ACT NO. 190
Miscellaneous tax amendments
This act makes the following amendments to Vermont tax laws:
Sec. 1. Allows commissioner to charge a delinquent taxpayer for the cost of serving a complaint for collection of taxes due.
This proposal is similar to collection of lien fees from the delinquent taxpayer, which is allowed by current law. Fees for serving complaint to delinquent taxpayers cost the state approximately $25,000 a year.
Revenue effect: State cost may be recouped.
Sec. 2. Combines two current use report to municipalities into one report and eliminates deadline for reviewing current use eligibility.
Current law prescribes several steps for Division of Property Valuation Review (PVR) review of eligibility of current and new use-value parcels, with various dates for when the review should be done and when it should be reported to towns. This section simplifies those steps and leaves just two deadlines. One deadline is new: PVR must review all current and new parcels and send its report to towns by March 15. The other deadline remains the same: towns must report back to PVR by July 5 on whether the list is correct and what the fair market value of each parcel is.
Sec. 3. Provides that although the transfer of ownership alone will not affect the eligibility of a parcel, the failure of an owner to provide information about the transfer or new maps or a new application within 30 days of a request by PVR will result in removal from the program.
Sec. 4. A PVR decision regarding enrollment or use value of land is appealable to the director, but there is no appeal deadline in current law. This section provides the aggrieved owner a 30-day appeal period.
Sec. 5. For fiscal year 2009 only, sets the homestead and nonresidential education property tax rates at $0.87 and $1.36 respectively, and sets the applicable percentage for property tax adjustments at 1.80 percent.
Revenue effect: Education fund is in balance (reserve is between 3.5% and 5.0%).
Secs. 6, 7, 8. Prior to Act 60, 32 V.S.A. § 3843 allowed a town selectboard to enter into a property tax stabilization agreement with a federally subsidized affordable housing project. Section 3844 then allowed the town a permissive referendum, to vote to disapprove the selectboards agreement. A tax stabilization agreement under this section meant that any forgone revenue was made up by the towns other taxpayers.
Act 60 provided that the education property tax would honor these affordable housing stabilization agreements for up to ten years, and this ten-year period was extended to 11 years by Act 81 of 2007. During that grandfathering period, any forgone education revenue was made up by the states other taxpayers.
Now that the grandfathering period is expiring, this section is simplified to allow a town to vote directly to exempt, in whole or in part, affordable housing; and reverts to having any forgone revenue made up by the towns other taxpayers. Since the stabilization would be adopted by vote and not by the selectboard, the permissive referendum statute is repealed.
A transition rule provides that any agreements made prior to April 1, 2008, will continue in effect, but beginning in FY 2010, the forgone education tax revenue must be made up by the towns other taxpayers. There are evidently four housing projects affected by this proposal, located in Richmond, Colchester, and Burlington.
Revenue effect: continues $30,000 of forgone education fund revenue.
Sec. 9. 32 V.S.A. § 4186, which refers to a state tax which existed in 1977, and to poll taxes, and to assessments inserted into the grand list, none of which appears to exist under current law. Since Act 60 of 1997 created a new state education tax, with its own rules for administration in chapter 135, the outdated Section 4186 is confusing and this section would repeal it.
Sec. 10. Eliminates one of two similar, informational notices currently required to be included with property tax bills.
Sec. 11. Makes two amendments to 32 V.S.A. § 5402, the section which imposes the education property tax:
The first amendment specifies a date on which the grand list is closed for purposes of establishing education tax liabilities.
The second amendment changes the way towns are compensated for having to re-issue a property tax bill due to a late-filed property tax adjustment claim. Instead of requiring the commissioner of taxes to pay the town $15 for each re-issued bill, the amended section would allow municipalities to retain $15 from education taxes collected. [Section 15 of this act repeals the language which requires the tax commissioner to pay the town the $15.]
Revenue effect: Revenue neutral.
Sec. 12. In prior legislation, the amount towns may retain for collection of the statewide education tax was increased from 0.125 of one percent to 0.225 of one percent of the education taxes collected. This makes a parallel change in the law that allows a percentage to be retained in the case of new or corrected tax bills.
Revenue effect: Minimal education fund cost.
Sec. 13. 32 V.S.A. § 5412 allows recalculation of a towns education tax liability if a property tax appeal results in a significant reduction of the municipalitys grand list.
This section amends § 5412 to make it applicable not only to reduction in value due to a valuation appeal, but also to reduction in value due to any legal proceeding, such as a declaratory judgment action. It also provides that in case of a settlement agreement between a town and a taxpayer, the towns education tax liability will only be recalculated if the commissioner determines that the settlement agreement value is fair market value.
