Source: http://www.leg.state.vt.us/docs/legdoc.cfm?URL=/docs/2006/bills/intro/S-165.HTM
Timestamp: 2017-10-18 02:08:56
Document Index: 278632796

Matched Legal Cases: ['§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 406', '§ 5929', '§ 5929', '§ 5930', '§ 5930', '§ 5930', '§ 5930', '§ 5401', '§ 5404']

Subject: Economic development; tax incentives; Vermont Economic Progress Council
Statement of purpose: This bill proposes to improve the effectiveness and accountability of the state’s economic development programs by:
(1) Establishing a process by which economic advancement tax incentives (EATI) awarded prior to July 1, 2000 may be evaluated immediately against the performance expectations, conditions, and law in effect at the time an award was granted; and direct the agencies of the state to seek recapture or disallowance of any award where appropriate and lawful;
(2) Terminating the current multi-credit EATI award program at the end of the fiscal year on June 30, 2005;
(3) Replacing the EATI award program on July 1, 2005 for the fiscal year ending June 30, 2006 with a more efficient and accountable program to stimulate economic growth based on a single, payroll-based incentive under which credits may be earned annually over a five‑year period based upon measurable objective criteria;
(4) Establishing a Joint Economic Development Study Committee of six members of the General Assembly directed to oversee the implementation of the new payroll‑based tax credit program, review and recommend appropriate parameters and objectives for the state’s economic incentive programs, and create a framework and establish objectives for a long-term economic development planning process in the state;
(5) Establishing a new film industry tax credit and a new wood products manufacturing tax credit; repealing the financial services development tax credits; retaining with changes the program for property tax allocations and tax increment financing districts; and retaining with changes the brownfields tax benefit program for the redevelopment of contaminated properties program.
(1) The Economic Advancement Tax Incentive (EATI) program was enacted by the legislature in 1998 (No 71 of the Acts of the 1997 Adj. Sess. (1998)) to accomplish general economic policy goals of investment and job growth through economic advancement tax incentive awards. In 2000, the legislature amended the program to increase accountability and condition EATI awards upon specific performance expectations (No. 159 of the Acts of the 1999 Adj. Sess. (2000)), and in 2003, to further strengthen the performance expectation requirements by establishing clear and quantifiable benchmarks upon which awards shall be allowed or denied. (No. 69 of the Acts of 2003).
(2) Many businesses have participated in the EATI program in good faith and have, in return, contributed and produced significant numbers of additional jobs and capital investment in Vermont.
(3) The amount of costs, participation, and performance from the EATI Program Summary 1998-2004 (revised April 5, 2005) are the following:
Total reduction in Education Fund: 3.2 million
(4) Nevertheless, shortcomings in the EATI program have been identified in the areas of performance measurements and controls, program expenditure controls, state fiscal losses, and adequacy and availability of program information.
(5) The state lacks adequate controls to enforce key performance provisions of the economic advancement tax incentives (EATI) program, and it is incumbent on the legislature to ensure that these and other economic advancement tax incentives achieve the projected economic activity upon which the awards were conditioned.
(6) There is currently no program expenditure cap on the Vermont Economic Progress Council’s (VEPC’s) ability to grant tax credits on behalf of the state which reduce future state revenues. These off-budget tax expenditures are not accounted for in the state’s financial statements or budget, and may constitute a large and growing contingent liability to the revenues of the state not specifically approved by the Vermont legislature during the budget process.
(7) Three audits by two state auditors over a period of six years recommend that there be improved controls and accountability, and that tax incentives be more directly linked to economic performance.
* * * Part II. Description, Evaluation, and
Recapture of Prior Awards * * *
Sec. 2. TERMINOLOGY; PRE-JULY 2005 ECONOMIC
ADVANCEMENT TAX INCENTIVES.
(5) “Earned” means the amount of authorized credit that is available for the year without regard to the tax liability. For each year, this is the amount of payroll increase, qualified R&D expenditures, qualified expenditures for workforce development, or investments in plant and equipment multiplied by the applicable rate or the difference between double-weighted and single-weighted apportionment.
