An Act Relating to Miscellaneous Substantive Tax Amendments

SENATE PROPOSAL OF AMENDMENT H.521

2007 Page 21

H.521

An act relating to miscellaneous substantive tax amendments

The Senate proposes to the House to amend the bill as follows:

First: By adding a Sec. 10 to read:

Sec. 10. 32 V.S.A. § 3481(1) is amended to read:

(1) “Appraisal value” shall mean, with respect to property enrolled in a use value appraisal program, the use value appraisal as defined in subdivision 3752(12) of this title, multiplied by the common level of appraisal, and with respect to all other property, the estimated fair market value. The estimated fair market value of a property is the price which the property will bring in the market when offered for sale and purchased by another, taking into consideration all the elements of the availability of the property, its use both potential and prospective, any functional deficiencies, and all other elements such as age and condition which combine to give property a market value. Those elements shall include a consideration of a decrease in value in nonrental residential property due to a housing subsidy covenant as defined in section 610 of Title 27, or the effect of any state or local law or regulation affecting the use of land, including but not limited to chapter 151 of Title 10 or any land capability plan established in furtherance or implementation thereof, rules adopted by the state board of health and any local or regional zoning ordinances or development plans. In determining estimated fair market value, the sale price of the property in question is one element to consider, but is not solely determinative.

For residential rental property that is subject to a housing subsidy covenant or other legal restriction, imposed by a governmental, quasigovernmental, or public purpose entity, on rents that may be charged, fair market value shall be determined by an income approach using the following elements:

(A) market rents with utility allowance adjustments for the geographic area in which the property is located as determined by the federal office of Housing and Urban Development or in the case of properties authorized under 42 U.S.C. § 1437, 12 U.S.C. § 1701q, 42 U.S.C. § 1485, 12U.S.C. § 1715z1, 42 U.S.C. § 1437f, and 24 CFR Part 882 Subpart D and E, the higher of contract rents (meaning the amount of federal rental assistance plus any tenant contribution) and HUD market rents;

(B) actual expenses incurred with respect to the property as which shall be provided by the property owner in a format acceptable to the commissioner and certified by an independent third party, such as a certified public accounting firm or public or quasipublic funding agency;

(C) a vacancy rate that is 50 percent of the market vacancy rate as determined by the United States Census Bureau with local review by the Vermont housing finance agency; and

(D) a capitalization rate that is typical for the geographic area determined and published annually prior to April 1 by the division of property valuation and review after consultation with the Vermont housing finance agency.

Second: By adding a Sec. 11 to read:

Sec. 11. EXTENSION OF GRANDFATHERED EDUCATION PROPERTY
TAX EXEMPTIONS FROM 1997

Property tax exemptions authorized before July 1, 1997, under a municipal tax stabilization agreement, charter provision or vote of a municipality, still in effect on June 30, 2007, and qualified as exemptions affecting the education property tax grand list under 32 V.S.A. § 5404a(a), shall continue to affect the education property tax grand list under that section through June 30, 2008.

Third: By adding Secs. 12 through 22 to read:

Sec. 12. 32 V.S.A. § 5404a(b) is amended to read:

(b) An agreement affecting the education property tax grand list defined under subsection (a) of this section shall reduce the municipality’s education property tax liability under this chapter for the duration of the agreement or exemption without extension or renewal, and for a maximum of ten years, subject to the provisions of subsection 5930b(f) of this title. A municipality’s property tax liability under this chapter shall be reduced by any difference between the amount of the education property taxes collected on the subject property and the amount of education property taxes that would have been collected on such property if its fair market value were taxed at the equalized nonresidential rate for the tax year.

Sec. 13. 32 V.S.A. § 5404a(e) is amended to read:

(e) Allocations. A municipality on behalf of a person may apply to the Vermont economic progress council for an allocation of the education grand list value for up to ten years, of a portion of the increase in the value and liability assessed under section 5402 of this title on new economic development that is subsequently approved by the Vermont economic progress council pursuant to this section and subsections 5930a(c) and (d) of this title. The allocation may be awarded for up to ten years, subject to the provisions of subsection § 5930b(f) 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 for infrastructure that includes wastewater treatment, water supply, transportation, and telecommunications and utility connections.

Sec. 14. 32 V.S.A. § 5930a(b) is amended to read:

(b) The Vermont economic progress council, within 60 days of receipt of a complete application, shall approve or deny the following economic incentives:

(1) tax stabilization agreements and exemptions under subdivision 5404a(a)(2) of this title;

(2) applications for allocation to municipalities of a portion of education grand list value and municipal liability from new economic development under subsection 5404a(e) of this title; and

(3) the Vermont employment growth incentives (VEGI) under section 5930b of this title.

(4) the tax increment financing (TIF) district program as established in section 5404a of this title.

All incentives are subject to application of the incentive ratio as determined under section 5930b(b)(3) of this title and no tax stabilization agreement, exemption or allocation shall be approved except in conjunction with the approval of an incentive under subdivision (3) of this subsection.

Sec. 15. 32 V.S.A. § 5930a(d) is amended to read:

(d) The council shall apply the costbenefit model in reviewing applications under subdivisions (b)(1), (2), and (3) of this section to determine the net fiscal benefit to the state. The costbenefit model shall be a uniform and comprehensive methodology for assessing and measuring the projected net fiscal benefit or cost to the state of proposed economic development activities over the fiveyear award period. Any modification of the costbenefit model shall be subject to the approval of the joint fiscal committee. The costbenefit analysis shall include consideration of the effect of the passage of time and inflation on the value of multiyear fiscal benefits and costs.

