The Vermont Statutes Online
The Statutes below include the actions of the 2024 session of the General Assembly.
NOTE: The Vermont Statutes Online is an unofficial copy of the Vermont Statutes Annotated that is provided as a convenience.
Title 32: Taxation and Finance
Chapter 151: Income Taxes
- Subchapter 001: DEFINITIONS; GENERAL PROVISIONS
§ 5811. Definitions
As used in this chapter unless the context requires otherwise:
(1) [Repealed.]
(2) “Commissioner” means the Commissioner of Taxes appointed under section 3101 of this title or any officer or employee of the Department authorized by the Commissioner (directly or indirectly by one or more redelegations of authority) to perform the functions mentioned or described in this chapter.
(3) “Corporation” means any business entity subject to income taxation as a corporation, and any entity qualified as a small business corporation, under the laws of the United States, with the exception of the following entities that are exempt from taxation under this chapter:
(A) railroad and insurance companies that are taxed under chapter 211 of this title;
(B) credit unions organized under 8 V.S.A. chapter 221 and federal credit unions;
(C) nonprofit hospital service corporations organized under 8 V.S.A. chapter 123; and
(D) nonprofit medical service corporations organized under 8 V.S.A. chapter 125.
(4) [Repealed.]
(5) “Fiscal year” means an accounting period of 12 months ending on the last day of any month except December, or an accounting period of less than 12 months, which period is employed as the fiscal year of the taxpayer for U.S. income tax purposes.
(6) “Individual” means a natural person. However, if, for any taxable year, a spouse or a surviving spouse file a joint income tax return under this chapter, they shall be considered to be a single individual for that taxable year.
(7) “Laws of the United States” means, for any taxable year, the statutes of the United States relating to federal income taxes, whether enacted before or after this chapter effective for the taxable year, unless otherwise provided.
(8) “Nonresident estate” means any estate other than a resident estate.
(9) “Nonresident individual or trust” means, for any taxable year, an individual or trust not qualifying for residency in this State during any part of that taxable year.
(10) “Part-year resident individual or trust” means, for any taxable year, an individual or trust qualifying for residency in this State during only part of that taxable year.
(11) “Residency.”
(A) An individual qualifies for residency in this State for that portion of the taxable year during which:
(i) the individual is domiciled in this State; or
(ii) the individual maintains a permanent place of abode within this State if the individual both maintains a permanent place of abode and is present in this State for more than an aggregate of 183 days of that taxable year.
(B) A trust qualifies for residency in this State if it is:
(i) a trust, or a portion of a trust, consisting of property transferred by will or by a decedent who at his or her death was domiciled in this State; or
(ii) a trust, or a portion of a trust, consisting of property of:
(I) a person domiciled in this State at the time such property was transferred to the trust, if such trust or portion of a trust was then irrevocable, or if it was then revocable and has not subsequently become irrevocable; or
(II) a person domiciled in this State at the time such trust, or portion of a trust, became irrevocable, if it was revocable when such property was transferred to the trust but has subsequently become irrevocable.
(C) As used in subdivision (B) of this subdivision (11), a trust or a portion of a trust is revocable if it is subject to a power, exercisable immediately or at any future time, to revest title in the person whose property constitutes such trust or portion of a trust, and a trust or portion of a trust becomes irrevocable when the possibility that such power may be exercised has been terminated.
(12) “Resident estate” means the estate of a decedent who, at the decendent’s death, was domiciled in this State.
(13) “Resident individual or trust” means, for any taxable year, an individual or trust qualifying for residency in this State during the entirety of that taxable year.
(14) “Tax” or “tax liability” includes the liability for all amounts owing by a taxpayer to the State of Vermont under this chapter.
(15) “Taxable corporation” means, for any taxable year, a corporation that, at any time during that taxable year:
(A) was incorporated under the laws of this State;
(B) possessed a certificate of authority to do business within this State; or
(C) received any income allocable or apportionable to this State under the provisions of section 5833 of this title, except that a corporation that would otherwise be taxable under this subdivision shall be exempt if the corporation’s activities in this State are limited to the performance of any activities that, without more, would not subject the corporation to taxation in this State, plus either:
(i) fulfillment operations as follows:
(I) maintenance of cash balances with banks or trust companies in this State;
(II) the following actions by a person unrelated to the corporation taken on behalf of the corporation:
(aa) sales order processing service;
(bb) credit card processing services;
(cc) receipt, storage, and removal from storage of property of the corporation in conjunction with the packaging or repackaging of such property for shipment to a customer of the corporation; and
(dd) reproduction of property of the corporation contained in or on electromagnetic or optical media, such as computer discs, magnetic tapes, compact discs, laser discs, and microprocessor chips, onto tangible media, and receipt, storage, and removal from storage of property of the corporation for shipment to a customer of the corporation or to the corporation itself in conjunction with any such reproduced property; or
(ii) any or all of the following necessary to create or maintain a World Wide Web page or Internet site for the corporation:
(I) ownership of data or programming code in this State, or use of that data or programming code by a person other than the corporation or by a person not in this State;
(II) ownership of, or receipt of services from, computer servers in this State; and
(III) receipt of computer processing or web hosting services from a computer service provider or web hosting service in this State.
(16) “Taxable year” means the calendar year, or the fiscal year ending during the calendar year, with respect to which a tax is imposed under this chapter and, in the case of a return filed with respect to a fractional part of a year, the period with respect to which the return is filed.
(17) “Taxpayer” means a person obligated to file a return with or pay or remit any amount to this State under this chapter.
(18) “Vermont net income” means, for any taxable year and for any corporate taxpayer:
(A) the taxable income of the taxpayer for that taxable year under the laws of the United States, without regard to 26 U.S.C. § 168(k), and excluding income that under the laws of the United States is exempt from taxation by the states:
(i) increased by:
(I) the amount of any deduction for State and local taxes on or measured by income, franchise taxes measured by net income, franchise taxes for the privilege of doing business and capital stock taxes;
(II) to the extent such income is exempted from taxation under the laws of the United States by the amount received by the taxpayer on and after January 1, 1986 as interest income from state and local obligations, other than obligations of Vermont and its political subdivisions, and any dividends or other distributions from any fund to the extent such dividend or distribution is attributable to such Vermont State or local obligations; and
(III) the amount of any deduction for a federal net operating loss; and
(ii) decreased by:
(I) the “gross-up of dividends” required by the federal Internal Revenue Code to be taken into taxable income in connection with the taxpayer’s election of the foreign tax credit;
(II) the amount of income that results from the required reduction in salaries and wages expense for corporations claiming the Targeted Job or WIN credits; and
(III) any federal deduction or credit that the taxpayer would have been allowed for the cultivation, testing, processing, or sale of cannabis or cannabis products as authorized under 7 V.S.A. chapter 33 or 37, but for 26 U.S.C. § 280E.
(B) In the case of an “electing small business corporation” (“Subchapter S Corporation”) under the laws of the United States, “Vermont net income” shall include only the Vermont net income of the corporation (as defined in this section) that is taxable to the corporation under the provisions of the Internal Revenue Code.
(C) For a taxable corporation that is a member of an affiliated group and that is engaged in a unitary business with one or more other members of that affiliated group, “Vermont net income” includes the allocable share of the combined net income of the group.
(D) For a corporation with federal exempt status, “Vermont net income” means all income that is subject to federal income tax, including unrelated business income under 26 U.S.C. § 511 and any income arising from debt-financed property subject to taxation under 26 U.S.C. § 514.
(19) [Repealed.]
(20) “Person” shall include an individual, firm, partnership, association, joint stock company, corporation, trust, estate, or other entity.
(21) “Taxable income” means, in the case of an individual, federal adjusted gross income determined without regard to 26 U.S.C. § 168(k) and:
(A) increased by the following items of income (to the extent such income is excluded from federal adjusted gross income):
(i) interest income from non-Vermont state and local obligations; and
(ii) dividends or other distributions from any fund to the extent they are attributable to non-Vermont state or local obligations; and
(B) decreased by the following items of income (to the extent such income is included in federal adjusted gross income):
(i) income from U.S. government obligations;
(ii) with respect to adjusted net capital gain income as defined in 26 U.S.C. § 1(h) reduced by the total amount of any qualified dividend income: either the first $5,000.00 of such adjusted net capital gain income or 40 percent of adjusted net capital gain income from the sale of assets held by the taxpayer for more than three years, except not adjusted net capital gain income from:
(I) the sale of any real estate or portion of real estate used by the taxpayer as a primary or nonprimary residence; or
(II) the sale of depreciable personal property other than farm property and standing timber; or stocks or bonds publicly traded or traded on an exchange, or any other financial instruments; regardless of whether sold by an individual or business; and provided that the total amount of decrease under this subdivision (21)(B)(ii) shall not exceed 40 percent of federal taxable income or $350,000.00, whichever is less;
(iii) recapture of State and local income tax deductions not taken against Vermont income tax;
(iv) the portion of certain retirement income and federally taxable benefits received under the federal Social Security Act that is required to be excluded under section 5830e of this chapter;
(v) the amount of any federal deduction or credit that the taxpayer would have been allowed for the cultivation, testing, processing, or sale of cannabis or cannabis products as authorized under 7 V.S.A. chapter 33 or 37, but for 26 U.S.C. § 280E; and
(vi) the amount of interest paid by a qualified resident taxpayer during the taxable year on a qualified education loan for the costs of attendance at an eligible educational institution; and
(C) decreased by the following exemptions and deductions:
(i) a personal exemption of $4,150.00 per person for the taxpayer, for the spouse or the deceased spouse of the taxpayer whose filing status under section 5822 of this chapter is married filing a joint return or surviving spouse, and for each individual qualifying as a dependent of the taxpayer under 26 U.S.C. § 152, provided that no exemption may be claimed for an individual who is a dependent of another taxpayer;
(ii) a standard deduction determined as follows:
(I) for taxpayers whose filing status under section 5822 of this chapter is unmarried (other than surviving spouses or heads of households) or married filing separate returns, $6,000.00;
(II) for taxpayers whose filing status under section 5822 of this chapter is head of household, $9,000.00; and
(III) for taxpayers whose filing status under section 5822 of this chapter is married filing joint return or surviving spouse, $12,000.00;
(iii) an additional deduction of $1,000.00 for each federal deduction under 26 U.S.C. § 63(f) that the taxpayer qualified for and received; and
(iv) an amount equal to the itemized deduction for medical expenses taken at the federal level by the taxpayer, under 26 U.S.C. § 213:
(I) minus the amount of the Vermont standard deduction and Vermont personal exemptions taken by the taxpayer under this subdivision (C); and
(II) minus any amount deducted at the federal level that is attributable to the payment of an entrance fee or recurring monthly payment made to a continuing care retirement community regulated under 8 V.S.A. chapter 151, which exceeds the deductibility limits for premiums paid during the taxable year on qualified long-term care insurance contracts under 26 U.S.C. 213(d)(10)(A).
(D) The dollar amounts of the personal exemption allowed under subdivision (C)(i) of this subdivision (21), the standard deduction allowed under subdivision (C)(ii) of this subdivision (21), and the additional deduction allowed under subdivision (C)(iii) of this subdivision (21) shall be adjusted annually for inflation by the Commissioner of Taxes beginning with taxable year 2018 by using the Consumer Price Index and the same methodology as used for adjustments under 26 U.S.C. § 1(f)(3); provided, however, that as used in this subdivision (D), “consumer price index” means the last Consumer Price Index for All Urban Consumers published by the U.S. Department of Labor.
(22) “Affiliated group” means a group of two or more corporations in which more than 50 percent of the voting stock of each member corporation is directly or indirectly owned by a common owner or owners, either corporate or noncorporate, or by one or more of the member corporations, but shall exclude foreign corporations and corporations taxable under 8 V.S.A. § 6014.
(23) “Unitary business” means one or more related business organizations engaged in business activity both within and outside the State among which there exists a unity of ownership, operation, and use or an interdependence in their functions.
(24) [Repealed.]
(25) “Vermont net operating loss” means any negative income after allocation and apportionment of Vermont net income pursuant to section 5833 of this chapter.
(26) “Digital business entity” means a business entity that, during the entire taxable year:
(A) was not a member of an affiliated group or engaged in a unitary business with one or more members of an affiliated group that is subject to Vermont income taxation; did not have any Vermont property, payroll, or sales; and did not perform any activities in this State that would constitute doing business for purposes of income taxation except activities described in subdivisions (15)(C)(i) (fulfillment operations) and (C)(ii) (web page or Internet site maintenance) of this section; and
(B) used mainly computer, electronic, and telecommunications technologies in its formation and in the conduct of its business meetings, in its interaction with shareholders, members, and partners, in executing any other formal requirements.
(27)(A) For the purposes of subdivisions (21)(B)(ii)(I), (21)(B)(ii)(II), (28)(B)(ii)(I), and (28)(B)(ii)(II) of this section, the sale of a farm shall mean the disposition of real and personal property owned by a farmer as that term is defined in subdivision 3752(7) of this title and used by the farmer in the business of farming as that term is defined in 26 C.F.R. § 1.175-3.
(B) For the purposes of subdivisions (21)(B)(ii)(II) and (28)(B)(ii)(II) of this section, the sale of standing timber shall mean the disposition of standing timber by an owner of timber that would give rise to the owner recognizing a capital gain or loss as defined in 26 U.S.C. § 631(b).
(28) “Taxable income” means, in the case of an estate or a trust, federal taxable income determined without regard to 26 U.S.C. § 168(k) and:
(A) increased by the following items of income:
(i) interest income from non-Vermont state and local obligations;
(ii) dividends or other distributions from any fund to the extent they are attributable to non-Vermont state or local obligations; and
(iii) the amount of State and local income taxes deducted from federal gross income for the taxable year; and
(B) decreased by the following items of income:
(i) income from U.S. government obligations;
(ii) with respect to adjusted net capital gain income as defined in 26 U.S.C. § 1(h), reduced by the total amount of any qualified dividend income: either the first $5,000.00 of such adjusted net capital gain income or 40 percent of adjusted net capital gain income from the sale of assets held by the taxpayer for more than three years, except not adjusted net capital gain income from:
(I) the sale of any real estate or portion of real estate used by the taxpayer as a primary or nonprimary residence; or
(II) the sale of depreciable personal property other than farm property and standing timber; or stocks or bonds publicly traded or traded on an exchange, or any other financial instruments; regardless of whether sold by an individual or business; and provided that the total amount of decrease under this subdivision (28)(B)(ii) shall not exceed 40 percent of federal taxable income or $350,000.00, whichever is less; and
(iii) recapture of State and local income tax deductions not taken against Vermont income tax.
(29) As used in subdivision (21)(B)(vi) of this section:
(A) “Qualified education loan” and “eligible educational institution” shall have the same meanings as under 26 U.S.C. § 221(d).
(B) “Qualified resident taxpayer” means an individual qualifying for residency as defined under subdivision (11) of this section and whose adjusted gross income is equal to or less than:
(i) $120,000.00 if the individual’s filing status is single, head of household, or married filing separately; or
(ii) $200,000.00 if the individual’s filing status is married filing jointly. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1967, No. 121, § 1, eff. Jan. 1, 1968 for taxable years beginning on or after January 1, 1968; 1971, No. 73, § 12, eff. April 16, 1971; 1973, No. 90, § 4; 1975, No. 190 (Adj. Sess.), § 3, eff. for tax years beginning after December 31, 1974; 1977, No. 17, § 1, eff., March 22, 1977 for tax years ending on and after December 31, 1976; 1977, No. 117 (Adj. Sess.), §§ 1, 2, eff. Jan. 27, 1978 for tax years commencing on and after January 1, 1977; 1979, No. 105 (Adj. Sess.), §§ 1, 2, § 45, eff. April 2, 1980 for taxable years beginning after January 1, 1979; 1981, No. 152 (Adj. Sess.), § 1, eff. April 12, 1982 for taxable years beginning on and after Jan. 1, 1982; 1985, No. 262 (Adj. Sess.), §§ 5–7, eff. June 4, 1986, affecting income taxes beginning on and after Jan. 1, 1986; 1985, No. 266 (Adj. Sess.), §§ 1, 2, eff. June 4, 1986 for taxable years beginning on and after Jan. 1, 1986; 1987, No. 82, §§ 4, 5, 9, eff. June 9, 1987 affecting taxable years beginning on and after Jan. 1, 1987; 1987, No. 210 (Adj. Sess.), § 4; 1989, No. 119, § 2, eff. June 22, 1989, applying to taxes payable for taxable years beginning on and after Jan. 1, 1989; 1989, No. 210 (Adj. Sess.), § 296, eff. May 31, 1990, affecting taxable years beginning on or after Jan. 1, 1990; 1989, No. 222 (Adj. Sess.) § 4, eff. May 31, 1990, applying to taxable years beginning on or after Jan. 1, 1990; 1991, No. 32, eff. May 18, 1991, §§ 31, 32, eff. May 18, 1991, applying retroactively to taxable years beginning on and after January 1, 1990, § 33 eff. May 18, 1991, applying to loss years ending on and after April 30, 1991; 1991, No. 67, § 25, eff. June 19, 1991; 1995, No. 29, §§ 7, 8, eff. April 14, 1995; 1995, No. 169 (Adj. Sess.), §§ 14, 22, eff. May 15, 1996; 1997, No. 156 (Adj. Sess.), §§ 3, 51, eff. April 29, 1998; 2001, No. 67, §§ 2, 3, eff. June 16, 2001; 2001, No. 140 (Adj. Sess.), §§ 1-3, eff. June 21, 2002; 2001, No. 144 (Adj. Sess.), § 28, eff. June 21, 2002; 2003, No. 67, § 24a, eff. July 1, 2003; 2003, No. 152 (Adj. Sess.), § 2, eff. June 7, 2004; 2005, No. 94 (Adj. Sess.), § 1, eff. March 8, 2006; 2005, No. 207 (Adj. Sess.), §§ 9, 15, eff. May 31, 2006; 2007, No. 190 (Adj. Sess.), §§ 19, 36; 2009, No. 1 (Sp. Sess.), §§ H.25, H.47, H.51; 2009, No. 2 (Sp. Sess.), §§ 16a, 16b, 17, eff. June 9, 2009; 2009, No. 160 (Adj. Sess.), § 60, eff. June 4, 2010; 2013, No. 73, §§ 17, 18, eff. June 5, 2013; 2015, No. 57, § 64, eff. Jan. 1, 2015; 2017, No. 73, § 13a, eff. Jan. 1, 2018; 2018, No. 11 (Sp. Sess.), § H.1, eff. Jan. 1, 2018; 2019, No. 71, § 1; 2019, No. 71, § 2, eff. Jan. 1, 2019; 2019, No. 164 (Adj. Sess.), § 18, eff. Jan. 1, 2022; 2019, No. 164 (Adj. Sess.), §§ 18a, 18b, eff. Jan. 1, 2023; 2021, No. 105 (Adj. Sess.), § 532, eff. July 1, 2022; 2021, No. 138 (Adj. Sess.), §§ 5, 6, eff. January 1, 2022; 2021, No. 148 (Adj. Sess.), § 1, eff. January 1, 2023; 2023, No. 6, § 375, eff. July 1, 2023; 2023, No. 85 (Adj. Sess.), §§ 467, 468, eff. July 1, 2024.)
§ 5812. Income taxation of parties to a civil union
This chapter shall apply to parties to a civil union or civil marriage and surviving parties to a civil union or civil marriage as if federal income tax law recognized a civil union and civil marriage in the same manner as Vermont law. (Added 1999, No. 91 (Adj. Sess.), § 21; amended 2013, No. 73, § 19.)
§ 5813. Statutory purposes
(a) The statutory purpose of the exemption for Vermont municipal bond income in subdivision 5811(21)(A)(i) of this title is to lower the cost of borrowing in order to finance State and municipal projects.
(b) The statutory purpose of the Vermont flat capital gains exclusion in subdivision 5811(21)(B)(ii) of this title is intended to increase savings and investment by making the effective tax rate on capital gains income lower than the effective tax rate on earned income while exempting a portion of the gain that may represent inflation. The 40-percent business capital gains exclusion mitigates the impact of one-time realizations in a progressive tax structure.
(c) [Repealed.]
(d) The statutory purpose of the Vermont credit for persons who are elderly or disabled in subsection 5822(d) of this title is to provide financial assistance to seniors and persons who are disabled with little tax-exempt retirement or disability income.
(e) The statutory purpose of the Vermont investment tax credit in subsection 5822(d) of this title is to encourage Vermont business investments by lowering the effective costs of certain activities.
(f) The statutory purpose of the Vermont farm income averaging credit in subdivision 5822(c)(2) of this title is to mitigate the adverse tax consequences of fluctuating farm incomes under a progressive tax structure and to provide stability to farm operations.
(g) The statutory purpose of the exemption for military pay in subdivisions 5823(a)(2) and (b)(3) of this title is to provide additional compensation for military personnel in recognition of their service to Vermont and to the country.
(h) The statutory purpose of the Vermont charitable housing credit in section 5830c of this title is to enable lower capital cost to certain affordable housing charities by restoring some of the forgone investment income through a tax credit to the investor.
(i) The statutory purpose of the Vermont affordable housing credit in section 5930u of this title is to increase the capital available to certain affordable housing projects for construction or rehabilitation by attracting up-front private investment.
(j) The statutory purpose of the Vermont qualified sale of a mobile home park credit in section 5828 of this title is to encourage sales of mobile home parks to a group composed of a majority of the mobile home park leaseholders, or to a nonprofit organization that represents such a group and, in doing so, to provide stability to the inhabitants of such mobile home parks.
(k) The statutory purpose of the Vermont higher education investment credit in section 5825a of this title is to encourage contributions to Vermont 529 plans that would not otherwise occur and to lower the cost of higher education for Vermont students and the Vermont taxpayers who financially support them.
(l) The statutory purpose of the Vermont entrepreneurs’ seed capital fund credit in section 5830b of this title is to provide incentives for investment in the Seed Capital Fund, ensuring it has sufficient capital to make equity investments in Vermont businesses.
(m) The statutory purpose of the Vermont historical rehabilitation tax credit in subsection 5930cc(a) of this title is to provide incentives to improve and rehabilitate historic properties in designated downtowns and village centers.
(n) The statutory purpose of the Vermont façade improvement tax credit in subsection 5930cc(b) and sections 5930aa-5930ff of this title is to provide incentives to improve façades and rehabilitate historic properties in designated downtowns and village centers.
(o) The statutory purpose of the Vermont code improvement tax credit in subsection 5930cc(c) and sections 5930aa-5930ff of this title is to provide incentives to improve and rehabilitate historic properties in designated downtowns and village centers.
(p) The statutory purpose of the Vermont research and development tax credit in section 5930ii of this title is to encourage business investment in research and development within Vermont and to attract and retain intellectual-property-based companies.
(q) The statutory purpose of the Vermont downtown tax credits in sections 5930n-5930r of this title is to provide incentives to improve and rehabilitate historic properties in designated downtowns and village centers.
(r) The statutory purpose of the Vermont child and dependent care tax credit in section 5828c of this title is to provide cash relief to employees who incur dependent care expenses to enable them to remain in the workforce.
(s) The statutory purpose of the Vermont earned income tax credit in section 5828b of this title is to provide incentives for working families and individuals with low income and to offset the effect on these Vermonters of conventionally regressive taxes.
(t) The statutory purpose of the Vermont machinery and equipment tax credit in section 5930ll of this title is to provide an incentive to make a major, long-term capital investment in Vermont-based plants and property to ensure the continuation of in-state employment.
(u) The statutory purpose of the Vermont Employment Growth Incentive Program in chapter 105, subchapter 2 of this title is to generate net new revenue to the State by encouraging a business to add new payroll, create new jobs, and make new capital investments and sharing a portion of the revenue with the business.
(v) The statutory purpose of the Vermont Downtown and Village Center Program tax credits in section 5930cc of this title is to provide incentives to improve and rehabilitate historic properties in designated downtowns and village centers.
(w) The statutory purpose of the partial exemption of federally taxable benefits under the Social Security Act and certain retirement income in section 5830e of this title is to lessen the tax burden on Vermonters with low to moderate income who derive part of their income from Social Security benefits and certain retirement income.
(x) The statutory purpose of the charitable contribution credit in subdivision 5822(d)(3) of this title is to reduce the tax liability for Vermonters who contribute to charitable causes.
(y) The statutory purpose of the Vermont child tax credit in section 5830f of this title is to provide financial support to families with young children.
(z) The statutory purpose of the exclusion from income of student loan interest paid in subdivision 5811(21)(B)(vi) of this title is to lessen the financial impact of higher education debt on Vermonters. (Added 2013, No. 200 (Adj. Sess.), § 3; amended 2015, No. 157 (Adj. Sess.), § H.7, eff. Jan. 1, 2017; 2018, No. 11 (Sp. Sess.), § H.6, eff. Jan. 1, 2018; 2021, No. 105 (Adj. Sess.), § 533, eff. July 1, 2022; 2021, No. 138 (Adj. Sess.), § 8, eff. January 1, 2022.)
§ 5814. Repealed. 1991, No. 186 (Adj. Sess.), § 8(b), eff. May 7, 1992.
§ 5815. Repealed.
§ 5816. Repealed. 1991, No. 186 (Adj. Sess.), § 3(b), eff. May 7, 1992.
§ 5817. Repealed. 1991, No. 186 (Adj. Sess.), § 8(c), eff. May 7, 1992.
§ 5818. Repealed. 1991, No. 186 (Adj. Sess.), § 8(d), eff. May 7, 1992.
§ 5819. Inconsistent provisions
Notwithstanding any provision of the statutes of this State to the contrary, no individual, corporation, or other taxpayer, and no item of income, shall be exempt from taxation under this chapter unless the individual, corporation, other taxpayer, or item of income, as the case may be, is expressly exempted from taxation by this chapter. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1967, No. 121, § 2, eff. Jan. 1, 1968 for taxable years beginning on or after Jan. 1, 1968.)
§ 5820. Purpose
(a) This chapter is intended to conform the Vermont personal and corporate income taxes with the U.S. Internal Revenue Code, except as otherwise expressly provided, in order to simplify the taxpayer’s filing of returns, reduce the taxpayer’s accounting burdens, and facilitate the collection and administration of these taxes.
(b) It is intended that, for any taxable year, individuals, estates, and trusts shall be taxed upon only their Vermont income for that year, but that the rate at which the Vermont income of any taxpayer is taxed under this chapter shall reflect the taxpayer’s ability to pay as measured by his or her adjusted gross income for the taxable year. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1967, No. 121, § 3, eff. Jan. 1, 1968 for taxable years beginning on or after Jan. 1, 1968.)
- Subchapter 002: TAXATION OF INDIVIDUALS, TRUSTS, AND ESTATES
§ 5821. Name of tax
The tax imposed by this subchapter shall be known as the Vermont personal income tax. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.)
§ 5822. Tax on income of individuals, estates, and trusts
(a) A tax is imposed for each taxable year upon the taxable income earned or received in that year by every individual, estate, and trust, subject to income taxation under the laws of the United States, in an amount determined by the following tables, and adjusted as required under this section:
(1) Married individuals filing joint returns and surviving spouses:
If taxable income is: The tax is: Not over $64,600.00 3.35% of taxable income Over $64,600.00 but $2,164.00 plus 6.6% of not over $156,150.00 the amount of taxable income over $64,600.00 Over $156,150.00 but $8,206.00 plus 7.6% not over $237,950.00 of the amount of taxable income over $156,150.00 Over $237,950.00 $14,423.00 plus 8.75% of the amount of taxable income over $237,950.00 (2) Heads of households:
If taxable income is: The tax is: Not over $51,850.00 3.35% of taxable income Over $51,850.00 but $1,737.00 plus 6.6% not over $133,850.00 of the amount of taxable income over $51,850.00 Over $133,850.00 but $7,149.00 plus 7.60% not over $216,700.00 of the amount of taxable income over $133,850.00 Over $216,700.00 $13,446.00 plus 8.75% of the amount of taxable income over $216,700.00 (3) Unmarried individuals (other than surviving spouse or head of household):
If taxable income is: The tax is: Not over $38,700.00 3.35% of taxable income Over $38,700.00 but $1,296.00 plus 6.6% of not over $93,700.00 the amount of taxable income over $38,700.00 Over $93,700.00 but $4,926.00 plus 7.6% not over $195,450.00 of the amount of taxable income over $93,700.00 Over $195,450.00 $12,659.00 plus 8.75% of the amount of taxable income over $195,450.00 (4) Married individuals filing separate returns:
If taxable income is: The tax is: Not over $32,300.00 3.35% of taxable income Over $32,300.00 but $1,082.00 plus 6.6% of not over $78,075.00 the amount of taxable income over $32,300.00 Over $78,075.00 but $4,103.00 plus 7.6% not over $118,975.00 of the amount of taxable income over $78,075.00 Over $118,975.00 $7,212.00 plus 8.75% of the amount of taxable income over $118,975.00 (5) Estates and trusts:
If taxable income is: The tax is: $2,600.00 or less 3.35% of taxable income Over $2,600.00 but $87.00 plus 6.6% of not over $6,100.00 the amount of taxable income over $2,600.00 Over $6,100.00 but $318.00 plus 7.6% not over $9,350.00 of the amount of taxable income over $6,100.00 Over $9,350.00 $565.00 plus 8.75% of the amount of taxable income over $9,350.00 (6) If the federal adjusted gross income of the taxpayer exceeds $150,000.00, then the tax calculated under this subsection shall be the greater of the tax calculated under subdivisions (1)-(5) of this subsection or three percent of the taxpayer’s federal adjusted gross income.
(b) As used in this section:
(1) “Married individuals,” “surviving spouse,” “head of household,” “unmarried individual,” “estate,” and “trust” have the same meaning as under the Internal Revenue Code.
(2) The amounts of taxable income shown in the tables in this section shall be adjusted annually for inflation by the Commissioner of Taxes using the Consumer Price Index adjustment percentage, in the manner prescribed for inflation adjustment of federal income tax tables for the taxable year by the Commissioner of Internal Revenue, beginning with taxable year 2003; provided, however, notwithstanding 26 U.S.C. § 1(f)(3), that as used in this subdivision, “consumer price index” means the last Consumer Price Index for All Urban Consumers published by the U.S. Department of Labor.
