Favorable with Proposal of Amendment

Senate Calendar

friday, may 5, 2006

123rd DAY OF ADJOURNED SESSION

TABLE OF CONTENTS

Page No.

NEW BUSINESS

Second Reading

Favorable with Proposal of Amendment

H. 843Miscellaneous tax policy amendments...... 2250

Finance Committee Report...... 2250

Sen. Campbell, Ayer, Collins, Dunne, Gander, Illuzzi, Kitchel, ... Leddy, Lyons, Miller, Mullin and Welch amendment 2267

House Proposal of Amendment

S. 88State labor relations board membership...... 2268

S. 90Prescription drugs and substance abuse...... 2270

Sen. Sears amendment...... 2276

Resolution for Action

S.R. 12Recognizing the vital role of immigrants in the state of VT/U.S.2276

NOTICE CALENDAR

Favorable

H. 890Relating to emergency management and public safety...... 2276

Appropriations Committee Report...... 2277

Government Operations Committee Report...... 2277

Sen. Illuzzi amendment...... 2276

Sen. Sears amendment...... 2277

H. 891Relating to Vermont web portal...... 2278

Government Operations Committee Report...... 2278

Appropriations Committee Report...... 2278

Favorable with Proposal of Amendment

H. 547Adjustments to retirement systems of state employees/teachers.2278

Government Operations Committee Report...... 2278

Appropriations Committee Report...... 2281

Sen. Dunne amendment...... 2281

Committee of Conference Report

S. 262Employer access to applicants’ criminal history records...... 2281

S. 265Relating to penalties for larceny crimes...... 2290

S. 292State employees labor relations act...... 2295

House Proposal of Amendment

S. 150Relating to motor vehicles...... 2295

House Proposal of Amendment to Senate Proposal of Amendment

H. 701Relating to unidentified corridors...... 2296

ORDERED TO LIE

S. 112Relating to the practice of optometry...... 2396

S. 157Relating to rulemaking for Vermont origin...... 2296

S. 315Relating to creation of the Vermont Land Bank program...... 2297

S. 316Relating to access to broadband services throughout Vermont..2297

S. 319Relating to expanding the scope of the net metering program..2297

Concurrent Resolutions for Adoption

(For text of Resolutions, see Addendum to May 4, 2006 Calendar

SCR 72 Vt. Insurance Agents Association on its centennial anniversary.237

SCR 73 James Eckhardt small business champion award winner...... 238

SCR 74 HonoringRutlandCity schoolboard chair Dr. Michael Dick...239

SCR 75 Role of sexual assault nurse examiners in health care system...241

SCR 76 In memory of Harold J. Haynes of North Troy...... 243

SCR 77 Congratulating Sen. “Bobby” Starr ...... 244

SCR 78 Hannah Teter 2006 Olympic snowboarding gold medal winner.246

HCR 324 – 359 ...... 247-301

ORDERS OF THE DAY

ACTION CALENDAR

NEW BUSINESS

Second Reading

Favorable with Proposal of Amendment

H.843

An act relating to miscellaneous tax policy amendments.

Reported favorably with recommendation of proposal of amendment by Senator Cummings for the Committee on Finance.

The Committee recommends that the Senate propose to the House to amend the bill by as follows:

* * *Preserves Changes to Cigarette Tax in Health Bill if it is Enacted* * *

First: By adding a new section to be numbered Sec. 3a to read as follows:

Sec. 3a. PRIORITY OF ENACTMENTS

Sec. 3 of this act (amending 32 V.S.A. § 7771 relating to the cigarette tax) shall be subject to and further amended by any amendments to § 7771 in H. 861 which are enacted in 2006, except that the repeal of the sentence at the end of subsection (a)(3) of Sec. 3 of this act, which reads “All taxes upon cigarettes under this chapter are declared to be a direct tax upon the consumer at retail and shall conclusively be presumed to be precollected for the purpose of convenience and facility only.” shall remain repealed.

