News Briefings - State Taxes

The following article was taken from the 6/17/2013 issue of State & Local Taxes Weekly.

6/17/2013 -- Vermont updates IRC conformity and enacts other tax changes

by Maria T. Albanese, Esq. (RIA)

Governor Pete Shumlin has signed into law the 2012 Miscellaneous Tax Bill, which updates Vermont's conformity to the Internal Revenue Code for income tax and estate and gift tax purposes, increases the threshold for determining underpayment of estimated tax liability, and make other changes to the income tax, sales and use tax, property tax, healthcare taxes, and the cigarette and spirituous liquors taxes. All changes are effective as of June 6, 2013, unless otherwise noted. (L. 2013, H295 Act 73, effective 06/05/2013)

IRC conformity. Federal income tax laws are adopted as in effect for taxable year 2012, and apply to tax years beginning on and after January 1, 2012

Estate and gift taxes: Vermont conforms to the federal estate and gift taxes as in effect on December 31, 2012 except: (1) the credit for state death taxes shall remain as in effect on January 1, 2001; (2) the applicable credit amount shall under 26 U.S.C. § 2010 does not apply; and the tax imposed under § 7442a is calculated as if the applicable exclusion amount were $2,750,000.00; and (3) the deduction for state death taxes is not allowed.

Income tax. The definition of net income: For any taxable year and for any corporate taxpayer, the definition of "net income" now includes the amount of any deduction for a federal net operating loss, and is decreased by the total amount of any qualified dividend income.

Definition of civil union: "Income taxation of parties to a civil union" has been amended to included not only parties to a civil union but parties to a 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.

Estimated tax payments--installment payments: In lieu of the estimated payments a taxpayer who pays federal estimated income tax in annualized income installments may pay for the installment period an amount equal to the 24% of the taxpayer's required payment for federal income tax purposes.

Underpayment of estimated taxes: The amount of estimated tax that must be paid to prevent interest from accruing has increased from 80% to 90% of the tax shown on the return for the taxable year, or 90% of the tax for such a year if no return were filed over the amount, if any, of the installment paid on or before the last date prescribed for payment. If 90% of the tax finally due for the taxable year is paid, then no interest will be due.

Wood products manufacture tax credit. The wood products manufacture credit provision was due to sunset on July 1, 2013, and has now been extended to January 1, 2014.

General provisions. Power of Attorney: A power of attorney appointing a representative to represent a person before the Department of Taxes will be considered valid without the signature of a witness or notary.

Interest on refunds: Interest on refunds will be calculated from the latest of 45 days after the date the return was filed or was due, including any extensions of time or, if the taxpayer filed an amended return or otherwise requested a refund.

Appeals: A taxpayer may appeal the decision of the Commissioner, but must now do so within 30 days to the Superior Court of the county in which such person resides.

Petition for refund: Interest on overpayments will be computed from the latest of 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, with respect to which the excess payment was made or, whichever is the later date if the taxpayer filed an amended return or otherwise requested a refund, 45 days after the date of such amended return or request was filed.

Real property. Electronic filing of liens: The Commissioner may file notice of a lien due to nonpayment of taxes with the clerk of a municipality in which the property subject to lien is located in electronic format, and it will have the same force and effect as a lien filed in paper form.

Definition of property "owner" expanded: For property tax purposes, the definition of "owner" has been amended to includes the person who is the owner of record of any land or the lessee under a perpetual lease as defined in Vt. Stat. Ann. § 3610(a) provided the term of the lease exceeds 999 years exclusive of renewals.

Appeals from agricultural land classification: Whenever an application for classification as agricultural land or forest land, or farm buildings, or has been denied in whole or in part, or the Director grants a different classification than that applied for, or the Director or assessing officials fix a use value appraisal, or the Director denies a request for an exemption from the terms of the definition of a "farmer", the aggrieved party may appeal the decision of the Director to the Commissioner within 30 days of the decision, and from there to the Superior Court in the county in which the property is located.

Appeal from Department of Forests Parks and Recreation decision: An appeal from a decision of the Commissioner of the Department of Forests, Parks and Recreation may be made within 60 days of the filing of the adverse inspection report, and must appealed to the Superior Court.