(c) The amount of tax determined under subsection (a) of this section shall be:
(1) increased by 24 percent of the taxpayer’s federal tax liability for the taxable year for the following:
(A) additional taxes on qualified retirement plans, including individual retirement accounts and medical savings accounts and other tax-favored accounts;
(B) recapture of the federal investment tax credit attributable to the Vermont portion of the investment; and
(C) tax on qualified lump-sum distributions of pension income not included in federal taxable income; and
(2) decreased by 24 percent of the reduction in the taxpayer’s federal tax liability due to farm income averaging.
(d)(1) A taxpayer shall be entitled to a credit against the tax imposed under this section of 24 percent of each of the credits allowed against the taxpayer’s federal income tax for the taxable year as follows: the credit for people who are elderly or permanently totally disabled and the investment tax credit attributable to the Vermont-property portion of the investment.
(2) Any unused solar energy investment tax credit under this section may be carried forward for not more than five years following the first year in which the credit is claimed.
(3) Individuals shall receive a nonrefundable charitable contribution credit against the tax imposed under this section for the taxable year. The credit shall be five percent of the first $20,000.00 in charitable contributions made during the taxable year that are allowable under 26 U.S.C. § 170. This credit shall be available irrespective of a taxpayer’s election not to itemize at the federal level.
(e) The tax determined under subsections (a) through (d) of this section shall be reduced by a percentage equal to the portion of adjusted gross income that is not Vermont income; provided, however, that if a taxpayer’s Vermont income exceeds the taxpayer’s adjusted gross income, no reduction shall be made and provided, further, that if a taxpayer has zero or negative Vermont income and the taxpayer’s Vermont income computed without regard to the reductions in subsection 5823(a) of this chapter does not equal or exceed the taxpayer’s adjusted gross income, no tax shall be due under this section. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1967, No. 121, § 4, eff. Jan. 1, 1968; 1979, No. 70, § 1, eff. Jan. 1, 1968, affecting taxable years beginning on or after Jan. 1, 1968; 1979, No. 84 (Adj. Sess.), § 1, eff. Jan. 29, 1980 for taxable years beginning on and after Jan. 1, 1980; 1981, No. 170 (Adj. Sess.) § 15, eff. April 19, 1982, affecting taxable years beginning on and after January 1, 1982; 1983, No. 144 (Adj. Sess.), § 4, eff. Jan. 1, 1985; 1985, No. 213 (Adj. Sess.), § 2, eff. June 2, 1986 for taxable years beginning on and after January 1, 1987; 1987, No. 82, § 2, eff. June 9, 1987, affecting taxable years beginning on and after Jan. 1, 1987 (except for change in tax rate); 1987, No. 259 (Adj. Sess.), § 1, eff. June 16 1988, affecting taxable years beginning on and after Jan. 1, 1988, § 2, eff. Jan. 1, 1989, affecting taxable years beginning on and after Jan. 1, 1989; 1989, No. 119, § 26, eff. June 22, 1989, applying to taxes payable for taxable years beginning on and after January 1, 1989; 1991, No. 32, § 2, eff. May 18, 1991, affecting taxes payable for taxable years beginning January 1, 1991, through December 31, 1993; 1993, No. 14, § 1, eff. April 27, 1993, applicable to income taxes payable for taxable years beginning on and after January 1, 1993; 1999, No. 49, § 35, eff. June 2, 1999; 2001, No. 67, § 4, eff. June 16, 2001; 2001, No. 140 (Adj. Sess.), § 5, eff. June 21, 2002; 2003, No. 66, § 305; 2005, No. 75, § 15; 2007, No. 92 (Adj. Sess.), § 27; 2009, No. 45, §§ 9, 9b, eff. May 27, 2009; 2009, No. 54, §§ 97, 99, eff. June 1, 2009; 2009, No. 1 (Sp. Sess.), § H.48a, eff. June 2, 2009; 2009, No. 159 (Adj. Sess.), §§ 9, 10, eff. June 4, 2010; 2013, No. 96 (Adj. Sess.), § 196; 2015, No. 57, § 65, eff. Jan. 1, 2015; 2018, No. 11 (Sp. Sess.), § H.2, eff. Jan. 1, 2018; 2018, No. 11 (Sp. Sess.), § H.3, eff. Jan. 1, 2018; 2019, No. 51, § 4, eff. Jan. 1, 2019; 2021, No. 138 (Adj. Sess.), § 2, eff. January 1, 2022; 2023, No. 85 (Adj. Sess.), § 469, eff. July 1, 2024.)
§ 5823. Vermont income of individuals, estates, and trusts
(a) For any taxable year, the Vermont income of a resident individual is the adjusted gross income of the individual for that taxable year, and the Vermont income of a resident estate or trust is its gross income for the taxable year, less:
(1) income exempted from State taxation under the laws of the United States and not subtracted under subdivision 5811(21)(B)(i) of this chapter;
(2) military pay for full-time active duty with the U.S. Armed Services earned outside the State; and the first $2,000.00 of military pay for unit training in the State to National Guard and U.S. Reserve personnel for whom the Adjutant and Inspector General or Reserve Component Commander certifies that the taxpayer completed all unit training of his or her unit during the calendar year, and who has a federal adjusted gross income of less than $50,000.00;
(3) funds received through the federal Armed Forces Educational Loan Repayment Program under 10 U.S.C. chapters 109 and 1609, to the extent the funds are included in adjusted gross income of the taxpayer for the taxable year; and
(4)-(7) [Repealed.]
(8) the amount paid by the State of Vermont pursuant to 20 V.S.A. chapter 181 to the extent that such amount is included in the federal adjusted gross income of the taxpayer for the taxable year.
(b) For any taxable year, the Vermont income of a nonresident individual, estate, or trust is the sum of the following items of income to the extent they are required to be included in the adjusted gross income of the individual or the gross income of an estate or trust for that taxable year:
(1) rents and royalties derived from the ownership of property located within this State;
(2) gains from the sale or exchange of property located within this State;
(3) wages, salaries, commissions, or other income (excluding military pay for full-time active duty with the U.S. Armed Services and also excluding funds received through the federal Armed Forces Educational Loan Repayment Program under 10 U.S.C. chapters 109 and 1609; and also excluding the first $2,000.00 of military pay for unit training in the State to National Guard and U.S. Reserve personnel for whom the Adjutant and Inspector General or Reserve Component Commander certifies that the taxpayer completed all unit training of his or her unit during the calendar year, and who has a federal adjusted gross income of less than $50,000.00) received with respect to services performed within this State;
(4) income (other than income exempted from State taxation under the laws of the United States) derived from every business, trade, occupation, or profession to the extent that the business, trade, occupation, or profession is carried on within this State, including any compensation received:
(A) under an agreement not to compete with a business operating in Vermont;
(B) for goodwill associated with the sale of a Vermont business; or
(C) for services to be performed under a contract associated with the sale of a Vermont business, unless it is shown that the compensation for services does not constitute income from the sale of the business;
(5) income that was previously deferred under a nonqualified deferred compensation plan and that would have previously been included in the taxpayer’s Vermont income if it had not been deferred, and income derived from such previously deferred income; and
(6) proceeds from wagering transactions made within the State; or any Vermont State Lottery, tri-state lottery, or multijurisdictional lottery ticket paid to a person who purchased the ticket in Vermont, including payments received from a third party for the transfer of the rights to future proceeds related to the ticket; and the Commissioner may require withholding of any taxes due to the State under this subdivision from payments of wagering or lottery proceeds.
(c) For any taxable year, the Vermont income of a part-year resident individual or trust is the sum of:
(1) all items of income constituting Vermont income for the purpose of subsection (a) of this section that are earned or received during the period of the taxpayer’s residency in this State in the taxable year; and
(2) all items of income constituting Vermont income for the purposes of subsection (b) of this section that are earned or received during the period of the taxpayer’s nonresidency in this State in the taxable year.
(d) Vermont income shall not include any income of a nonresident from the activities listed in this subsection; and shall not include income of a nonresident through an entity such as a partnership, limited liability company, or trust, if that entity’s activities in this State are limited to activities that, without more, would not constitute nexus, plus any or all of the following activities necessary to create or maintain a World Wide Web page or Internet site for the nonresident or entity:
(1) ownership of data or programming code in this State, or use of that data or programming code by a person other than the nonresident or entity or by a person not in this State;
(2) ownership of, or receipt of services from, computer servers in this State; and
(3) receipt of computer processing or web hosting services from a computer service provider or web hosting service in this State. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1967, No. 121, § 5, eff. Jan. 1, 1968; 1969, No. 263 (Adj. Sess.), § 3, eff. April 6, 1970; 1979, No. 105 (Adj. Sess.), § 44, eff. date, see note set out below; 1989, No. 119, §§ 22, 23(a), eff. June 22, 1989; 1989, No. 210 (Adj. Sess.), § 297, eff. May 31, 1990; 1991, No. 32, § 6, eff. May 18, 1991; 1993, No. 49, § 8, eff. May 28, 1993; 1995, No. 29, § 28, eff. April 14, 1995; 1995, No. 71 (Adj. Sess.), § 1, eff. Feb. 14, 1996; 1995, No. 169 (Adj. Sess.), § 23, eff. May 15, 1996; 1995, No. 174 (Adj. Sess.), § 6; 1997, No. 50, §§ 13, 14, eff. June 26, 1997; 1997, No. 79 (Adj. Sess.), § 2, eff. Jan. 1, 1999; 1997, No. 156 (Adj. Sess.), §§ 4, 52, eff. April 29, 1998; 2001, No. 140 (Adj. Sess.), § 6; 2001, No. 144 (Adj. Sess.), §§ 1, 2, 29, eff. June 21, 2002; 2003, No. 70 (Adj. Sess.), § 40, eff. March 1, 2004; 2003, No. 152 (Adj. Sess.), § 14; 2005, No. 14, § 2, eff. May 3, 2005; 2007, No. 33, § 1, eff. May 18, 2007; 2009, No. 160 (Adj. Sess.), §§ 51, 53, eff. June 4, 2010; 2011, No. 45, § 3a, eff. May 24, 2011; 2011, No. 45, § 36l, eff. July 1, 2013; 2023, No. 63, § 4, eff. June 14, 2023.)
§ 5824. Adoption of federal income tax laws
The statutes of the United States relating to the federal income tax, as in effect on December 31, 2023, but without regard to federal income tax rates under 26 U.S.C. § 1, are hereby adopted for the purpose of computing the tax liability under this chapter and shall continue in effect as adopted until amended, repealed, or replaced by act of the General Assembly. (Added 2001, No. 140 (Adj. Sess.), § 7, eff. June 21, 2002; 2001, No. 144 (Adj. Sess.), § 23, eff. June 21, 2002; amended 2003, No. 66, § 313; 2003, No. 152 (Adj. Sess.), § 24, eff. June 7, 2004; 2005, No. 14, § 13; 2005, No. 94 (Adj. Sess.), § 2, eff. March 8, 2006; 2007, No. 33, § 6, eff. May 18, 2007; 2007, No. 190 (Adj. Sess.), § 26; 2009, No. 1 (Sp. Sess.), § H.26, eff. June 2, 2009; 2009, No. 160 (Adj. Sess.), § 29, eff. June 4, 2010; 2011, No. 45, § 2, eff. May 24, 2011; 2011, No. 143 (Adj. Sess.), § 9, eff. May 15, 2012; 2013, No. 73, § 20; 2013, No. 174 (Adj. Sess.), § 5, eff. Jan. 1, 2014; 2015, No. 57, § 66, eff. Jan. 1, 2015; 2015, No. 134 (Adj. Sess.), § 11, eff. Jan. 1, 2015; 2017, No. 73, § 7, eff. Jan. 1, 2016; 2018, No. 11 (Sp. Sess.), § H.7, eff. Jan. 1, 2018; 2019, No. 51, § 5, eff. Jan. 1, 2019; 2019, No. 175 (Adj. Sess.), § 13, eff. Jan. 1, 2020; 2021, No. 9, § 23, eff. Jan. 1, 2021; 2021, No. 73, § 23, eff. March 31, 2021; 2021, No. 148 (Adj. Sess.), § 7, eff. January 1, 2022; 2023, No. 72, § 1, eff. January 1, 2023; 2023, No. 144 (Adj. Sess.), § 3, eff. January 1, 2024.)
§ 5825. Credit for taxes paid to other states and provinces
(a) A taxpayer of this State who was a resident individual, estate, or trust during any portion of a taxable year shall receive credit against the tax imposed, for that taxable year, by section 5822 of this title for income taxes imposed by, and paid to, another state or territory of the United States, the District of Columbia, or a province of Canada, upon the taxpayer’s income earned or received from sources within that state, territory, district, or province during that portion of that taxable year. In no case shall the credit allowed by this section exceed the portion of Vermont income tax, otherwise imposed by this chapter, attributable to the adjusted gross income earned or received from sources within such other state, territory, district, or province.
(b) For purposes of this section, when a taxpayer domiciled in another jurisdiction is deemed to be a resident of Vermont as provided by subdivision 5811(11)(A)(ii) of this title, income from intangibles not employed in a business, trade, or profession shall be deemed to be derived from sources within the jurisdiction of domicile. However, notwithstanding the provisions of this subsection, no credit will be allowed against the tax imposed unless the jurisdiction of domicile provides for a similar credit. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1981, No. 134 (Adj. Sess.), § 1, eff. April 2, 1982; 1991, No. 67, § 26, eff. June 19, 1991; 1991, No. 186 (Adj. Sess.), § 12; 1997, No. 50, § 16, eff. June 26, 1997; 2001, No. 140 (Adj. Sess.), § 8, eff. June 21, 2002.)
§ 5825a. Credit for Vermont Higher Education Investment Plan contributions
(a) A taxpayer of this State, including each spouse filing a joint return, shall be eligible for a nonrefundable credit against the tax imposed under section 5822 of this title of 10 percent of the first $2,500.00 per beneficiary, contributed by the taxpayer during the taxable year to a Vermont Higher Education Investment Plan account under 16 V.S.A. chapter 87, subchapter 7, provided the account is provided directly by the Vermont Student Assistance Corporation to the participant.
(b) A taxpayer who has received a credit under subsection (a) of this section shall repay to the Commissioner 10 percent of any distribution from a higher education investment plan account, up to a maximum of the total credits received by the taxpayer under subsection (a) of this section minus any amount of repayment of such credits in prior tax years except when the distribution:
(1) is used exclusively for costs of attendance at an approved postsecondary education institution as defined in 16 V.S.A. § 2822(6);
(2) is used for a qualifying expense associated with a registered apprenticeship program pursuant to 26 U.S.C. § 529(c)(8);
(3) is made after the death of the beneficiary or after the beneficiary becomes disabled pursuant to subdivisions (q)(2)(C) and (m)(7) of 26 U.S.C. § 72; or
(4) is used for qualified higher education expense loan repayment pursuant to 26 U.S.C. § 529(c)(9), provided the loan being repaid was used exclusively for costs of attendance at an approved postsecondary education institution as defined in 16 V.S.A. § 2822(6).
(c) Repayments under subsection (b) of this section shall be subject to assessment, notice, penalty and interest, collection, and other administration in the same manner as an income tax under this chapter. (Added 2003, No. 65, § 2, eff. for tax years beginning on and after Jan. 1, 2004; amended 2005, No. 207 (Adj. Sess.), § 6, eff. May 31, 2006; 2019, No. 51, § 19, eff. Jan. 1, 2019; 2019, No. 154 (Adj. Sess.), § E.605.3, eff. Oct. 2, 2020; 2019, No. 175 (Adj. Sess.), § 19, eff. Oct. 8, 2020; 2021, No. 20, § 269; 2021, No. 179 (Adj. Sess.), § 18, eff. January 1, 2022.)
§ 5826. Repealed. 2009, No. 160 (Adj. Sess.), § 51(a)(2), eff. Jan. 1, 2013.
§ 5827. Repealed. 1989, No. 119, § 23(b), eff. June 22, 1989.
§ 5828. Mobile home park sale; capital gain credit
A taxpayer of this State shall receive a credit against the tax imposed under section 5822 or 5832 of this title for a qualified sale of a mobile home park. The credit shall be in the amount of seven percent of the taxpayer’s gain subject to federal income tax for the taxable year. Credit in excess of the taxpayer’s tax liability for the taxable year may be carried forward for credit in the next succeeding three taxable years. “Qualified sale of a mobile home park” means the land comprising a mobile home park that is transferred in a single purchase to a group composed of a majority of the mobile home park leaseholders as defined in 10 V.S.A. § 6242(a) or to a nonprofit organization that represents such a group. (Added 1997, No. 103 (Adj. Sess.), § 11, eff. April 23, 1998.)
§ 5828a. Repealed. 1991, No. 32, § 7, eff. May 18, 1991.
§ 5828b. Earned income tax credit
(a) A resident individual or part-year resident individual who is entitled to an earned income tax credit granted under the laws of the United States or who would have been entitled to an earned income tax credit under the laws of the United States but for the fact that the individual, the individual’s spouse, or one or more of the individual’s children does not have a qualifying taxpayer identification number shall be entitled to a credit against the tax imposed for each year by section 5822 of this title. The credit shall be 38 percent of the earned income tax credit granted to the individual under the laws of the United States or that would have been granted to the individual under the laws of the United States but for the fact that the individual, the individual’s spouse, or one or more of the individual’s children does not have a qualifying taxpayer identification number, multiplied by the percentage that the individual’s income that is earned or received during the period of the individual’s residency in this State bears to the individual’s total income.
(b) The tax credit claimed by a taxpayer under this section shall be deductible from the taxpayer’s income tax liability, if any, for the year in which the income is earned. In the event the credit exceeds the amount of the income tax payments due from the taxpayer, the excess of credits over payments due shall be paid to the taxpayer. Any payments due to a taxpayer under this subsection shall not bear interest. (Added 1987, No. 258 (Adj. Sess.), § 1, eff. June 16, 1988; amended 1999, No. 49, § 36, eff. June 2, 1999; 1999, No. 119 (Adj. Sess.), § 2, eff. May 18, 2000; 2005, No. 14, § 1, eff. May 3, 2005; 2018, No. 11 (Sp. Sess.), § H.4, eff. Jan. 1, 2018; 2021, No. 138 (Adj. Sess.), § 4, eff. January 1, 2022; 2023, No. 72, § 15, eff. January 1, 2023.)
§ 5828c. Child and dependent care credit
A resident or part-year resident of this State shall be eligible for a refundable credit against the tax imposed under section 5822 of this title. The credit shall be equal to 72 percent of the federal child and dependent care credit allowed to the taxpayer for the taxable year for child or dependent care services. The amount of the credit for a part-year resident shall be multiplied by the percentage that the individual’s income that is earned or received during the period of the individual’s residency in this State bears to the individual’s total income. (Added 2001, No. 144 (Adj. Sess.), § 24, eff. June 21, 2002; amended 2003, No. 70 (Adj. Sess.), § 39, eff. March 1, 2004; 2021, No. 138 (Adj. Sess.), § 3, eff. January 1, 2022; 2023, No. 72, § 14, eff. January 1, 2023.)
§ 5829. Repealed. 1993, No. 210 (Adj. Sess.), § 40, eff. Jan. 1, 1994.
§ 5830. Taxpayer identification numbers; credits
(a) The Commissioner shall provide a process for an individual to claim the child tax credit or the earned income tax credit, or both, pursuant to subsections 5828b(a) and 5830f(a) of this title when the individual, the individual’s spouse, or one or more of the individual’s qualifying children does not have a taxpayer identification number. The Commissioner shall not inquire about or record the citizenship and immigration status of an individual, an individual’s spouse, or one or more of an individual’s qualifying children when an individual claims one or more credits pursuant to this section and subsections 5828b(a) and 5830f(a) of this title.
(b) Upon the Commissioner’s request, an individual who claims one or more credits pursuant to subsections 5828b(a) and 5830f(a) of this title shall provide valid documents establishing the identity and income for the taxable year of the individual and, as applicable, the individual’s spouse and qualifying children. Upon receiving a valid Social Security number issued by the Social Security Administration, the individual shall notify the Commissioner in the time and manner prescribed by the Commissioner.
(c) All claims submitted and records created pursuant to this section and subsections 5828b(a) and 5830f(a) of this title shall be exempt from public inspection and copying under the Public Records Act 1 V.S.A. § 317(c)(6) and shall be kept confidential as return or return information pursuant to section 3102 of this title. (Added 2023, No. 72, § 17, eff. January 1, 2023.)
§ 5830a. Interest tax
(a) When another state imposes a tax upon interest earned by its residents on deposits in a lending institution located in this State, but exempts from such taxation deposits by its residents in lending institutions located within that state, then there is hereby levied a tax in the amount of five percent upon interest earned by residents of this State on deposits in lending institutions located in such other state. As used in this section, “lending institution” includes any bank, savings bank, trust company, or building and loan association or other similar institution.
(b) For each taxpayer, $600.00 of income otherwise taxable under this section shall be exempt in each tax year. A husband and wife filing a joint return constitute a single taxpayer. (Added 1977, No. 67.)
§ 5830b. Tax credits; Entrepreneurs’ Seed Capital Fund
(a) The initial capitalization of the Entrepreneurs’ Seed Capital Fund, as established in 10 V.S.A. § 291, up to $7,150,000.00 raised from Vermont taxpayers on or before January 1, 2020, shall entitle those taxpayers to a credit against the tax imposed by section 5822, 5832, 5836, or 8551 of this title and by 8 V.S.A. § 6014. The credit may be claimed for the taxable year in which a contribution is made and each of the four succeeding taxable years. The amount of the credit for each year shall be the lesser of four percent of the taxpayer’s contribution or 50 percent of the taxpayer’s tax liability for that taxable year prior to the allowance of this credit; provided, however, that in no event shall the aggregate credit allowable under this section for all taxable years exceed 20 percent of the taxpayer’s contribution to the initial $7,150,000.00 capitalization of the Fund. The credit shall be nontransferable except as provided in subsection (b) of this section.
(b) If the taxpayer disposes of an interest in the Fund within four 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. (Added 1985, No. 171 (Adj. Sess.), § 2, eff. May 7, 1986; amended 1987, No. 80, § 7, eff. June 9, 1987; 1993, No. 78, § 1; 2003, No. 164 (Adj. Sess.), § 8, eff. June 12, 2004; 2005, No. 184 (Adj. Sess.), § 17b, eff. May 24, 2006; 2009, No. 54, § 27, eff. June 1, 2009.)
§ 5830c. Tax credits; charitable investments in housing
(a) Credit authorized. A charitable investment approved by the Commissioner of Housing and Community Affairs in an eligible housing charity shall entitle a Vermont taxpayer to a credit against the tax imposed by sections 5822 (individual income), 5832 (corporate income), 5836 (banks and financial institutions), or 8551 (insurance companies) of this title. The credit may be claimed for any year in which a charitable investment is made and for each year thereafter until the principal is repaid, or the investment is transferred, or the taxpayer is notified or agrees or the Commissioner of Housing and Community Affairs determines that the principal is not likely to be repaid, or until the end of the year in which the housing charity ceases to be eligible, whichever is earlier.
(b) Amount of credit. The amount of the credit shall be equal to the difference between the net income that would have been received by the taxpayer at the charitable threshold rate during the taxable year and the actual net income received by or credited to the taxpayer from a charitable investment in an eligible housing charity. However, the credit shall not exceed three percent of the average outstanding principal balance of the investment during the taxable year.
(c) Definitions. As used in this section:
(1) “Affordable housing” shall be defined by rule adopted by the Department of Housing and Community Affairs. The rule shall include the following provisions:
(A) At least 50 percent of the units shall be occupied by households whose income does not exceed 100 percent of the greater of State or area median income.
(B) The goal shall be to provide housing at a cost of no more than 30 percent of a household’s gross income.
(C) The affordability of the unit shall be protected for a period of time not less than the term of any loan made pursuant to subdivision (d)(4) of this section for the unit or units or at least 15 years, whichever is greater, through a housing subsidy covenant or other legally binding instrument, which shall terminate upon the issuance of a judgment of foreclosure or a transfer of the property in lieu of foreclosure. This rule may also include additional provisions consistent with this section.
(2) “Bank prime loan rate” means the March average prime loan rate, as of March 31 each year, used by insured U.S. chartered commercial banks to price short-term business loans, as published in the Federal Reserve Board’s statistical release.
(3) “Charitable investment” means a loan or deposit made to an eligible housing charity, on which the actual annual rate of return is at or below the charitable threshold rate.
(4) The “charitable threshold rate” means, for each year beginning July 1, a rate that is the greater of: two percentage points below the most recent bank prime loan rate or one percent.
(5) “Eligible housing charity” means a governmental agency or private nonprofit organization determined eligible by the Commissioner of Housing and Community Affairs according to subsection (d) of this section.
(6) “Net income” means interest income received or credited to the taxpayer.
(d) Eligibility. Any organization seeking eligibility shall apply to the Commissioner of Housing and Community Affairs, who is authorized to issue certificates of eligibility for tax credits to eligible housing charities in specific amounts. In no event shall certificates of eligibility for tax credits for charitable investments be issued in excess of $5,000,000.00 in the aggregate for any fiscal year. The Commissioner by rule shall establish procedures and criteria for application to ensure the equitable distribution of tax credit certificates among eligible applicants. Subject to this limit, the Commissioner shall issue a certificate of eligibility to receive tax credit investments to an organization if it meets all of the following criteria:
(1) It is either an agency or instrumentality of the State, or a private not-for-profit organization that has applied for and has not been denied tax-exempt status by the U.S. Internal Revenue Service.
(2) It has as a major purpose to provide affordable housing.
(3) It can demonstrate that as of the date of its application, it had loaned or invested at least $50,000.00 for the provision of affordable housing.
(4) At least 70 percent of all investments subject to this section are disbursed within 12 months for:
(A) the acquisition, rehabilitation, or construction of affordable housing in Vermont by the eligible housing charity; or
(B) loans for affordable housing in Vermont; or
(C) loans to individual borrowers in Vermont having no more than 100 percent of median income of the State or area, whichever is greater.
(5) Loans of charitable investments made pursuant to subdivision (4) of this subsection shall be at an average rate of interest not more than two percent above the bank prime loan rate.
(6) It can demonstrate that it has the administrative capacity to segregate funds to comply with and account for the requirements of subdivision (4) of this subsection.
(e) Revocation. The Commissioner of Housing and Community Affairs may revoke the eligibility of any organization under this section after a hearing, upon a finding that it fails to meet substantially all of the criteria required for eligibility. Such organization shall immediately notify all investors of the revocation. Such organization shall reimburse the State for the full amount of any tax credits allowed its investors after revocation of eligibility, and shall pay to investors the full amount of any tax credits claimed by an investor but disallowed by the Commissioner due solely to revocation of eligibility. Any person aggrieved by the denial or revocation of eligibility may appeal to Superior Court.
(f) Procedure for claiming tax credit.
(1) Each eligible housing charity accepting investment funds for which a tax credit may be claimed by the investor under this section shall furnish investors with a copy of its certificate of eligibility to receive tax credit investments, plus a statement of the amount and terms of the investment on a form to be provided by the Commissioner of Taxes. The eligible housing charity shall keep a current list of the names, current addresses, and taxpayer identification numbers of all investors who may claim a tax credit under this section.
(2) On or before January 31 of each year, the eligible housing charity shall furnish all investors who may claim a tax credit under this section with three copies of a tax credit statement, in a form specified by the Commissioner of Taxes, showing the principal balance of the investment at the beginning of the previous calendar year or at the date of the investment if made during that year, the principal balance at the end of the calendar year, the average outstanding principal balance during the year, the income that would have been received at the charitable threshold rate, the actual income received by or credited to the investor from the eligible housing charity during the calendar year and the amount of the tax credit.
(3) On or before January 31 of each year, the eligible housing charity shall furnish the Commissioner of Taxes with a list of all investors who may claim a tax credit under this section, in a form specified by the Commissioner, showing the principal balance of the investment at the beginning of the previous calendar year or at the date of the investment if made during that year, the principal balance at the end of the calendar year, the average outstanding principal balance during the year, the income that would have been received at the charitable threshold rate, the actual income received by or credited to the investor from the eligible housing charity during the calendar year and the amount of the tax credit.
(4) Each investor who claims a tax credit under this section shall claim the credit on a form to be provided by the Commissioner, which may be combined with the tax credit statement furnished by the eligible housing charity pursuant to subdivision (2) of this subsection. Each claimant shall also submit with his or her tax return a copy of the certificate of eligibility of the eligible housing charity and a copy of the tax credit statement furnished by the eligible housing charity.
(5) If the amount of allowed tax credit exceeds the taxpayer’s income tax liability for the taxable year, the amount thereof that exceeds such tax liability may be carried over for deduction from the taxpayer’s income tax liability in the next succeeding taxable year or years until the total amount of the tax credit has been deducted from tax liability; provided, however, that no tax credit shall be carried over for deduction after the third taxable year succeeding the taxable year in which the credit was earned.
(6) Investors in an eligible housing charity whose eligibility to receive tax credit investments is revoked during any calendar year may receive the credit for the year during which the revocation occurs, but not for any succeeding year unless eligibility is reinstated by the Commissioner of Housing and Community Affairs. (Added 1989, No. 240 (Adj. Sess.), § 2; amended 2001, No. 144 (Adj. Sess.), §§ 39, 40, eff. June 21, 2002; 2005, No. 116 (Adj. Sess.), §§ 3, 4, eff. April 26, 2006.)
§ 5830d. Deferral of income taxation; combat zone duty
The provisions of 26 U.S.C. § 7508 shall apply to this chapter for the benefit of:
(1) individuals called up for full-time active military duty as the result of the existence of a military conflict in an area designated as a combat zone by the President of the United States, regardless of whether such duty is performed within the combat zone; and
(2) individuals serving in an area treated by federal law in the same manner as if it were a combat zone. (Added 1991, No. 110, § 2, eff. June 28, 1991; amended 1995, No. 169 (Adj. Sess.), § 25, eff. May 15, 1996.)