(8) “Unearned” means the amount authorized either not yet earned or no longer available to be earned because the specified activity did not take place during the five year earning period.
Sec. 3. PRE-JULY 1, 2000 EATI AWARDS
(a) Not later than July 1, 2005, the Attorney General shall provide to the Department of Taxes, the Vermont Economic Progress Council and the Joint Economic Development Study Committee established by Sec. 9 of this act, a legal opinion in response to the following:
(1) Can the tax department, consistent with the law in effect prior to July 1, 2000, recapture or disallow awards authorized by the council prior to that date on any basis other than substantial curtailment of trade or business as that term is defined in 32 V.S.A. § 5930h, including statements made in an awardee’s application or in the notice of award or the certificate of eligibility issued by the council?
(2) If recapture or disallowance may be based on something other than substantial curtailment or trade or business, what specific acts, statements, or failure triggers recapture or disallowance?
(3) If there is no authority for recapture or disallowance except as specified in 32 V.S.A. § 5930h, may the legislature, consistent with due process, subject pre-July 1, 2000 awards to recapture or disallowance based on performance expectations similar to those in 32 V.S.A. § 5930a(k) and (l); and if so, can such standards apply regardless of whether an award has already been earned or applied?
(b) For the purposes of this section, notwithstanding any other provision of law, the Attorney General shall have access to all records and documents pertaining to the EATI awards subject to this section in the possession of the Vermont Economic Progress Council and the Department of Taxes, and shall in turn be subject to the confidentiality requirements and applicable penalties for any breach of confidentiality.
(c) Consistent with this section, the department of taxes and the Vermont Economic Progress Council are directed immediately to seek recapture or disallowance of any economic advancement tax incentive award granted prior to July 1, 2000.
Sec. 4. RETROACTIVE APPLICATION OF DEFERRAL AND
MITIGATION TO PRIOR AWARDS
The deferral and mitigation of disallowance and recapture provisions of section 5930h of Title 32 shall continue in effect to defer and mitigate disallowance or recapture of any economic advancement tax incentive award granted prior to July 1, 2005, with the following modifications:
(1) The deferral and mitigation provisions of subsection 5930h(f) of Title 32 shall be available whether or not the curtailment of trade or business resulting in the notice of recapture or disallowance occurred prior to July 1, 2003, the effective date of No. 67 of the Acts of 2003.
(2) An application to the council for a deferral relating to an award granted prior to July 1, 2005 must be made within 90 days of the effective date of this act or within 90 days of receipt of written determination of recapture or disallowance, whichever is later.
(3) The deferral period shall be for a nonrenewable period of 36 months, notwithstanding the 12‑month provision prescribed in subsection 5930h(f) of Title 32.
(4) The minimum level of restoration of employment necessary within the recapture period shall be the greater of:
(A) The level of full-time Vermont employment when the applicant applied for the award; or
(B) Seventy-five percent of the highest annual average number of full-time employees of the applicant during any year in a period of six years after the initial authorization of an incentive by the council.
(5) The deferral and mitigation provisions of subsection 5930h(f) of Title 32 shall apply to credits which have been applied against tax liabilities and to carryforward of credits granted but not yet taken. The council may in its discretion mitigate the disallowance or recapture of credits applied against tax liabilities. With respect to disallowance of carryforward of credits, the council shall determine a mitigated amount based on the cost-benefit model analysis of the taxpayer’s actual job creation and performance, and any mitigated amount shall take account of credits applied against tax liabilities. For the purposes of this section, the three‑year time limit on notices of deficiency and assessment of penalty and interest under section 5882 of Title 32 shall commence upon conclusion of the 36‑month deferral period allowed by this section.
* * * Part III. Termination and Replacement of EATI program * * *
Sec. 5. TERMINATION AND TRANSITIONAL PROVISIONS
(a) On July 1, 2005, the authority of the Vermont Economic Progress Council and the Department of Taxes to grant Economic Advancement Tax Incentive awards pursuant to the provisions of 32 V.S.A §§ 5930a and 5930b is terminated.
