent of their jobs provided by employers that manufacture finished wood products and having the highest unemployment rate in the state for at least one month in the previous calendar year. Upon making a designation, the secretary shall send a written notice to the commissioner of taxes identifying the designated counties.
(b) A credit against the income tax liability is available as follows:
(1) There shall be a credit of two percent of the wages paid in the taxable year by an employer for services performed in a designated county or an adjacent county associated with the manufacture of finished wood products. The credit shall be available to the employer in any year the county qualifies and for one year after a qualification ends.
(2) The credit, either alone or in combination with any other credit allowed by this chapter, shall not reduce the income tax liability of the employer by more than 80 percent.
(3) The recapture of development incentives established in subchapter 6 of chapter 47 of Title 3 shall apply to the tax credits in this section, except that the provisions of subsection 2512(c) of that title shall not apply to business relocation outside the designated counties.
* * * VEPC Board Membership * * *
Sec. 14. 32 V.S.A. § 5930a(a) is amended to read:
There is created a Vermont economic progress council which shall be attached to
the department of economic development for administrative support, including an
executive director who shall be appointed by the council, knowledgeable in
subject areas of the council’s jurisdiction, and hold the status of an exempt
state employee, and administrative staff employed in the state classified
service. The council shall consist of
citizens of the state, six of whom shall be appointed by the governor.
The governor shall appoint citizens to the council 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 insofar as possible as to provide representation to the various
geographical areas of the state and municipalities of various sizes. One
member of the council shall represent labor interests, and one member shall
represent the public, both appointed by the Speaker of the House and the
President Pro Tempore of the Senate. One member shall be the state treasurer,
or the designee of the state treasurer. Members of the council shall serve
initial staggered terms with three members serving three-year terms, three
members serving two-year terms, and three members serving one-year terms. All
council members’ terms shall be three-year terms upon the expiration of their
initial terms and council members may be reappointed to serve successive
terms. The governor shall select a chair from among the council’s members. In
addition to the nine members appointed by the governor, there as
previously provided, the council 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
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, 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.
* * * Public Information * * *
Sec. 15. 32 V.S.A. § 5930a(h), as relettered to be subsection (e) in Sec. 6 of this act, is amended to read:
Information and materials submitted by a business concerning its income taxes
and other confidential financial information shall not be subject to public
disclosure under the state’s public records law in Title 1, chapter 5 of
Title 1, but shall be available to the joint fiscal office or its agent
upon authorization of the joint fiscal committee or a standing committee of the
general assembly, and shall also be available to the auditor of accounts in
connection with the performance of duties under section 163 of this title; provided,
however, that the joint fiscal office or its agent, and the auditor of
accounts, shall not disclose, directly or indirectly, to any person any
proprietary business information or any information which would identify a
business except in accordance with a judicial order or as otherwise
specifically provided by law. Nothing in this subsection shall be construed to
prohibit the publication of statistical information, rulings, determinations,
reports, opinions, policies, or other information so long as the data is
disclosed in a form that cannot identify or be associated with a particular
business; except that nothing in this section shall be construed to prohibit
the public disclosure of any information reported as required by subsection (n)
of this section.
Sec. 16. 32 V.S.A. § 5930a(n) is added to read:
(n) Annually, a business receiving a payroll based tax credit against withholding under section 5930b of this title shall submit a written report to the Vermont economic progress council and the Vermont department of taxes. Reports filed under this subsection are public records for the purposes of subchapter 3 of chapter 5 of Title 1. Reports shall be filed no later than
August 1 of the following year containing but not limited to the following information:
(1) The amount of assistance received by the business in the preceding year from the payroll based tax credit against withholding;
(2) The base number of jobs at the time of application and the total number of jobs at the end of the award year, the number of jobs created that qualified for the credit, and the number of jobs retained;
(3) The average wage of the qualifying jobs and a description of the benefits available for those jobs;
(4) the amount of qualifying capital investments made during the award year; and
(5) An assessment of how the credit assisted the business to accomplish the goals identified in the application for the credit.
* * * Brownfields * * *
Sec. 17a. 32 V.S.A. § 5401 (10) is amended to read:
(10) "Nonresidential property" means all property except:
* * *
property, excluding land, consisting of unoccupied new facilities, or
unoccupied facilities under renovation or expansion, owned by a business that
has obtained the approval of the Vermont economic progress council under
section 5930a of this title that is less than 75 percent complete, not in use
as of April 1 of the applicable tax year, and for a period not to exceed two
Real property consisting of the value of remediation expenditures incurred by a
business that has obtained the approval of the Vermont economic progress
council under section 5930a of this title for the construction of new, expanded
or renovated facilities on contaminated property eligible under the
redevelopment of contaminated properties program pursuant to section 6615a(f)
of Title 10, including supporting infrastructure, on sites eligible for the
United States Environmental Protection Agency "Brownfield Program,"
for a period of ten years. For ten years after the date of enrollment,
real property that is enrolled in the redevelopment of contaminated properties
program pursuant to section 6615a of Title 10 or for which a certificate of
completion of that program has been filed in the land records except to the
extent of the greater of:
(a) the value at the time of enrollment in the program, or
(b) the value reduced by three times the total abatement, removal and remediation expenditures made pursuant to a corrective action plan under the program.
