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May 25, 2017

2017 Final Vermont Legislative Update: Taxation

An analysis from DRM's Government & Public Affairs Team

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TAXATION

Miscellaneous Tax Bill (H.516)

Vermont Information Technology Leaders Funding (H.518/H.516)

Miscellaneous Tax Bill

H.516

There are no new taxes and no new fees assessed in the Miscellaneous Tax Bill, H.516, but the legislature hopes it will raise at least $5 million through better compliance with tax laws.

The bill directs the Department of Taxes to use “new and existing strategies” to collect $3 million more from existing taxpayers in fiscal year 2018. Tax collectors also hope that by reducing the “hold harmless” rate for voluntary remittance of the use tax due from individuals ordering goods on-line from 0.2 percent to 0.1 percent of taxable income will help bring the tax yield up to a total of $5 million more than last year. Another provision changes the basis for the personal income tax from a taxpayer’s taxable federal income to adjusted gross income, but tax analysts say it will have no practical effect on taxpayers.

After years of singling out certain lines of business for special tax attention, such as audits on auctioneers or audits of records regarding equipment used in manufacturing, legislators expressed a desire for a better relationship with the business community. A provision in the bill requires the Taxpayer Advocate to convene a working group of interested stakeholders to examine ways the Department of Taxes can improve outreach and education to small business taxpayers. One of its jobs is to identify complex areas of law that could be simplified to enhance voluntary compliance.

Finally, the bill establishes a working group headed by the Secretary of the Agency of Natural Resources to develop long-term funding sources to support clean water efforts. Although State Treasurer Beth Pearce presented a comprehensive report to the legislature this session, a bundle of taxes proposed by the House Natural Resources, Fish and Wildlife Committee was ignored by the House Ways and Means Committee in light of the governor’s pledge to veto any new taxes and fees. The group is expected to focus on how to assess a per-parcel fee on real property.

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Vermont Information Technology Leaders Funding

H.518/H.516

The legislature agreed to transfer $2.5 million from the Health Information Technology Fund to the Health Care Resources Fund to help finance the Medicaid program. The current HIT fund balance is $6 million. Since 2008, the state has assessed a 0.199 percent tax on all health insurance claims to support technology infrastructure to help doctors and hospitals share electronic medical records. The funds are directed to Vermont Information Technology Leaders, a private organization.

A provision in the miscellaneous tax bill extends the sunset on the health care claims tax for the health information technology fund for one year to July 1, 2018. The bill also requires the administration to evaluate how payments from the HIT fund have promoted advancement of heath information technology adoption, to recommend whether to continue the HIT fund with its current revenue source, to review the need for a state-sponsored HIT fund, and to recommend any changes to the structure of VITL, including whether it should be a public or private entity.

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