(b) Any unused credits or incentives granted before July 1, 2005 shall remain in effect, including all carry-forwards, but shall be subject to the evaluation, disallowance, and recapture directives of Sec. 2 of this act and the deferral and mitigation provisions of Sec. 3 of this act.
(c) For the fiscal year beginning on July 1, 2005, the Vermont Economic Progress Council is authorized to grant the awards pursuant to the single, payroll based incentive program established by Sec. 7 of this act. Sec. 7 of this act is repealed effective July 1, 2006 unless extended by act of the General Assembly.
Sec. 6. AMENDMENTS AND REPEALS OF CURRENT EATI
(a) Vermont Economic Progress Council.
(1) 32 V.S.A. § 5930a (Vermont Economic Progress Council) (b), (c), (d), (e), (i), (j), (k), (l), and (m) are repealed.
(2) 32 V.S.A. § 5930a (Vermont Economic Progress Council) (f), (g), and (h) are relettered to be subsections (b), (c), and (d) respectively.
(b) Economic Advancement Tax Incentive program:
(1) 32 V.S.A. § 5930c (Economic advancement payroll tax credit) is repealed.
(2) 32 V.S.A. § 5930d (Economic Advancement Research and Development Tax Credit) is repealed.
(3) 32 V.S.A. § 5930e (Workforce development incentive tax credit) is repealed.
(4) 32 V.S.A. § 5930f (Vermont export tax incentive) is repealed.
(5) 32 V.S.A. § 5930g (Capital investment tax credit) is repealed.
(6) 32 V.S.A. § 5930h (Carry-forward, carry-back, and recapture) is repealed.
(7) 32 V.S.A. § 5930i (credit allocation) is repealed.
(8) 32 V.S.A. § 5930k (high tech growth incentives) is repealed.
(9) 32 V.S.A. § 5930w (sustainable technology research and development) is repealed.
(10) 32 V.S.A. § 5930x (export tax credit) is repealed.
(c) This section shall take effect July 1, 2005, except that those provisions repealed by subsections (a) and (b) of this section shall remain in effect to govern economic advancement tax incentive awards granted prior to July 1, 2005. Economic incentives awarded prior to July 1, 2005 but not yet earned, may be earned and applied to the tax liability of the award recipient in a subsequent year for which approval was granted under the law in effect prior to July 1, 2005.
Sec. 7. 32 V.S.A. § 5930b is amended to read:
§ 5930b. ECONOMIC ADVANCEMENT TAX INCENTIVES PAYROLL
BASED TAX CREDIT AGAINST WITHHOLDING
Sec. 8. FISCAL YEAR 2006 CAP
(a) Notwithstanding any other provision of law, in fiscal year 2006 the annual authorization for the total net fiscal cost of payroll based job credits the council may approve under 32 V.S.A. § 5930b(h) shall not exceed $1,000,000.00 from the general fund.
(b) Payroll based job credits within this annual authorization amount shall be granted solely for awards to businesses located in a labor market area of this state in which the rate of unemployment is greater than the average for the state or in which the average annual wage is below the average annual wage for the state. For the purposes of this section, a “labor market area” shall be as determined by the department of employment and training.
* * * Part IV. Study and Oversight * * *
Sec. 9. ECONOMIC DEVELOPMENT STUDY COMMITTEE
(a) There is created an Economic Development Study Committee to be composed of six members of the General Assembly, three from the Senate appointed by the Senate Committee on Committees, one each from the Committees on Appropriations, Finance, and Economic Development, Housing and General Affairs; and three members of the House appointed by the Speaker, one each from the Committees on Appropriations, Commerce, and Ways and Means.
(b) The committee may meet following adjournment of the 2005 session of the general assembly as it deems necessary to perform its duties, and for attendance at meetings members shall be entitled to reimbursement for expenses and compensation for services as provided in 2 V.S.A. § 406.
(c) The Economic Development Study Committee shall have the assistance of the Joint Fiscal Office, the Legislative Council, the Department of Taxes, the Agency of Commerce, and the Vermont Economic Progress Council. With the approval of the Joint Fiscal Committee, the Economic Development Study Committee may retain or contract for expert consulting assistance.