(1) In determining the projected net fiscal benefit or cost of the incentives considered under subdivisions (b)(1) and (2) of this section, the council shall calculate the net present value of the enhanced or forgone statewide education tax revenues, reflecting both direct and indirect economic activity. If the council approves an incentive pursuant to this section, the net fiscal costs, if any, to the state shall be counted as if all those costs occurred in the year in which the council first approved the incentive and that cost shall reduce the amount of the annual authorization for such approvals established by the legislature for the applicable calendar year.

(2) In determining the projected net fiscal benefit or cost of the incentives considered under subdivision (b)(3) of this section, the council shall calculate the net present value of the enhanced or forgone state tax revenues attributable to the incentives, reflecting both direct and indirect economic activity over the fiveyear award period. If the council approves an incentive, the net fiscal costs, if any, to the state shall be counted as if all of those costs occurred in the year in which the council first approved the incentive and that cost shall reduce the amount of the council’s annual authorization for approval of economic incentives as established by the legislature for the applicable calendar year.

Sec. 16. REPEAL

32 V.S.A. § 5930b(a)(12) (definition of “incremental payroll”) is repealed.

Sec. 17. 32 V.S.A. § 5930b(a)(16) is amended to read:

(16) “Payroll target” means the projected qualifying payroll Vermont gross wages and salaries for qualifying jobs in an award period year as reported on the Vermont employment growth incentive application.

Sec. 18. 32 V.S.A. § 5930b(a)(17) is amended to read:

(17) “Payroll threshold” means base payroll or application base payroll (if year 1), plus expected average industry payroll growth as determined by the costbenefit model.

Sec. 19. 32 V.S.A. § 5930b(a)(21) is amended to read:

(21) “Qualifying payroll” means actual annualized Vermont gross wages and salaries paid for qualifying jobs created in or carried forward to a utilization period the award period year, provided incremental payroll in that year equals or exceeds such gross wages that:

(A) award period year base payroll; minus

(B) Vermont gross wages and salaries paid for new qualifying jobs created in or carried forward to the award period year; equals or exceeds

(C) prioryear base payroll minus any carryforward of qualifying payroll under subdivision (c)(4) of this section, plus awardyear payroll threshold.

Sec. 20. 32 V.S.A. § 5930b(c) is amended to read:

(c) Claiming an employment growth incentive.

(1) A business whose application is approved and, in any year during the award period, meets or exceeds its payroll target and either its jobs or capital investment target may file an annual return claiming incentives pursuant to this section. Upon approval by the department of taxes, incentive payments will be issued by the department of taxes calculated for each of the five award period years in equal annual installments. The department of taxes will disburse the incentives over consecutive fiveyear periods, beginning with each award period year, provided that the incentivetriggering award period year payroll and job targets are maintained in each utilization period year for which an installment is claimed.

(2) Incentives shall be calculated and disbursed as follows: Qualifying payroll for the utilization award period year, not to exceed the payroll target or targets reduced by the payroll threshold for the incentivetriggering award period year or years shall be multiplied by the incentive percentage. Up to onefifth of the total incentive amount shall be disbursed in the first of five consecutive utilization period years, to the extent the full amount of qualifying payroll was actually paid in that year. A full onefifth of the total incentive amount shall be disbursed in each of the remaining four consecutive utilization period years, provided that incentivetriggering targets are maintained.

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(4) Qualifying jobs, qualifying capital investment, and qualifying payroll in excess of the jobs, capital investment, and payroll targets for an award year shall be carried forward and counted toward future award period year targets, provided such excess jobs, investment and payroll are maintained.

(5) A business whose application is approved and, in the first award period year, fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets shall forfeit all authority to earn and claim incentives under this section. The department of taxes shall notify the Vermont economic progress council that the first year award period targets have not been met, and the council shall rescind the incentive authorization in its entirety. A business whose incentive authorization is rescinded for failure to meet firstyear award period targets may reapply to the Vermont economic progress council for a new authorization pursuant to this section.

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Sec. 21. 32 V.S.A. § 5930b(f) is added to read:

(f) The property of a business whose authority to earn, apply or retain incentives under this section has been revoked is ineligible for property tax stabilization under subdivision 5404a(a)(2) of this title or allocation of property tax value under subsection 5404a(e) of this title for any education property tax grand list after the date of revocation.

Sec. 22. EFFECTIVE DATE

Secs. 11 through 21 (Vermont Employment Growth Incentive technical amendments conforming to Act 184) of this act shall apply to claims filed in 2007 and after.

Fourth: By adding a Sec. 23 to read:

Sec. 23. 32 V.S.A. § 5930ee is amended to read:

§ 5930ee. LIMITATIONS

Beginning in fiscal year 2007 2008 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 $1,500,000.00 $1,600,000.00.

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Fifth: By adding Secs. 24 and 25 to read:

Sec. 24. 32 V.S.A. § 6066a(g) is added to read:

(g) Upon transfer of a residence, the parties’ proration of currentyear taxes shall be based upon the adjusted property tax, unless the parties otherwise agree. No reimbursement by the transferee to the transferor for any property tax adjustment in the property tax year following the transfer shall be required unless the parties otherwise agree.

Sec. 25. REPEAL

32 V.S.A. § 6066(f) (proration of taxes shall be based upon the unadjusted property tax) is repealed as of January 1, 2007.