Vermont Legislative Update Quick Links
To tax or not to tax Payroll Protection Program grants
Businesses will not have to pay federal income taxes on 2020 and 2021 Payroll Protection Program grants, and they will be exempt from 2020 Vermont income taxes under a bill, H.315, that is awaiting signature by Gov. Scott. Businesses still need the legislature to exempt income taxes on 2021 grants. If your loan has yet to be converted to a grant you will have to pay income tax on the funds. Advocates are working to get that support before the legislature adjourns in May.
PPP grants were issued to help businesses keep their employees during the pandemic. Vermont Tax Commissioner Craig Bolio has been testifying before House and Senate committees to garner support for legislation that would align the state with the federal government so that businesses wouldn’t be responsible for paying state income taxes on these grants.
The Lake Champlain Chamber will be hosting a webinar on this issue on Wednesday, April 14, 2021 from 8:30-9:30. Click here to register.
Vermont poised for post-COVID life
Governor Scott this week finally rolled out his long-awaited post-COVID Reopening Plan. The hospitality sector needed the guidance to book spring and summer events. Each week this was delayed resulted in wedding and event opportunities moving to surrounding states.
Reopening guidelines expand in three steps based on percentages of Vermonters receiving their first vaccine doses. The final target is July 4, when the administration anticipates no capacity restrictions on gatherings and events. Compliance with universal guidance will continue to be encouraged. Universal guidance includes:
- Stay home if sick.
- Wear a mask.
- Ensure six-foot spacing.
- Practice good hygiene.
- Know state travel guidance.
Following this announcement, the Agency of Commerce and Community Development began receiving questions specific to various business situations. In response, ACCD has scheduled a webinar for Wednesday, April 14 to help business owners prepare for the coming months.
Vermont businesses left out of state American Rescue Plan grants
The American Rescue Plan Act will deliver $2.7 billion to Vermont, so business owners looked forward to Governor Scott’s proposal for additional recovery grants. On Tuesday, the Governor enthusiastically announced the reopening plan, crediting Vermont’s businesses with saving lives by shutting down. Later in the day, when the administration announced its $1 billion ARPA proposal, business owners were dismayed to discover that the plan allocates only $50 million for economic recovery grants. Knowing that the legislature approved $330 million in the last round, which only covered the first half of COVID impacts, this $50 million was one more gut punch to a group that has had a most challenging year.
For many business, the climb out of their revenue holes will be much more difficult unless the legislature acknowledges the importance of helping them rebound, which will also boost the economy. As everyone scrambles for some of the ARPA funds, Vermont’s small business owners hope their value to the state’s economy is not overlooked.
After rough ride, contractor registry passes the House
H.157, a bill that creates a mandatory registry for the state’s residential contractors, finally had its turn on the House floor this week. The bill passed a preliminary vote on Tuesday with largely Democratic support on a partisan 97-52 vote. The bill received final approval on Wednesday with a voice vote.
There are currently no requirements for registration or licensing for the state’s building profession. As passed by the House, the bill requires any contractor who performs a residential building or renovation project that will exceed $3,500 in time and materials to register with the state every two years. It also requires a written contract between a contractor and client and the maintenance of liability insurance.
The legislation has been hailed by Vermont’s Office of Professional Regulation as an essential tool in preventing consumer fraud, and by the Vermont Builders and Remodelers Association as an important step in professionalizing the construction trade industry.
Despite the industry support, the two-day debate turned into one of the more contentious in recent legislative sessions, with opponents raising misconceptions over the bill’s modest intent. Republicans sowed confusion and forced delay based on registry exemptions and civil penalties for failing to register, temporarily forcing the bill back to the Ways and Means and General, Housing, and Military Affairs committees for further amendment.
In the end, concerns that the bill would burden contractors performing smaller jobs were outweighed by the clear need for consumer protection. The legislation did not make the crossover deadline, so it will need the blessing of the Senate Rules Committee to be referred to a policy committee.
Committee proposes cloud tax to pay for corporate tax changes
The House Ways and Means Committee is planning to use a popular feminine hygiene products tax exemption bill as a vehicle to change corporate income taxes and adopt a new, sweeping sales tax on software.
The proposed corporate tax changes would reduce annual state revenues by $8-9 million annually once all provisions are enacted. The changes include a shift from the traditional payroll/property/sales tax on corporations to a single sales factor apportionment, which would tax corporations based solely on the share of their nationwide sales that occur in Vermont. Mutual fund fees and annual report fees would be increased.
To offset the revenue loss from the corporate tax changes, committee member Rep. Emilie Kornheiser, D-Brattleboro, resurrected a Cloud Tax proposal that would remove an existing sales tax exemption on pre-written software that is accessed remotely. In prior years, the proposal was limited to taxation on software-as-a-service such as TurboTax or Microsoft Office, products that were previously purchased in boxes off the shelf. Due to concerns about administering the tax and determining product eligibility, the committee is strongly considering expanding the tax to platform and infrastructure services, such as Squarespace and Amazon Web Services.
Lake Champlain Chamber lobbyist Austin Davis testified in strong opposition to the last-minute proposal, noting that “taxing more things to make something simple is not the way to go.” He added that taxing remote work tools is the wrong message to send as Vermont is trying to cultivate a remote work reputation.
Tax Commissioner Craig Bolio testified that the administration does not believe it is necessary to offset revenue decreases in the bill when the state is experiencing a surplus. Bolio pointed out that Vermont-exclusive businesses would not benefit from the corporate tax reform, but would be hit by the cloud tax and corporate minimum tax changes that the committee brought up for consideration for the first time on Friday.
Committee chair Janet Ancel, D- Calais, told the committee today that they will review a new draft of the bill on Tuesday, inclusive of the corporate tax changes, the cloud tax and the corporate minimum tax change, with the goal of voting it out by the end of the day.
Telecom companies advocate for piece of the broadband pie
The Senate Finance Committee took testimony from communication union districts and private telecommunication companies this week on H.360, a bill to accelerate community broadband deployment. The bill proposes $200 million to support startup CUDs that promote fiber networks that are capable of 100/100 Mbps service to the “last mile” of Vermont’s rural landscape. Privately owned telecommunication companies are not eligible to participate in the grant program unless they work in partnership with a CUD.
Consolidated Communications, Inc., recently launched a $140 million project that aims to deliver fiber-to-the-premise to more than 200,000 Vermont locations over the next five years. Jeff Austin, Senior Director for the company, told the committee that CCI has delivered on every one of its state and federal obligations and hopes to be a part of the H.360 solution.
Committee members expressed interest in expanding grant eligibility to small and family-owned companies.
The Committee plans to establish its goals for the broadband bill and begin making recommendations in the days ahead.
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