(d) The study committee shall:
(1) Receive and review the legal opinion of the Attorney General required by Sec. 3 of this act, and oversee any resulting actions by the Department of Taxes to recapture or disallow pre-July 2000 EATI awards.
(2) Oversee the implementation of the payroll‑based tax credit program established by Sec. 7 of this act and recommend whether the program should be extended beyond fiscal 2006 with any revisions the committee deems appropriate.
(3) Review and recommend to the General Assembly appropriate parameters and objectives of any tax-based economic incentive program, and for this purpose shall specifically consider appropriate means:
(A) to target economic advancement incentives to regions and labor market areas of the state with high unemployment, low per capita wages, or other indications of need for economic development and job creation; and
(B) to focus upon and provide incentives to ensure net economic benefit to the state and for additional economic growth, whether that be through the application of a “but for” test or through the application of an annual cap or other limitation on the amount awards, to require priorities for awards, a combination of such means, or other methods; and
(C) to develop and link economic advancement tax incentives to municipal awards and incentives to municipalities and to account for the same.
(4) Create a framework, articulate objectives, and recommend means by which a long-term economic development plan can be generated and recommend provisions for revising the long-term economic development planning process in the state.
(e) The Economic Development Study Committee shall report its findings and recommendations to the Senate Committees on Economic Development, Housing and General Affairs, Finance, and Appropriations; and the House Committees on Commerce, Ways and Means, and Appropriations no later than January 15, 2006.
* * * Part V. Miscellaneous Provisions * * *
* * * Film Industry * * *
Sec. 10. 32 V.S.A. § 5929b is added to read:
§ 5929b. VERMONT FILM INDUSTRY TAX CREDIT
(a) A film production company shall be entitled to a credit against the income tax liability imposed under this chapter on income resulting from film project activity in the state equal to ten percent of its total payroll paid in the taxable year to its employees for services performed in Vermont in a film project, up to a maximum credit of $1,000,000.00 for any film project. If the film production company is a limited liability company, partnership or an S corporation, the credit under this section shall be allocated ratably among the owners of the entity.
(1) “Film production company” means a person engaged in the business of making motion pictures or television or digital images for theatrical, commercial or educational purposes.
(2) “Film project” means a single media or multimedia program produced by a film production company, including but not limited to motion pictures, feature films, shorts and documentaries, television films or episodes or similar programs fixed on film, videotape, computer disk, laser disk, or other similar means that is intended for exhibition in theaters, by television stations or by other means for the home viewing market, but does not include any film production that is produced by or on behalf of a corporation or other person for its own internal use for advertising, educational, training, or similar purposes.
(3) “Total payroll” means salary and wages paid pursuant to an employment contract which provides for payment at not less than the prevailing wage rate in Vermont for services of a similar nature as determined by the commissioner of employment and training. Total payroll shall not include the first $50,000.00 of wages and salary paid.
(c) The credit under this section shall not exceed the tax liability of the film production company for the year in which the company applies for the credit.
* * * Financial Services * * *
Sec. 11. Financial Services Development Tax Credits;
(1) That the financial services sector is a vital and growing sector of Vermont’s economy which has provided thousands of direct and indirect employment opportunities in the state, most of which are quality jobs providing significant personal income to Vermonters and tax revenues to the state.
(2) Nevertheless, it is difficult to evaluate the benefits and costs to the state of the financial services development tax credit, in as much as:
(A) There is no review of the effectiveness of the financial services development tax credit, including the number of new jobs created, new companies, payroll growth, and the amount of credit claimed.
(B) The financial services development tax credit program does not require companies to hire new workers.
(b) For taxable years beginning on and after July 1, 2005, subchapter 11 of chapter 151 of Title 32, providing authority to grant financial services development tax credit, is repealed and such authority terminated.