Property tax hearings: The statute governing the appointment of an appraiser a property tax appeal is filed to determine valuation of the property or a homestead has been amended to now refer to a "hearing officer" instead of an appraiser.

Nonresidential property: The definition of "nonresidential property" has been amended so that is no longer excludes steamboat car and transportation companies.

Insurance replacement cost information: Before April 1 of each year, owners of exempt property exempt must provide their local assessing officials with information regarding the insurance replacement cost of the exempt property or with a written explanation of why the property is not insured. When the grand list of a town describes exempt property, the grand list will contain the insurance replacement cost or the full listed value.

Inventory list exemption: Previously, persons taxable only for real estate and taxable only upon their polls were exempt from having to file an inventory with local officials; the exemption for polls has been removed Property transfer return: The requirements of the property tax return have been amended so that the return must be signed by the appropriate parties and include notice that the property may be subject to regulations governing potable water supplies and wastewater systems and to building, zoning, and subdivision regulations; and that the parties have an obligation under law to investigate and disclose his or her knowledge regarding flood regulation, if any, affecting the property.

Skating rinks used for public schools: The 50% exemption from the education property taxes for real and personal property operated as a skating rink, and which provided facilities to local public schools for a sport officially recognized by the Vermont Principals' Association has been extended for fiscal years 2013 and 2014.

Education property tax--Essex County: The statute governing the equalized education property tax grand list of a municipality that establishes a tax increment financing district now provides that the unified towns and gores of Essex County may be treated as one municipality for the purpose of determining an equalized education property grand list and a coefficient of dispersion if the Director determines that all such entities have a uniform appraisal schedule and uniform appraisal practices.

Renewable energy plants: The existence of a renewable energy plant subject to tax under the uniform capacity tax does not alter the exempt status of any underlying property.

Sales and use. Exemption for medical equipment and supplies: The exemption for medical equipment and supplies has been expanded to include items used to diagnose as well as treat human suffering or physical disabilities.

Property exempt from use tax: The definition of property exempt from use tax that was purchased outside of the state while the purchaser was a nonresident, has been amended to now only exclude property purchased and used outside of the state by the user while a nonresident of the state.

Healthcare. Healthcare claims tax: Effective July 1, 2013, the health care claims tax imposed annually on health insurers has decreased from 0.999 to 0.8 of 1% of all health insurance claims paid by the health insurer for its Vermont members in the previous fiscal year ending June 30. The health care claims assessment will be repealed effective July 1, 2013. Previously, the provision was due to sunset on July 1, 2015.

Home health care agency annual assessment: Effective July 1, 2013, the home health care agency annual assessment of 19.30% of net operating revenues will be limited to no more than 6% of the agency's annual net patient revenue. The amount of the tax is determined by the Commissioner based on the home health agency's most recent audited financial statements which now must be submitted on or before May 1st of each year to the Department of Revenue. It was previously due on or before December 1.

Disclosure of confidential tax return information: The Commissioner of Taxes may now release information to the Commissioner of Financial Regulation and the Commissioner of Vermont Health Access, if such return or return information relates to obligations of health insurers .

Cigarettes and tobacco products. The prohibition that no stamps may be purchased during the period June 15 through June 30 of each year has been eliminated.

Fuel gross receipts tax. Effective July 1, 2013, sellers of various fuels with sales of less than $10,000 annually are not longer exempt from the fuel gross receipts tax.

Spirituous liquors tax. Effective July 1, 2013, The tax is assessed on the gross revenue on the retail sale of spirituous liquor will now be based on the gross revenue of the retail sales by the seller in the current year (formerly based on the previous year). In addition, the threshold amounts have increased for the different rates of tax. If the gross revenue of the seller is $150,000 (previously $100,000) or lower, the rate of tax is 5%. If the gross revenue of the seller is between $150,000 and $250,000, (previously $100,000-$200,000) the tax rate is $7,500 (previously $15,000) plus 15% of gross revenues over $150,000 (previously $100,000). If the gross revenue of the seller is over $250,000 (previously $200,000) the rate of tax is 25%.