Title 32: Taxation and Finance
Chapter 151: INCOME TAXES
Sub-Chapter 011E: Economic Advancement Tax Incentives
32 V.S.A. § 5930a. Vermont Economic Progress Council
§ 5930a. Vermont Economic Progress Council
(a) 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 Governor with the advice and consent of the Senate, who shall be 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 11 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 residents 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. Members of the Council appointed by the Governor shall serve initial staggered terms with five members serving four-year terms, and four members serving two-year terms. All Council members' terms shall be four-year terms upon the expiration of their initial terms and Council 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 members. In addition, 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, 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 2 V.S.A. § 406. 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.
(b)(1) The Vermont Economic Progress Council, within 60 days of receipt of a complete application, shall approve or deny the following economic incentives:
(A) tax stabilization agreements and exemptions under subdivision 5404a(a)(2) of this title; and
(B) Vermont employment growth incentives (VEGI) under section 5930b of this title.
(2) All incentives are subject to application of the incentive ratio as determined under subdivision 5930b(b)(3) of this title and no tax stabilization agreement or exemption shall be approved except in conjunction with the approval of an incentive under subdivision (1)(B) of this subsection.
(c) The Council shall first review each application under subsection (b) of this section and ascertain, to the best of its judgment, that but for the economic incentive to be offered, 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 economic incentives, and shall not be considered further by the Council. If the "but for" test is answered in the affirmative, then prior to approving any application for an economic incentive under subsection (b) of this section, 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 years, unless the Council determines that the enterprise will establish a significantly different, new line of business and create new jobs in the new line of business that were not part of the enterprise prior to filing its application for incentives with the Council. 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 the cost-benefit model in reviewing applications under subdivision (b)(1)(A) and (B) 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. Any modification of the cost-benefit model shall be subject to the approval of the Joint Fiscal Committee. The cost-benefit analysis shall include consideration of the effect of the passage of time and inflation on the value of multi-year fiscal benefits and costs.
(1) In determining the projected net fiscal benefit or cost of the incentives considered under subdivision (b)(1)(A) 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 calendar year.
(2) In determining the projected net fiscal benefit or cost of the incentives considered under subdivision (b)(1)(B) 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 calendar year.
(e) Only a business may apply for approval under subdivision (b)(1)(B) of this section. A municipality and a business must apply jointly for approval of a tax stabilization agreement pursuant to subdivision (b)(1)(A) of this section.
(f) The Economic Progress Council shall have the authority to adopt rules under 3 V.S.A. chapter 25 to provide streamlined and efficient procedures for processing and deciding applications.
(g) Decisions of the Economic Progress Council shall be administrative decisions that are not subject to the contested case hearing requirements of 3 V.S.A. chapter 25. The Council's decisions shall be final and not subject to judicial review.
(h) 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 1 V.S.A. chapter 5, 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 are disclosed in a form that cannot identify or be associated with a particular business.
(i) The Governor shall recommend to the General Assembly, and the General Assembly shall thereafter establish by law,
(1) an annual authorization for the total net fiscal cost of incentives the Council may approve in the authorized year under subdivision (b)(1), (4), and (5) of this section for projects that are net negative under the cost-benefit model;
(2) an annual authorization for the total net fiscal cost of incentives the Council may approve in the authorized year under subdivisions (b)(2) and (3) of this section for projects that are net negative under the cost-benefit model.
(j) By April 1 of each year, the Council and the Department of Taxes shall file a joint report on economic advancement tax incentives 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 gross and net value of incentives granted pursuant to subdivisions (b)(1), (4), and (5) of this section and pursuant to subdivisions (b)(2) and (3) of this section during the preceding year. The joint report shall include an account of each incentive granted under subsection (b) of this section, 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 describe the extent to which the tax credits allowed by the Department of Taxes in the previous calendar year supported economic activity that complied with the performance expectations in the written notification of approval under subsection (k) of this section. The joint report shall summarize all credits awarded and earned, applied for, and carried forward by entities participating in the Economic Advancement Tax Incentives Program authorized by this subchapter through the end of the preceding calendar year. The joint report shall include the claims by specific type of credit, number of participating entities, and tax type against which the credit is applied. The joint report shall also include information on award recaptures. 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 Department of Taxes shall develop the capacity to report by fiscal year the amount of total credits applied by tax type against the tax liabilities for the prior fiscal year and any award recaptures. The joint report shall also address the Council's conformance with the annual authorizations established in subsection (i) of this section. 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.