§ 5830e. Retirement income; social security income
(a) Social Security income. The portion of federally taxable Social Security benefits excluded from taxable income under subdivision 5811(21)(B)(iv) of this chapter shall be as follows:
(1) For taxpayers whose filing status is single, married filing separately, head of household, or surviving spouse:
(A) If the federal adjusted gross income of the taxpayer is less than or equal to $50,000.00, all federally taxable benefits received under the federal Social Security Act shall be excluded.
(B) If the federal adjusted gross income of the taxpayer is greater than $50,000.00 but less than $60,000.00, the percentage of federally taxable benefits received under the Social Security Act to be excluded shall be proportional to the amount of the taxpayer’s federal adjusted gross income over $50,000.00, determined by:
(i) subtracting the federal adjusted gross income of the taxpayer from $60,000.00;
(ii) dividing the value under subdivision (i) of this subdivision (B) by $10,000.00; and
(iii) multiplying the value under subdivision (ii) of this subdivision (B) by the federally taxable benefits received under the Social Security Act.
(C) If the federal adjusted gross income of the taxpayer is equal to or greater than $60,000.00, no amount of the federally taxable benefits received under the Social Security Act shall be excluded under this section.
(2) For taxpayers whose filing status is married filing jointly:
(A) If the federal adjusted gross income of the taxpayer is less than or equal to $65,000.00, all federally taxable benefits received under the Social Security Act shall be excluded.
(B) If the federal adjusted gross income of the taxpayer is greater than $65,000.00 but less than $75,000.00, the percentage of federally taxable benefits received under the Social Security Act to be excluded shall be proportional to the amount of the taxpayer’s federal adjusted gross income over $65,000.00, determined by:
(i) subtracting the federal adjusted gross income of the taxpayer from $75,000.00;
(ii) dividing the value under subdivision (i) of this subdivision (B) by $10,000.00; and
(iii) multiplying the value under subdivision (ii) of this subdivision (B) by the federally taxable benefits received under the Social Security Act.
(C) If the federal adjusted gross income of the taxpayer is equal to or greater than $75,000.00, no amount of the federally taxable benefits received under the Social Security Act shall be excluded under this section.
(b) Civil Service Retirement System income. The portion of income received from the Civil Service Retirement System excluded from taxable income under subdivision 5811(21)(B)(iv) of this title shall be subject to the limitations under subsection (e) of this section and shall be determined as follows:
(1) For taxpayers whose filing status is single, married filing separately, head of household, or surviving spouse:
(A) If the federal adjusted gross income of the taxpayer is less than or equal to $50,000.00, the first $10,000.00 of income received from the Civil Service Retirement System shall be excluded.
(B) If the federal adjusted gross income of the taxpayer is greater than $50,000.00 but less than $60,000.00, the percentage of the first $10,000.00 of income received from the Civil Service Retirement System to be excluded shall be proportional to the amount of the taxpayer’s federal adjusted gross income over $50,000.00, determined by:
(i) subtracting the federal adjusted gross income of the taxpayer from $60,000.00;
(ii) dividing the value under subdivision (i) of this subdivision (B) by $10,000.00; and
(iii) multiplying the value under subdivision (ii) of this subdivision (B) by the first $10,000.00 of income received from the Civil Service Retirement System.
(C) If the federal adjusted gross income of the taxpayer is equal to or greater than $60,000.00, no amount of the income received from the Civil Service Retirement System shall be excluded under this section.
(2) For taxpayers whose filing status is married filing jointly:
(A) If the federal adjusted gross income of the taxpayer is less than or equal to $65,000.00, the first $10,000.00 of income received from the Civil Service Retirement System shall be excluded.
(B) If the federal adjusted gross income of the taxpayer is greater than $65,000.00 but less than $75,000.00, the percentage of the first $10,000.00 of income received from the Civil Service Retirement System to be excluded shall be proportional to the amount of the taxpayer’s federal adjusted gross income over $65,000.00, determined by:
(i) subtracting the federal adjusted gross income of the taxpayer from $75,000.00;
(ii) dividing the value under subdivision (i) of this subdivision (B) by $10,000.00; and
(iii) multiplying the value under subdivision (ii) of this subdivision (B) by the first $10,000.00 of income received from the Civil Service Retirement System.
(C) If the federal adjusted gross income of the taxpayer is equal to or greater than $75,000.00, no amount of the income received from the Civil Service Retirement System shall be excluded under this section.
(c) Other contributory retirement systems; earnings not covered by Social Security. Other retirement income, except U.S. military retirement income pursuant to subsection (d) of this section, received by a taxpayer of this State shall be excluded pursuant to subsection (b) of this section as though the income were received from the Civil Service Retirement System and shall be subject to the limitations under subsection (e) of this section, provided that:
(1) the income is received from a contributory annuity, pension, endowment, or retirement system of:
(A) the U.S. government or a political subdivision or instrumentality of the U.S. government;
(B) this State or a political subdivision or instrumentality of this State; or
(C) another state or a political subdivision or instrumentality of another state; and
(2) the contributory system from which the income is received was based on earnings that were not covered by the Social Security Act.
(d) U.S. military retirement income. U.S. military retirement income received by a taxpayer of this State shall be excluded pursuant to subsection (b) of this section as though the income were received from the Civil Service Retirement System and shall be subject to the limitations under subsection (e) of this section.
(e) Requirement to elect one exclusion. A taxpayer of this State who is eligible during the taxable year for the Social Security income exclusion under subsection (a) of this section and any of the exclusions under subsections (b)–(d) of this section shall elect either one of the exclusions for which the taxpayer is eligible under subsections (b)–(d) of this section or the Social Security income exclusion under subsection (a) of this section, but not both, for the taxable year. A taxpayer of this State who is eligible during the taxable year for more than one of the exclusions under subsections (b)–(d) of this section shall elect only one of the exclusions for which the taxpayer is eligible for the taxable year. (Added 2018, No. 11 (Sp. Sess.), § H.5, eff. Jan. 1, 2018; amended 2021, No. 105 (Adj. Sess.), § 534, eff. July 1, 2022; 2021, No. 138 (Adj. Sess.), § 7, eff. January 1, 2022; 2023, No. 6, §§ 376, 377, eff. July 1, 2023.)
§ 5830f. Vermont child tax credit
(a) A resident individual or part-year resident individual who is entitled to a child tax credit under the laws of the United States or who would have been entitled to a child tax credit under the laws of the United States but for the fact that the individual or the individual’s spouse does not have a taxpayer identification number shall be entitled to a refundable credit against the tax imposed by section 5822 of this title for the taxable year. The total credit per taxable year shall be in the amount of $1,000.00 per qualifying child, as defined under 26 U.S.C. § 152(c) but notwithstanding the taxpayer identification number requirements under 26 U.S.C. § 24(e) and (h)(7), who is five years of age or younger as of the close of the calendar year in which the taxable year of the taxpayer begins. For a part-year resident individual, the amount of the credit shall be multiplied by the percentage that the individual’s income that is earned or received during the period of the individual’s residency in this State bears to the individual’s total income.
(b) Notwithstanding subsection (a) of this section, the amount of the credit per child under this section shall be reduced, but not below zero, by $20.00 for each $1,000.00, or fraction thereof, by which the individual’s adjusted gross income exceeds $125,000.00, irrespective of the individual’s filing status. For purposes of this subsection, spouses filing jointly shall be considered an individual.
(c) Notwithstanding any provision of law to the contrary, the refundable credit and its payment authorized under this section shall be treated in the same manner as the federal Earned Income Tax Credit and shall not be considered as assets, income, or resources to the same extent the credit and its payment would be disregarded pursuant to 26 U.S.C. § 6409 and the general welfare doctrine for purposes of determining eligibility for benefits or assistance, or the amount or extent of those benefits or assistance, under any State or local program, including programs established under 33 V.S.A. § 3512 and chapters 11, 17, 19, 21, 25, and 26. This subsection shall only apply to the extent that it does not conflict with federal law relating to the benefit or assistance program and that any required federal approval or waiver is first obtained for that program.
[Subsection (d) effective when contingency met.]
(d)(1) The Commissioner shall establish a program to make advance quarterly payments of the credit under this section during the calendar year that, in the aggregate, equal 50 percent of the annual amount of the credit allowed to each individual for the taxable year. The quarterly payments made to an individual during the calendar year shall be in equal amounts, except that the Commissioner may modify the quarterly amount upon receipt of any information furnished by the individual that allows the Commissioner to determine the annual amount. The remaining 50 percent of the annual amount of the credit allowed to each individual shall be determined at the time of filing a Vermont personal income tax return for the taxable year pursuant to section 5861 of this title.
(2) The Commissioner shall provide a process by which individuals may elect not to receive advance payments under this subsection. (Added 2021, No. 138 (Adj. Sess.), § 1, eff. January 1, 2022; amended 2023, No. 72, § 16, eff. January 1, 2023; 2023, No. 72, § 18.)
- Subchapter 003: TAXATION OF CORPORATIONS
§ 5831. Name of tax
The tax imposed by this subchapter shall be known as the Vermont Corporate Income Tax. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.)
§ 5832. Tax on income of corporations
A tax is imposed for each calendar year, or fiscal year ending during that calendar year, upon the income earned or received in that taxable year by every taxable corporation, reduced by any Vermont net operating loss allowed under section 5888 of this title, such tax being the greater of:
(1) an amount determined in accordance with the following schedule:
Vermont net income of the corporation Tax for the taxable year allocated or apportioned to Vermont under section 5833 of this title $ 0-10,000.00 6.00% 10,001.00-25,000.00 $600.00 plus 7.0% of the excess over $10,000.00 25,001.00 and over $1,650.00 plus 8.5% of the excess over $25,000.00 or (2)(A) $75.00 for small farm corporations. “Small farm corporation” means any corporation organized for the purpose of farming, which during the taxable year is owned solely by active participants in that farm business and receives less than $100,000.00 Vermont gross receipts from that farm operation, exclusive of any income from forest crops; or
(B) An amount determined in accordance with section 5832a of this title for a corporation that qualifies as and has elected to be taxed as a digital business entity for the taxable year; or
(C) For C corporations with Vermont gross receipts from $0.00–$500,000.00, the greater of the amount determined under subdivision (1) of this section or $100.00; or
(D) For C corporations with Vermont gross receipts from $500,001.00–$1,000,000.00, the greater of the amount determined under subdivision (1) of this section or $500.00; or
(E) For C corporations with Vermont gross receipts from $1,000,001.00–$5,000,000.00, the greater of the amount determined under subdivision (1) of this section or $2,000.00; or
(F) For C corporations with Vermont gross receipts from $5,000,001.00–$300,000,000.00, the greater of the amount determined under subdivision (1) of this section or $6,000.00; or
(G) For C corporations with Vermont gross receipts greater than $300,000,000.00, the greater of the amount determined under subdivision (1) of this section or $100,000.00. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1969, No. 144, § 10, eff. June 1, 1969; 1973, No. 270 (Adj. Sess.), § 1, eff. date, see note set out below; 1983, No. 144 (Adj. Sess.), § 3, eff. April 12, 1984; 1983, No. 144 (Adj. Sess.), § 6(b), eff. Jan. 1, 1988; 1991, No. 32, § 31, eff. May 18, 1991; 1991, No. 67, § 26c, eff. June 19, 1991; 1997, No. 60, § 73, eff. June 26, 1997; 2003, No. 152 (Adj. Sess.), §§ 3, 4, eff. June 7, 2004; 2005, No. 207 (Adj. Sess.), §§ 14, 16, eff. May 31, 2006; 2009, No. 1 (Sp. Sess.), § H.52, eff. Jan. 1, 2010; 2011, No. 143 (Adj. Sess.), § 16, eff. May 15, 2012; 2019, No. 51, § 7, eff. Jan. 1, 2019; 2021, No. 148 (Adj. Sess.), § 2, eff. January 1, 2023.)
§ 5832a. Digital business entity franchise tax
(a) There is imposed upon every business entity that qualifies as and has elected to be taxed as a digital business entity an annual franchise tax equal to:
(1) the greater of 0.02 percent of the current value of the tangible and intangible assets of the company or $250.00, but in no case more than $500,000.00; or
(2) where the authorized capital stock does not exceed 5,000 shares, $250.00; where the authorized capital stock exceeds 5,000 shares but is not more than 10,000 shares, $500.00; and the further sum of $250.00 on each 10,000 shares or part thereof.
(b) In no case shall the tax on any corporation for a full taxable year, whether computed under subdivision (a)(1) or (2) of this section, be more than $500,000.00 or less than $250.00.
(c) In the case of a corporation that has not been in existence during the whole year, the amount of tax due, at the foregoing rates and as provided, shall be prorated for the portion of the year during which the corporation was in existence.
(d) In the case of a corporation changing during the taxable year the amount of its authorized capital stock, the total annual franchise tax payable at the foregoing rates shall be arrived at by adding together the franchise taxes calculated pursuant to subdivision (a)(2) of this section as prorated for the several periods of the year during which each distinct authorized amount of capital stock was in effect.
(e) For the purpose of computing the taxes imposed by this section, the authorized capital stock of a corporation shall be considered to be the total number of shares that the corporation is authorized to issue without regard to whether the number of shares that may be outstanding at any one time is limited to a lesser number.
(f) The franchise tax under this section shall be reported and paid in the same manner as the tax under subdivision 5832(2)(B) of this title; provided, however, that an electing corporation shall also provide the Commissioner with a copy of its federal tax return. (Added 2009, No. 1 (Sp. Sess.), § H.53, eff. Jan. 1, 2010.)
§ 5833. Allocation and apportionment of income
(a) If the income of a taxable corporation is derived from any trade, business, or activity conducted entirely within this State, the Vermont net income of the corporation shall be allocated to this State in full. If the income of a taxable corporation is derived from any trade, business, or activity conducted both within and outside this State, the amount of the corporation’s Vermont net income that shall be apportioned to this State, so as to allocate to this State a fair and equitable portion of that income, shall be determined by multiplying that Vermont net income by the gross sales, or charges for services performed, within this State, expressed as a percentage of such sales or charges whether within or outside this State.
(1) Sales of tangible personal property are made in this State if: the property is delivered or shipped to a purchaser, other than the U.S. government, who takes possession within this State, regardless of f.o.b. point or other conditions of sale.
(2) Sales, other than the sale of tangible personal property, are in this State if the taxpayer’s market for the sales is in this State. The taxpayer’s market for sales is in this State:
(A) in the case of sale, rental, lease, or license of real property, if and to the extent the property is located in this State;
(B) in the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in this State;
(C) in the case of sale of a service, if and to the extent the service is delivered to a location in this State; and
(D) in the case of intangible property:
(i) that is rented, leased, or licensed, if and to the extent the property is used in this State, provided that intangible property utilized in marketing a good or service to a consumer is “used in this State” if that good or service is purchased by a consumer who is in this State; and
(ii) that is sold, if and to the extent the property is used in this State, provided that:
(I) a contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is “used in this State” if the geographic area includes all or part of this State;
(II) receipts from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property shall be treated as receipts from the rental, lease, or licensing of such intangible property under subdivision (i) of this subdivision (2)(D); and
(III) all other receipts from a sale of intangible property shall be excluded from the numerator and denominator of the receipts factor.
(3) If the state or states of assignment under subdivision (2) of this subsection cannot be determined, the state or states of assignment shall be reasonably approximated.
(4) If the taxpayer is not taxable in a state to which a receipt is assigned under subdivision (2) or (3) of this subsection, or if the state of assignment cannot be determined under subdivision (2) of this subsection or reasonably approximated under subdivision (3) of this subsection, such receipt shall be excluded from the denominator of the receipts factor.
(5) The Commissioner of Taxes shall adopt rules as necessary to carry out the purposes of this section.
(6) A taxable corporation subject to apportionment under this section shall report to the Commissioner of Taxes:
(A) the average of the value of all the real and tangible property within this State at the beginning of the taxable year and at the end of the taxable year, provided the Commissioner may require the use of the average of the value on the 15th or other day of each month in cases where the Commissioner determines that the computation is necessary to more accurately reflect the average value of property within Vermont during the taxable year, expressed as a percentage of all property both within and outside this State; and
(B) the total wages, salaries, and other personal service compensation paid to employees within this State during the taxable year, expressed as a percentage of all compensation paid, whether within or outside this State.
(b) If the application of the provisions of this section does not fairly represent the extent of the business activities of a corporation within this State, the corporation may petition for, or the Commissioner may require, with respect to all or any part of the corporation’s business activity, if reasonable:
(1) separate accounting;
(2) the exclusion or modification of any or all of the factors;
(3) the inclusion of one or more additional factors that will fairly represent the corporation’s business activity in this State; or
(4) the employment of any other method to effectuate an equitable allocation and apportionment of the corporation’s income. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 73, §§ 15, 16, eff. April 16, 1971; 1987, No. 82, § 6, eff. June 9, 1987; 2003, No. 152 (Adj. Sess.), § 5, eff. June 7, 2004; amended 2019, No. 51, § 8, eff. Jan. 1, 2020; 2021, No. 148 (Adj. Sess.), § 3, eff. January 1, 2023; 2023, No. 6, § 378, eff. July 1, 2023.)
§ 5834. Computation of gains and losses
For the purpose of ascertaining gain or loss from the sale or other disposition of property, real, personal, or mixed, acquired before January 1, 1931, the taxpayer may, in lieu of the adjusted basis prescribed by the applicable U.S. Internal Revenue Code, use the fair market value of such property as of January 1, 1931, adjusted for the period subsequent thereto. In all other respects, the gain or loss on the sale or other disposition of property shall be ascertained as prescribed by such Code. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.)
§ 5835. Construction of subchapter
Nothing in this subchapter shall be construed to repeal or affect any of the provisions of chapter 211 of this title. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.)
§ 5836. Franchise tax on financial institutions
(a) A tax is imposed for each calendar month or part thereof upon the franchise or privilege of doing business in this State of every corporation that is a financial institution as defined in 8 V.S.A. § 11101(32) that has a business location in this State; provided, however, that a merchant bank organized under 8 V.S.A. § 12603 and an uninsured bank organized under 8 V.S.A. § 12604 shall not be considered to be financial institutions for purposes of the tax imposed by this section.
(b) The tax imposed by this section for each taxable month shall be equal to 0.000096 of the average monthly deposit for such taxable month held in Vermont by the corporation. As used in this section, the word “deposit” shall have the same meaning as the word “deposit” as defined in 12 C.F.R. § 204.2(a)(1). The average monthly deposit for any taxable month shall be determined by the deposits held in Vermont by the corporation on the last business day of each of the 12 months directly preceding the taxable month for which the average monthly deposit is to be determined. The 12 deposits for the preceding 12 months shall be added together and divided by 12 to produce the average monthly deposit for the taxable month in question. In the event a corporation has not been doing business for 12 consecutive months prior to any taxable month for which an average monthly deposit is to be determined, the average monthly deposit for such taxable months shall be based upon the number of months (less than 12) that the bank has been doing business prior to the taxable month in question.
(c) The tax imposed by this section shall be paid monthly to the Commissioner on or before the 25th day of each month for the tax due in the previous month.
(d), (e) [Repealed.]
(f) To the extent they are not explicitly in conflict with the provisions of this section, the provisions of subchapters 6, 7, 8, and 9 of this chapter shall apply to the tax imposed by this section.
(g) A corporation that is subject to the tax imposed by this section shall not be subject to the tax imposed by section 5832 of this title.
(h) When a taxpayer, under this section, transfers all or a portion of its business assets to another corporation that is or will be subject to tax under this section, the transferee corporation shall include, and the transferor shall not include, in the computation of “average monthly deposit” for purposes of subsection (b) of this section, the transferred deposits that were held by the transferor corporation during the 12 months directly preceding the transfer.
(i) An independent trust company established pursuant to 8 V.S.A. chapter 77 is not a financial institution within the meaning of this section.
(j) The Vermont Higher Education Savings Plan shall not be subject to the tax imposed by this section. (Added 1967, No. 157, § 1; amended 1969, No. 144, § 11, eff. June 1, 1969; 1973, No. 270 (Adj. Sess.), § 2, eff. date, see note set out below; 1983, No. 144 (Adj. Sess.), § 5, eff. April 12, 1984; 1991, No. 32, § 29, eff. May 18, 1991; 1995, No. 29, § 29, eff. April 14, 1995; 1995, No. 169 (Adj. Sess.), § 16, eff. May 15, 1996; 1997, No. 60, § 75; 1997, No. 79 (Adj. Sess.), § 3; 1997, No. 98 (Adj. Sess.), § 8d, eff. April 16, 1998; 1999, No. 153 (Adj. Sess.), § 33, eff. Jan. 1, 2001; 2003, No. 152 (Adj. Sess.), § 6, eff. June 7, 2004; 2015, No. 134 (Adj. Sess.), § 37, eff. Jan. 1, 2017.)
§ 5837. Repealed. 2003, No. 152 (Adj. Sess.), § 8.
§ 5838. Digital business entity election
A corporation shall not be subject to the tax imposed by section 5832 of this title if the corporation qualifies as and elects to be taxed as a digital business entity for the taxable year. (Added 2009, No. 1 (Sp. Sess.), § H.54, eff. Jan. 1, 2010.)
- Subchapter 004: WITHHOLDING OF TAXES AT SOURCE
§ 5841. Requirement and rate of withholding
(a) Every person who is required under the laws of the United States to withhold federal income tax from payments that are also subject to Vermont income tax shall deduct and withhold during the calendar year from the payments made by such person such amount as the Commissioner shall prescribe. Every person who makes payments of income with respect to services performed for such person that were previously deferred under a nonqualified deferred compensation plan shall deduct and withhold during the calendar year from the payments made by such person six percent of any payment (including any withheld tax) of such previously deferred income and of income derived from such previously deferred income. The Commissioner may authorize any person to deduct and withhold Vermont income tax from any other payments that are subject to the tax imposed by this chapter. Notwithstanding the foregoing, banks (as defined in 8 V.S.A. § 909a(a)) shall not be required to withhold Vermont income tax from payments that are subject to federal back-up withholding.
(b) The Commissioner shall establish such withholding tables, schedules, or formulae as will result in the withholding of such amounts from the payments made by any person during any taxable year, as shall closely approximate the income tax liabilities of the recipients of those payments with respect to those payments for that year under this chapter.
(c) Every person who is required under this subchapter to withhold income taxes from payments of income, except for the government of the United States, shall provide the aggregate cost of applicable employer-sponsored coverage required under 26 U.S.C. § 6051(a)(14) regardless of the number of W-2 forms filed. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1985, No. 266 (Adj. Sess.), § 3, eff. June 4, 1986; 1989, No. 210 (Adj. Sess.), § 298, eff. June 1, 1990; 1989, No. 222 (Adj. Sess.), § 6, eff. May 31, 1990; 1991, No. 67, § 24, eff. June 19, 1991; 2015, No. 57, § 67.)
§ 5842. Return and payment of withheld taxes
(a) Every person required to deduct and withhold any amount under section 5841 of this title shall make return thereof and shall pay over that amount to the Commissioner as follows:
(1) In quarterly payments to be made not later than 25 days following the last day of March, June, September, and December, if the person is required to make quarterly or annual payments of federal withholding pursuant to the Internal Revenue Code.
(2) In semiweekly payments, if the person is required to make semiweekly payments of federal withholding pursuant to the Internal Revenue Code. Semiweekly shall mean payment of tax withheld for pay dates on Wednesday, Thursday, or Friday is due by the following Wednesday, and tax withheld for pay dates on Saturday, Sunday, Monday, or Tuesday is due by the following Friday.
(3) In monthly payments to be made not later than the 25th (23rd of February) day following the close of the calendar month during which the amount was withheld, if subdivisions (1) and (2) of this subsection do not apply.
(b) The Commissioner shall prescribe the method of payment of tax and may, without limitation, require electronic funds transfer or payment to a bank depository. The Commissioner may, in writing, permit or require returns to be made covering other periods and upon such dates as the Commissioner may specify and require payments of tax liability at such intervals and based upon such classifications as the Commissioner may designate:
(1) to conform to federal withholding law as the Commissioner deems appropriate;
(2) in cases in which less frequent reporting is determined by the Commissioner to be sufficient; and
(3) in cases in which the Commissioner determines that the taxpayer’s repeated failure to file or pay tax makes more frequent reporting necessary to ensure the prompt and orderly collection of the tax.
(c) In addition to the returns required to be filed and payments required to be made under subsection (a) of this section, every person required to deduct and withhold any tax under section 5841 of this title shall file an annual return covering the aggregate amount deducted and withheld during the entire preceding year, on or before January 31 of each year. At the time of filing that return, the person shall pay over to the Commissioner any amount deducted and withheld during the preceding calendar year and not previously paid. The person shall, further, make such annual report to payees and to the Commissioner of amounts paid and withheld as the Commissioner by regulation shall prescribe.
(d) Notwithstanding section 5867 of this title, the Commissioner may, in his or her discretion, prescribe that one or more or all of the returns required by subsection (a) of this section are not required to be signed or verified by the taxpayer. The Commissioner may require businesses and payroll service providers to file information under this section by electronic means. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1983, No. 59, § 10, eff. April 22, 1983; 1985, No. 266 (Adj. Sess.), § 3, eff. June 4, 1986; 1989, No. 124 (Adj. Sess.), § 1, eff. Feb. 8, 1990; 1989, No. 222 (Adj. Sess.), §§ 7, 8, eff. May 31, 1990; 1991, No. 186 (Adj. Sess.), § 13, eff. May 7, 1992; 1993, No. 49, §§ 10-12, eff. May 28, 1993; 1995, No. 29, § 9, eff. April 14, 1995; 1999, No. 49, § 73, eff. June 2, 1999; 1999, No. 119 (Adj. Sess.), § 17, eff. May 18, 2000; 2007, No. 81, § 2, eff. July 1, 2008; 2009, No. 146 (Adj. Sess.), § B7; 2015, No. 57, § 68; 2015, No. 134 (Adj. Sess.), § 12.)
§ 5843. Failure to account; maintenance of trust account
If a person fails at any time to comply with the Commissioner’s requirement under subsection 5842(b) of this title to remit amounts deducted and withheld at such intervals and based upon such classifications as the Commissioner designates, the Commissioner may petition the Superior Court wherein the person has a place of business, and, upon the petition and hearing, a judge of that court shall issue a citation declaring any amounts thereafter deducted and withheld by the person under section 5841 of this title to be a trust for the State of Vermont. That order shall further require the person, (and, if the person is a corporation, any principal officer of the corporation), to remit those amounts as the Commissioner has required to, and to file a return with respect to each of those payments under the terms of this subchapter with, the court upon pain of contempt of court. The order of notice upon the petition shall be returnable not later than seven business days after the filing of the petition. The petition shall be heard and determined on the return day, or on such day as soon thereafter as the court considers practicable and shall fix, having regard to the circumstances of the case. The costs of the proceeding shall be payable as the court determines. The remittance of those amounts shall be made to the court or, if the court so directs, to the Commissioner, as the Commissioner has required for such period of time as the Commissioner determines with the approval of the court, whether or not all tax liabilities theretofore due have been satisfied, having regard to the maintenance of regular future payments by the person. All amounts and all returns received by the court under this section shall be remitted as soon as is practicable by the court to the Commissioner. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974; 1985, No. 266 (Adj. Sess.), § 3, eff. June 4, 1986; 1991, No. 186 (Adj. Sess.), § 14, eff. May 7, 1992; 1995, No. 29, § 10, eff. April 14, 1995; 2017, No. 11, § 61.)
§ 5844. Liability; penalty; trust for the State
(a) Withholding requirement. Any person who fails to withhold the required tax or to pay it to the Commissioner as required under this subchapter shall be personally and individually liable for the amount of such tax, and if the person is a corporation or other entity, the personal liability shall extend and be applicable to any officer or agent of the corporation or entity who, as an officer or agent of the same, is under a duty to withhold the tax and transmit it to the Commissioner as required in this chapter.
(b) Held in trust for State. Any sum or sums withheld in accordance with this subchapter shall be deemed to be held by the person in trust for the State of Vermont. Such sums shall be recorded by such person in a ledger account so as clearly to indicate the amount of tax withheld and that the same are the property of the State of Vermont.
(c) Withholding penalties.
(1) Failure to file; failure to withhold; failure to remit. Any employer, including any corporate officer or agent, who knowingly fails to file a return, fails to withhold a tax, or fails to remit a tax required under this subchapter shall be imprisoned not more than one year or fined not more than $1,000.00, or both.
(2) Failure to file; failure to withhold; failure to remit; over $500.00. Any employer, including any corporate officer or agent, who with intent to evade a tax liability fails to file a return, fails to withhold a tax, or fails to remit a tax required under this subchapter shall, if the amount of tax withheld or required to be withheld exceeds $500.00 in a single calendar year, be imprisoned not more than three years or fined not more than $10,000.00, or both.
(3) False or fraudulent return. Any employer, including any corporate officer or agent, who knowingly makes, signs, verifies, or files with the Commissioner a false or fraudulent tax return shall be imprisoned not more than one year or fined not more than $1,000.00, or both. Any employer, including any corporate officer or agent, who with intent to evade a tax liability makes, signs, verifies, or files with the Commissioner a false or fraudulent return, if the amount of tax withheld or required to be withheld exceeds $500.00, shall be imprisoned not more than three years or fined not more than $10,000.00, or both.
(4) Lien. In addition, an unpaid tax shall constitute a lien in favor of the State of Vermont as provided in this chapter.
(d) Withholding liability. Any amount required to be deducted and withheld, and to be paid over to the Commissioner, by a person under this subchapter shall be considered to be a tax liability of the person for purposes of this chapter. The person shall be subject, with respect to that tax liability, to the provisions of this chapter, including the provisions governing returns, fees for late filing of returns, interest and penalties for nonpayment of tax liabilities, liens, levies, and appeals, except as those provisions conflict with the express provisions of this subchapter. Any report required under subsection 5842(c) of this title or rules issued under that section shall be considered to be a return for the purposes of this chapter. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 73, § 17, eff. April 16, 1971; 1985, No. 266 (Adj. Sess.), § 3, eff. June 4, 1986; 1987, No. 48, § 8; 1997, No. 50, § 17, eff. June 26, 1997; 2019, No. 14, § 79, eff. April 30, 2019; 2021, No. 105 (Adj. Sess.), § 535, eff. July 1, 2022.)