Revenue effect: Potential education fund cost.
***Property Tax Adjustments***
Sec. 14. Under current law, if a property tax adjustment amount exceeds the current and prior years taxes, the town must refund the excess to the taxpayer. However, because taxpayers have the right to amend their household income for three years after the date for filing a claim, it means that towns could be making and accounting for refunds long after they have closed the tax books for a particular year. Under this amendment, the state, and not the town, would pay any taxpayer refund amounts determined after December 31 each year resulting from household income amendment or other new information resolved on appeal to the department of taxes.
Revenue effect: minimal education fund cost.
Sec. 15. Repeals the language which requires the tax commissioner to pay the town the $15 for re-issuing a property tax bill to an owner who files a late property tax adjustment claim or late homestead declaration. Also see Sec. 11, above.
Revenue effect: Revenue Neutral
Sec. 16. Current law allows towns to decide whether to apply property tax adjustment amounts to property tax bills all at once or pro rata over all the tax installments.
This section requires towns to apply the adjustment amount pro rata over all installments which include education tax liabilities.
This section also makes a technical amendment to the rule governing how a town should apply the property tax adjustment amount when it exceeds the amount of new tax liability.
Secs. 17, 18. Provide that the property tax adjustment amount shall be allocated to the seller at closing unless the parties otherwise agree; and repeals a provision that requires allocation of the unadjusted property tax at closing unless the parties otherwise agree.
Sec. 19. In the personal income tax law, amends the capital gain exclusion. The federal mechanism for calculating tax on capital gain is different from the Vermont mechanism for calculating tax on capital gain. The difference in the two approaches creates an anomaly in Vermont income tax, so that in some cases, a taxpayer who owes tax at the federal level can, at the Vermont level, end up with no taxable income or negative taxable income - even though all the taxpayers deductions, exclusions, and capital gain are the same on both tax returns.
To prevent this anomaly, the amendment provides that the Vermont capital gain exclusion may not exceed 40 percent of federal taxable income.
Revenue effect: $1.5 million additional general fund revenue.
Secs. 20-22. Clarify that tax refund appeals are subject to the same procedure as the appeal procedure for tax deficiencies (underpayments) and assessments of interest and penalty. That is, after a taxpayer has been notified of a denial of a refund, the taxpayer has 60 days to appeal to the commissioner, who will hold a hearing under the Vermont Administrative Procedures Act and issue a written decision. A taxpayer then has 30 days to appeal that decision to superior court. This has been past practice, but in two recent cases, taxpayers have tried to bypass the administrative hearing on their refund claims.
Sec. 20. Explicitly brings refund denials under 32 V.S.A. § 3203, which provides for notice to the taxpayer of the departments action with respect to an assessment or denial.
Sec. 21. Makes a technical correction to 32 V.S.A. § 5882, replacing references to a repealed statute with the correct citations (§ 5881 was repealed in 1997 and replaced with §§ 3202 and 3203) and provides that if a notice of deficiency is based on the fact that a refund was paid in error, then that notice may be made within the usual three-year period or one year after the date the erroneous refund was paid, whichever is later.
Sec. 22. Amends 32 V.S.A. § 5883 to provide that refund denials, like assessments, trigger a 60-day appeal period.
Sec. 23. Repeals a property tax exemption for Civil War and Spanish-American War veterans.
Sec. 24. Adds to the annual tax expenditure report a requirement that the commissioner of taxes recommend prospective repeal of unused or little-used tax credits or incentives.
Sec. 25. Allows the commissioner to petition a court to require that a taxpayer file meals and rooms tax returns. This authority exists with respect to sales tax and income tax.
Sec. 26. Updates the Vermont link to federal income tax law.
Sec. 27. Updates the Vermont link to federal estate and gift tax law.
Sec. 28. In the first year of a Vermont Employment Growth Incentive plan, allows the business a grace period for meeting its employment and wage requirements, similar to the grace period already allowed in the second and third years.
Secs. 29, 30. Extends the sunset on the wood products manufacturers income tax credit from July 1, 2008, to July 1, 2011; and requires the commissioner of economic development to report, in 2009, 2010, and 2011, to the committees on ways and means and finance on the effect of this credit on wood products manufacturing in Vermont.
Revenue effect: Extends $151,000 general fund cost.
Sec. 31. Provides that for a 2007 townwide reappraisal, the common level of appraisal to be applied to that new grand list shall be no less than 100 percent.
Revenue effect: one-time $1.0 million education fund cost.