Sec. 17b. 10 V.S.A. §6615a(j)(2)(E) is amended to read:
(E) provide to the state all documents and information relating to the performance and cost of the investigation, abatement, removal, remediation and monitoring activities;
Sec. 17c. Effective dates
Secs 17a and 17b of this act shall take effect from passage, and affect property tax grand lists for the ten years following enrollment.
* * * Property tax allocations and TIFs * * *
Sec. 18. 32 V.S.A. § 5404a(e) and (f) are amended and (g) is added to read:
(e) A municipality may apply to the Vermont economic
progress council for an allocation of the education grand list value for up to
20 years, of a portion 75 percent of the increase in the
value and liability assessed under section 5402 of this title on new economic
development that is subsequently real property improvements and
supporting infrastructure approved by the Vermont economic progress council
pursuant to this section and section 5930a of this title. The
council shall not approve an allocation unless it determines that but for the
allocation, the proposed real property improvements and supporting
infrastructure would not be made or would be made in a significantly different
or significantly less desirable manner. The council must also evaluate the
overall consistency of the project with the criteria set forth in subdivisions
5930a(c)(1) through (9) 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 wastewater treatment, water
supply, transportation and utility connections, that supports the real
(f) Municipalities 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
revenues to repayement 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 75 percent of the increase
in the value and liability assessed under section 5402 of this title on new
real property improvements and supporting infrastructure to repayment of debt
issued to finance improvements within the tax increment financing district as
approved by the Vermont economic
(g) Any economic incentive approved by the Vermont economic progress council pursuant to subsections (e) and (f) of this section may not affect the education tax liability of the property in a greater proportion than the incentive affects the municipal tax liability of the property. If so approved by the council, an incentive shall affect the property tax liability of the municipality under this chapter beginning April 1 of the year following approval. Incentives granted pursuant to subsections (e) and (f) of this section shall remain available to the municipality for the full period authorized and shall be restricted only to the extent the real property improvements and supporting infrastructure giving rise to the increased value to the grand list fail to occur within the authorized period. The council shall report to the general assembly on the effect of the incentive on the education property tax grand list of the municipality and of the state.
(h) The authority of Vermont economic progress council to grant to municipalities allocations of the education grand list value under 32 V.S.A. §5404a (e) and allocations relating to tax increment financing districts under 32 V.S.A. §5404a (f) shall terminate on July 1, 2008. 32 V.S.A. §§5404a(e) and 5404a(f) are repealed effective July 1, 2008, except that they shall remain in effect to govern allocations granted to municipalities prior to July 1, 2008.
Sec. 18a. 32 V.S.A. § 312 is added to read:
§ 312. TAX EXPENDITURE LEGISLATION AND REPORTS
(a) For purposes of this section, “tax expenditure” shall mean the actual or estimated loss in tax revenue resulting from any exemption, exclusion, deduction, or credit applicable to the tax.
(b) Tax expenditure legislation. In any legislation which proposes to enact a tax expenditure for a state-level tax, the general assembly shall include a statement of the following:
(1) A description of the tax expenditure.
(2) A description of and the estimated number of taxpayers who will directly benefit from the expenditure.
(3) The estimated annual cost of the tax expenditure.
(c) Tax expenditure reports. Annually, as part of the budget process, beginning January 15, 2009, the department of taxes shall file with the house committees on ways and means and appropriations and the senate committees on finance and appropriations a report on tax expenditures that are reported on filed personal and corporate income, sales and use, and meals and rooms tax returns, and education property tax grand lists. The report shall also include, for each tax expenditure, the following information:
(1) A description of the tax expenditure.
(2) The most recent fiscal information available on the direct cost of the tax expenditure in the past two years.
(3) The purpose of the expenditure as described in the enacting legislation and the most recent measure of whether the purpose is being achieved.
(4) A description of and estimate of the number of taxpayers directly benefiting from the expenditure provision.
Sec. 18b. TRANSITION REPORTS
(a) The department of taxes shall file with the House Committees on Ways and Means and Appropriations, and to the Senate Committees on Finance and Appropriations reports on the following:
(1) By January 15, 2006, tax expenditures reported under the personal and corporate income tax with the information required by 32 V.S.A. § 312(c) for the most recent fiscal year available.
(2) By January 15, 2007, tax expenditures reported under the personal and corporate income tax and the sales and use tax, with the information required by 32 V.S.A. § 312(c) for the most recent fiscal year available.
(3) By January 15, 2008, tax expenditures under the personal and corporate income tax, sales and use tax and meals and rooms tax, and education property tax, with the information required by 32 V.S.A. § 312(c) for the most recent fiscal year available.
(b) The department of taxes shall advise the Joint Fiscal Committee at its September meeting in 2005, 2006, and 2007, on the status of the department’s research in preparation for the report due the following January under subsection (a) of this section.
Sec. 19. EFFECTIVE DATES
This act shall take effect from passage, except that:
(1) Secs. 5 and 6, providing for termination of the EATI program, shall take effect for taxable years beginning on and after July 1, 2005.
(2) Secs. 7 and 8, providing for the creation of the payroll-based tax credit program, shall take effect July 1, 2005, and Sec. 7 shall terminate July 1, 2007 unless extended by the General Assembly.
(3) Sec. 10, relating to repeal of the financial services development tax credit, shall take effect July 1, 2005.
(4) Secs. 11, 12, and 13, relating to VEPC board membership, public information, and reporting, shall take effect July 1, 2005.
The Vermont General Assembly
115 State Street