§ 5845. Repealed. 1991, No. 186 (Adj. Sess.), § 8(e), eff. May 7, 1992.
§ 5846. Repealed. 1991, No. 186 (Adj. Sess.), § 8(f), eff. May 7, 1992.
§ 5847. Withholding on sales or exchanges of real estate
(a) Except as otherwise provided in this section, in the case of any sale or exchange of real property located in Vermont by a nonresident of Vermont, the transferee shall be required to withhold and transmit to the Commissioner within 30 days of such sale or transfer, a withholding tax equal to 2 1/2 percent of the consideration paid for the transfer. Any transferee who fails to withhold such amount shall be personally liable for the amount of such tax.
(b) Subject to subsection (d) of this section, no person shall be required to withhold any amount under subsection (a) of this section if:
(1) the transferor furnishes to the transferee a certificate by the transferor stating, under penalty of perjury, the transferor’s Social Security number and the fact that the transferor is a Vermont resident; or
(2) the transferor or transferee has received a certificate from the Commissioner stating that:
(A) no tax is due on the gain from that transfer; or
(B) the transferor or transferee has satisfied the transferor’s tax liability or has provided adequate security to cover such liability; or
(3) the transferor is a mortgagor conveying the mortgaged property to a mortgagee in foreclosure, or in a transfer in lieu of foreclosure, with no additional consideration.
(c) At the request of the transferor or transferee, the Commissioner may issue the certificate referred to in subdivision (b)(2) of this section or a certificate prescribing a reduced amount to be withheld under this section if the Commissioner determines that such reduced amount will not jeopardize the collection of the tax imposed by this chapter and the transferor is in good standing with the Department of Taxes with respect to any and all taxes. For purposes of this section, a transferor is in good standing with respect to any and all taxes if:
(1) all returns due from the transferor for any and all taxes have been filed; and
(2) no taxes are due and payable, except those on appeal.
(d) If a transferee has actual knowledge that a certificate furnished under subsection (b) of this section is false and the transferee fails to withhold the prescribed amount, the transferee shall be liable for an amount equal to the amount that should have been withheld together with penalty and interest as provided by this title.
(e) As used in this section “nonresident” of Vermont shall include individuals, trusts, partnerships, and corporations, but not estates. A nonresident individual is an individual who is domiciled outside Vermont at the time of closing. A nonresident trust is a trust that, at the time of closing, does not qualify for Vermont residency as defined in subdivision 5811(11) of this title. A nonresident partnership is a partnership, the controlling interest in which is held by nonresidents. A nonresident corporation, other than a Subchapter S corporation, is a corporation that is incorporated outside Vermont other than a corporation that has its principal place of business in Vermont and does no business in its state of incorporation. A nonresident Subchapter S corporation is a Subchapter S corporation the controlling interest in which is held by nonresidents. A nonresident limited liability company is a limited liability company the controlling interest in which is held by nonresidents.
(f) The amount withheld pursuant to this section shall be deemed to be a payment against the tax imposed by this chapter on income received by the seller.
(g) The Commissioner shall, by rule, establish a procedure by which a seller may apply for an early refund of the tax withheld when the seller establishes that no tax under this chapter will be owed or that a tax less than the amount withheld will be owed. The Commissioner shall, by rule, establish methods by which nonresident transferors may provide security in lieu of withholding.
(h) In the case of an installment sale, the seller may elect for Vermont purposes to report the entire gain in the year of the sale and to pay a tax equal to six percent of that gain. If the seller does not make this election, the real estate withholding will be retained by the Department and applied as a credit against the seller’s tax liability in each year that an installment is received. (Added 1989, No. 93; amended 1989, No. 222 (Adj. Sess.), § 9, eff. May 31, 1990; 1991, No. 67, § 26a, eff. June 19, 1991; 1995, No. 29, § 41, eff. April 14, 1995; 1997, No. 50, § 18, eff. June 26, 1997; 2021, No. 105 (Adj. Sess.), § 536, eff. July 1, 2022.)
- Subchapter 005: ESTIMATIONS OF NONWITHHELD INCOME TAX
§ 5851. Definitions
As used in this subchapter:
(1) “Tax” means, for any taxpayer and for any taxable year, the income tax liability of the taxpayer for that taxable year under section 5822 of this title, reduced by any allowable credits against such tax.
(2) “Required annual payment” means the lesser of:
(A) 90 percent of the tax shown on the return for the taxable year (or, if no return is filed, 90 percent of the tax for such year); or
(B) 100 percent of the tax shown on the return of the taxpayer for the preceding taxable year, if the preceding year was a taxable year of 12 months and the taxpayer filed a return for such preceding taxable year. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1985, No. 266 (Adj. Sess.), § 4, eff. June 4, 1986; 1989, No. 119, § 3, eff. June 22, 1989.)
§ 5852. Payment of estimated income tax
(a) Every individual, estate, and trust subject to taxation under section 5822 of this title (other than a person receiving at least two-thirds of his or her income from farming or fishing as defined under the laws of the United States) shall make installment payments of the taxpayer’s estimated tax liability for each taxable year. The amount of each payment shall be 25 percent of the required annual payment. For any taxable year, payments shall be made on or before April 15, June 15, and September 15 of the taxable year and January 15 of the following taxable year. In applying this section to a taxable year beginning on any date other than January 1, there shall be substituted, for the months specified in this section, the months that correspond thereto.
(b) In lieu of the estimated payments provided in subsection (a) of this section, a taxpayer who pays federal estimated income tax in annualized income installments may pay for the installment period an amount equal to the 24 percent of the taxpayer’s required payment for federal income tax purposes, reduced by a percentage equal to the percentage of the taxpayer’s adjusted gross income for the taxable year that is not Vermont income; provided, however, that if a taxpayer’s Vermont income exceeds the taxpayer’s adjusted gross income, no reduction shall be made.
(c) For purposes of applying this section, the amount deducted and withheld for the taxable year under subchapter 4 of this chapter shall be deemed a payment of estimated tax. An equal part of such amount shall be deemed paid on each due date for such taxable year unless the taxpayer establishes the dates on which all amounts were actually withheld, in which case the amounts so withheld shall be deemed payments of estimated tax on the dates on which such amounts were actually withheld.
(d) If a married couple has filed a joint personal income tax return for the 12-month period immediately preceding any taxable year, the payments of estimated tax required to be made under this section shall be deemed to be a joint obligation of the married couple unless they make separate payments of estimated tax liability for that taxable year. If a married couple has made any payments with respect to a joint obligation to pay estimated tax for any taxable year and those taxpayers thereafter file separate Vermont and federal income tax returns for that taxable year, the total amount of the payments may be treated as the payment of either member of the married couple, or may be divided between them.
(e) The Commissioner may require the filing of a return with the payment of estimated taxes required under subchapter 5 of this chapter. Notwithstanding section 5867 of this title, or any other provision of law, those returns are not required to be signed or verified by the taxpayer. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1967, No. 278 (Adj. Sess.), § 29, eff. March 12, 1968; 1983, No. 59, § 1, eff. April 22, 1983; 1987, No. 278 (Adj. Sess.), § 15, eff. June 21, 1988; 1989, No. 119, § 4, eff. June 22, 1989; 2013, No. 73, § 21, eff. June 5, 2013; 2015, No. 57, § 69, eff. June 11, 2015.)
§§ 5853, 5854. Repealed. 1989, No. 119, § 6, eff. June 22, 1989.
§ 5855. Payments as tax liability
(a) Any payment of estimated tax required to be made under the provisions of this subchapter shall be deemed to be a tax liability for the purposes of this chapter. All of the provisions of this chapter, including the provisions governing interest and penalties for nonpayment of tax liabilities, liens, levies, and appeals, shall apply to underpayments of estimated tax except as such provisions conflict with the express provisions of this subchapter.
(b) No interest or penalty shall be assessed for underpayment of estimated tax for any taxable year if:
(1) the tax shown on the return for such taxable year (or, if no return is filed, the tax), reduced by the amount deducted and withheld for the taxable year under subchapter 4 of this chapter, is less than $500.00; or
(2) the preceding taxable year was a taxable year of 12 months and the taxpayer did not have any liability for tax for the preceding taxable year. (Added 1966, No. 61 (Sp. Sess.), eff. Jan. 1, 1966; amended 1967, No. 121, § 12, eff. Jan. 1, 1968; 1985, No. 266 (Adj. Sess.), § 8, eff. June 4, 1986; 1989, No. 119, § 5, eff. June 22, 1989; 1997, No. 156 (Adj. Sess.), § 6, eff. April 29, 1998; 2001, No. 140 (Adj. Sess.), § 10, eff. June 21, 2002.)
- Subchapter 005A: QUARTERLY FILING AND PAYMENT
§ 5856. Declaration of estimated tax
(a) Every corporate taxpayer shall make a declaration of estimated tax for the taxable year in such form as the Commissioner shall prescribe, if the amount payable as estimated tax can reasonably be expected to be more than $500.00 for the taxable year. The term “estimated tax” shall mean the amount that the taxpayer estimates to be its tax under this title for the taxable year, or in the case of a taxable year of less than 12 months an amount of tax determined in accordance with regulations prescribed by the Commissioner. For the purposes of this chapter, a declaration is a return.
(b) A corporate taxpayer may amend a declaration, under regulations prescribed by the Commissioner. (Added 1975, No. 1 (Sp. Sess.), § 15, eff. Jan. 1, 1976; amended 1989, No. 119, § 8, eff. June 22, 1989.)
§ 5857. Filing dates
A declaration of estimated tax shall be filed on or before the 15th day of the fourth month of each taxable year, except that if the $500.00 minimum tax requirement is met:
(1) after the fourth month and before the sixth month of the taxable year, the declaration shall be filed on or before the 15th day of the sixth month;
(2) after the fifth and before the ninth month of the taxable year, the declaration shall be filed on or before the 15th day of the ninth month; or
(3) after the eighth month and before the 12th month of the taxable year, the declaration shall be filed for the taxable year on or before the 15th day of the 12th month. (Added 1975, No. 1 (Sp. Sess.), § 15, eff. Jan. 1, 1976; amended 1989, No. 119, § 9, eff. June 22, 1989.)
§ 5858. Payment dates
A taxpayer required to file a declaration of estimated tax shall pay such estimated tax as follows:
(1) If the declaration is required to be filed on or before the 15th day of the fourth month of the taxable year, the estimated tax shall be paid in four equal installments. The first installment shall be paid at the time of required filing of the declaration, and the second, third, and fourth installments shall be paid on or before the 15th day of the sixth, ninth, and 12th months of the taxable year, respectively.
(2) If the declaration is required to be filed on or before the 15th day of the sixth month of the taxable year, the estimated tax shall be paid in three equal installments. The first installment shall be paid at the time of required filing of the declaration, and the second and third installments shall be paid on or before the 15th day of the ninth and 12th months of the taxable year, respectively.
(3) If the declaration is required to be filed on or before the 15th day of the ninth month of the taxable year, the estimated tax shall be paid in two equal installments, at the time of required filing of the declaration for such taxable year and on or before the 15th day of the 12th month of such taxable year.
(4) If the declaration is required to be filed on or before the 15th day of the 12th month of the taxable year, the estimated tax shall be paid in full at the time of such required filing.
(5) If an amended declaration is filed, the remaining installments, if any, shall be ratably increased or decreased, as the case may be, to reflect the increase or decrease in the estimated tax occasioned by such amendment.
(6) The Commissioner may authorize payment by electronic funds transfer. The Commissioner may require payment by electronic funds transfer from any taxpayer who is required by federal tax law to pay any federal tax in that manner, or from any taxpayer who has submitted to the Department of Taxes two or more protested or otherwise uncollectible checks with regard to any State tax payment in the prior two years. (Added 1975, No. 1 (Sp. Sess.), § 15, eff. Jan. 1, 1976; amended 1997, No. 156 (Adj. Sess.), § 7, eff. April 29, 1998.)
§ 5859. Assessment date, penalties, interest
(a) Any amount paid as estimated tax shall be deemed assessed upon the due date for the taxpayer’s return for the taxable year (determined without regard to any extensions of time for filing such return).
(b) Except as provided in subsection (c) of this section, the taxpayer shall be liable for interest and penalties pursuant to section 3202 of this title, with interest imposed at the rate per annum established from time to time by the Commissioner pursuant to section 3108 of this title upon the amount of any underpayment of estimated tax.
(1) For purposes of this subsection, the amount of any underpayment of estimated tax shall be the excess of:
(A) the amount of the installment that would be required to be paid if the estimated tax were equal to 90 percent of the tax shown on the return for the taxable year or, if no return were filed, 90 percent of the tax for such year; over
(B) the amount, if any, of the installment paid on or before the last date prescribed for payment.
(2)(A) The period of the underpayment for which interest and penalties shall apply shall commence on the date the installment was required to be paid and shall terminate on the earlier of the following dates:
(i) the date a U.S. income tax return is required to be filed for that year by that corporation under the laws of the United States; or
(ii) with respect to any portion of the underpayment, the date on which such portion is paid.
(B) For purposes of this subdivision (2), a payment of estimated tax on any installment date shall be considered a payment of any previous underpayment only to the extent such payment exceeds the amount of the installment determined under subdivision (1)(A) of this subsection (b) for such installment date.
(c) No interest for underpayment of any installment or estimated tax shall be imposed if the total amount of all such payments made on or before the last date prescribed for the payment of such installment equals or exceeds the amount that would have been required to be paid on or before such date if the estimated tax were the lesser of:
(1) an amount equal to the tax computed at the rate applicable to the taxable year but otherwise on the basis of the facts shown on the return for, and the law applicable to, the preceding taxable year; or
(2) an amount equal to 90 percent of the tax finally due for the taxable year.
(d) As used in subdivision (b)(1) and subsection (c) of this section, the term “tax” shall mean the excess of the tax imposed by this chapter over all amounts properly credited against such tax for the taxable year.
(e) The application of this subsection to taxable years of less than 12 months shall be in accordance with rules adopted by the Commissioner.
(f) The Commissioner may provide by rule for a credit against estimated taxes for any taxable year of any amount determined by the taxpayer or by the Department to be an overpayment of the tax imposed by this title for a preceding taxable year. (Added 1975, No. 1 (Sp. Sess.), § 15, eff. Jan. 1, 1976; amended 1979, No. 105 (Adj. Sess.), § 5; 1981, No. 191 (Adj. Sess.), § 7; 2013, No. 73, § 22, eff. June 5, 2013; 2021, No. 105 (Adj. Sess.), § 537, eff. July 1, 2022; 2021, No. 179 (Adj. Sess.), § 5, eff. January 1, 2022; 2023, No. 85 (Adj. Sess.), § 470, eff. July 1, 2024.)
- Subchapter 006: RETURNS
§ 5861. Returns by individuals, trusts, and estates
(a) Every individual, trust, or estate subject to taxation for any taxable year under section 5822 of this title shall file a Vermont personal income tax return for that taxable year if that person is required to file a United States income tax return for that year and (1) earned or received more than $100.00 of Vermont income, or (2) earned or received more than $1,000.00 in gross income from the sources listed in subdivisions 5823(b)(1) through (6) of this title, whether or not a resident, in that year, or has a tax liability under this chapter for that year.
(b) The return required to be filed under this section shall be filed on or before the date a United States income tax return is originally required to be filed by the individual, trust, or estate under the laws of the United States for the taxable year or the date as extended by the Commissioner under section 5868 of this title.
(c) Spouses or a surviving spouse may file a joint Vermont personal income tax return for any taxable year for which the spouses or surviving spouse are permitted to file a joint federal income tax return under the laws of the United States.
(d) If a joint Vermont personal income tax return is filed by spouses or by a surviving spouse for any taxable year, the tax under this chapter shall be measured by the joint federal income tax liability of the taxpayers for that taxable year and their liability with respect to the tax under this chapter shall be joint and several.
(e) The Commissioner may require information on a Vermont personal income tax return that is sufficient to identify the school district, as defined in 16 V.S.A. § 11(a)(10), in which the taxpayer resides. The Commissioner may consider a return incomplete if the information required under this subsection is not provided and shall cause the return to be completed.
(f) [Repealed.]
(g) [Repealed.] (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1967, No. 121, § 13, eff. Jan. 1, 1968; 1981, No. 170 (Adj. Sess.), § 5, eff. April 19, 1982; 1987, No. 82, § 3, eff. June 9, 1987; 1993, No. 49, §§ 13, 14, eff. May 28, 1993; 1995, No. 47, § 20, eff. April 20, 1995; 1999, No. 49, § 56, eff. June 2, 1999; 2007, No. 33, § 2, eff. May 18, 2007; 2021, No. 105 (Adj. Sess.), § 538, eff. July 1, 2022.)
§ 5861a. Returns by partnerships
(a) Every partnership having any income derived from Vermont sources shall file with the Commissioner a Vermont partnership income tax return and a copy of the federal form 1065, including Schedules K and K-1 (U.S. Partnership Return of Income and Partner’s Share of Income, Credits, Deductions, etc.), required to be filed with the federal authorities at such time as such schedule is required to be filed or is, in fact, filed with the federal authorities. A partnership is considered to have income from Vermont sources if it earned or received more than $100.00 of Vermont income or earned or received more than $1,000.00 of gross income from the sources listed in subdivisions 5823(b)(1) through (6) of this title or associated with or attributable to business activities carried on in Vermont.
(b) The returns and schedules required to be filed under this section shall be treated as a return for all purposes under this chapter. (Added 1983, No. 59, § 11, eff. April 22, 1983; amended 1989, No. 222 (Adj. Sess.), § 10, eff. May 31, 1990; 1997, No. 50, § 19, eff. June 26, 1997.)
§ 5862. Returns by corporations
(a) Every corporation that is a taxable corporation, for any taxable year, shall file a Vermont corporate income tax return for that taxable year on or before the date a U.S. income tax return is required to be filed for that year by that corporation under the laws of the United States.
(b) If such corporation fails to file such return on or before such date, the corporation shall pay a penalty of $50.00 in addition to any other penalties, interest, or fees provided by this chapter. If a petition is filed under section 5864 of this title in order to force the filing of such return, then a further penalty of $200.00 shall be paid in addition to any other penalties, interest, or fees provided by this chapter and in addition to the $50.00 penalty provided herein. However, if a judge of the Superior Court finds that there was no cause for the Commissioner to file the petition, he or she shall order that the $200.00 penalty not be imposed. Such penalties shall be paid at the time the return is filed, without assessment or demand.
(c) Taxable corporations that received any income allocated or apportioned to this State under the provisions of section 5833 of this title for the taxable year and that under the laws of the United States constitute an affiliated group of corporations may elect to file a consolidated return in lieu of separate returns if such corporations qualify and elect to file a consolidated federal income tax return for that taxable year. Such an election to file a Vermont consolidated return shall continue for five years, including the year the election is made.
(d) A taxable corporation that is part of an affiliated group engaged in a unitary business shall be treated as a single taxpayer and shall file a group return containing the combined net income of the affiliated group and such other informational returns as the Commissioner shall require by rule. A unitary combined return shall include the income and apportionment factors of any taxable corporation incorporated in the United States or formed under the laws of any state, the District of Columbia, or any territory or possession of the United States and in a unitary relationship with the taxpayer. The income, gain, or losses from members of a combined group shall be combined to the extent allowed under the Internal Revenue Code for consolidated filing as if the combined group was a consolidated filing group, provided that a state tax credit shall not be combined and shall be limited to the member to which the credit is attributed. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 73, § 18, eff. April 16, 1971; 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974; 1987, No. 82, § 8, eff. June 9, 1987; 1991, No. 67, § 4, eff. June 19, 1991; 2003, No. 152 (Adj. Sess.), § 7, eff. June 7, 2004; 2013, No. 174 (Adj. Sess.), § 2, eff. Jan. 1, 2014; 2021, No. 148 (Adj. Sess.), § 4, eff. January 1, 2023.)
§ 5862a. Nongame Wildlife Account checkoff
(a) Returns filed by individuals shall include, on a form prescribed by the Commissioner of Taxes, an opportunity for the taxpayer to designate funds to reimburse the State, in all or in part, for its General Fund appropriation to the Nongame Wildlife Account.
(b) Amounts so designated shall be deducted from refunds due to, or overpayments made by, the designating taxpayers. All amounts so designated and deducted shall be deposited in the Nongame Wildlife Account by the Commissioner of Taxes. If at any time after the payment of amounts so designated to the Nongame Wildlife Account it is determined that the taxpayer was not entitled to all or any part of the amount so designated, the Commissioner may assess, and the Nongame Wildlife Account shall then pay to the Commissioner, the amount received, together with interest at the rate prescribed by section 3108 of this title, from the date the payment was made until the date of repayment.
(c) The Commissioner of Taxes may encourage taxpayers to make designations to the Account, including explaining the purposes of the Account and how to contribute to it.
(d) If amounts paid with respect to a return are insufficient to cover both the amount owed on the return under this chapter and the amount designated by the taxpayer as a contribution to the Nongame Wildlife Account, the payment shall first be applied to the amount owed on the return under this chapter and the balance, if any, shall be deposited in the Nongame Wildlife Account.
(e) Nothing in this section shall be construed to require the Commissioner to collect any amount designated as a contribution to the Nongame Wildlife Account. (Added 1985, No. 191 (Adj. Sess.), § 4, eff. May 14, 1986; amended 1987, No. 221 (Adj. Sess.), §§ 1, 2, eff. May 27, 1988.)
§ 5862b. Vermont Children’s Trust Foundation checkoff
(a) Returns filed by individuals shall include, on a form prescribed by the Commissioner of Taxes, an opportunity for the taxpayer to designate funds to the Vermont Children’s Trust Foundation.
(b) Amounts so designated shall be deducted from refunds due to, or overpayments made by, the designating taxpayers. All amounts so designated and deducted shall be deposited in an account by the Commissioner of Taxes for payment to the Vermont Children’s Trust Foundation. If at any time after the payment of amounts so designated to the account it is determined that the taxpayer was not entitled to all or any part of the amount so designated, the Commissioner may assess, and the account shall then pay to the Commissioner, the amount received, together with interest at the rate prescribed by section 3108 of this title, from the date the payment was made until the date of repayment.
(c) The Commissioner of Taxes shall explain to taxpayers the purposes of the account and how to contribute to it. The Commissioner shall make available to taxpayers the annual income and expense report of the Vermont Children’s Trust Foundation and shall provide notice in the instructions for the State individual income tax return that the report is available at the Department of Taxes.
(d) If amounts paid with respect to a return are insufficient to cover both the amount owed on the return under this chapter and the amount designated by the taxpayer as a contribution to the Vermont Children’s Trust Foundation, the payment shall first be applied to the amount owed on the return under this chapter and the balance, if any, shall be deposited in the account.
(e) Nothing in this section shall be construed to require the Commissioner to collect any amount designated as a contribution to the Vermont Children’s Trust Foundation.
(f) The Vermont Children’s Trust Foundation shall use the revenue received under this section to provide funds for community-based primary prevention programs that have been shown to be effective for juveniles. The Foundation shall solicit proposals for grant awards from public and private persons and agencies and shall evaluate the proposals on the basis of the following criteria:
(1) the demonstrated effectiveness of the program upon which the proposal is based;
(2) the need for such services within the community;
(3) other resources available to meet the need for primary prevention services; and
(4) the ability of the applicant to obtain funding from another source to cover a portion of the program costs.
(g) To the extent that funds permit, the Vermont Children’s Trust Foundation shall award and administer grants to applicants of proposals that the Foundation determines to have met the criteria established in subsection (f) of this section. The Foundation shall monitor expenditures by grantees and evaluate the effectiveness of the programs, assistance, or services financed by the revenue received under this section. The Foundation shall develop guidelines for the coordination of community-based primary prevention programs, the application process, and the distribution of grants under this section. (Added 1995, No. 164 (Adj. Sess.), § 1; amended 2021, No. 179 (Adj. Sess.), § 8, eff. July 1, 2022; 2023, No. 6, § 379, eff. July 1, 2023.)
§ 5862c. Repealed. 2009, No. 160 (Adj. Sess.), § 51(c)(1) repealed effective for taxable years beginning on and after January 1, 2010.
§ 5862d. Filing of federal form 1099
(a) Any individual or business required to file a federal form 1099 with respect to a nonresident who performed services within the State during the taxable year shall file a copy of the form with the Department. The Commissioner may authorize electronic filing of the form.
(b) Any person required to file information returns pursuant to 26 U.S.C. § 6050W shall, within 30 days of the date the filing is due to the Internal Revenue Service, file with the Commissioner a duplicate of such information returns on which the recipient has a Vermont address. In addition, at the same time the information in this subsection is required, third-party settlement organizations shall report to the Department of Taxes, and to any participating payee with a Vermont address, any information required by 26 U.S.C. § 6050W with respect to third-party network transactions related to that participating payee, as if the de minimis limitations of 26 U.S.C. § 6050W(e) did not apply, but that the de minimis limitations of 26 U.S.C. § 6041(a) did apply. The Commissioner may adopt rules and authorize electronic filing of the information required by this subsection.
(c) A failure to provide the information required by subsections (a) and (b) of this section shall be considered a failure to provide a return or return information required by this chapter, for the purposes of sections 3202, 5863, and 5864 of this title. (Added 1997, No. 156 (Adj. Sess.), § 8, eff. April 29, 1998; amended 2013, No. 174 (Adj. Sess.), § 1, eff. Jan. 1, 2014; 2017, No. 73, § 22, eff. Jan. 1, 2017.)
§ 5862e. Vermont Veterans’ Fund checkoff
(a) Returns filed by individuals shall include, on a form prescribed by the Commissioner of Taxes, an opportunity for the taxpayer to designate funds to the Vermont Veterans’ Fund.
(b) Amounts designated under subsection (a) of this section shall be deducted from refunds due to, or overpayment made by, the designating taxpayer. All amounts so designated and deducted shall be deposited in an account by the Commissioner of Taxes for payment to the Vermont Veterans’ Fund. If at any time after the payment of amounts so designated to the account it is determined that the taxpayer was not entitled to all or any part of the amount so designated, the Commissioner may assess, and the account shall then pay to the Commissioner, the amount received, together with interest at the rate prescribed by section 3108 of this title, from the date the payment was made until the date of repayment.
(c) The Commissioner of Taxes shall explain to taxpayers the purpose of the account and how to contribute to it. The Commissioner shall provide notice in the instructions for the State individual income tax return as to how to obtain a copy of the annual income and expense report of the Vermont Veterans’ Fund.
(d) If amounts paid with respect to a return are insufficient to cover both the amount owed on the return under this chapter and the amount designated as a contribution to the Vermont Veterans’ Fund, the payment shall first be applied to the amount owed on the return under this chapter and the balance, if any, shall be deposited in the Fund.
(e) Nothing in this section shall be construed to require the Commissioner to collect any amount designated as a contribution to the Vermont Veterans’ Fund. (Added 2009, No. 160 (Adj. Sess.), § 49.)
§ 5862f. Vermont Green Up checkoff
(a) Returns filed by individuals shall include, on a form prescribed by the Commissioner of Taxes, an opportunity for the taxpayer to designate funds to Vermont Green Up, Inc.
(b) Amounts so designated shall be deducted from refunds due to, or overpayments made by, the designating taxpayers. All amounts so designated and deducted shall be deposited in an account by the Commissioner of Taxes for payment to Vermont Green Up, Inc. If at any time after the payment of amounts so designated to the account it is determined that the taxpayer was not entitled to all or any part of the amount so designated, the Commissioner may assess, and the account shall then pay to the Commissioner, the amount received, together with interest at the rate prescribed by section 3108 of this title, from the date the payment was made until the date of repayment.
(c) The Commissioner of Taxes shall explain to taxpayers the purposes of the account and how to contribute to it. The Commissioner shall make available to taxpayers the annual income and expense report of Vermont Green Up, Inc., and shall provide notice in the instructions for the State individual income tax return that the report is available at the Department of Taxes.
(d) If amounts paid with respect to a return are insufficient to cover both the amount owed on the return under this chapter and the amount designated by the taxpayer as a contribution to Vermont Green Up, Inc., the payment shall first be applied to the amount owed on the return under this chapter and the balance, if any, shall be deposited in the account.
(e) Nothing in this section shall be construed to require the Commissioner to collect any amount designated as a contribution to Vermont Green Up, Inc. (Added 2013, No. 174 (Adj. Sess.), § 3, eff. Jan. 1, 2015.)
§ 5863. Additional returns
When the Commissioner is of the opinion that a taxpayer has failed to file any return required by this chapter, or to include in any return so filed, either intentionally or through error, information by which the taxpayer’s tax liability may correctly be determined, the Commissioner may, by written notice to the taxpayer, require that the taxpayer file that return, or an additional supplementary return containing such information, verified as provided in section 5867 of this title, in such form as the Commissioner shall prescribe. The filing of that return shall not relieve the taxpayer from any of the penalties to which he or she may be liable under this chapter. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.)
§ 5864. Failure to file a return; petition and computation of tax
(a) Upon the failure of a taxpayer to file any return required under this chapter within 15 days of the date of a notice to the taxpayer under section 5863 of this title, the Commissioner may petition a judge of the Superior Court in the county wherein the taxpayer resides or has a place of business or, if the taxpayer neither resides nor has a place of business in this State, the Commissioner may petition the Washington Superior Court, and upon the petition of the Commissioner and a hearing, the judge shall issue a citation requiring the taxpayer and, if the taxpayer is a corporation, any principal officer of such corporation to file a proper return in accordance with this chapter, upon pain of contempt. The order of notice upon the petition shall be returnable not later than 20 days after the filing of the petition. The petition shall be heard and determined on the return day or on such day thereafter as the court shall fix, having regard to the speediest possible determination of the case consistent with the rights of the parties. The judgment shall include costs in favor of the prevailing party.
(b) Upon the failure of a taxpayer to file any return required under this chapter within 15 days of the date of a notice to the taxpayer under section 5863 of this title, whether or not a petition has been or will be filed under subsection (a) of this section, the Commissioner may compute the tax liability of the taxpayer with respect to which the return was required to be filed, according to the Commissioner’s best information and belief. Upon that computation, the Commissioner shall notify the taxpayer of his or her deficiency with respect to the payment of that tax liability, and may assess any penalty or interest with respect thereto, under sections 3202 and 3203 of this title. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974; 2017, No. 74, § 137.)