Sec. 12. WOOD PRODUCTS MANUFACTURING TAX CREDITS;
Sec. 13. 32 V.S.A. § 5930y is added to read:
Sec. 14. 32 V.S.A. § 5930a(a) is amended to read:
(a) There is created a Vermont economic progress council which shall be attached to the department of economic development for administrative support, including an executive director who shall be appointed by the council, knowledgeable in subject areas of the council’s jurisdiction, and hold the status of an exempt state employee, and administrative staff employed in the state classified service. The council shall consist of nine citizens of the state appointed by the governor. The governor shall appoint citizens to the council who are knowledgeable and experienced in the subjects of community development and planning, education funding requirements, economic development, state fiscal affairs, property taxation, or entrepreneurial ventures, and shall make appointments to the council insofar as possible as to provide representation to the various geographical areas of the state and municipalities of various sizes. Members of the council shall serve initial staggered terms with three members serving three-year terms, three members serving two-year terms, and three members serving one-year terms. All council members’ terms shall be three-year terms upon the expiration of their initial terms and council members may be reappointed to serve successive terms. The governor shall select a chair from among the council’s members. In addition to the nine members appointed by the governor, there the council shall include one member selected by the speaker of the house, who may be a member of the house; and one member selected by the committee on committees of the senate, who may be a member of the senate. Members appointed by the general assembly shall be voting members. There shall also be two regional members from each region of the state; one shall be designated by the regional development corporation of the region and one shall be designated by the regional planning commission of the region. Regional members shall be nonvoting members and shall serve during consideration by the council of applications from their respective regions. For attendance at meetings and for other official duties all appointed members shall be entitled to compensation for services and reimbursement of expenses as provided in section 1010 of this, except that any members appointed by the general assembly who are members of the legislature shall be entitled to compensation for services and reimbursement for expenses as provided in section 406 of Title 2. A regional member who does not otherwise receive compensation and reimbursement for expenses from his or her regional development or planning organization shall also be entitled to compensation and reimbursement of expenses for attendance at meetings and for other official duties as provided in section 1010 of this title.
* * * Public Information * * *
Sec. 15. 32 V.S.A. § 5930a(h), as relettered to be subsection (e) in Sec. 6 of this act, is amended to read:
(h)(e) Information and materials submitted by a business concerning its income taxes and other confidential financial information shall not be subject to public disclosure under the state’s public records law in Title 1, chapter 5 of Title 1, but shall be available to the joint fiscal office or its agent upon authorization of the joint fiscal committee or a standing committee of the general assembly, and shall also be available to the auditor of accounts in connection with the performance of duties under section 163 of this title; provided, however, that the joint fiscal office or its agent, and the auditor of accounts, shall not disclose, directly or indirectly, to any person any proprietary business information or any information which would identify a business except in accordance with a judicial order or as otherwise specifically provided by law. Nothing in this subsection shall be construed to prohibit the publication of statistical information, rulings, determinations, reports, opinions, policies, or other information so long as the data is disclosed in a form that cannot identify or be associated with a particular business; except that nothing in this section shall be construed to prohibit the public disclosure of any information reported as required by subsection (n) of this section.
Sec. 16. 32 V.S.A. § 5930a(n) is added to read:
(n) Annually, a business receiving a payroll based tax credit against withholding under section 5930b of this title shall submit a written report to the Vermont economic progress council and the Vermont department of taxes. Reports filed under this subsection are public records for the purposes of subchapter 3 of chapter 5 of Title 1. Reports shall be filed no later than August 1 of the following year containing but not limited to the following information:
(1) The amount of assistance received by the business in the preceding year from the payroll based tax credit against withholding;
(2) The base number of jobs at the time of application and the total number of jobs at the end of the award year, the number of jobs created that qualified for the credit, and the number of jobs retained;
(3) The average wage of the qualifying jobs and a description of the benefits available for those jobs;
(4) the amount of qualifying capital investments made during the award year; and
(5) An assessment of how the credit assisted the business to accomplish the goals identified in the application for the credit.