* *Leaves Sales Tax on Downloaded Software to Begin When SST Begins* *

Second: By striking out Sec. 4 (accelerating the effective date for sales taxation of prewritten computer software in electronic form)

Third: In Sec. 6 (effective datefor Sec. 4) by striking out subsection (4)

* * *3% Production Deduction* * *

Fourth: By adding a new section to be numbered Sec. 7 to read as follows:

Sec. 7. 32 V.S.A. § 5811 is amended to read:

* * *

(18) "Vermont net income" means, for any taxable year and for any corporate taxpayer:

(A) the taxable income of the taxpayer for that taxable year under the laws of the United States, without regard to Section 168(k) of the Internal Revenue Code, and excluding income which under the laws of the United States is exempt from taxation by the states:

(i) increased by:

(I) the amount of any deduction for state and local taxes on or measured by income, franchise taxes measured by net income, franchise taxes for the privilege of doing business and capital stock taxes; and

(II) to the extent such income is exempted from taxation under the laws of the United States by the amount received by the taxpayer on and after January 1, 1986 as interest income from state and local obligations, other than obligations of Vermont and its political subdivisions, and any dividends or other distributions from any fund to the extent such dividend or distribution is attributable to such Vermont state or local obligations; and

(III) the amount of any domestic production activity deduction under section 199 of the Internal Revenue Code in excess of 3 percent of qualified income; and

* * *

(21) "Taxable income" means federal taxable income:

(A) Increased by the following items of income (to the extent such income is excluded from federal adjusted gross income):

(i) interest income from non-Vermont state and local obligations;

(ii) dividends or other distributions from any fund to the extent they are attributable to non-Vermont state or local obligations;

and also increased by:

(iii) any amount of capital gain income which was deferred in a prior year under subdivision (B)(iii) of this subdivision (21), to be added in the taxable year of disposition of the taxpayer's interest in the qualified business;

(iv) the amount of any domestic production activity deduction under section 199 of the Internal Revenue Code in excess of 3 percent of qualified income;

* * *Increase of Credit for Higher Ed Investment Plan Contributions* * *

Fifth: By adding a new section to be numbered Sec. 8 to read as follows:

Sec. 8. 32 V.S.A. § 5825A is amended to read:

§ 5825A. CREDIT FOR VERMONT HIGHER EDUCATION INVESTMENT PLAN CONTRIBUTIONS

(a) A taxpayer of this state, including each spouse filing a joint return, shall be eligible for a nonrefundable credit against the tax imposed under section 5822 of this title of fiveten percent of the first $2,000.00$2,500.00 per beneficiary, contributed by the taxpayer during the taxable year to a Vermont higher education investment plan account under subchapter 7 of chapter 87 of Title 16.

(b) A taxpayer who has received a credit under subsection (a) of this section shall repay to the commissioner five ten percent of any distribution from a higher education investment plan account, which distribution is not excluded from gross income in the taxable year under Section 529 of the Internal Revenue Code, as amended, up to a maximum of the total credits received by the taxpayer under subsection (a) of this section minus any amount of repayment of such credits in prior tax years. Repayments under this subsection shall be subject to assessment, notice, penalty and interest, collection, and other administration in the same manner as an income tax under this chapter.

* * *State College Property/VTC “Incubator”* * *

Sixth: By adding two new sections to be numbered Secs. 9 and 10 to read as follows:

Sec. 9. 32 V.S.A. § 3701(1)(A) is amended to read:

(1) “State-owned property” means:

(A) state-owned buildings, including buildings of the Vermont state colleges andwhich are tax-exempt under section 2178 of Title 16; buildings of the University of Vermont and State Agricultural College used for educational and not commercial purposes; and buildings of the agency of transportation and the department of the military; but excluding the value of land on which the buildings are located, and excluding all highways and bridges and any land pertaining thereto; and

Sec. 10. 16 V.S.A. § 2178 is amended to read:

§ 2178. TAX EXEMPTION

All real and personal property owned by the corporation and used for educational and not commercial purposes shall be exempt from taxation.

* * *Changing Angel Investment Incentive to a Credit* * *

Seventh: By adding three new sections to be numbered Secs. 11, 12 and 13 to read as follows:

Sec. 11. 32 V.S.A. § 5811(21) is amended to read:

(21) “Taxable income” means federal taxable income:

(A) Increased by the following items of income (to the extent such income is excluded from federal adjusted gross income):

(i) interest income from non-Vermont state and local obligations; and

(ii) dividends or other distributions from any fund to the extent they are attributable to non-Vermont state or local obligations;

(B) Decreased by the following items of income (to the extent such income is included in federal adjusted gross income):

(i) income from United States government obligations; and

(ii) 40 percent of adjusted net capital gain income as defined in Section 1(h) of the Internal Revenue Code;

(iii) 60 percent of capital gain income that is invested in the taxable year, or (through filing an amended return) within two years of receipt, in an eligible venture capital investment under section 5930v of this title.