§ 5865. Repealed. 1991, No. 186 (Adj. Sess.), § 8(g), eff. May 7, 1992.
§ 5866. Supplemental information; changes in federal tax liability or taxable income
(a) If, after the time for filing any return required by this chapter, a taxpayer:
(1) becomes aware of any information that makes that return materially false, inaccurate, or incomplete;
(2) is notified of any assertion by the United States, whether under 26 U.S.C. § 6212 or otherwise, that the taxpayer’s taxable income under the laws of the United States is other than the amount stated in the return; or
(3) files an amended return under the laws of the United States, the taxpayer shall, within 180 days of the receipt of that information or notification of that assertion or filing that amended return, notify the Commissioner thereof, and of such particulars as may be relevant to the amount of any tax liability of the taxpayer under this chapter.
(b) Any notice required to be given to the Commissioner under this section shall be considered to be a return for purposes of this chapter, and a taxpayer required to file any such return shall be subject, with respect thereto, to the provisions of this chapter, including the provisions governing fees for failure to file a return, except as those provisions conflict with the express provisions of this section.
(c) If a change in federal tax liability results from the audit of a partnership or an adjustment of a partnership’s taxable income under 26 U.S.C. subtitle F, chapter 63, subchapter C, the taxpayer shall file and amend returns and pay tax owed pursuant to section 5866a of this title. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 2005, No. 94 (Adj. Sess.), § 4, eff. March 8, 2006; 2019, No. 175 (Adj. Sess.), § 17, eff. Oct. 8, 2020; 2021, No. 105 (Adj. Sess.), § 539, eff. July 1, 2022; 2021, No. 179 (Adj. Sess.), § 12, eff. January 1, 2022.)
§ 5866a. Reporting adjustments to federal taxable income and federal partnership audits
(a) Definitions. As used in this section:
(1) “Administrative adjustment request” means an administrative adjustment request filed by a partnership under 26 U.S.C. § 6227.
(2) “Audited partnership” means a partnership subject to a partnership-level audit resulting in a federal adjustment.
(3) “Corporate partner” means a partner that is subject to tax under chapter 151, subchapter 3 of this title.
(4) “Direct partner” means a partner that holds an interest directly in a partnership or pass-through entity.
(5) “Exempt partner” means a partner that is exempt from taxation under this chapter but not an entity with federal exempt status having taxable income under subdivision 5811(18) of this title.
(6) “Federal adjustment” means a change to an item or amount determined under the Internal Revenue Code that is used by a taxpayer to compute tax owed, whether that change results from action by the Internal Revenue Service, including a partnership-level audit, or the filing of an amended federal return, federal refund claim, or an administrative adjustment request by the taxpayer. A federal adjustment is positive to the extent that it increases State taxable income as determined under this chapter and is negative to the extent that it decreases State taxable income as determined under this chapter.
(7) “Federal adjustments report” includes methods or forms required by the Commissioner for use by a taxpayer to report final federal adjustments, including an amended tax return, information return, or uniform multistate report.
(8) “Federal partnership representative” means the person that the partnership designates for the taxable year as the partnership’s representative or the person that the Internal Revenue Service appoints to act as the federal partnership representative pursuant to 26 U.S.C. § 6223(a).
(9) “Final determination date” means the following:
(A) Except as provided in subdivisions (B) and (C) of this subdivision (a)(9), if the federal adjustment arises from an audit or other action by the Internal Revenue Service, “final determination date” means the first day on which no federal adjustments arising from that audit or other action remain to be finally determined, whether by Internal Revenue Service decision with respect to which all rights of appeal have been waived or exhausted, by agreement, or, if appealed or contested, by a final decision with respect to which all rights of appeal have been waived or exhausted. For agreements required to be signed by the Internal Revenue Service and the taxpayer, the “final determination date” means the date on which the last party signed the agreement.
(B) For federal adjustments arising from an audit or other action by the Internal Revenue Service, if the taxpayer filed as a member of an affiliated group electing to file a consolidated return under subsection 5862(c) of this title or filed as a member of a unitary combined group under subsection 5862(d) of this title, the “final determination date” means the first day on which no related federal adjustments arising from that audit remain to be finally determined, as described in subdivision (A) of this subdivision (a)(9), for the entire group.
(C) If the federal adjustment results from filing an amended federal return, a federal refund claim, or an administrative adjustment request, or if it is a federal adjustment reported on an amended federal return or other similar report filed pursuant to 26 U.S.C. § 6225(c), the “final determination date” means the day on which the amended return, refund claim, administrative adjustment request, or other similar report was filed.
(10) “Final federal adjustment” means a federal adjustment after the final determination date for that federal adjustment has passed.
(11) “Indirect partner” means a partner in a partnership or pass-through entity that itself holds an interest directly, or through another indirect partner, in a partnership or pass-through entity.
(12) “I.R.C.” means the Internal Revenue Code of 1986, as codified under 26 U.S.C. subtitles A–K, and applicable regulations as promulgated by the U.S. Department of the Treasury. To the extent that the terms used in this section are not defined under this section, it is the intent of the General Assembly to conform to the definitions and terminology used in the amendments to the I.R.C., subtitle F, chapter 63 pertaining to the comprehensive partnership audit regime contained in the Bipartisan Budget Act of 2015, Pub. L. No. 114-74, as amended, and this section shall be interpreted accordingly.
(13) “Nonresident partner” means an individual, trust, or estate partner that is not a resident partner.
(14) “Partner” means a person that holds an interest, directly or indirectly, in a partnership or other pass-through entity.
(15) “Partnership” means an entity subject to taxation under 26 U.S.C. subtitle A, chapter 1, subchapter K.
(16) “Partnership-level audit” means an examination by the Internal Revenue Service at the partnership level pursuant to 26 U.S.C. subtitle F, chapter 63, subchapter C that results in federal adjustments.
(17) “Pass-through entity” means an entity other than a partnership that is not subject to tax under section 5822 or 5832 of this title.
(18) “Reallocation adjustment” means a federal adjustment resulting from a partnership-level audit or an administrative adjustment request that changes the shares of one or more items of partnership income, gain, loss, expense, or credit allocated to direct partners. A positive reallocation adjustment means the portion of a reallocation adjustment that would increase federal income for one or more direct partners, and a negative reallocation adjustment means the portion of a reallocation adjustment that would decrease federal income for one or more direct partners.
(19) “Resident partner” means an individual, trust, or estate partner that is a resident under section 5811 of this title for the relevant tax period.
(20) “Reviewed year” means the taxable year of a partnership that is subject to a partnership-level audit from which federal adjustments arise.
(21) “Taxpayer” means any person or entity required to file a return or pay tax under this chapter and, unless the context clearly indicates otherwise, includes a partnership, including a tiered partner of a partnership, subject to a partnership-level audit and a partnership, including a tiered partner of a partnership, that has made an administrative adjustment request.
(22) “Tiered partner” means any partner that is a partnership or pass-through entity.
(23) “Unrelated business taxable income” has the same meaning as in 26 U.S.C. § 512.
(b) Reporting adjustments to federal taxable income; general rule.
(1) Except in the case of final federal adjustments that are required to be reported by a partnership and its partners using the procedures in subsection (c) of this section, a taxpayer shall report and pay any Vermont tax due with respect to the following final federal adjustments:
(A) arising from an audit or other action by the Internal Revenue Service;
(B) reported by the taxpayer on a timely filed amended federal income tax return, including a return or other similar report filed pursuant to 26 U.S.C. § 6225(c)(2); or
(C) a federal claim for refund.
(2) A taxpayer shall report and pay any tax due under this subsection by filing a federal adjustments report with the Commissioner for the reviewed year and, if applicable, paying the additional Vermont tax owed not later than 180 days after the final determination date.
(c) Reporting federal adjustments; partnership-level audit and administrative adjustment request. Except for negative federal adjustments required under federal law or regulations to be taken into account by the partnership in the partnership return for the adjustment or other year, and the distributive share of adjustments reported as required under subsection (b) of this section, partnerships and partners shall report final federal adjustments arising from a partnership-level audit or an administrative adjustment request and make payments as required under this subsection (c).
(1) State partnership representative.
(A) With respect to an action required or permitted to be taken by a partnership under this subsection and a petition for a hearing under sections 5883, 5884, or 5885 of this title with respect to that action, the State partnership representative for the reviewed year shall have the sole authority to act on behalf of the partnership, and the partnership’s direct partners and indirect partners shall be bound by those actions.
(B) The State partnership representative for the reviewed year is the partnership’s federal partnership representative unless the partnership designates in writing another person as its State partnership representative.
(C) The Commissioner may establish reasonable qualifications and procedures for designating a person, other than the federal partnership representative, to be the State partnership representative.
(2) Reporting and payment requirements for partnerships subject to a final federal adjustment and their direct partners. Final federal adjustments subject to the requirements of this subsection, except for those subject to an election that is properly made under subdivision (3) of this subsection, shall be reported as follows:
(A) Not later than 90 days after the final determination date, the partnership shall:
(i) File a completed federal adjustments report with the Commissioner, including any other information required by the Commissioner. The federal adjustments report shall:
(I) Identify each partner during the reviewed year.
(II) Specify each item addressed by, and the amount included in, the final federal adjustment.
(III) Explain how the final federal adjustment needs to be modified for State tax purposes to reflect relevant differences between federal and State law.
(IV) Provide any other information related to the final determination or modification as the Commissioner may require. If the audited partnership has received an approved modification, the audited partnership shall notify the Commissioner of this approval not later than 90 days after the date of approval. An audited partnership that fails to meet the filing requirements under this subsection (c) shall be subject to the penalties for failure to file under section 3202 of this title. The statute of limitations for assessing a partner or an audited partnership pursuant to this section shall be tolled in any instance in which the audited partnership has not provided the Commissioner with the notice and filing required by this subsection (c).
(ii) Notify each of its direct partners of their distributive share of the final federal adjustments.
(iii) File an amended composite return for direct partners as required under subsections 5914(a) and (b) and 5920(a) and (b) of this title and, as applicable, an amended withholding return for direct partners as required under subchapter 4 of this chapter and pay the additional tax that would have been due had the final federal adjustments been reported properly.
(B) Not later than 180 days after the final determination date, each direct partner that is taxed under sections 5822 and 5832 of this title shall:
(i) file a federal adjustments report reporting their distributive share of the adjustments reported to them under subdivision (A)(ii) of this subdivision (c)(2) as required under this chapter; and
(ii) pay any additional amount of tax that would have been due if final federal adjustments had been reported properly, plus any penalty and interest due under section 3202 of this title, and less any credit for related amounts paid or withheld and remitted on behalf of the direct partner under subdivision (A)(iii) of this subdivision (c)(2).
(3) Election; partnership pays. Subject to the limitations under subdivision (C) of this subdivision, an audited partnership making an election under this subdivision shall do the following:
(A) Not later than 90 days after the final determination date, file a completed federal adjustments report as required by subdivision (2) of this subsection (c) and notify the Commissioner that it is making the election under this subdivision (3).
(B) Not later than 180 days after the final determination date, pay an amount, determined as follows, in lieu of taxes owed by its direct and indirect partners:
(i) Exclude from final federal adjustments the distributive share of these adjustments reported to a direct exempt partner not subject to tax under this chapter.
(ii) For the total distributive shares of the remaining final federal adjustments reported to direct corporate partners subject to tax under section 5832 of this title, apportion and allocate the adjustments as provided under section 5833 of this title, and multiply the result by the highest tax rate imposed under section 5832 of this title.
(iii) For the total distributive shares of the remaining final federal adjustments reported to nonresident direct partners subject to tax under this chapter, determine the amount of the adjustments that is Vermont-source income, and multiply the result by the highest tax rate imposed under section 5822 of this title.
(iv) For the total distributive shares of the remaining final federal adjustments reported to tiered partners:
(I) Determine the amount of the adjustments that is of a type that it would be subject to sourcing to Vermont under this chapter and then determine the portion of the amount that would be sourced to Vermont.
(II) Determine the amount of the adjustments that is of a type that it would not be subject to sourcing to Vermont by a nonresident partner under this chapter.
(III) Determine the portion of the amount determined in subdivision (iv)(II) of this subdivision (3)(B) that can be established as properly allocable to nonresident indirect partners or other partners not subject to tax on the adjustments or that can be excluded under procedures for modified reporting and payment method allowed under subdivision (5) of this subsection (c).
(v) Multiply the total of the amounts determined in subdivisions (iv)(I) and (iv)(II) of this subdivision (3)(B) reduced by the amount determined in subdivision (iv)(III) of this subdivision (3)(B) by the highest tax rate under section 5822 of this title.
(vi) For the total distributive shares of the remaining final federal adjustments reported to resident direct partners subject to tax under section 5822 of this title, multiply the amount reported by the highest tax rate under section 5822 of this title.
(vii) Add the amounts determined in subdivisions (ii), (iii), (v), and (vi) of this subdivision (3)(B), along with penalty and interest as calculated under subsection 3202(a) and subdivisions 3202(b)(2) and (b)(3) of this title.
(C) Final federal adjustments subject to the election under this subdivision (c)(3) exclude:
(i) the distributive share of final audit adjustments that, under subsection 5862(d) of this title, must be included in the unitary combined business income of any direct or indirect corporate partner, provided that the audited partnership can reasonably determine this; and
(ii) any final federal adjustments resulting from an administrative adjustment request.
(D) An audited partnership that is not otherwise subject to any reporting or payment obligations to Vermont and that makes an election under this subdivision (c)(3), consents to be subject to Vermont laws related to reporting, assessment, payment, and collection of Vermont tax calculated under the election.
(4) Tiered partners. The direct and indirect partners of an audited partnership that are tiered partners, and all partners of those tiered partners that are subject to tax under this chapter, are subject to the reporting and payment requirements of subdivision (2) of this subsection, and the tiered partners are entitled to make the elections provided in subdivisions (3) and (5) of this subsection. The tiered partners or their partners shall make required reports and payments not later than 90 days after the time for filing and furnishing statements to tiered partners and their partners as established under 26 U.S.C. § 6226 and the associated regulations. The Commissioner may adopt rules to establish procedures and interim time periods for the reports and payments required by tiered partners and their partners and for making the elections under this subsection.
(5) Alternative reporting and payment methods.
(A) Pursuant to any procedures established by the Commissioner, an audited partnership or tiered partner may request approval by the Commissioner to utilize alternative reporting and payment methods, including modifying applicable time requirements and any other requirement of this subsection (c), provided that:
(i) the audited partnership or tiered partner demonstrates to the Commissioner’s satisfaction that the requested method will reasonably provide for the reporting and payment of taxes, penalties, and interest due under this subsection (c); or
(ii) the audited partnership or tiered partner establishes to the Commissioner’s satisfaction that their direct partners have agreed to allow a refund of the State tax to the entity.
(B) A request for approval of alternative reporting and payment methods by the Commissioner shall be made by the audited partnership or tiered partner within the time for election provided in subdivision (3) or (4) of this subsection (c), as applicable.
(6) Effect of election by audited partnership or tiered partner and payment of amount due.
(A) The election made pursuant to subdivision (3) or (5) of this subsection (c) is irrevocable unless the Commissioner, at the Commissioner’s discretion, determines otherwise.
(B) If reported properly and paid by the audited partnership or tiered partner, the amount determined under subdivision (3)(B) of this subsection (c) or under an optional election under subdivision (5) of this subsection (c) shall be treated as paid in lieu of taxes owed by its direct and indirect partners, to the extent applicable, on the same final federal adjustments. The direct or indirect partners shall not be eligible to take any deduction or credit for this amount or claim a refund of the amount in this State. Nothing in this subdivision (6) shall preclude a direct resident partner from claiming a credit against taxes paid or any amounts paid by the audited partnership or tiered partner on the resident partner’s behalf to another state or local tax jurisdiction pursuant to section 5825 of this title.
(7) Failure of audited partnership or tiered partner to report or pay. Nothing in this subsection prevents the Commissioner from using the best information available to assess a direct or indirect partner for taxes owed by those partners if a partnership or tiered partner fails, for any reason, to make any report or payment required by this subsection in a timely manner.
(d) De minimis exception. The Commissioner may, at the Commissioner’s discretion, adopt rules to establish a de minimis amount below which a taxpayer shall not be required to comply with subsections (b) and (c) of this section.
(e) Assessments of additional tax, interest, and penalties arising from adjustments to federal taxable income; statute of limitations. The Commissioner shall assess additional tax, interest, and penalties arising from final federal adjustments arising from an audit by the Internal Revenue Service, including a partnership-level audit, as reported by the taxpayer on an amended federal income tax return, or as part of an administrative adjustment request, by the following dates:
(1) Timely reported federal adjustments. If a taxpayer files with the Commissioner a federal adjustments report or an amended tax return as required within the period prescribed in subsection (b) or (c) of this section, the Commissioner may assess any amounts, including in-lieu-of amounts, taxes, interest, and penalties arising from those federal adjustments, if a notice of the assessment to the taxpayer is issued not later than:
(A) the expiration of the limitations period prescribed in section 5882 of this title; or
(B) the expiration of the one-year period following the date of filing the federal adjustments report with the Commissioner.
(2) Untimely reported federal adjustments. If the taxpayer fails to file the federal adjustments report within the period prescribed in subsection (b) or (c) of this section, as appropriate, or if the federal adjustments report filed by the taxpayer omits final federal adjustments or understates the correct amount of tax owed, the Commissioner may assess amounts or additional amounts, including in-lieu-of amounts, taxes, interest, and penalties arising from the final federal adjustments, if the Commissioner mails a notice of the assessment to the taxpayer by a date that is the latest of one of the following:
(A) the expiration of the limitations period prescribed in section 5882 of this title;
(B) the expiration of the one-year period following the date of filing the federal adjustments report with the Commissioner; or
(C) absent fraud, the expiration of the six-year period following the final determination date.
(f) Estimated tax payments made during a pending federal audit. A taxpayer may make estimated payments, according to the process prescribed by the Commissioner, of the tax expected to result from a pending Internal Revenue Service audit and prior to the due date of the federal adjustments report, without filing the report with the Commissioner. The estimated tax payments shall be credited against the final Vermont tax liability and shall limit the accrual of further statutory interest on that amount. If the estimated tax payments exceed the final Vermont tax liability and statutory interest ultimately determined to be due, the taxpayer is entitled to a refund or credit for the excess, provided the taxpayer files a federal adjustments report or claim for refund or credit of tax paid pursuant to section 5884 of this title, not later than one year following the final determination date. As used in this subsection, “final Vermont tax liability” means the amount of any Vermont tax liability ultimately found to be due to the State.
(g) Claims for refund or credits of tax paid arising from final federal adjustments made by the Internal Revenue Service or by administrative adjustment request.
(1) Except for negative federal adjustments required by federal law to be taken into account by the partnership in the partnership return for the adjustment or other year, a taxpayer may file a claim for refund or credit of tax paid arising from final federal adjustments on or before the later of:
(A) the expiration of the last day for filing a claim for refund or credit of tax paid pursuant to section 5884 of this title, including any extensions; or
(B) one year from the date a federal adjustments report prescribed in subsection (b) or (c) of this section, as applicable, was due to the Commissioner, including any extensions pursuant to subsection (h) of this section.
(2) The federal adjustments report shall serve as the means for the taxpayer, including a partnership and its tiered partners, direct partners, and indirect partners, to report additional tax due, report a claim for refund or credit of tax paid, and make other adjustments, including to its net operating losses, resulting from adjustments to the taxpayer’s federal taxable income. Any refund granted to the partnership under subsection (c) of this section shall be in lieu of State tax paid that may be owed to the partners.
(h) Scope of adjustments and extensions of time.
(1) Unless otherwise agreed in writing by the taxpayer and the Commissioner, any adjustments made by the Commissioner or the taxpayer after the expiration of the limitations periods prescribed in sections 5882 and 5884 of this title are limited to changes to the taxpayer’s tax liability arising from federal adjustments.
(2) The time periods provided for in this subsection may be extended:
(A) automatically by 60 days for an audited partnership or tiered partner that has 10,000 or more direct partners, upon written notice to the Commissioner; or
(B) by written agreement between the taxpayer and the Commissioner.
(3) Any extension granted under this subsection for filing the federal adjustments report extends the last day prescribed by law for assessing any additional tax arising from the adjustments to federal taxable income and the period for filing a claim for refund or credit of taxes.
(i) Commissioner’s rule-making authority. The Commissioner may adopt rules or issue other guidance to implement or explain the provisions of this section. The rules adopted or guidance issued with regard to this section may apply the principles set forth in 26 U.S.C. subtitle F, chapter 63, subchapter C; federal regulations; and other related guidance issued by the U.S. Department of the Treasury in order to prevent the omission or duplication of State tax due as the result of a partnership-level audit and to account for differences between federal and State law. (Added 2021, No. 179 (Adj. Sess.), § 13, eff. January 1, 2022; amended 2023, No. 6, § 380, eff. July 1, 2023.)
§ 5867. Form and verification of returns
The returns required to be filed under this chapter shall be in such form and manner as the Commissioner prescribes in order to ensure payment of the taxes imposed by this chapter and shall be filed at the main office of the Department of Taxes. Those returns shall be verified by written declarations that the statements therein are made subject to the pains and penalties of perjury. When a return is made by a corporation, the person signing it shall be considered to be the person who is subject to the pains and penalties of perjury. The Commissioner shall cause to be prepared blank forms for the returns and shall cause them to be distributed throughout the State and to be furnished upon application, but failure to secure or receive such a form shall not relieve a taxpayer from the obligation of filing any return herein required. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.)
§ 5868. Extension of time for filing of returns
The Commissioner may extend the time within which a taxpayer is required to file a return. The Commissioner shall extend the time for filing a taxpayer’s Vermont income tax return to the extended date for filing the United States income tax return if the taxpayer has been granted either an automatic or a good cause extension of time for filing the United States income tax return, except that the time for filing a corporation’s Vermont income tax return shall be extended to one month after the extended date for filing the United States income tax return. An extension of the time in which to file a return will not result in a corresponding extension of the time for the payment of the tax liability with respect to which the return is filed. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1979, No. 105 (Adj. Sess.), § 6; 1981, No. 191 (Adj. Sess.), § 7; 1989, No. 222 (Adj. Sess.), § 11, eff. May 31, 1990; 1991, No. 67, § 5, eff. June 19, 1991; 2019, No. 175 (Adj. Sess.), § 18, eff. Oct. 8, 2020.)
§ 5869. Repealed. 1997, No. 156 (Adj. Sess.), § 37.
§ 5870. Reporting use tax on individual income tax returns
(a) The Commissioner of Taxes shall provide that individuals report use tax on their State individual income tax returns. Taxpayers are required to attest to the amount of their use tax liability under chapter 233 of this title for the period of the tax return. Alternatively, they may elect to report an amount that is a percentage of their adjusted gross income determined under subsection (b) of this section, and use tax liability arising from the purchase of each item with a purchase price in excess of $1,000.00 shall be added to the table amount shown under subsection (b) of this section.
(b) The amount of use tax a taxpayer may elect to report under subsection (a) of this section shall be based on the taxpayer’s adjusted gross income as determined by the following tables; provided, however, that a taxpayer shall not be required to pay more than $150.00 for use tax liability under this subsection arising from total purchases of items with a purchase price of $1,000.00 or less.
If adjusted gross income is: The tax is:
Not over $20,000.00 $ 0.00
$20,001.00 to $30,000.00 $10.00
$30,001.00 to $40,000.00 $15.00
$40,001.00 to $50,000.00 $20.00
$50,001.00 to $60,000.00 $25.00
$60,001.00 to $70,000.00 $30.00
$70,001.00 to $80,000.00 $35.00
$80,001.00 to $90,000.00 $40.00
$90,001.00 to $100,000.00 $45.00
$100,001.00 and over the lesser of $150.00 or
0.05% of adjusted gross income.
(Added 2003, No. 68, § 35, eff. June 18, 2003; amended 2009, No. 160 (Adj. Sess.), § 37; 2013, No. 174 (Adj. Sess.), § 33, eff. Jan. 1, 2015; 2015, No. 57, § 95, eff. Jan. 1, 2016; 2015, No. 57, § 96, eff. Jan. 1, 2017; 2017, No. 73, § 20, eff. Jan. 1, 2017; 2019, No. 175 (Adj. Sess.), § 8, eff. Jan. 1, 2020.)
- Subchapter 007: PAYMENT OF INCOME TAXES
§ 5871. Payments by individuals, trusts, and estates
In the case of individuals, trusts, and estates, the income tax liability imposed by this chapter shall be discharged as follows:
(1) In the case of those taxpayers whose wages are subject to withholding, by periodic withholding within the taxable year for which the tax is imposed, or within such longer period as the Commissioner by regulation may prescribe.
(2) In the case of those taxpayers required to make installment payments of estimated non-withheld tax under subchapter 5 of this chapter by those payments.
(3) All income tax liabilities not theretofore discharged by withholding or installment payments shall be paid on or before the date when the return of the taxpayer for the taxable year is required to be filed. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.)
§ 5872. Payment by corporations
In the case of corporations, if the income tax liability is, or is expected to be, in excess of $500.00, the income tax liability imposed by this chapter shall be discharged in accordance with subchapter 5A of this chapter; any balance due shall be paid on or before the date on which the return of the corporation for the taxable year is required to be filed (determined with regard to any extension of time for filing). Payments made under extension are subject to interest pursuant to section 5868 of this title. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 73, § 19, eff. April 16, 1971; 1975, No. 1 (Sp. Sess.), § 12, eff. Jan. 1, 1976; 1979, No. 105 (Adj. Sess.), § 8; 1989, No. 119, § 7, eff. June 22, 1989.)
§ 5873. Extension of time for payment
For good cause shown, the Commissioner may extend the time for the payment of any tax liability, but the taxpayer shall pay, at the time the tax liability is paid, without assessment or demand, interest computed at the rate per annum established from time to time by the Commissioner pursuant to section 3108 of this title on the unpaid amount of that tax liability from the time when the liability was originally due to the time of payment. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1979, No. 105 (Adj. Sess.), § 9; 1981, No. 191 (Adj. Sess.), § 7.)
§ 5874. Method of payment
All tax liabilities imposed by this chapter may be paid pursuant to section 3110 of this title. A tax liability may be paid with uncertified check, but if an uncertified check is not honored by the bank on which it is drawn, the taxpayer shall remain liable for the payment of the tax and for all lawful penalties and interest, in the same manner as if the check had not been tendered. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 2021, No. 73, § 5.)
§ 5875. Repealed. 1997, No. 156 (Adj. Sess.), § 37.
- Subchapter 008: DEFICIENCIES, ASSESSMENTS, REFUNDS, AND APPEALS
§ 5881. Repealed. 1997, No. 156 (Adj. Sess.), § 37.
§ 5882. Time limitation on notices of deficiency and assessment of penalty and interest
(a) The Commissioner may notify a taxpayer of a deficiency with respect to the payment of any tax liability, or assess a penalty or interest with respect thereto, in accordance with section 3202 of this title, at any time within three years after the date that tax liability was originally required to be paid under this chapter.
(b) Notwithstanding subsection (a) of this section:
(1) If the taxpayer fails to file a proper return with respect to any tax liability at the time prescribed for its filing, the notification or assessment may be made at any time before the end of three years after the taxpayer files such a return.
(2) If the deficiency is caused by reason of fraud or the willful intent of the taxpayer to defeat or evade this chapter, the notification or assessment may be made at any time.
(3) If the notice of deficiency or assessment is founded upon an assertion or determination by the United States that the taxable income, or income tax liability, of the taxpayer under the laws of the United States is greater than the amount of the taxable income or income tax liability reported on any return of the taxpayer filed under the laws of the United States, the notification or assessment under section 3203 of this title may be made within the time prescribed under subsection (a) of this section, or at any time before the expiration of six months after the date the Commissioner is notified, in writing, by the taxpayer or by the United States of the federal assertion or determination, whichever period is the later to expire.
(4) If the taxpayer and Commissioner agree, the notification or assessment may be made at any time before the date so agreed upon.
(5) If a person withholds tax under subchapter 4 of this chapter but underreports the tax withheld by 20 percent or more, the notification or assessment may be made at any time before the expiration of six years from the date of the filing of such return.
(6) If the notice or deficiency is based upon a refund that was paid in error, the notification or assessment under section 3203 of this title may be made within the time prescribed under subsection (a) of this section or at any time before the expiration of one year after the date the refund was paid, whichever period is the later to expire. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1989, No. 119, § 13, eff. June 22, 1989; 2007, No. 190 (Adj. Sess.), § 21, eff. June 6, 2008.)
§ 5883. Determination of deficiency, refund, or assessment
Upon receipt of a notice of deficiency, of denial or reduction of a refund claim, or of assessment of penalty or interest under section 3203 of this title, the taxpayer may, within 60 days after the date of mailing of the notice or assessment, petition the Commissioner in writing for a determination of that deficiency, refund, or assessment. The Commissioner shall thereafter grant a hearing upon the matter and notify the taxpayer in writing of his or her determination concerning the deficiency, refund, or assessment. (Added 1966 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1975, No. 154 (Adj. Sess.), § 1, eff. date, see note set out below; 1979, No. 105 (Adj. Sess.), § 12; 1989, No. 222 (Adj. Sess.), § 34; 2007, No. 190 (Adj. Sess.), § 22, eff. June 6, 2008; 2013, No. 73, § 23, eff. June 5, 2013.)
§ 5884. Refunds; petitions for refunds
(a) At any time within three years after the date a return is required to be filed under this chapter, six months from the date a tax liability is paid or offset, or six months after a refund was received from the United States with respect to an income tax liability, or an amount of taxable income, under the laws of the United States, reported in a return filed under the laws of the United States for the taxable year, with respect to which that return was filed under this chapter, whichever is later, a taxpayer may petition the Commissioner for the refund of all or any part of the amount of tax paid. Unless the period is extended by agreement of the Commissioner and the taxpayer, the Commissioner shall thereafter, upon notice to the taxpayer, hold a hearing on the claim and shall notify the taxpayer of his or her determination of the claim within 30 days of the hearing. The failure of the Commissioner to refund the amount claimed by a taxpayer within six months of the date of the petition for the refund, under this subsection, shall be considered to be a notification to the taxpayer of the Commissioner’s determination concerning the claim. The notification shall be considered to have been given on the date of the expiration of the six-month period.