(k) The Council shall provide written notification to the applicant of its approval of economic incentives under subsection (b) of this section. The written notification shall include both an assessment of the probability that the economic development activity would not occur or would occur in a significantly different and significantly less desirable manner but for the approval of incentives under this section, and an assessment of the application's consistency with the guidelines set forth in subsection (c) of this section. The written notification shall also specify performance expectations on which approval has been granted and continuing approval shall be conditioned. In the written notification, the Council shall set out the performance expectations upon which an award is based in clear and quantifiable benchmarks, sufficient to enable the Department of Taxes, pursuant to subdivision ( l )(1)(B) of this section, to determine whether performance expectations have been met. The Council shall forward a copy of the written notification, including its assessment and the performance expectations, with the certificate of eligibility that it provides to the Department of Taxes.
( l )(1)(A) On or before the date, including the date of any extensions, that an award recipient is required to file its return under the provisions of section 5861, 5862, 5914, or 5920 of this title, an award recipient shall file a report with the Department of Taxes and with the Council for each tax year for which the award is authorized by the Council. The report shall respond directly to the performance expectations in the written notification of approval issued under subsection (k) of this section, and shall include a description of the economic activity, including the total number of jobs created, the number of new jobs filled by Vermont residents, the wages for the new jobs, investments made according to the categories of incentives awarded, the nature and extent to which the economic activity was consistent with the guidelines in subsection (c) of this section, and any other information required by the Council or the Department of Taxes to assess the performance of the award recipient.
(B) The Department of Taxes shall compare the award recipient's report with the performance expectations in the written notification of approval. Upon determining that an award recipient has met all of the performance expectations the Department of Taxes shall allow the tax credit and shall provide the council with a report of the credit amount allowed and the basis for allowing the credit. If the Department of Taxes is unable to determine full compliance with the performance expectations, the Department shall request that the Council conduct a more detailed review. If the Department requests the Council to conduct a more detailed review, the Council shall assess whether the taxpayer's actual performance meets the goals of the overall performance expectations and all factors upon which the authorization was originally based. The Council shall conduct the review in a manner consistent with the original authorization, including examination of consistency with guidelines, and, if necessary, application of the cost-benefit model. At the conclusion of its review, the Council shall submit a written report to the Commissioner of Taxes, setting out the factors and bases for the Council's reassessment, if any, and recommending that the credit be approved, in full or in part, or disallowed. Upon receiving the council's reassessment and recommendation, the Commissioner of Taxes shall decide whether the credit shall be approved, in full or in part, or disallowed.
(C) In assessing the performance of an award recipient, the Department of Taxes shall have the authority to obtain from the Council all records and information necessary to determine whether the award recipient has complied with the performance expectations in the written notice of approval.
(D) In any one year, an economic incentive awarded under subdivision (b)(2) of this section shall not be applied to reduce the award recipient's income tax liability by more than 80 percent of its income tax liability in that year.
(E) Nothing in this subsection shall preclude the Department of Taxes from adjusting the tax liability of any award recipient whose credit was incorrectly calculated.
(2) By December 31 of each year following the approval of an economic incentive, until the December 31 following the taxable year in which the approved incentive expires, an award recipient that has obtained the Council's approval under subdivision (b)(1), (4), or (5) of this section shall file a report with the Council, stating the amount of any incentives used during the preceding taxable year, and detailing compliance with all performance expectations upon which the award was conditioned.
(m)(1) Recapture for failure to meet performance expectations. The value of any economic incentives taken by an applicant that has obtained the Council's approval under this section shall be refunded to the State, and any economic incentives remaining to be exercised shall be disallowed in the event that:
(A) the applicant fails to comply with all performance expectations upon which the award was conditioned as set out in the notification provided in subsection (k) of this section and determined by the Department of Taxes under subsection ( l ) of this section;
(B) the applicant knowingly fails to supply any information required under this section or knowingly files false or misleading information; or
(C) the applicant fails to file the report required in subsection ( l ) of this section.
(2) The Commissioner may assess amounts payable under this subsection any time within the time period provided in section 5882 of this title for adjustments to the returns on which the credit is applied or within three years of the date that the required report or information was due or the false or misleading information was supplied. The award recipient shall pay the amount required by this subsection within 30 days of the Commissioner's assessment. (Added 1997, No. 71 (Adj. Sess.), § 48, eff. March 11, 1998; amended 1999, No. 159 (Adj. Sess.), § 4, eff. May 29, 2000; 1999, No. 159 (Adj. Sess.), §§ 5-12; 2003, No. 67, §§ 8-14; 2005, No. 184 (Adj. Sess.), §§ 5-7, 12, eff. May 24, 2006; 2007, No. 81, §§ 14, 15; 2009, No. 54, §§ 14, 64, eff. June 1, 2009; 2011, No. 52, § 3, eff. May 27, 2011.)