Sec. 12. 32 V.S.A. § 5930v is amended to read:

§ 5930v. Angel venture capital; capital gain rollover credit

(a) A qualified taxpayer of this state shall be eligible for taxation of capital gain income under subdivision 5811(21) of this title resulting froma credit of three percent of capital gain income from an eligible venture capital investment under this section made by the taxpayer during the taxable year. If the taxpayer is a partnership, limited liability company, or S corporation, the treatment of capital gain income under this section shall be allocated ratably among the partners, members, or shareholders of the entity.

* * *

(b) In this section:

* * *

(3) “Eligible venture capital investment” means at least $50,000.00 and up to $200,000.00 of total investment by one person, which is equity or at-risk debt investment in one qualified business, for expenditure by the qualified business on the plant, equipment, research, and development or as working capital in Vermont.

Sec. 13. INVESTMENTS DEFERRED UNDER PRIOR LAW

Capital gain income, the taxation of which was deferred pursuant to 32V.S.A. § 5811(21)(B)(iii), must be included in the qualified taxpayer’s taxable income no later than five years after the taxable year in which the investment that gave rise to the deferral was made.

* * *Local Option Taxes for All Towns, No Sunset; Highway Funds* * *

Eighth: By adding three new sections to be numbered Secs. 14, 15 and 16 to read as follows

Sec. 14. 24 V.S.A. § 138(a) is amended to read:

(a) Local option taxes are authorized under this section for the purpose of affording municipalities an alternative method of raising municipal revenues .to facilitate the transition and reduce the dislocations in those municipalities that may be caused by reforms to the method of financing public education under the Equal Educational Opportunity Act of 1997. Accordingly:

(1) the local option taxes authorized under this section may be imposed by a municipality only during calendar years 1999 through 2008;

(2) a municipality opting to impose a local option tax may do so prior to July 1, 1998 to be effective beginning January 1, 1999, and anytime after December 1, 1998 a A local option tax adopted under this section shall be effective beginning on the next tax quarter following 30 days' notice to the department of taxes of the imposition; and all authority to opt to impose a local option tax under this section shall terminate September 1, 2007, and all authority to impose a local option tax shall terminate on December 31, 2008; and

(3) a local option tax may only be adopted by a municipality in which:

(A) the education property tax rate in 1997 was less than $1.10 per $100.00 of equalized education property value; or

(B) the equalized grand list value of personal property, business machinery, inventory, and equipment is at least ten percent of the equalized education grand list as reported in the 1998 Annual Report of the Division of Property Valuation and Review; or

(C) the combined education tax rate of the municipality will increase by 20 percent or more in fiscal year 1999 or in fiscal year 2000 over the rate of the combined education property tax in the previous fiscal year.

Sec. 15. 32 V.S.A. § 3707a is added to read:

(a) There is hereby established a PILOT special fund, consisting of local option tax revenue paid to the Treasurer pursuant to 24 V.S.A. § 138. This fund shall be managed by the commissioner of taxes pursuant to subchapter 5 of chapter 7 of this title. Notwithstanding section 588(3) of this title, all interest earned on the fund shall be retained in the fund for use in meeting future obligations. The fund shall be used exclusively for state payments in lieu of taxes required under this subchapter 4. The commissioner of finance and management may draw warrants for disbursement from this fund in anticipation of receipts.

(b) If the PILOT special fund in insufficient to pay the full amount of all payments in lieu of taxes required under this subchapter 4, then payments, after application of the cap in subsection 3703(c) of this subchapter, shall be reduced proportionately.

Sec. 16. 24 V.S.A. § 138(d) is amended to read:

(d) Of the taxes reported under this section, 80 percent shall be paid to the municipality in which they were reported for calendar year 1999, 70 percent shall be paid to the municipality in which they were reported for calendar years thereafter. Such revenues may be expended by the municipality for municipal services only and not for educational expenditures. The remaining amount of the taxes reported shall be remitted monthly to the state treasurer for deposit in the PILOT special fund established in Sec. 89 of No. 60 of the Acts of 1997. Amounts to be paid to a municipality under this section shall be reduced by five percent to reflect the difference between the amounts reported and collected. Taxes due to a municipality under this section, less the costs of administration and collection, shall be paid on a quarterly basis. Taxes collected under this section shall be paid as follows:

(i) 70 percent of the taxes shall be paid on a quarterly basis to the municipality in which they were collected, after reduction for the costs of administration and collection. Revenues received by a municipality may be expended for municipal services only, and not for educational expenditures.