(b) If the Commissioner determines, with respect to a timely filed return or otherwise, that a taxpayer has paid an amount of tax under this chapter that, as of the date of the determination, exceeds the amount of tax liability owing from the taxpayer to the State, with respect to the current and all preceding taxable years, under any provision of this title, the Commissioner shall forthwith refund the excess amount to the taxpayer together with interest at the rate per annum established from time to time by the Commissioner pursuant to section 3108 of this title. That interest shall be computed from 45 days after the date the return was filed or from 45 days after the date the return was due, including any extensions of time thereto, with respect to which the excess payment was made, whichever is the later date.
(c) Notwithstanding subsection (b) of this section, in the case of a refund claimed on a return that is filed after the last date prescribed for filing such return, including any extensions of time thereto, or claimed on an amended return, the interest on the excess amount to be refunded by the Commissioner to the taxpayer shall be computed from 45 days after the date the late or amended return is filed.
(d) Notwithstanding subsection (a) of this section, a report required by subsection 5842(c) of this title may be amended after the due date of such report only for an administrative error. An administrative error is one that does not change the amount of tax withheld. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 73, § 21, eff. April 16, 1971; 1979, No. 105 (Adj. Sess.), § 48, see change of interest rate note set out below; 1983, No. 59, § 4, eff. April 22, 1983; 2003, No. 68, § 81, eff. June 18, 2003; 2011, No. 45, § 3, eff. May 24, 2011; 2019, No. 175 (Adj. Sess.), § 15, eff. Oct. 8, 2020.)
§ 5885. Procedure for hearings by Commissioner; appeals
(a) Any hearing granted by the Commissioner under section 5883 or 5884 of this title shall be subject to and governed by 3 V.S.A. chapter 25.
(b) Any aggrieved taxpayer may, within 30 days after a determination by the Commissioner concerning a notice of deficiency, an assessment of penalty or interest, or a claim to refund, appeal that determination to the Washington Superior Court or the Superior Court of the county in which the taxpayer resides or has a place of business. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 185 (Adj. Sess.), § 224, eff. March 29, 1972; 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974; 1979, No. 105 (Adj. Sess.), § 13; 1997, No. 50, § 20, eff. June 26, 1997.)
§ 5886. Payment and collection of deficiencies and assessments; jeopardy notices
(a) Upon notification to a taxpayer of any deficiency, and upon assessment against the taxpayer of any penalty or interest, under sections 3202 and 3203 of this title, the amount of the assessment shall be payable immediately and the amount of the deficiency and assessment shall be collectible by the Commissioner 60 days after the date of the notification or assessment. The collection by the Commissioner of the deficiency, penalty, or interest shall be stayed:
(1) if the taxpayer files a petition for determination by the Commissioner in accordance with section 5883 of this title, collection shall be stayed until 30 days after the notification of the taxpayer of the determination;
(2) if within 30 days of the notification of determination the taxpayer files a notice of appeal, collection shall be stayed pending judgment of the court upon the appeal; and
(3) under such further circumstances and upon such terms as the Commissioner prescribes.
(b) Notwithstanding subsection (a) of this section, the Commissioner, if he or she believes the collection from a taxpayer of any deficiency, penalty, or interest to be in jeopardy, may demand, in writing, that the taxpayer pay the deficiency, penalty, or interest forthwith. The demand may be made concurrently with, or after, the notice of deficiency or the assessment of penalty, or interest given to the taxpayer under sections 3202 and 3203 of this title. The amount of deficiency, penalty, or interest shall be collectible by the Commissioner on the date of the demand, unless the taxpayer files with the Commissioner a bond in an amount equal to the deficiency, penalty, or interest sought to be collected as security for such amount as finally may be determined. In the event that it is finally determined that the taxpayer was not liable for the amount of the deficiency, penalty, or interest referred to in any demand under this subsection, the Commissioner shall reimburse the taxpayer promptly upon such determination for the reasonable cost to the taxpayer of any bond obtained by him or her for the purposes of this subsection. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 185 (Adj. Sess.), § 225, eff. March 29, 1972; 1979, No. 105 (Adj. Sess.), § 14; 1995, No. 29, § 23, eff. April 14, 1995; 2017, No. 74, § 138; 2021, No. 105 (Adj. Sess.), § 540, eff. July 1, 2022.)
§ 5887. Remedy exclusive; determination final
(a) The exclusive remedy of a taxpayer with respect to the refund of monies paid in connection with a return filed under this chapter shall be the petition for refund provided under section 5884 of this title and the appeal from an adverse determination of the petition for refund provided under section 5885 of this title. The exclusive remedy of a taxpayer with respect to a notification of deficiency or assessment of penalty or interest under sections 3202 and 3203 of this title shall be the petition for determination of the deficiency or assessment provided under section 5883 of this title and the appeal from an adverse determination of deficiency or assessment provided under section 5885 of this title.
(b) Upon the failure of a taxpayer to petition in accordance with section 5883 of this title from a notice of deficiency or assessment under sections 3202 and 3203 of this title, or to appeal in accordance with section 5885 of this title from a determination of a deficiency or assessment of tax liability under section 5883 of this title, the taxpayer shall be bound by the terms of the notification, assessment, or determination, as the case may be. The taxpayer shall not thereafter contest, either directly or indirectly, the tax liability as therein set forth in any proceeding, including a proceeding upon a claim of refund of all or any part of any payment made with respect to the tax liability or a proceeding for the enforcement or collection of all or any part of the tax liability.
(c) Notwithstanding subsections (a) and (b) of this section, the Commissioner may compromise a tax liability arising under this title upon the grounds of doubt as to liability or doubt as to collectibility, or both. Upon acceptance by the Commissioner of an offer in compromise, the liability of the taxpayer in question is conclusively settled, and neither the taxpayer nor the Commissioner may reopen the case except by reason of falsification or concealment of assets by the taxpayer or mutual mistake of a material fact or if, in the opinion of the Commissioner, justice requires it. The decision of the Commissioner to reject an offer in compromise is not subject to review. The Commissioner may adopt rules regarding the procedures to be followed for the submission and consideration of offers in compromise. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 2011, No. 45, § 36f, eff. May 24, 2011; 2017, No. 74, § 139.)
§ 5888. Determination of taxable income and income tax liability under the laws of the United States
For purposes of this chapter, a taxpayer’s taxable income or income tax liability under the laws of the United States shall be determined by reference to the judicial decisions and administrative rulings of the United States.
(1) A determination by the United States that establishes the amount of a taxpayer’s taxable income or income tax liability under the laws of the United States for any taxable year shall be binding on the taxpayer and the State in calculating the taxpayer’s liability to Vermont under this chapter. As used in this section, “determination by the United States” means:
(A) a decision by the Tax Court of the United States or a judgment, decree, or other order by any U.S. court of competent jurisdiction that has become final;
(B) a closing agreement under 26 U.S.C. § 7121; or
(C) an agreement executed under 26 U.S.C. § 1313(a)(4).
(2) For any taxable year, the payment to the United States by any taxpayer of an aggregate amount of income tax, whether by withholding or otherwise; whether under a claim of deficiency, demand or otherwise; and whether under protest or otherwise, shall be prima facie evidence, for purposes of this chapter, that such aggregate amount, less any refunds received by the taxpayer from the United States with respect to his or her income tax payments for that year, constitutes the income tax liability of the taxpayer for that taxable year under the laws of the United States, and that the items of income, deductions, exemptions, and credits with respect to which the income tax liability was calculated are the items of income, deductions, exemptions, and credits of the taxpayer for that taxable year under the laws of the United States.
(3) For purposes of this section, the affidavit of any U.S. District Director of Internal Revenue that a taxpayer:
(A) has paid a specified aggregate amount of income tax;
(B) has received a specified amount of refund with respect to the taxpayer’s income tax payments; or
(C) has paid any amount of tax calculated with respect to specified items of income, deductions, exemptions, or credits, shall be prima facie evidence of the truth of those matters set forth in the affidavit.
(4) Notwithstanding any other provision of law:
(A) Any adjustments made to basis or deductions taken under the laws of the United States in connection with the claiming of a federal tax credit shall also be made for the calculation of Vermont tax, whether or not such federal credit is available to the taxpayer in the determination of the amount of the taxpayer’s Vermont tax.
(B) The amount of any Vermont net operating loss shall be available to a taxpayer as a carryforward in the 10 years following the loss year. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 73, § 22, eff. April 16, 1971; 1983, No. 206 (Adj. Sess.), § 2, eff. April 26, 1984; 1985, No. 262 (Adj. Sess.), § 4, eff. June 4, 1986; 1991, No. 32, § 33, eff. May 18, 1991; 1993, No. 89, § 13; 2005, No. 207 (Adj. Sess.), § 17, eff. May 31, 2006; 2021, No. 105 (Adj. Sess.), § 541, eff. July 1, 2022.)
- Subchapter 009: ENFORCEMENT AND COLLECTION
§ 5891. Tax a debt to the State
Any tax liability imposed by this chapter becomes, from the time the tax liability is due and payable, a debt of the taxpayer to the State to be recovered in an action on this title. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.)
§ 5892. Action to collect taxes; limitations
(a) Action may be brought by the Attorney General of the State at the instance of the Commissioner in the name of the State to recover the amount of the tax liability of any taxpayer, if the action is brought within six years after the date the tax liability was collectible under section 5886 of this title. The action shall be returnable in the county where the taxpayer resides or has a place of business, and if the taxpayer neither resides nor has a place of business in this State, the action shall be returnable in Washington County.
(b) Notwithstanding 12 V.S.A. §§ 3167 and 3168, a motion may be brought by the Attorney General of the State at the instance of the Commissioner in the name of the State for issuance of trustee process at the same time as an action is brought under subsection (a) of this section, and, if judgment is granted in that action, the court may proceed immediately to hear and render a decision on the trustee process. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 2009, No. 1 (Sp. Sess.), § H.27, eff. June 2, 2009.)
§ 5893. Levy for nonpayment
When all or any portion of a tax liability imposed by this chapter is not paid within 60 days after it becomes collectible under section 5886 of this title, the Commissioner may issue a warrant under his or her hand and official seal directed to the sheriff of any county of this State. The warrant shall command the sheriff to levy upon and sell the real and personal property of the taxpayer for the payment of the unpaid tax liability imposed by this chapter, together with allowable fees and costs. The levy and sale shall be effected in the manner, and shall be subject to the limitations, prescribed for the levy, distraint, and sale of property for the nonpayment of town taxes under sections 5191-5193 and 5253-5263 of this title. The sheriff shall return the warrant to the Commissioner and pay to him or her the money collected thereunder within the time specified in the warrant. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.)
§ 5894. Liability for failure or delinquency
(a) Failure to supply information. An individual, fiduciary, or officer or employee of any corporation or partner or employee of any partnership who, with intent to evade any requirement of this chapter or any lawful requirement of the Commissioner hereunder, fails to supply any information required by or under this chapter shall be fined not more than $1,000.00 or be imprisoned not more than one year, or both.
(b) Failure to file. An individual, fiduciary, or officer or employee of any corporation or partner or employee of any partnership who knowingly fails to file a tax return when due shall be imprisoned not more than one year or fined not more than $1,000.00, or both.
(c) Failure to pay. An individual, fiduciary, or officer or employee of any corporation or partner or employee of any partnership who, with intent to evade a tax liability, fails to pay a tax when due shall, if the amount of tax evaded is $500.00 or less in a single calendar year, be imprisoned not more than one year or fined not more than $1,000.00, or both.
(d) Failure to file or failure to pay; in excess of $500.00. An individual, fiduciary, or officer or employee of a corporation or partner or employee of a partnership who, with intent to evade a tax liability, fails to file a tax return when required to do so or fails to pay a tax when due shall, if the amount of tax evaded is in excess of $500.00 in a single calendar year, be imprisoned not more than three years or fined not more than $10,000.00, or both.
(e) False or fraudulent return. An individual, fiduciary, or officer or employee of a corporation or partner or employee of a partnership who knowingly makes, signs, verifies, or files with the Commissioner a false or fraudulent tax return shall be imprisoned not more than one year or fined not more than $1,000.00, or both. An individual, fiduciary, or officer or employee of a corporation or partner or employee of a partnership who, with intent to evade a tax liability, makes, signs, verifies, or files with the Commissioner a false or fraudulent tax return shall, if the amount of tax evaded is more than $500.00, be imprisoned not more than three years or fined not more than $10,000.00, or both.
(f) Violations from income derived from illegal activity. An individual, fiduciary, officer, or employee of any corporation or a partner or employee of any partnership who violates subsections (a)-(e) of this section based on income derived from illegal activity shall be imprisoned not more than three years or fined not more than $10,000.00, or not more than $100,000.00 if the violation was based on income derived from the unlawful sale of a regulated drug in violation of 18 V.S.A. chapter 84, or both. The penalty provided in this subsection shall be in addition to any other civil or criminal penalties provided by law. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1987, No. 48, § 9; 2013, No. 76, § 7; 2019, No. 40, § 12.)
§ 5895. Tax liability as property lien
(a)(1) If any corporation, partnership, individual, trust, or estate required to pay or remit any tax liability under this chapter neglects or refuses to pay it in accordance with this chapter after notification or assessment thereof under sections 3202 and 3203 of this title, the aggregate amount of the tax liability then due and owing, together with any costs that may accrue in addition thereto, shall be a lien in favor of this State upon all property and rights to property, whether real or personal, belonging to the corporation, partnership, individual, trust, or estate.
(2) The lien shall arise at the time the notification or assessment is made by the Commissioner and shall continue until the aggregate tax liability with costs is satisfied in full or becomes unenforceable by reason of lapse of time. The lien shall be valid as against any subsequent mortgagee, pledgee, purchaser, or judgment creditor when notice of the lien and the sum due has been filed by the Commissioner with the clerk of the town or city in which the property subject to lien is situated or, in the case of an unorganized town, gore, or grant, in the office of the clerk of the county wherein the property is situated. The lien shall be deemed filed when the clerk of the town or city indorses a certificate on the lien pursuant to 24 V.S.A. § 1159.
(3) In the case of a motor vehicle, the lien shall also be valid when a notation of the lien is made on the certificate of title and shall only be valid as against any subsequent mortgagee, pledgee, bona fide purchaser, or judgment creditor when such notation is made.
(4) In the case of any prior mortgage on any real or personal property so written as to secure a present debt and also future advances by the mortgagee to the mortgagor, the lien established pursuant to this section, when notice thereof has been filed in the proper clerk’s office, shall be subject to the prior mortgage unless the Commissioner also notifies the mortgagee of the recording of the lien in writing, in which case any indebtedness thereafter created from the mortgagor to the mortgagee shall be junior to the lien established pursuant to this section.
(b) The Commissioner shall issue to the taxpayer a certificate of release of the lien if:
(1) the Commissioner finds that the liability for the amount demanded, together with costs, has been satisfied or has become unenforceable by reason of lapse of time;
(2) there is furnished to the Commissioner a bond with surety approved by the Commissioner in a sum sufficient to equal the amount demanded, together with costs, the bond to be conditioned upon the payment of any judgment rendered in proceedings regularly instituted by the Commissioner to enforce collection thereof at law or of any amount agreed upon in writing by the Commissioner to constitute the full amount of the liability; or
(3) the Commissioner determines at any time that the interest of this State in the property has no value.
(c) The lien provided for by this section may be foreclosed at any time after the tax liability with respect to which the lien arose becomes collectible under section 5886 of this title. In the case of real property, the lien may be foreclosed in the manner prescribed in 12 V.S.A. chapter 172, subchapters 1–3 and in such rules as the Supreme Court may promulgate for the foreclosure of mortgages on real estate. In the case of personal property, the lien may be satisfied in the manner prescribed in 9A V.S.A. article 9 for the disposition of collateral under a security interest or in the manner provided by law for the foreclosure of other security interests in personal property. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 185 (Adj. Sess.), § 226, eff. March 29, 1972; 1989, No. 119, § 18, eff. June 22, 1989; 2017, No. 74, § 140; 2019, No. 14, § 80, eff. April 30, 2019; 2019, No. 38, § 6; 2021, No. 105 (Adj. Sess.), § 542, eff. July 1, 2022.)
- Subchapter 010: CONFIDENTIAL PREPARATION OF RETURNS
§ 5901. Consent to use or disclosure of information
(a) Any return of the tax imposed by this chapter, other than a declaration of estimated tax required by this chapter, which is prepared by a person other than the taxpayer, shall contain a written declaration, under the penalties of perjury, by the person preparing the return or declaration that the statements therein are true, correct, and complete, based on all information of which the preparer has any knowledge, and that, either:
(1) he or she has not used and will not use any information furnished by the taxpayer for any purpose other than the preparation of the return or declaration, and has not made and will not make any such information available to any other person for any such purpose; or
(2) he or she has obtained a valid consent of the taxpayer to use such information for purposes other than the preparation of the return or declaration or to make such information available to another person or persons for such purposes.
(b) For the purposes of subdivision (a)(2) of this section, a consent of a taxpayer shall be valid only if it:
(1) is set forth in a separate document signed by the taxpayer;
(2) is printed in eight point or larger type or is typed or written in letters of comparable size; and
(3) specifies the information that may be used by the preparer or made available by him or her to another person or persons and the purpose or purposes for which such information may be used or made available. (Added 1971, No. 251 (Adj. Sess.), § 2, eff. July 1, 1972; amended 1985, No. 266 (Adj. Sess.), § 6, eff. June 4, 1986.)
§ 5902. Persons preparing returns
A person shall be fined not more than $1,000.00 or imprisoned for not more than one year, or both, if he or she receives any information furnished by a taxpayer to enable such person to prepare or have prepared for such taxpayer a return of the tax imposed by this chapter or a declaration of estimated tax required by this chapter and he or she:
(1) uses any such information for any purpose other than the preparation of the return or declaration or makes any such information available to any other person for any such purpose, unless a valid consent, as described in section 5901 of this title, to so use such information or to so make such information available has been obtained; or
(2) uses any such information, or makes any such information available, for a purpose not specified in such valid consent. (Added 1971, No. 251 (Adj. Sess.), § 2, eff. July 1, 1972.)
§ 5903. Exceptions
Section 5902 of this title shall not apply to a disclosure of information if such disclosure is made:
(1) pursuant to subdivision 3102(d)(4) of this title; or
(2) pursuant to an order of a court. (Added 1971, No. 251 (Adj. Sess.), § 2, eff. July 1, 1972; amended 2003, No. 70 (Adj. Sess.), § 42, eff. March 1, 2004.)
- Subchapter 010A: TAXATION OF S CORPORATIONS
§ 5910. Definitions; federal conformity
(a) As used in this subchapter:
(1) “C corporation” means a corporation that is not an S corporation.
(2) “Code” means the Internal Revenue Code of 1986, as amended and as applicable to the taxable period; references to sections of the Code shall be deemed to refer to corresponding provisions of prior and subsequent federal tax laws.
(3) “Income attributable to Vermont” means items of income, loss, deduction, or credit of the S corporation allocated and apportioned to Vermont pursuant to section 5833 of this title.
(4) “Income not attributable to Vermont” means all items of income, loss, deduction, or credit of the S corporation other than income attributable to Vermont.
(5) “Pro rata share” means the portion of any item attributable to an S corporation shareholder for a taxable period determined in the manner provided in, and subject to any election made under, subsection 1377(a) or 1362(e), as the case may be, of the Code.
(6) “S corporation” means a corporation for which a valid election under subsection 1362(a) of the Code is in effect.
(7) “Taxable period” means any taxable year or portion of a taxable year during which a corporation is an S corporation.
(b) Except as otherwise expressly provided or clearly appearing from the context, any term used in this subchapter shall have the same meaning as when used in comparable context in the Code, or in any statute relating to federal income taxes, in effect for the taxable period. Due consideration shall be given in the interpretation of this subchapter to applicable sections of the Code in effect from time to time and to federal rulings and regulations interpreting such sections, provided such Code, rulings, and regulations do not conflict with the provisions of this subchapter. (Added 1995, No. 169 (Adj. Sess.), § 21, eff. May 15, 1996; amended 2021, No. 105 (Adj. Sess.), § 543, eff. July 1, 2022.)
§ 5911. Taxation of an S corporation and its shareholders
(a) An S corporation shall not be subject to the tax imposed by section 5832 of this title, except to the extent of income taxable to the corporation under the provisions of the Internal Revenue Code.
(b) For the purposes of section 5823 of this title, each shareholder’s pro rata share of the S corporation’s income attributable to Vermont and each resident shareholder’s pro rata share of the S corporation’s income not attributable to Vermont shall be taken into account by the shareholder in the manner provided in 26 U.S.C. § 1366. (Added 1995, No. 169 (Adj. Sess.), § 21, eff. May 15, 1996; amended 2021, No. 105 (Adj. Sess.), § 544, eff. July 1, 2022.)
§ 5912. Repealed. 2015, No. 134 (Adj. Sess.), § 13, eff. May 25, 2016.
§ 5913. Part-year residence
For purposes of this subchapter, if a shareholder of an S corporation is both a resident and nonresident of Vermont during any taxable period, the shareholder’s pro rata share of the S corporation’s income attributable to Vermont and income not attributable to Vermont for the taxable period shall be further prorated between the shareholder’s periods of residence and nonresidence during the taxable period, in accordance with the number of days in each period. (Added 1995, No. 169 (Adj. Sess.), § 21, eff. May 15, 1996.)
§ 5914. Returns and mandatory payments
(a) An S corporation that engages in activities in Vermont that would subject a C corporation to the requirement to file a return under section 5862 of this title shall file with the Commissioner an annual return, in the form prescribed by the Commissioner, on or before the due date prescribed for the filing of S corporation returns under 26 U.S.C. § 6072(b). The return shall set forth the name, address, and Social Security or federal identification number of each shareholder; the income attributable to Vermont and income not attributable to Vermont with respect to each shareholder as determined under this subchapter; and such other information as the Commissioner may by regulation prescribe. The S corporation shall, on or before the day on which such return is filed, furnish to each person who was a shareholder during the year a copy of such information shown on the return as the Commissioner may by regulation prescribe.
(b) The Commissioner may upon request and for ease of administration permit S corporations to file composite returns and to make composite payments of tax on behalf of some or all of its nonresident shareholders. In addition, the Commissioner may require an S corporation that has in excess of 50 nonresident shareholders to file composite returns and to make composite payments at the second-highest marginal rate on behalf of all of its nonresident shareholders.
(c) With respect to each of its nonresident shareholders, an S corporation shall for each taxable period be liable for all income taxes, together with related interest and penalties, imposed on the shareholder by Vermont with respect to the income of the S corporation. An S corporation shall declare estimated tax, and shall pay estimated tax, including applicable interest and penalties, on such liability in the manner and at the times specified for individuals in subchapter 5 of this chapter; provided, however, that an S corporation with a single shareholder and a tax liability under this section of $250.00 or less in the prior year, and an S corporation with two or more shareholders and a tax liability under this section of $500.00 or less in the prior year, may file the entire estimated amount on or before the fourth payment date, January 15. As used in this subsection, “estimated tax” means an amount equal to the next-to-lowest marginal tax rate prescribed under section 5822 of this title multiplied by the shareholder’s pro rata share of the income attributable to Vermont.
(d) If interest or penalty is imposed on an S corporation for any underpayment of estimated tax under subsection (c) of this section, no interest or penalty shall be imposed upon a shareholder for underpayment of estimated taxes relating to the shareholder’s pro rata share of the income attributable to Vermont to which the interest or penalty relates. If an S corporation shows to the satisfaction of the Commissioner that interest or penalties have been assessed against it in excess of the interest or penalties that would have been applied against the combined, actual tax liabilities of all nonresident shareholders, the Commissioner shall abate such excess interest and penalties. Nothing in this subsection shall be construed as authorizing a corporation to reduce its estimated tax payments.
(e) Any amount paid by the corporation to Vermont pursuant to this section shall be considered to be a payment by the shareholder of the income tax imposed on the shareholder for the taxable period pursuant to section 5822 of this title. An S corporation shall be entitled to recover a payment made pursuant to this section from the shareholder on whose behalf the payment was made. (Added 1995, No. 169 (Adj. Sess.), § 21, eff. May 15, 1996; amended 1999, No. 119 (Adj. Sess.), § 3a, eff. May 18, 2000; 2005, No. 14, § 3, eff. May 3, 2005; 2005, No. 207 (Adj. Sess.), § 1, eff. May 31, 2006; 2011, No. 45, § 20, eff. May 24, 2011; 2017, No. 73, § 4, eff. June 13, 2017; 2021, No. 105 (Adj. Sess.), § 545, eff. July 1, 2022; 2023, No. 72, § 19, eff. January 1, 2023.)
§ 5915. Minimum tax
An S corporation that is subject to the provisions of section 5914 of this title shall pay an annual tax of $250.00 to the Commissioner of Taxes on or before the due date prescribed for the filing of S corporation returns under subsection 6072(b) of the Internal Revenue Code. (Added 1995, No. 169 (Adj. Sess.), § 21, eff. May 15, 1996; amended 1997, No. 71 (Adj. Sess.), § 27a(a), eff. March 11, 1998; 2015, No. 134 (Adj. Sess.), § 14, eff. May 25, 2016.)
§ 5916. Tax credits
For purposes of section 5825 of this title, no credit shall be available to a resident individual, estate, or trust, for taxes imposed by another state or territory of the United States, the District of Columbia, or a Province of Canada upon an S corporation or the income of an S corporation. (Added 1995, No. 169 (Adj. Sess.), § 21, eff. May 15, 1996.)
- Subchapter 010B: TAXATION OF PARTNERSHIPS AND LIMITED LIABILITY COMPANIES
§ 5920. Returns and mandatory payments
(a) A partnership or limited liability company, which engages in activities in Vermont that would subject a C corporation to the requirement to file a return under section 5862 of this title, shall file with the Commissioner an annual return, in the form prescribed by the Commissioner, on or before the due date prescribed for the filing of the entity’s federal return. The return shall set forth the name, address, and Social Security or federal identification number of each partner or member; the partnership or limited liability company income attributable to Vermont and the income not attributable to Vermont with respect to each partner or member as determined under this chapter; and such other information as the Commissioner may by rule prescribe. The partnership or limited liability company shall, on or before the day on which such return is filed, furnish to each person who was a partner or member during the year a copy of such information shown on the return as the Commissioner may by rule prescribe.
(b) The Commissioner may permit a partnership or limited liability company to file composite returns and to make composite payments of tax on behalf of some or all of its nonresident partners or members. In addition, the Commissioner may require a partnership or limited liability company that has in excess of 50 nonresident partners or members to file composite returns and to make composite payments at the second-highest marginal rate on behalf of all of its nonresident partners or members.
(c) With respect to each of its nonresident partners or nonresident members, a partnership or limited liability company shall for each taxable period be liable for all income taxes, together with related interest and penalties, imposed on the partner or member by Vermont with respect to the income of the partnership or limited liability company. A partnership or limited liability company shall declare estimated tax, and shall pay estimated tax, including applicable interest and penalties, on such liability in the manner and at the times specified in subchapter 5 of this chapter; provided, however, that a partnership or limited liability company with a single partner or member and a tax liability under this section of $250.00 or less in the prior year, and a partnership or limited liability company with two or more partners or members and a tax liability under this section of $500.00 or less in the prior year, may file the entire estimated amount on or before the fourth payment date, January 15. As used in this subsection, “estimated tax” as used in subchapter 5 of this chapter shall mean an amount equal to the next-to-lowest marginal tax rate prescribed under section 5822 of this title, multiplied by the partner’s or member’s pro rata share of the income attributable to Vermont.
(d) If interest or penalty is imposed upon a partnership or limited liability company for any underpayment of estimated tax under subsection (c) of this section, no interest or penalty shall be imposed upon a partner or member for underpayment of estimated taxes relating to the partner’s or member’s pro rata share of the income attributable to Vermont to which the interest or penalty relates. If a partnership or limited liability company shows to the satisfaction of the Commissioner that interest or penalties have been assessed against it in excess of the interest or penalties that would have been applied against the combined, actual tax liabilities of all nonresident partners or members, the Commissioner shall abate such excess interest and penalties. Nothing in this subsection shall be construed as authorizing a partnership or limited liability company to reduce its estimated tax payments.
(e) Any amount paid by the partnership or limited liability company to Vermont pursuant to this section shall be considered to be a payment by the partner or member on account of the income tax imposed on the partner or member for the taxable period pursuant to section 5822 of this title. A partnership or limited liability company shall be entitled to recover a payment made pursuant to this section from the partner or member on whose behalf the payment was made.
(f)(1) Subsection (c) of this section shall not apply to a partnership or limited liability company engaged solely in the business of operating one or more affordable housing projects in this State, provided such partnership or limited liability company shall notify its nonresident partners or nonresident members of their obligation under subchapter 6 of this chapter to file Vermont personal income tax returns and under subchapter 2 of this chapter to pay a tax on income earned from such investment; instruct each nonresident partner or nonresident member to pay such tax; and in addition to filing copies of all schedules K-1 with its partnership or limited liability company return shall file with the Commissioner segregated duplicate copies of all nonresident schedules K-1. In this subsection, “affordable housing project” means a rental residential development that is intended primarily to benefit low-income Vermont residents throughout the period of the investment and that is subject to one or more of the following:
(A) a housing subsidy covenant that has been granted to the Vermont Housing and Conservation Board;
(B) a regulatory agreement or LIHTC housing subsidy covenant that has been granted to the Vermont Housing Finance Agency;
(C) a housing assistance payment contract with the U.S. Department of Housing and Urban Development pursuant to 24 C.F.R. Part 883; or
(D) a regulatory agreement that has been granted to the Farmers Home Administration of the U.S. Department of Agriculture.
(2) In this subsection, “low income” means income that is less than or equal to area median income based on statistics from State or federal sources.