* * * Brownfields * * *
Sec. 17. 32 V.S.A. § 5401(10) is amended to read:
(I) Real property consisting of the value of remediation expenditures incurred by a business that has obtained the approval of the Vermont economic progress council under section 5930a of this title for the construction of new, expanded or renovated facilities on contaminated property eligible under the redevelopment of contaminated properties program pursuant to section 6615a(f) of Title 10, including supporting infrastructure, on sites eligible for the United States Environmental Protection Agency “Brownfield Program,” for a period of ten years. With respect to property that is enrolled in the redevelopment of contaminated properties program pursuant to subsection 6615a(f) of Title 10, the increase in value that results from construction of new, expanded, or renovated facilities, including supporting infrastructure, pursuant to a corrective action plan approved by the secretary of the agency of natural resources under subsection 6615a(f) for a period of five years beginning with the year succeeding the year in which improvements are commenced.
* * * Property tax allocations and TIFs * * *
Sec. 18. 32 V.S.A. § 5404a(e) and (f) are amended and (g) is added to read:
(e) A municipality may apply to the Vermont economic progress council for an allocation of the education grand list value for up to ten 20 years, of a portion 75 percent of the increase in the value and liability assessed under section 5402 of this title on new economic development that is subsequently real property improvements approved by the Vermont economic progress council pursuant to this section and section 5930a of this title. The council shall not approve an allocation unless it determines that but for the allocation, the proposed real property improvements would not be made or would be made in a significantly different or significantly less desirable manner. The council must also evaluate the overall consistency of the project with the criteria set forth in subdivisions 5930a(c)(1) through (9) of this title. Allocation to a municipality pursuant to this subsection shall be in addition to any other payments to the municipality under chapter 133 of Title 16. If allocated, the allocated portion of the education fund liability shall be used by the municipality to support economic development through the purchase or financing of for infrastructure including, but not limited to wastewater treatment, water supply, transportation and utility connections, that supports the real property improvements.
(f) Municipalities which have existing tax increment financing districts under subchapter 5 of chapter 53 of Title 24 shall have the authority to expand those districts and to collect all state and local property taxes on properties within the tax increment financing district and apply those revenues to repayement of debt issued to finance improvements within the tax increment financing district to the extent approved for this purpose by the Vermont economic progress council upon application by the district under procedures for approval of tax stabilization agreements under this section, and that any such action shall be included in the annual authorization limits provided in section 5930a(d)(1) of this title 75 percent of the increase in the value and liability assessed under section 5402 of this title on new real property improvements to repayment of debt issued to finance improvements within the tax increment financing district as approved by the Vermont economic progress council for up to 20 years. Approval shall be given only if the council determines that the new real property improvements would not have occurred but for the proposed application of the new tax revenues or would have occurred in a significantly different or significantly less desirable manner. The council must also evaluate the overall consistency of the project with the criteria set forth in subdivisions 5930a(c)(1) through (9) of this title.
(g) Any economic incentive approved by the Vermont economic progress council pursuant to subsections (e) and (f) of this section may not affect the education tax liability of the property in a greater proportion than the incentive affects the municipal tax liability of the property. If so approved by the council, an incentive shall affect the property tax liability of the municipality under this chapter beginning April 1 of the year following approval. Incentives granted pursuant to subsections (e) and (f) of this section shall remain available to the municipality for the full period authorized and shall be restricted only to the extent the real property improvements giving rise to the increased value to the grand list fail to occur within the authorized period. The council shall report to the general assembly on the effect of the incentive on the education property tax grand list of the municipality and of the state.
(1) Secs. 5, 6, 7, and 8, providing for termination of the EATI program and creation of the payroll based tax incentive program, shall take effect for taxable years beginning on and after July 1, 2005
(2) Sec. 10, relating to the film industry, shall take effect for taxable years beginning on and after January 1, 2005.
(3) Sec. 11, relating to repeal of the financial services development tax credit, shall take effect July 1, 2005.
(4) Secs. 12 and 13, relating to wood products manufacturing tax credit, shall take effect for taxable years beginning on and after July 1, 2005.
(5) Secs. 14, 15, and 16, relating to VEPC board membership, public information, and reporting, shall take effect July 1, 2005.
(6) Sec. 17, relating to the Brownfields action plans, shall take effect July 1, 2005.
(7) Sec. 18, relating to education grand list allocations and tax increment financing districts shall take effect July 1, 2005.