(ii) The first $2.5 million of any remaining revenue shall be deposited into the PILOT special fund established by 32 V.S.A. §3709.

(iii) Any then remaining revenue shall be deposited fifty percent into the PILOT special fund established by 32 V.S.A. §3709, and fifty percent into the Town Highway Fund for town highway state aid.

* * *Less Frequent Reporting for Voluntary SST Collections* * *

Ninth: By striking out Sec. 5 in its entirety and inserting a new Sec. 5 to read as follows:

Sec. 5. 32 V.S.A. § §9775(a) and (f) are amended to read:

(a) EveryExcept as otherwise provided in this section, every person required to collect or pay tax under this chapter shall, where the sales and use tax liability under this chapter for the immediately preceding calendar year has been (or would have been in cases when the business was not operating for the entire year) $500.00 or less, pay the tax imposed by this chapter in one annual payment on or before the 25th day of January of each year. Every person required to collect or pay tax under this chapter shall, where the sales and use tax liability under this chapter for the immediately preceding calendar year has been (or would have been in cases when the business was not operating for the entire year) more than $500.00 but less than $2,500.00, pay the tax imposed by this chapter in quarterly installments on or before the 25th day of the calendar month succeeding the quarter ending on the last day of March, June, September and December of each year. In all other cases, except as provided in subsection (e) of this section, the tax imposed by this chapter shall be due and payable monthly on or before the 25th (23rd of February) day of the month following the month for which the tax is due. Payment by electronic funds transfer does not affect the requirement to file returns. The return of a vendor of tangible personal property shall show such information as the commissioner may require.

***

(f) A person registered under the Multistate Streamlined Sales and Use Tax Agreement that does not have a legal requirement to register in this state and is not a Model 1, 2 or 3 seller may file a return within one year of the month of initial registration and may file annual returns in the same month for succeeding years; provided, however, that such person must file a return on the 25th of the month following any month in which the taxpayer accumulated state and local taxes in the amount of $1000.00 or more.

* * *Technical: Repeal of Unused Credit* * *

Tenth: By adding a new section to be numbered Sec. 17 to read as follows:

Sec. 17. REPEAL

32 V.S.A. § 5930t (tax credit for training employees) is repealed.

* * *Technical: Updated Reference to “Telecom Provider”* * *

Eleventh: By adding a new section to be numbered Sec. 18 to read as follows:

Sec. 18. 32 V.S.A. § 9701(9)(H) is amended to read:

(H) A person who provides telecommunications service provider as defined in 30 V.S.A. § 7501 32 V.S.A. § 9701(19), except that "vendor" shall not include a person whose activities in this state are limited to the performance of any activities which, without more, would not constitute nexus for sales tax collection purposes, plus any or all of the following necessary to create or maintain a worldwide web page or internet site for the person:

(i) ownership of data or programming code in this state, or use of that data or programming code by another person or by a person not in this state;

(ii) ownership of, or receipt of services from, computer servers in this state;

(iii) receipt of computer processing or web hosting services from a computer service provider or web hosting service in this state.

* * *Technical: Arithmetic Error in 2006 Corp. Tax Table* * *

Twelfth: By adding a new section to be Sec. 19 to read as follows:

Sec. 19. 32 V.S.A. § 5832(1) is amended to read:

Vermont net income of the corpo-

ration for the taxable year allo-

cated or apportioned to Vermont

under section 5833 of this titleTax

0-10,000.006.00%

$ 10,001.00-25,000.00 $600.00 plus 7.0% of the excess

over $10,000.00

25,001.00-250,000.00 $1,650.00 plus 8.75% of the excess over $25,000.00

250,001.00 and over $19,688.00$21,338.00 plus 8.90%

of the excess over $250,000.00

* * *Net Operating Loss Simplification* * *

Thirteenth: By adding four new sections to be numbered Secs. 20, 21, 22 and 23 to read as follows:

Sec. 20. 32 V.S.A. § 5811(25) is added to read:

§ 5811 Definitions

The following definitions shall apply throughout this chapter unless the context requires otherwise:

***

(25) “Vermont net operating loss” means any negative income after allocation and apportionment of Vermont net income pursuant to section 5833 of this chapter.