(g)(1) Subsection (c) of this section shall not apply to a partnership or limited liability company engaged solely in the business of operating one or more federal new market tax credit projects in this State, provided such partnership or limited liability company shall:
(A) notify its nonresident partners or nonresident members of their obligation under subchapter 6 of this chapter to file Vermont personal income tax returns and under subchapter 2 of this chapter to pay a tax on income earned from such investment;
(B) instruct each nonresident partner or nonresident member to pay such tax; and
(C) in addition to filing copies of all schedules K-1 with its partnership or limited liability company return, file with the Commissioner segregated duplicate copies of all nonresident schedules K-1.
(2) As used in this subsection, “federal new market tax credit project” means a business that is intended primarily to benefit low-income Vermont residents throughout the period of investment and that is subject to the following:
(A) has been determined by the U.S. Department of the Treasury to be a community development entity;
(B) has been awarded an allocation of federal new market tax credits under 26 U.S.C. § 45D; and
(C) is a partnership or limited liability corporation that is a pass-through of the federal new market tax credit to the nonresident investor.
(h)(1) Notwithstanding any provisions in this section, a publicly traded partnership as defined in 26 U.S.C. § 7704(b) that is treated as a partnership for the purposes of the Internal Revenue Code is exempt from any income tax liability and any compliance and payment obligations under subsections (b) and (c) of this section if information required by the Commissioner under subdivision (2) of this subsection is provided by the due date of the partnership’s return.
(2) Publicly traded partnerships shall provide to the Commissioner in an electronic format, according to rules or procedures adopted by the Commissioner, an annual return that includes the name, address, taxpayer identification number, and other information requested by the Commissioner for each partner with Vermont-source income in excess of $500.00.
(3) A lower-tier pass-through entity of a publicly traded partnership may request from the Commissioner an exemption from the compliance and payment obligations specified in subsections (b) and (c) of this section. The request for the exemption must be in writing and contain:
(A) the name, the address, and the account number or federal identification number of each of the lower-tier pass-through entity’s partners, shareholders, members, or other owners; and
(B) information that establishes the ownership structure of the lower-tier pass-through entity and the amount of Vermont source income.
(4) The Commissioner may request additional documentation before granting an exemption to a lower-tier pass-through entity. As used in this subsection, a “lower-tier pass-through entity” means a pass-through entity for purposes of the Internal Revenue Code, which can include a partnership, S corporation, disregarded entity, or limited liability company and which allocates income, directly or indirectly, to a publicly traded partnership. The exemption under subdivision (3) of this subsection shall only apply to income allocated, directly or indirectly, to a publicly traded partnership.
(5) If granted, the exemption for the lower-tier pass-through entity shall be effective for three years following the date the exemption is granted. At the end of the three-year period, the lower-tier pass-through entity of a publicly traded partnership shall submit a new exemption request to continue the exemption. The Commissioner may revoke the exemption for the lower-tier pass-through entity if the Commissioner determines that the lower-tier pass-through entity is not satisfying its tax payment and reporting obligations to the State with respect to income allocated, directly or indirectly, to nonresident partners or members that are not publicly traded partnerships. (Added 1995, No. 169 (Adj. Sess.), § 24, eff. May 15, 1996; amended 1997, No. 50, §§ 21, 22, eff. June 26, 1997; 1999, No. 119 (Adj. Sess.), § 3b, eff. May 18, 2000; 2005, No. 14, § 4, eff. May 3, 2005; 2005, No. 207 (Adj. Sess.), § 2, eff. May 31, 2006; 2011, No. 45, § 21, eff. May 24, 2011; 2011, No. 143 (Adj. Sess.), § 17, eff. May 15, 2012; 2015, No. 57, § 70, eff. June 11, 2015; 2015, No. 97 (Adj. Sess.), § 66; 2019, No. 51, § 10, eff. June 10, 2019; 2023, No. 72, § 20, eff. January 1, 2023.)
§ 5921. Minimum tax
A partnership or a limited liability company that is taxed as a partnership under the Internal Revenue Code and is subject to the provisions of section 5920 of this title shall pay an annual tax of $250.00 to the Commissioner of Taxes on or before the due date prescribed for the filing of the entity’s federal return. The tax shall be submitted together with a form prescribed by the Commissioner. A limited liability company that does not receive partnership treatment under the Internal Revenue Code shall be taxed for State purposes in the same manner as taxed under the Internal Revenue Code. Partnerships whose activities are limited to the maintenance and management of their intangible investments and whose annual investment income does not exceed $5,000.00 and whose total assets are not in excess of $20,000.00 shall be exempt from the tax imposed by this section. (Added 1995, No. 169 (Adj. Sess.), § 24, eff. May 15, 1996; amended 1997, No. 50, § 23, eff. June 26, 1997; 1997, No. 71 (Adj. Sess.), § 27a(b), eff. March 11, 1998; 1997, No. 156 (Adj. Sess.), § 37a, eff. April 29, 1998.)
- Subchapter 011: FINANCIAL SERVICES DEVELOPMENT TAX CREDIT
§ 5922. Financial services development tax credit
(a) Definitions. As used in this subchapter:
(1) “Qualified person” means any corporation, partnership, limited liability company, sole proprietor, or trust primarily engaged in business as an investment advisor and registered as such with the Federal Securities Exchange Commissions or primarily engaged in investment management, or an investment company.
(2) “Investment management” means the provision of investment management, research, distribution, or administration services to or on behalf of an investment company, including trustees, and sponsors or participants of employee benefit plans that have accounts in an investment company, or to or on behalf of an investment advisor.
(3) “Investment company” means any person registered under the Federal Investment Company Act of 1940 (the Act) or a company that would be required to register as an investment company under the Act except that such person is exempt to such registration pursuant to Section 3(c)(1) of the Act.
(4) “Qualified payroll expense” means compensation for performance by the qualified person’s employees related to investment advisor, investment management, or investment company services in Vermont.
(5) “Apportioned ratio” means the revenue from assets under management or other investment business for non-Vermont residents who are unrelated persons, divided by the total revenue from assets under management or other investment business for unrelated persons during the tax year.
(6) “Apportioned payroll ratio” means qualified payroll expense divided by total payroll expense compensation for employees’ services related to investment advisor, investment management, or investment company services during the tax year.
(7) “Unrelated persons” means any person other than the person claiming the credit under this section, or his or her spouse, parent, child, or sibling.
(b) Non-Vermont revenue tax credit. Subject to subsections (c) and (d) of this section, a qualified person shall be allowed to claim against its income tax, from sources defined in subsection (a) of this section, a credit in the amount of the qualified person’s Vermont income tax liability from sources defined in subsection (a), times the apportioned ratio and the payroll ratio. As used in this subsection, “Vermont income tax liability” means for an individual, the taxpayer’s Vermont income tax liability as determined under this chapter multiplied by the percentage of the taxpayer’s adjusted gross income from sources defined in subsection (a) of this section; and for a corporation, the taxpayer’s Vermont tax liability as determined under this chapter multiplied by the percentage of the taxpayer’s Vermont net income from sources defined in subsection (a) of this section.
(c) Claims. A credit available in subsection (b) of this section to a qualified person who is a partnership, limited liability company, subchapter S corporation, or trust may not be claimed by the entity, but may be claimed by the entity’s partners, members, shareholders, or beneficiaries on their distributive share of the income from sources defined in subsection (a) of this section. The credit allowed shall be the pre-credit tax on the distributive share of income, multiplied by the qualified person’s apportioned ratio and payroll ratio. No credit shall be allowed under this section based upon income received by the claimant for services as an employee.
(d) Limitations. The credit shall be available in the tax year of the income used to calculate the credit.
(1) The credit may not be applied to reduce the Vermont income tax liability of the person claiming the credit, from sources defined in subsection (a) of this section, to less than 25 percent of pre-credit tax.
(2) Unused credit may not be carried forward or back.
(3) The credit may not be applied as a result of transferring employees or assets among affiliated companies or persons. The Commissioner may adopt rules to define affiliates.
(e) Recapture. In the event a qualified person ceases to employ in Vermont, for a period in excess of 120 consecutive days, at least 65 percent of the number of employees it employed in Vermont as of the year a tax credit was taken under this section, there shall be imposed upon such person a recapture penalty equal to a percentage of the total credits taken, computed in accord with the following table:
2 or less 100% More than 2 and up to 4 50% More than 4 but no more than 6 25% The recapture shall be reported on the taxpayer’s income tax return for the tax year in which the 120-day threshold is exceeded.
(f) Applicability of credit. A qualified person who claims and is awarded tax credits under this section shall report, on a form approved by the Commissioner of Taxes, such person’s qualified payroll expenses as of July 1, 1996. No credits shall be available for taxable years beginning on or after January 1, 2007 unless the General Assembly specifically authorizes the allowance of credits under this section for taxable years 2007 and after. The Department of Economic Development shall evaluate the effectiveness of the financial services development tax credit. (Added 1995, No. 184 (Adj. Sess.), § 10; amended 1999, No. 49, § 96c, eff. June 2, 1999; 2001, No. 138 (Adj. Sess.), § 1, eff. June 21, 2002; 2003, No. 70 (Adj. Sess.), § 43, eff. March 1, 2004; 2011, No. 139 (Adj. Sess.), § 35, eff. May 14, 2012; 2021, No. 105 (Adj. Sess.), § 546, eff. July 1, 2022.)
§§ 5923, 5924. Repealed.
- Subchapter 011A: TAX CREDITS RELATING TO A JOB DEVELOPMENT ZONE
§ 5925. Repealed. 2015, No. 57, § 98, effective June 11, 2015.
§ 5926. Repealed. 2005, No. 75, § 16, eff. June 23, 2005.
- Subchapter 011B: RESEARCH AND DEVELOPMENT TAX CREDIT
§§ 5927, 5928. Repealed. 2005, No. 75, § 16, eff. June 23, 2005.
- Subchapter 011C: NEW JOBS TAX CREDIT
§ 5929. Repealed. 2005, No. 94 (Adj. Sess.), § 5, eff. March 8, 2006.
- Subchapter 011D: MANUFACTURER'S INVESTMENT TAX CREDIT
§ 5930. Repealed. 2005, No. 94 (Adj. Sess.), § 5, eff. March 8, 2006.
- Subchapter 011E: ECONOMIC ADVANCEMENT TAX INCENTIVES
§§ 5930a, 5930b. Repealed. 2015, No. 157 (Adj. Sess.), § H.11, eff. January 1, 2017.
§§ 5930c-5930i. Repealed. 2005, No. 184 (Adj. Sess.), § 4(a), eff. January 1, 2017.
§ 5930j. Repealed. 2005, No. 184 (Adj. Sess.), § 16.
§ 5930k. Repealed. 2005, No. 184 (Adj. Sess.), § 4(a), eff. January 1, 2017.
- Subchapter 011F: TAX CREDIT FOR REHABILITATION OF HISTORIC BUILDINGS
§ 5930n. Repealed. 2005, No. 183 (Adj. Sess.), § 16(b).
- Subchapter 011G: REHABILITATION TAX CREDIT
§§ 5930p-5930r. Repealed. 2005, No. 183 (Adj. Sess.), § 16(b).
- Subchapter 011H: TRAINING TAX CREDIT
§ 5930t. Repealed. 2005, No. 207 (Adj. Sess.), § 12, eff. May 31, 2006.
- Subchapter 111: AFFORDABLE HOUSING TAX CREDIT
§ 5930u. Tax credit for affordable housing
(a) Definitions. As used in this section:
(1) “Affordable housing project” or “project” means:
(A) a rental housing project identified in 26 U.S.C. § 42(g); or
(B) owner-occupied housing identified in 26 U.S.C. § 143 (c)(1) or that qualifies under Vermont Housing Finance Agency criteria governing owner-occupied housing.
(2) “Affordable housing tax credits” means the tax credit provided by this subchapter.
(3) “Allocating agency” or “Agency” means the Vermont Housing Finance Agency.
(4) “Committee” means the Joint Committee on Tax Credits consisting of five members: a representative from the Department of Housing and Community Development, the Vermont Housing and Conservation Board, the Vermont Housing Finance Agency, the Vermont State Housing Authority, and the Office of the Governor.
(5) “Credit certificate” means a certificate issued by the allocating agency to a taxpayer that specifies the amount of affordable housing tax credits that can be applied against the taxpayer’s individual or corporate income tax liability or franchise, captive insurance premium, or insurance premium tax liability as provided in this subchapter.
(6) “Eligible applicant” means any municipality, State agency as defined in 10 V.S.A. § 6301a, the Vermont Housing Finance Agency, a for-profit organization, or a nonprofit organization qualifying under 26 U.S.C. § 501(c)(3) or cooperative housing organization, the purpose of which is to create and retain affordable housing for Vermonters with lower income and that has in its bylaws a requirement that the housing the organization creates be maintained as affordable housing for Vermonters with lower income on a perpetual basis or that meets the application requirements of the allocation plan.
(7) “Eligible cash contribution” means an amount of cash:
(A) contributed to the owner, developer, or sponsor of an affordable housing project and determined by the allocating agency as eligible for affordable housing tax credits; or
(B) paid to the Agency in connection with the purchase of affordable housing tax credits.
(8) “Section 42 credits” means tax credits provided by 26 U.S.C. §§ 38 and 42.
(9) “Allocation plan” means the plan recommended by the Committee and approved by the Vermont Housing Finance Agency, which sets forth the eligibility requirements and process for selection of eligible rental housing projects to receive affordable housing tax credits and eligible owner-occupied housing projects to receive loans or grants under this section. The allocation plan shall include:
(A) requirements for creation and retention of affordable housing for persons with low income; and
(B) requirements to ensure that eligible rental housing is maintained as affordable by subsidy covenant, as defined in 27 V.S.A. § 610, on a perpetual basis and that eligible owner-occupied housing or program funds for owner-occupied housing remain as an affordable housing source for future owners or buyers, and meets all other requirements of the Vermont Housing Finance Agency related to affordable housing.
(10) “Taxpayer” means a taxpayer who makes an eligible cash contribution or the assignee or transferee of or successor to such taxpayer as determined by the Department of Taxes.
(b) Eligible tax credit allocations.
(1)
(A) An eligible applicant may apply to the allocating agency for an allocation of affordable rental housing tax credits under this section related to an affordable housing project authorized by the allocating agency under the allocation plan. In the case of a specific affordable rental housing project, the eligible applicant shall also be the owner or a person having the right to acquire ownership of the building and shall apply prior to placement of the affordable housing project in service. The allocating agency shall issue a letter of approval if it finds that the applicant meets the priorities, criteria, and other provisions of subdivision (B) of this subdivision (b)(1). The burden of proof shall be on the applicant.
(B) Upon receipt of a completed application, the allocating agency shall award an allocation of affordable housing tax credits with respect to a project to an applicant, provided the applicant demonstrates to the satisfaction of the allocating agency all of the following:
(i) the owner of the project has received from the allocating agency a binding commitment for, a reservation or allocation of, or an out-of-cap determination letter for Section 42 credits, or meets the requirements of the allocation plan; and
(ii) the project has received community support.
(2)
(A) The Vermont Housing Finance Agency shall have the authority to allocate affordable housing tax credits to provide funds to make loans or grants to eligible applicants for affordable owner-occupied housing. An eligible applicant may apply to the allocating agency for a loan or grant under this section related to an affordable owner-occupied housing project authorized by the allocating agency under the allocation plan. In the case of a specific affordable owner-occupied housing project, the eligible applicants shall also be the owner or a person having the right to acquire ownership of the unit and shall apply prior to sale of the unit to the homeowner.
(B) The Agency shall require that the loan or grant recipient use such funds to maintain the unit as an affordable owner-occupied unit or as an affordable housing source for future owners or buyers.
(C) The Agency shall use the proceeds of loans or grants made under subdivision (b)(2)(A) of this section for future loans or grants to eligible applicants for affordable owner-occupied housing projects.
(D) The Agency may assign its rights under any loan or grant made under subdivision (b)(2)(A) of this section to the Vermont Housing and Conservation Board or any State agency or nonprofit organization qualifying under 26 U.S.C. § 501(c)(3), provided such assignee acknowledges and agrees to comply with the provisions of subdivision (b)(2) of this section.
(3)
(A) The Vermont Housing Finance Agency shall have the authority to allocate affordable housing tax credits to finance down payment assistance loans that meet the following requirements:
(i) the loan is made in connection with a mortgage through an Agency program;
(ii) the borrower is a first-time home buyer of an owner-occupied primary residence; and
(iii) the borrower uses the loan for the borrower’s down payment or closing costs, or both.
(B) The Agency shall require the borrower to repay the loan upon the transfer or refinance of the residence.
(C) The Agency shall use the proceeds of loans made under the Program for future down payment assistance.
(D) The Agency may reserve funding and adopt guidelines to provide grants to first-time homebuyers who are also first-generation homebuyers.
(c) Amount of credit. A taxpayer shall be entitled to claim against the taxpayer’s individual income, corporate, franchise, captive insurance premium, or insurance premium tax liability a credit in an amount specified on the taxpayer’s credit certificate. The first-year allocation of a credit amount to a taxpayer shall also be deemed an allocation of the same amount in each of the following four years.
(d) Availability of credit. The amount of affordable housing tax credit set forth on the taxpayer’s credit certificate shall be available to the taxpayer every year for five consecutive tax years, beginning with the tax year in which the eligible cash contribution is made. Total tax credits available to the taxpayer shall be the amount of the first-year allocation plus the succeeding four years’ deemed allocations.
(e) Claim for credit. A taxpayer claiming affordable housing tax credits shall submit with each return on which such credit is claimed the taxpayer’s credit certificate and, with respect to credits issued under subdivision (b)(1) of this section, a copy of the allocating agency’s credit allocation to the affordable housing project. Any unused affordable housing tax credit may be carried forward to reduce the taxpayer’s tax liability for no more than 14 succeeding tax years, following the first year the affordable housing tax credit is allowed.
(f) [Repealed.]
(g) Credit allocation.
(1) In any fiscal year, the allocating agency may award up to:
(A) $400,000.00 in total first-year credit allocations to all applicants for rental housing projects, for an aggregate limit of $2,000,000.00 over any given five-year period that credits are available under this subdivision (A).
(B) $675,000.00 in total first-year credit allocations for loans or grants for owner-occupied unit financing or down payment loans as provided in subdivision (b)(2) of this section consistent with the allocation plan, including for new construction and manufactured housing, for an aggregate limit of $3,375,000.00 over any given five-year period that credits are available under this subdivision (B). Of the total first-year credit allocations made under this subdivision (B), $250,000.00 shall be used each fiscal year for manufactured home purchase and replacement.
(2) If the full amount of first-year credits authorized by an award are not allocated to a taxpayer, the Agency may reclaim the amount not allocated and re-award such allocations to other applicants, and such re-awards shall not be subject to the limits set forth in subdivision (1) of this subsection.
(h) Credit allocation; Down Payment Assistance Program.
(1) In fiscal year 2016 through fiscal year 2019, the allocating agency may award up to $125,000.00 in total first-year credit allocations for loans through the Down Payment Assistance Program created in subdivision (b)(2) of this section.
(2) In fiscal year 2020 through fiscal year 2026, the allocating agency may award up to $250,000.00 in total first-year credit allocations for loans through the Down Payment Assistance Program created in subdivision (b)(3) of this section. (Added 1999, No. 159 (Adj. Sess.), § 40; amended 2001, No. 62, § 7; 2003, No. 74 (Adj. Sess.), § 1; 2005, No. 75, § 7; 2005, No. 207 (Adj. Sess.), § 21, eff. May 31, 2006; 2007, No. 176 (Adj. Sess.), § 13, eff. July 1, 2008; 2011, No. 143 (Adj. Sess.), § 21; 2015, No. 51, § G.7; 2015, No. 97 (Adj. Sess.), § 67; 2015, No. 157 (Adj. Sess.), § T.4; 2017, No. 69, § H.10, eff. June 28, 2017; 2019, No. 71, § 3, eff. June 18, 2019; 2021, No. 105 (Adj. Sess.), § 547, eff. July 1, 2022; 2021, No. 138 (Adj. Sess.), § 9, eff. July 1, 2022; 2021, No. 182 (Adj. Sess.), § 1, eff. July 1, 2022; 2023, No. 6, § 382, eff. July 1, 2023.)
§ 5930v. Repealed. 2009, No. 1 (Sp. Sess.), § H.28(a), eff. January 1, 2010.
§§ 5930w-5930x. Repealed. 2005, No. 184 (Adj. Sess.), § 4(a), eff. January 1, 2017.
§ 5930y. Repealed. 2013, No 73, § 24, eff. January 1, 2014.
§ 5930z. Repealed. 2019, No. 51, § 40(1), eff. Jan. 1, 2019.
- Subchapter 011J: VERMONT DOWNTOWN AND VILLAGE CENTER TAX CREDIT PROGRAM
§ 5930aa. Definitions
As used in this subchapter:
(1) “Qualified applicant” means an owner or lessee of a qualified building involving a qualified project but does not include a State or federal agency or a political subdivision of either or an instrumentality of the United States.
(2) “Qualified building” means a building built at least 30 years before the date of application, located within a designated downtown, village center, or neighborhood development area, which, upon completion of the project supported by the tax credit, will be an income-producing building not used solely as a single-family residence. Churches and other buildings owned by religious organization may be qualified buildings, but in no event shall tax credits be used for religious worship.
(3) “Qualified code improvement project” means a project:
(A) to install or improve platform lifts suitable for transporting personal mobility devices, limited use or limited application elevators, elevators, sprinkler systems, and capital improvements in a qualified building, and the installations or improvements are required to bring the building into compliance with the statutory requirements and rules regarding fire prevention, life safety, and electrical, plumbing, and accessibility codes as determined by the Department of Public Safety;
(B) to abate lead paint conditions or other substances hazardous to human health or safety in a qualified building; or
(C) to redevelop a contaminated property in a designated downtown, village center, or neighborhood development area under a plan approved by the Secretary of Natural Resources pursuant to 10 V.S.A. § 6615a.
(4) “Qualified expenditures” means construction-related expenses of the taxpayer directly related to the project for which the tax credit is sought but excluding any expenses related to a private residence.
(5) “Qualified façade improvement project” means the rehabilitation of the Façade of a qualified building that contributes to the integrity of the designated downtown, designated village center, or neighborhood development area. Façade improvements to qualified buildings listed, or eligible for listing, in the State or National Register of Historic Places must be consistent with Secretary of the Interior Standards, as determined by the Vermont Division for Historic Preservation.
(6) “Qualified Flood Mitigation Project” means any combination of structural and nonstructural changes to a qualified building that reduces or eliminates flood damage to the building or its contents. This may include relocation of HVAC, electrical, plumbing, and other building systems, and equipment above the flood level; repairs or reinforcement of foundation walls, including flood gates; or elevation of an entire eligible building above the flood level. Further eligible projects may be defined via program guidance. The project shall comply with the municipality’s adopted flood hazard bylaw, if applicable, and a certificate of completion shall be submitted by a registered engineer, architect, qualified contractor, or qualified local official to program staff. Improvements to qualified buildings listed, or eligible for listing, in the State or National Register of Historic Places shall be consistent with Secretary of the Interior’s Standards for Rehabilitation, as determined by the Vermont Division for Historic Preservation.
(7) “Qualified historic rehabilitation project” means an historic rehabilitation project that has received federal certification for the rehabilitation project.
(8) “Qualified project” means a qualified code improvement, qualified façade improvement, or qualified historic rehabilitation project as defined by this subchapter.
(9) “State Board” means the Vermont Downtown Development Board established pursuant to 24 V.S.A. chapter 76A. (Added 2005, No. 183 (Adj. Sess.), § 12; amended 2013, No. 199 (Adj. Sess.), §§ 8, 9; 2015, No. 57, § 71, eff. June 11, 2015; 2019, No. 71, § 4; 2019, No. 131 (Adj. Sess.), § 294; 2021, No. 182 (Adj. Sess.), § 5, eff. July 1, 2022; 2023, No. 181 (Adj. Sess.), § 69, eff. June 17, 2024.)
§ 5930bb. Eligibility and administration
(a) Qualified applicants may apply to the State Board to obtain the tax credits provided by this subchapter for a qualified project at any time before the completion of the qualified project.
(b) To qualify for any of the tax credits under this subchapter, expenditures for the qualified project must exceed $5,000.00.
(c) Application shall be made in accordance with the guidelines set by the State Board.
(d) Beginning on July 1, 2025, under this subchapter no new tax credit may be allocated by the State Board to a qualified building located in a neighborhood development area unless specific funds have been appropriated for that purpose. (Added 2005, No. 183 (Adj. Sess.), § 12; amended 2011, No. 143 (Adj. Sess.), § 22; 2013, No. 199 (Adj. Sess.), § 10; 2017, No. 69, § H.9, eff. June 28, 2017; 2021, No. 182 (Adj. Sess.), § 6, eff. July 1, 2022; 2023, No. 6, § 381, eff. July 1, 2023; 2023, No. 181 (Adj. Sess.), § 70, eff. June 17, 2024.)
§ 5930cc. Downtown and Village Center Program tax credits
(a) Historic rehabilitation tax credit. The qualified applicant of a qualified historic rehabilitation project shall be entitled, upon the approval of the State Board, to claim against the taxpayer’s State individual income tax, corporate income tax, or bank franchise or insurance premiums tax liability a credit of 10 percent of qualified rehabilitation expenditures as defined in 26 U.S.C. § 47(c), properly chargeable to the federally certified rehabilitation.
(b) Façade improvement tax credit. The qualified applicant of a qualified façade improvement project shall be entitled, upon the approval of the State Board, to claim against the taxpayer’s State individual income tax, State corporate income tax, or bank franchise or insurance premiums tax liability a credit of 25 percent of qualified expenditures up to a maximum tax credit of $25,000.00.
(c) Code improvement tax credit. The qualified applicant of a qualified code improvement project shall be entitled, upon the approval of the State Board, to claim against the taxpayer’s State individual income tax, State corporate income tax, or bank franchise or insurance premiums tax liability a credit of 50 percent of qualified expenditures up to a maximum tax credit of $12,000.00 for installation or improvement of a platform lift, a maximum credit of $60,000.00 for the installation or improvement of a limited use or limited application elevator, a maximum tax credit of $75,000.00 for installation or improvement of an elevator, a maximum tax credit of $50,000.00 for installation or improvement of a sprinkler system, and a maximum tax credit of $100,000.00 for the combined costs of all other qualified code improvements.
(d) Flood Mitigation Tax Credit. The qualified applicant of a qualified flood mitigation project shall be entitled, upon the approval of the State Board, to claim against the taxpayer’s State individual income tax, State corporate income tax, or bank franchise or insurance premiums tax liability a credit of 50 percent of qualified expenditures up to a maximum tax credit of $100,000.00. (Added 2005, No. 183 (Adj. Sess.), § 12; amended 2013, No. 199 (Adj. Sess.), § 11; 2015, No. 57, § 72, eff. June 11, 2015; 2019, No. 71, § 4; 2021, No. 105 (Adj. Sess.), § 548, eff. July 1, 2022; 2021, No. 182 (Adj. Sess.), § 10, eff. July 1, 2022; 2023, No. 181 (Adj. Sess.), § 71, eff. June 17, 2024.)
§ 5930dd. Claims; availability
(a) A taxpayer claiming credit under this subchapter shall submit to the Department of Taxes with the first return on which a credit is claimed a copy of the State Board’s tax credit allocation.
(b) A credit under this subchapter shall be available for the first tax year in which the qualified project is complete. In the alternative, the State Board may allocate the credit available under this subchapter and make an allocation available upon completion of any distinct phase of a qualified project. The allocation and distinct phases of the qualified project shall be identified in the application package approved by the State Board.
(c) If within three years after the date of the credit allocation to the applicant no claim for tax credit has been filed, the tax credit allocation shall be rescinded, unless the project has an approved federal application for a phased (60 month) project pursuant to Treasury Regulation § 1.48-12(b)(2)(v), in which case the credit will not be rescinded until five years from the date of the credit allocation.
(d) Any unused credit under this section may be carried forward for no more than nine tax years following the first year for which the tax credit is claimed.
(e) In lieu of using a tax credit to reduce its own tax liability, an applicant may request the credit in the form of a bank credit certificate that a bank may accept in return for cash or may accept for adjusting the rate or term of the applicant’s mortgage or loan related to an ownership or leasehold interest in the qualified building. The amount of the bank credit certificate shall equal the unused portion of the credit allocated under this subchapter, and an applicant requesting a bank credit certificate shall provide to the State Board a copy of any returns on which any portion of the allocated credit under this section was claimed. A bank that purchases a bank credit certificate may use it to reduce its franchise tax liability under section 5836 of this title in the first tax year in which the qualified building is placed back in service after completion of the qualified project or in the subsequent nine years.
(f) In lieu of using a tax credit to reduce its own tax liability, an applicant may request the credit in the form of an insurance credit certificate that an insurance company may accept in return for cash and for use in reducing its tax liability under chapter 211, subchapter 7 of this title in the first tax year in which the qualified building is placed back in service after completion of the qualified project or in the subsequent nine years. The amount of the insurance credit certificate shall equal the unused portion of the credit allocated under this subchapter, and an applicant requesting an insurance credit certificate shall provide to the State Board a copy of any returns on which any portion of the allocated credit under this section was claimed. (Added 2005, No. 183 (Adj. Sess.), § 12; amended 2009, No. 160 (Adj. Sess.), § 30; 2011, No. 45, § 18, eff. May 24, 2011; 2019, No. 71, § 4.)
§ 5930ee. Limitations
Beginning in fiscal year 2010 and thereafter, the State Board may award tax credits to all qualified applicants under this subchapter, provided that:
(1) the total amount of tax credits awarded annually, together with sales tax reallocated under section 9819 of this title, does not exceed $3,000,000.00;
(2) a total annual allocation of no more than 30 percent of these tax credits in combination with sales tax reallocation may be awarded in connection with all of the projects in a single municipality;
(3) façade tax credits shall not be available for projects that qualify for the federal rehabilitation tax credit;
(4) no credit shall be allowed under this subchapter for the cost of acquiring any building or interest in a building;
(5) credit under any one subsection of 5930cc of this subchapter may not be allocated more often than once every two years with respect to the same building; and
(6) credit awarded under section 5930cc of this subchapter that is rescinded or recaptured by the State Board shall be available for the State Board to award to applicants in any subsequent year, in addition to the total amount of tax credits authorized under this section. (Added 2005, No. 183 (Adj. Sess.), § 12; amended 2007, No. 81, § 23, eff. June 11, 2007; 2009, No. 54, § 29, eff. June 1, 2009; 2011, No. 45, § 19, eff. May 24, 2011; 2013, No. 174 (Adj. Sess.), § 35; 2017, No. 69, § H.8, eff. June 28, 2018; 2019, No. 71, § 4; 2019, No. 154 (Adj. Sess.), § E.802, eff. Oct. 2, 2020.)