Sec. 32. Ratifies Sec. 10 of Act 81 of 2007 as the correct version of the amendments to 32 V.S.A. § 3481(1) in that act. Act 81 contained both the correct version of Sec. 10 and an incorrect version of Section 10 from an earlier draft, which was inadvertently left in the bill. Legislative Council removed the incorrect Sec. 10 from the bill as a typographical error. This ratifies that the correct version of Section 10 was the version left in the bill as enacted.
Secs. 33, 34, 35. Increase the amount paid annually by insurance companies to the fire safety special fund: from $400,000 to $600,000, for FY 2009, and from $600,000 to $800,000 for FY 2010 and after.
Add to the Fire Service Training Council a member to represent the insurance companies and add additional insurance types subject to the assessment.
Revenue effect: Additional $200,000 (over FY08) special fund revenue in FY 2009, and $400,000 additional (over FY08) in FY 2010 and after.
Sec. 36. In January of 2008, Congress enacted a new law which allows businesses to increase the amount of depreciation they can deduct on business property placed in service in 2008 or after. If Vermont allowed that same bonus depreciation deduction to be taken on the Vermont return, there would be a large revenue shortfall in the general fund in FY 2009. To avoid that shortfall, this section blocks the pass-through of the extra depreciation. Bonus depreciation is already blocked for corporate income tax, so this amendment means that corporate and personal income taxpayers are now treated the same with regard to bonus depreciation.
Revenue effect: Prevents the loss of $4.9 million in general fund revenue.
Sec. 37. Allows a late-filed property tax adjustment claim from 2007 to be refilled if originally filed by September 4, 2007, if the first property tax payment in claimants town was due after September 4, if the claim was denied by December 1, 2007 and if the claim was incomplete or missing information due to illness or other hardship.
Secs. 38, 39. Allow disclosure of certain tax information to the attorney general and the treasurer.
Sec. 40. For FY09 and FY10 only, exempts skating rinks from education property tax if they provide facilities to local public schools.
Secs. 41, 42. Add increased incentives for environmental technology businesses in the Vermont Employment Growth Incentive (VEGI) program; amend regular VEGI definitions.
Sec. 43. Extends the aircraft parts sales tax sunset from 2011 to 2018 (date when exemption will no longer be for all aircraft parts, but only for commercial aircraft parts).
Sec. 44. Changes penalty for historic rehabilitation credit if owner sells the building to a nonprofit organization.
Sec. 45. If a claimant is required to pay back a property tax adjustment claim overpayment, interest does not begin to run until December 1.
Sec. 46. Increases the education property tax exemption to $500,000 of property value for Holton Home (to account for some portion of inflation since the original exemption was set in 1906). Leaves municipal property tax exemption the same ($50,000).
Secs. 47-50. Lowers hospital provider tax rate from 6% to 5.5%; allows Medicaid funds setoff if hospital is delinquent with provider tax, but only after due process hearing.
Sec. 51. Unclaimed electric utility cooperative credits are retained by the cooperative and do not become unclaimed property through treasurers office.
Secs. 52, 53. Transfers net forward capacity payments from EEU to All Fuels.
Secs. 54-72. Tax Increment Financing (TIF) provisions. Highlights are:
a. Burlington: Allows for retroactive approval of Burlington financing.
b. Winooski: Establishes consumer level of appraisal (CLA) for 2007 and substitutes that Winooski will return to the Education Fund 2% of its total increment (rather than 5% of its residential increment).
c. Milton: Clarifies that it will use equal portions of education tax and municipal tax increment revenues and extends grandfathered TIF location criteria for one year.
d. Makes several technical clarifications.
e. Allows use of TIF increment for infrastructure outside a district if it serves the district and applies a proportionality test for use of the related TIF revenue.
f. Allows municipality to use not only traditional bonds, but also certain types of government loans to pay for TIF improvements, and allows use of the tax increment to pay both types of TIF debt.
g. Expands the period for approval of new TIFs by one more year, but reduces from ten to six the number of new TIFs that may be approved in that period.
h. Directs the joint fiscal office and the department of taxes, in consultation with the Vermont League of Cities and Towns, the Vermont Economic Progress Council, Smart Growth Vermont, the Lake Champlain Regional Chamber of Commerce, and the Vermont chapter of the National Education Association, to gather data and analyze the four existing TIFs and related issues.
Sec. 73. Adds sales tax holidays: July 12-13 for any item of personal use costing $2,000 or less; July 12-18 for any Energy Star appliance costing $2000 or less. Local option towns and PILOT fund held harmless.
Secs. 74-100. Add E-business provisions of H. 458.
Sec. 101. For FY09 only, allows an education property tax exemption for two hospital-designated health and recreation centers.
Sec. 102. Effective Dates: Signed by Governor on June 6, 2008; the act contains various effective dates.
The Vermont General Assembly
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