§ 5930ff. Recapture
If, within five years after completion of the qualified project, either of the following events occurs, the applicant shall be liable for a recapture penalty in an amount equal to the total tax credit claimed plus an amount equal to any value received from a bank for a bank or insurance credit certificate, and any credit allocated but unclaimed shall be disallowed to the applicant:
(1) The State Board finds that any work performed on the qualified project is inconsistent with the approved application; or the applicant knowingly failed to supply any information, or supplied incorrect or untrue information required by the State Board, or failed to comply with any award condition required by the State Board.
(2) The National Park Service revoked certification for unapproved alterations or for work not done as described in the historic preservation certification application. (Added 2005, No. 183 (Adj. Sess.), § 12; amended 2009, No. 160 (Adj. Sess.), § 31.)
- Subchapter 011L: RESEARCH AND DEVELOPMENT TAX CREDIT
§ 5930ii. Research and development tax credit
(a) A taxpayer of this State shall be eligible for a credit against the tax imposed under this chapter in an amount equal to 27 percent of the amount of the federal tax credit allowed in the taxable year for eligible research and development expenditures under 26 U.S.C. § 41(a) that are made within this State.
(b) Any unused credit available under subsection (a) of this section may be carried forward for up to 10 years.
(c) Each year, on or before January 15, the Department of Taxes shall publish a list containing the names of the taxpayers who have claimed a credit under this section during the most recent completed calendar year. (Added 2009, No. 2 (Sp. Sess.), § 22; amended 2013, No. 174 (Adj. Sess.), § 37, eff. Jan. 1, 2014.)
- Subchapter 011M: MACHINERY AND EQUIPMENT INVESTMENT TAX CREDIT
§ 5930ll. Machinery and equipment tax credit [Applicable to taxable years beginning on and after January 1, 2012 and repealed effective July 1, 2030]
(a) Definitions. As used in this subchapter:
(1) “Full-time job” means a permanent position filled by an employee who works at least 35 hours per week.
(2) “Investment period” means the period commencing January 1, 2010 and ending December 31, 2014.
(3) “Qualified capital expenditures” means expenditures properly chargeable to a capital account by a qualified taxpayer during the investment period, totaling at least $20 million for machinery and equipment to be located and used in Vermont for creating, producing, or processing tangible personal property for sale.
(4) “Qualified taxpayer” means a taxpayer that:
(A) is an existing business on January 1, 2010 with an aggregate average annual employment, including all employees of its related business units with which it files a combined or consolidated return for Vermont income tax purposes, during the investment period of no fewer than 200 full-time jobs in Vermont;
(B) is a taxable corporation under Subchapter C of the Internal Revenue Code;
(C) is a business whose operations at the time of application to the Vermont Economic Progress Council are located in a Rural Economic Area Partnership (REAP) zone designated by the U.S. Department of Agriculture Rural Development Authority, engaged primarily in the creation, production, or processing of tangible personal property for sale; and
(D) proposes to make qualified capital expenditures in a Vermont REAP zone and such expenditures will contribute substantially to the REAP zone’s economy.
(5) “Qualified taxpayer’s Vermont income tax liability” means the corporate income tax otherwise due on the qualified taxpayer’s Vermont net income after reduction for any Vermont net operating loss as provided for under section 5832 of this title. For a qualified taxpayer that is a member of an affiliated group and that is engaged in a unitary business with one or more other members of that affiliated group, its Vermont net income includes the allocable share of the combined net income of the group.
(b) Certification.
(1) A qualified taxpayer may apply to the Vermont Economic Progress Council for a machinery and equipment investment tax credit certification for all qualified capital expenditures in the investment period on a form prescribed by the council for this purpose.
(2) The Council shall issue a certification upon determining that the applicant meets the requirements set forth in subsection (a) of this section.
(c) Amount of credit. Except as limited by subsections (e) and (f) of this section, a qualified taxpayer shall be entitled to claim against its Vermont income tax a credit in an amount equal to ten percent of the total qualified capital expenditures.
(d) Availability of credit.
(1) The credit earned under this section with respect to qualified capital expenditures shall be available to reduce the qualified taxpayer’s Vermont income tax liability for its tax year beginning on or after January 1, 2012 or, if later, the first tax year within which the qualified taxpayer’s aggregate qualified capital expenditures exceed $20,000,000.00. A taxpayer claiming a credit under this subchapter shall submit with the first return on which a credit is claimed a copy of the qualified taxpayer’s certification from the Vermont Economic Progress Council.
(2) The credit may be used in the year earned or carried forward to reduce the qualified taxpayer’s Vermont income tax liability in succeeding tax years ending on or before December 31, 2030.
(e) Limitations.
(1) The credit earned under this section, either alone or in combination with any other credit allowed by this chapter, may not be applied to reduce the qualified taxpayer’s Vermont income tax liability in any one year by more than 80 percent, and in no event shall the credit reduce the taxpayer’s income tax liability below any minimum tax imposed by this chapter.
(2) The total amount of credit authorized under this section shall be $8,000,000.00, and in no event shall the credit in any one tax year exceed $1,000,000.00. The credit shall be available on a first-come, first-served basis by certification of the Vermont Economic Progress Council pursuant to subsection (b) of this section.
(f) Recapture.
(1) A qualified taxpayer who has earned credit under this section with respect to its qualified capital expenditures shall notify the Vermont Economic Progress Council in writing within 60 days if the taxpayer’s trade or business is substantially curtailed in any calendar year prior to December 31, 2023.
(2) A qualified taxpayer’s business shall be considered to be substantially curtailed when the average number of the taxpayer’s full-time jobs in Vermont for any calendar year prior to December 31, 2023 is less than 60 percent of the highest average number of its full-time jobs in Vermont for any calendar year in the investment period. For purposes of the preceding calculation, the qualified taxpayer’s full-time jobs in Vermont shall include all full-time jobs in Vermont of its related business units with which it files a combined or consolidated return for Vermont income tax purposes. A business shall not be considered to be substantially curtailed when the assets of the business have been sold but the business continues to be located in Vermont, provided that the employment test of this subdivision is met.
(3) In the event that a qualified taxpayer has substantially curtailed its trade or business, then:
(A) the credit certification for such tax year and all succeeding tax years of the taxpayer shall be terminated;
(B) any credit previously earned and carried forward shall be disallowed; and
(C) any credit that has been previously used by the taxpayer to reduce its Vermont income tax liability shall be subject to recapture in accordance with the following table:
Years between the close of the tax year Percent of credits
credit was earned and year to be when repaid (%):
business was substantially curtailed:
2 or less 100
More than 2, up to 4 80
More than 4, up to 6 60
More than 6, up to 8 40
More than 8, up to 10 20
More than 10 0
(4) The recapture shall be reported on the income tax return of the taxpayer who claimed the credit for the tax year in which the taxpayer’s trade or business was substantially curtailed, or the Commissioner may assess the recapture in accordance with the assessment and appeal provisions provided for in subchapter 8 of this chapter.
(5) Within 60 days of the close of the qualified taxpayer’s tax year in which the taxpayer’s trade or business was substantially curtailed, the taxpayer may petition the Commissioner for a reduction in the amount of the credit subject to recapture and the disallowance of credit previously earned and carried forward. The Commissioner shall hold a hearing within 45 days of the receipt of the taxpayer’s petition. The Commissioner shall have the discretion to reduce the amount of the credit subject to recapture and disallowance upon a showing of circumstances that contributed to the substantial curtailment of the taxpayer’s trade or business. The decision of the Commissioner shall be final and shall not be subject to judicial review.
(g) Reporting.
(1) Any qualified taxpayer who has been certified under subsection (b) of this section shall file a report with the Vermont Economic Progress Council on a form prescribed by the Council for this purpose and provide a copy of the report to the Commissioner of Taxes.
(2) The report shall be filed for each year following the certification until the year following the last year the taxpayer claims the credit to reduce its Vermont income tax liability, or 2031, whichever occurs first.
(3) The report shall be filed by the due date of the taxpayer’s tax return, including extensions, in each year for activity the previous calendar year and include, at a minimum:
(A) the number of full-time jobs in each quarter and the average number of hours worked per week;
(B) the level of qualifying capital investments made if reporting on a year within an investment period; and
(C) the amount of tax credit earned and applied during the previous calendar year. (Added 2009, No. 156 (Adj. Sess.), § H.1; amended 2015, No. 157 (Adj. Sess.), § H.8, eff. Jan. 1, 2017; repealed on July 1, 2030 pursuant to 2009, No. 156 (Adj. Sess.), § H.2; 2023, No. 144 (Adj. Sess.), § 16, eff. July 1, 2024.)
- Subchapter 011N: RECENTLY DEPLOYED VETERAN TAX CREDIT
§ 5930nn. Recently deployed veteran tax credit
(a) A qualified employer shall be eligible for a nonrefundable credit against the income tax liability imposed under this chapter in an amount equal to $2,000.00 for each new full-time employee hired after May 24, 2011 but on or before December 31, 2012 for a position, the majority of the duties of which are at a business location within Vermont.
(b) A recently deployed veteran shall be eligible for a nonrefundable credit against the income tax liability imposed under this chapter in an amount up to a total of $2,000.00 for expenses associated with one start-up business in which the recently deployed veteran holds at least a 50-percent ownership interest. A credit under this subsection may only be taken for a business started after May 24, 2011 but on or before December 31, 2012, that is located within Vermont, and that shows a net profit of at least $3,000.00 for the year in which the credit is taken.
(c) A credit earned under this section shall be claimed in the tax year following the new full-time employee’s date of hire, or in the tax year following the date that the start-up business was created, and may be carried forward one year.
(d) In this section:
(1) “Expense associated with a start-up business” means the following expenses:
(A) expenses associated with the development of a business plan;
(B) professional services associated with the formation of the business (e.g., attorney and accounting services);
(C) an analysis or survey of potential markets, products, labor supply, or transportation facilities;
(D) advertisements for the opening of the business;
(E) salaries and wages for employees who are being trained and their instructors;
(F) travel and other necessary costs for securing prospective distributors, suppliers, or customers; and
(G) salaries and fees for executives and consultants, or for similar professional services.
(2) “New full-time employee” means a recently deployed veteran:
(A) who works at least 35 hours per week for not less than 45 of the 52 weeks following the individual’s date of hire;
(B) whose compensation equals or exceeds the prevailing compensation level, including wages and benefits, for the particular employment sector and region of the State as determined by the Commissioner of Labor;
(C) who has certification by the Department of Labor at the time of hire of:
(i) collecting or being eligible to collect unemployment benefits; or
(ii) having exhausted his or her unemployment benefits; and
(D) who has not been employed by the qualified employer for 90 days prior to the date of hire.
(3) “Qualified employer” means a person who:
(A) is in good standing with respect to applicable registration, fee, and filing requirements with the Secretary of State, the Department of Taxes, and the Department of Labor; and
(B) has in place a valid workers’ compensation policy.
(4) “Recently deployed veteran” means an individual who:
(A)(i) was a resident of Vermont at the time of entry into military service; or
(ii) was mobilized to active, federal military service while a member of the Vermont National Guard or other reserve unit located in Vermont, regardless of the resident’s home of record;
(B) received an honorable or general discharge from active, federal military service within the two-year period preceding the date of hire; and
(C) for the purposes of the credit in subsection (b) of this section, a person who at the time of starting up a new business has been certified by the Department of Labor as:
(i) collecting or being eligible to collect unemployment benefits; or
(ii) having exhausted his or her unemployment benefits.
(e) The Department of Labor, in coordination with the Department of Taxes, the Agency of Commerce and Community Development, and the Office of Veterans’ Affairs, shall:
(1) promote awareness of the recently deployed veteran tax credit authorized in this section to employers and eligible veterans;
(2) establish procedures for prequalifying an individual as a recently deployed veteran and for providing notice to the Department of Labor when a new full-time employee is hired;
(3) establish procedures for certifying a qualified employer’s compliance or, in the case of a credit under subsection (b) of this section, a recently deployed veteran’s compliance, with the eligibility and expense verification requirements to claim the credit authorized under this section;
(4) adopt measurable goals, performance measures that demonstrate results, and an audit strategy to assess the utilization and performance of the credit authorized in this section; and
(5) engage in efforts to promote the hiring of recently deployed veterans through the hiring practices of the State of Vermont.
(6) [Repealed.]
(f) An employer shall not claim the credit in subsection (a) of this section for an employee who has claimed the credit under subsection (b) of this section, and a recently deployed veteran shall not claim the credit in subsection (b) if an employer has claimed his or her hire for the credit in subsection (a). (Added 2011, No. 44, § 1, eff. May 24, 2011; amended 2015, No. 11, § 34.)
- Subchapter 012: SETOFF DEBT COLLECTION
§ 5931. Short title
This subchapter may be cited as the Vermont Setoff Debt Collection Act. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982.)
§ 5932. Definitions
As used in this chapter:
(1) “Claimant agency” means any unit of State government, including agencies, departments, boards, commissions, authorities, or public corporations, including the Vermont Student Assistance Corporation and a collection agency under contract with the Court Administrator pursuant to 4 V.S.A. § 1109(d) or 13 V.S.A. § 7171. Notwithstanding the foregoing, the Department of Taxes shall not be considered a claimant agency and shall not be subject to the limitations contained in this chapter when it applies a refund to the outstanding Vermont State tax liability of a taxpayer, including a taxpayer’s liability for interest, penalties, and fees.
(2) “Debtor” means any individual owing a debt to a claimant agency or owing any support debt that may be collected by the Department for Children and Families.
(3) “Nondebtor spouse” means any individual who is not a debtor, but has filed a joint income tax return or claim under chapter 154 of this title with a debtor.
(4) “Debt” means any obligation to pay a sum of money to a claimant agency, the amount of which is fixed by agreement between the debtor and the claimant agency or by operation of law.
(5) “Department” means the Vermont Department of Taxes.
(6) “Refund” means any individual’s State income tax refund under chapter 151 of this title and any payment due a claimant under chapter 154 of this title.
(7) “Support debt” means a support delinquency pursuant to an obligation determined under a court order or as a result of an administrative process established by this or another state.
(8) “Court” means a Superior Court or the Judicial Bureau.
(9) “Judgment debtor” means any person who has not paid in full a court judgment for payment of a fine, penalty, surcharge, or fee, but not damages, due and payable to the State or a political subdivision thereof. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 1985, No. 63, §§ 15, 15a; 1987, No. 278 (Adj. Sess.), § 14, eff. June 21, 1988; 1999, No. 147 (Adj. Sess.), § 4; 2001, No. 144 (Adj. Sess.), § 26, eff. June 21, 2002; 2003, No. 57, § 13, eff. July 1, 2004; 2005, No. 38, § 11, eff. June 2, 2005; 2005, No. 167 (Adj. Sess.), § 4, eff. Sept. 1, 2006; 2005, No. 174 (Adj. Sess.), § 64; 2007, No. 33, § 3, eff. May 18, 2007; 2009, No. 4, § 115, eff. April 24, 2009; 2009, No. 154 (Adj. Sess.), § 216.)
§ 5933. Collection of debts through setoff
(a) A claimant agency may submit any debt of $45.00 or more to the Department for collection under the procedure established by this chapter. This setoff debt collection remedy is in addition to and not in substitution for any other remedy available by law.
(b) The Department shall, upon request of a claimant agency, set off any refund that it owes to a debtor against the amount of debt certified by a claimant agency in accordance with the procedure established by section 5934 of this chapter. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2019, No. 175 (Adj. Sess.), § 25a, eff. Oct. 8, 2020.)
§ 5934. Procedure for setoff
(a) Annually, on or before a date specified by the Department, a claimant agency shall supply the Department with information necessary to identify each debtor whose refund is sought to be set off and shall certify in writing the amount of each debt submitted to the Department for collection through setoff.
(b) If a debtor identified by a claimant agency is entitled to a refund, the Department shall transfer to the claimant agency an amount equal to the refund owed or the amount of the debt certified by the claimant agency, whichever is less.
(c) Prior to requesting the Department to reduce a taxpayer’s refund by the amount of certified debt in accord with this subchapter, the claimant agency shall notify the debtor at the debtor’s last known address. The notice shall state that the agency intends to request a setoff and shall advise the debtor of the procedure, the amount and basis for the alleged debt, and that the debtor may contest the validity and amount of the debt sought to be collected through setoff by applying in writing for a hearing before the claimant agency within 30 days of the date of mailing of the notice. The notice shall also include the name and mailing address of the claimant agency to which the application for a hearing must be sent and shall advise the taxpayer that failure to apply in writing for a hearing within the 30-day period will be deemed a waiver of the opportunity to contest the setoff. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 1997, No. 156 (Adj. Sess.), § 9, eff. April 29, 1998.)
§ 5935. Joint returns
(a) With respect to State income tax refunds under chapter 151 of this title and renter credit payments due a claimant under chapter 154 of this title, when the Department transfers funds payable on a joint return to a claimant agency and only one of the spouses filing the return is identified as a debtor of the claimant agency, the nondebtor spouse may, within 30 days after the date of mailing of the notice to the taxpayer described in subsection 5934(c) of this subchapter, petition the Department in writing for a return of that portion of the refund attributable to the income of the nondebtor spouse. The Commissioner shall thereafter conduct a hearing at which the nondebtor spouse shall bear the burden of establishing what portion of a refund transferred to a claimant agency, if any, is attributable to the nondebtor’s income.
(b) With respect to payments due a claimant under chapter 154 of this title based on property ownership, when the Department transfers funds payable on a claim filed with a joint return to a claimant agency and only one of the spouses filing the return is identified as a debtor of the claimant agency, the nondebtor spouse may, within 30 days of the date of mailing of the notice to the taxpayer described in subsection 5934(c) of this title, petition the Department in writing for a return of that portion of the claim equal to the ownership share that the nondebtor spouse holds in the property upon which the claim is based. If the property is held as tenancy by the entirety, the claim shall be divided equally. The Commissioner shall thereafter conduct a hearing at which the nondebtor spouse shall bear the burden of establishing his or her ownership interest in the property.
(c) The final determination of the Commissioner regarding the amount of a refund attributable to the income of a nondebtor spouse or the ownership interest of a nondebtor spouse may be appealed in the same manner as income tax appeals under subsection 5885(b) of this title.
(d) Upon receipt of a petition under this section, the Department shall notify each claimant agency to which funds payable on a joint return or claim have been transferred that the petition is pending. If it is established that any amount of a refund or claim transferred to a claimant agency is attributable to the income or ownership interest of a nondebtor spouse, that amount shall be refunded to the nondebtor spouse. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2003, No. 70 (Adj. Sess.), § 45, eff. March 1, 2004; 2021, No. 105 (Adj. Sess.), § 549, eff. July 1, 2022; 2023, No. 6, § 383, eff. July 1, 2023.)
§ 5936. Hearing procedure
(a) If a debtor applies in writing for a hearing before a claimant agency within 30 days of the date of mailing of the notice described in subsection 5934(c) of this chapter, the claimant agency shall conduct a hearing to determine the validity and amount of debt owed by the debtor. The hearing shall be held in accordance with 3 V.S.A. §§ 809 through 813.
(b) The final determination of any claimant agency regarding the validity and amount of any debt may be appealed within 30 days to the Civil Division of the Superior Court of the unit in which the taxpayer resides, except that if the claimant agency is the Office of Child Support, the appeal shall be to the Family Division of the Superior Court. Upon appeal, the provisions of the Vermont Rules of Civil Procedure or the Vermont Rules for Family Proceedings, as appropriate, shall apply, and the court shall proceed de novo to determine the debt owed.
(c) Upon conclusion of the hearings and appeals granted under this section, and upon notification by the Commissioner of the result of any appeal under section 5935 of this chapter, a claimant agency shall notify each taxpayer whose refund is set off that a final setoff has occurred. The notice shall include the amount of refund transferred to the claimant agency, the amount of debt finally determined to be owed to the claimant agency, the amount of refund, if any, returned to a non-debtor spouse, and the amount of any outstanding balance due the debtor after final setoff. The claimant agency shall disburse any outstanding balance due the debtor along with the notice of the final setoff. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 1997, No. 63, § 20, eff. Sept. 1, 1997; 2009, No. 154 (Adj. Sess.), § 217.)
§ 5937. Priorities in claims to setoff
(a) Priority in multiple claims to refunds allowed to be set off under the provisions of this chapter shall be in descending order of magnitude.
(b) Notwithstanding the priority set forth in subsection (a) of this section, the Department may apply a refund to the outstanding Vermont State tax liability of a taxpayer, including a taxpayer’s liability for interest, penalties, and fees, before any portion of a refund is transferred to a claimant agency. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2021, No. 105 (Adj. Sess.), § 550, eff. July 1, 2022.)
§ 5938. Collection assistance fees
Annually, the Department shall determine the actual per-offset costs incurred by the Department in setting off debts and, notwithstanding section 502 of this title, the Department may assess against a debtor a collection assistance fee equal to the per-offset cost so determined. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2009, No. 160 (Adj. Sess.), § 6.)
§ 5939. Confidentiality exemption; nondisclosure
(a) Notwithstanding any other provision of law prohibiting disclosure by the Department of the contents of taxpayer records or information and notwithstanding any confidentiality statute of any claimant agency, disclosure of the name, address, and Social Security number of a debtor; amount of refund owed to a debtor; amount of debt owed by a debtor; and amount of refund attributable to the income of non-debtor spouse, between the Department and the claimant agency as necessary to effectuate the intent of this chapter, is lawful.
(b) The information obtained by a claimant agency from the Department in accordance with the exemption allowed by this section shall only be used by a claimant agency in the pursuit of its debt collection duties and practices, and any person employed by, or formerly employed by, a claimant agency who discloses any such information for any other purpose, except as otherwise allowed by law, shall be penalized in accordance with the terms of section 3102 of this title as if that person were an agent of the Commissioner. The claimant agency to which information is disclosed shall provide for the protection and security of the information as required by the Commissioner. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2005, No. 14, § 12, eff. May 3, 2005.)
§ 5940. Rules and regulations
The Commissioner of Taxes and the head of any claimant agency are authorized to prescribe forms and make procedural rules and regulations under 3 V.S.A. chapter 25 that they deem necessary to effectuate the purposes of this subchapter, to include identification of any information regarding the debtor and the debt, holding of hearings, assessment and transfer of funds, and exchange and security of information. (Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982.)
§ 5941. Procedure for setoff of court judgments
(a) The court shall include in any judgment a notice that any unpaid amount of a fine, penalty, surcharge, or fee, but not damages, may be certified to the Department for a setoff on the judgment debtor’s income tax refund and property tax credit under chapter 154 of this title, and the notice shall explain how the judgment debtor may challenge the certification.
(b) Subsection 5934(c) and section 5936 of this title, relating to the procedure for contesting the debt, shall not apply to a court seeking setoff from a judgment debtor under this subchapter.
(c) Notwithstanding section 502 of this title, the Department may assess against the judgment debtor a collection assistance fee in an amount established pursuant to section 5938 of this title.
(d) If a judgment debtor identified by the court clerk is entitled to a refund, the Department shall retain the collection assistance fee and then transfer to the court in which the judgment was issued an amount equal to the refund owed or the amount unpaid, whichever is less.
(e) The Court Administrator may contract with one or more collection agencies to serve as a claimant agency on behalf of a court for purposes of this subchapter. (Added 2005, No. 167 (Adj. Sess.), § 5, eff. Sept. 1, 2006; amended 2007, No. 33, § 4, eff. May 18, 2007; 2009, No. 4, § 116, eff. April 24, 2009; 2021, No. 105 (Adj. Sess.), § 551, eff. July 1, 2022.)
§ 5942. Offset for taxes owed in another state; reciprocity
(a) Upon the request and certification of a tax officer of a claimant state to the Commissioner that a taxpayer owes taxes to the claimant state and that the debt is fixed and no longer subject to appeal under the laws of that state, the Commissioner may set off any refund that it owes to the taxpayer against the amount of the certified debt and pay that amount to the requesting state.
(b) The Commissioner shall not set off any debt unless the laws of the requesting state allow the Commissioner, in cases where the taxpayer owes taxes to this State, to certify that a tax is owed and to request a tax officer of the requesting state to set off any refund owed to the taxpayer and pay that amount to this State. (Added 2009, No. 160 (Adj. Sess.), § 7, eff. June 4, 2010.)
- Subchapter 013: FRANCHISE TAX ON WASTE FACILITIES
§ 5951. Definitions; general provisions
(a) As used in this subchapter, all terms defined in 10 V.S.A. § 6602 shall have the same meaning that they have for purposes of 10 V.S.A. chapter 159.
(b) To the extent that they are not in conflict with the provisions of this section, the provisions of subchapters 1, 6, 7, 8, 9, and 10 of this chapter shall apply to the tax imposed by this subchapter. (Added 1987, No. 78, § 17.)
§ 5952. Imposition of tax
(a)(1) A tax is imposed for each calendar quarter or part thereof upon the franchise or privilege of doing business of every person required by 10 V.S.A. chapter 159 to obtain certification for a facility. The tax shall be imposed in the amount of $6.00 per ton of waste delivered for disposal or incineration at the facility, regardless of the amount charged by the operator to recoup its expenses of operation, including the expense of this tax.
(2) The tax shall be similarly imposed on waste delivered to a transfer facility for shipment to an incinerator or other treatment facility or disposal facility that is located outside the State. However, if the transfer station is located within a district that is authorized by an interstate compact to enter into cooperative agreements with a district in another state, the tax shall only be imposed if the treatment or disposal facility is located outside the State and also outside the cooperating district in another state. For purposes of this determination, a treatment or disposal facility may be considered to be located within a district only if that district existed before July 1, 1987.
(3) The tax shall be similarly imposed on waste shipped to an incinerator or other treatment facility or disposal facility that is located outside the State, without having been delivered to a transfer station located in this State. In this situation, the tax is imposed for each calendar quarter or part thereof upon the franchise or privilege of doing business of every person regulated under 10 V.S.A. § 6607a as a commercial hauler of solid waste. This tax shall not be imposed on waste exempt under subdivision (2) of this subsection.
(b) The tax imposed by this section shall be in addition to any other taxes imposed on the taxpayer.
(c) If a return required by this chapter is not filed or if a return, when filed, is incorrect or insufficient, the Commissioner shall determine the amount of tax due from any information available. If adequate information is not available to determine the tax otherwise due under this section, the Commissioner may assess a tax at the rate of $3.50 per year per person served by the facility. The number of persons served by a facility shall be determined by the Commissioner based upon any available information and with regard given to seasonal and recreational use.
(d) Every person required to pay the tax imposed by this subchapter shall use a weight scale that accurately gauges the weight of the waste and shall keep accurate contemporaneous records of the volume or weight of all waste delivered for disposal; provided, however, that a landfill receiving less than 1,000 tons of municipal solid waste per year that does not have scales that accurately gauge the weight of the waste may compute weight indirectly from volume using accurate records of the volume of waste delivered for disposal and a conversion rate approved by the Commissioner. The taxpayer’s records relating to imposition of the tax imposed by this subchapter shall be available for inspection or examination at any time upon demand by the Commissioner of Taxes or the Secretary of Natural Resources, their duly authorized agents, or employees and shall be preserved for a period of three years. (Added 1987, No. 78, § 17; amended 1987, No. 246 (Adj. Sess.), § 5, eff. June 13, 1988; 1987, No. 278 (Adj. Sess.), §§ 7, 8, eff. June 21, 1988; 1989, No. 218 (Adj. Sess.), § 5; 1993, No. 81, § 6; 1995, No. 186 (Adj. Sess.), § 21; 2005, No. 94 (Adj. Sess.), § 6, eff. March 8, 2006.)
§ 5953. Exemptions
The following shall not be subject to the tax imposed by section 5952 of this title:
(1) wastes delivered to a recycling or composting facility and accepted by the facility for recycling or composting, but not wastes generated by that facility;
(2) septage or sludge delivered to a facility other than a landfill or incinerator;
(3) hazardous wastes subject to the tax imposed under 32 V.S.A. chapter 237;
(4) solid waste delivered to a facility certified pursuant to 10 V.S.A. § 6605c;
(5) roadside wastes delivered to a landfill when the landfill operator certifies that he or she has accepted those wastes without fee on a duly designated green-up day or the business day immediately following;
(6) waste delivered to a transfer station for transfer to a disposal facility located inside the State and waste delivered to a facility for storage as defined in 10 V.S.A. § 6602(7); and
(7) solid waste resulting from mining, extraction, or mineral processing operations delivered to a facility certified solely for the treatment, storage, recycling, or disposal of such waste. (Added 1987, No. 78, § 17; amended 1987, No. 139 (Adj. Sess.), eff. April 8, 1988; 1987, No. 278 (Adj. Sess.), §§ 9, 10, eff. June 21, 1988; 1995, No. 186 (Adj. Sess.), § 22; 2005, No. 65, § 4.)
§ 5954. Filing of return and payment of tax
(a) Every person required to pay this tax shall, on or before the 30th day of the month following each calendar quarter, file a return with the Commissioner of Taxes and pay the amount of tax due. The Commissioner may require a return to be filed for quarters in which no tax is due.
(b) Copies of this return shall be filed with the Secretary of Natural Resources at the same time, or as otherwise required by the Secretary. Information filed with the Secretary under this section shall be a public record and made available by the Agency in accordance with the provisions of 1 V.S.A. chapter 5 without being subject to the exception created by 1 V.S.A. § 317(c)(6). (Added 1987, No. 78, § 17; amended 1995, No. 186 (Adj. Sess.), § 23, eff. May 22, 1996; 2015, No. 134 (Adj. Sess.), § 15.)
