Vermont Legislature SmartTranscripts:

[Rep. Emilie Kornheiser (Chair)]: Ways and Means, we're still here in this room. It's 10:35, and we are picking up our text classification implementation language. We're going to do another round of work and edits on this with Kirby and Jake from the tax department. And then the next version, we'll send around to stakeholders, like the short term rental alliance and the realtors association and anyone else who wants it. And then we'll have those folks in for testimony next week in case they're wondering when they'd be invited in for testimony. That's when. With that, Kirby, you wanna join us? And we will not vote immediately after that. We will not be voting on this until crossover. Lots of time. Lots of legislative time. I don't know if it's a lot of actual time. Okay.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Good morning. Oh,

[Rep. Emilie Kornheiser (Chair)]: sorry. One more public service announcement. I have no idea what vehicle this is gonna go into. I don't have a secret plan. Just don't know what vehicle will be the best vehicle yet.

[Jake Feldman (Vermont Department of Taxes)]: Okay. Perfect.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Keith, legislative council. As chair mentioned, are going to walk through some of the updates on the classification language that we've reviewed recently. There are some changes here based off of feedback from last time and also a little bit more of the flushing out of of what was step two going a little bit into step three of the Department of Taxes report on this. Most of the legislative action under that report, there's eight steps as a reminder. Most of the legislative action takes place in the first three steps. So at this point, we've included most the legislative action requests in the report. Really dealing with appeals relating to classifications is the last item from the report that's not included. So, to give you an idea of the progress we're all making, Hopefully, that makes you feel good. So with that, we can get into the language. There's no changes to the grand list of contents sections in one one and two. And so the changes we have get into the definitions under the Property Tax Classification Establishment. I added some language here on page three that's a reference to the dwelling use attestation language that you'll be seeing later. And the substantive stuff starts on page four under the definition of long term rental. This is where last time there was discussion over farm workers and employees and employee housing. And we have some policy choices here. The choices come down to partly what degree of depth and detail do you want to try to sort out through definitions and what do you want to leave to department interpretation and deference there. So there is a version of the farm worker language that's been flushed out a little bit more than before. Previously, it was just using the term farm worker and leaving it at that. So one option you have is to use a more detailed definition that says, as used in this section, farm worker means an individual employed in agriculture without regard for whether they have an unemployment insurance obligation related to them and employed by a farmer as that term is defined under current use. And under current use, There's more than one way to qualify as a farmer, but the primary way is based off of having 50% of your income be farm income on your tax return. So that is one approach to trying to narrow down what farmworker means. I'm going to skip the blue language for now and just show that we have a definition of employee here as well. A more basic definition, which is an employee needs an individual who's so, so this adds in addition to farm worker, by the way, an inclusion in the definition of long term rental, which those properties qualifying as long term rentals would, would be classified as non homestead, non residential. So to kind of give you context of what we're talking about, there's a subdivision here adding employee housing to that definition of long term rental and defining employee to mean an individual who is reported by an employer for purposes of complying with unemployment compensation law.

[Rep. Emilie Kornheiser (Chair)]: Farm workers aren't responsible for complying with that, and so we have to add farm worker? Is that the

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Yes. There's agricultural exemption from UI laws. This would not cover most farm employees. So we have to break those out. So here's your basic version. And I'm going come up back up to the blue, which this comes from Abby of Department of Taxes, who I discussed the fact that I was working on these definitions. She spoke with Will, the general counsel there, and they put together a definition based on every thought they had of something that could come up. So a lot more detail.

[Rep. Emilie Kornheiser (Chair)]: So I have a context question on this. Does this chapter and this definition here have any significance in other chapters? So when we say that this housing is a non monetary benefit of employment, does that then mean that that benefit of employment has anything to do with, say, someone's income tax declaration or anything else?

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: It's possible. It's possible that it could be used. It would be a very fact specific situation. None that are direct and obvious to me, but it's definitely possible when you're talking about applying for benefits programs and things like that. There's so many different programs out there that, you know

[Rep. Emilie Kornheiser (Chair)]: So not personal income definitions, but it's possible it could be applied to other definitions.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Basically, what I'm thinking is, this could be used as evidence when someone tries to claim something somewhere else, whether federally, state, you know, someone might be claiming a certain situation in their life based on some benefit or something like that. And then it's definitely possible that whatever agency reviewing that says, well, I don't know how they would have access to what's claimed on a dwelling use attestation. So, you know, that might be part of it too. I'm just saying it's not impossible.

[Rep. Emilie Kornheiser (Chair)]: But by I think my And I'm less wondering about the individual circumstance of a person and more saying, if we pass this language in this section, would that then mean for the purposes of personal income taxation that we're defining employee provided housing as a non monetary benefit in writ large across the state. Does that question make

[Rep. Rebecca Holcombe (Member)]: sense? Yes.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: That's not the intent here. The definitions are drafted in a way that are for the purposes of tax classifications.

[Rep. Emilie Kornheiser (Chair)]: Thank you. Okay. Represent Holt.

[Rep. Rebecca Holcombe (Member)]: Okay, simple scheme of parts for a second here with an example. I'm just trying to figure out how this would apply. Let's say you own, I own an aunt, we have an employee who is a hospitality student who is kind of night manager, and they stay in the apartment because they're the night manager. So it's really a condition of employment. They actually couldn't do the job if they didn't have the thing. How would that fall under this? Would that be a rental or would that be a business space?

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: We can walk through each of because we have two different definitions for you to consider. We can walk through each one. Under the definition that's based off of UI responsibility, In your example, you said this was a student. They're not getting paid.

[Rep. Rebecca Holcombe (Member)]: Well, they aren't getting paid.

[Rep. Bridget Burkhardt (Clerk)]: And they

[Rep. Rebecca Holcombe (Member)]: are living on premises because you have to live there overnight as a condition of

[Jake Feldman (Vermont Department of Taxes)]: the work.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: So it sounds like there would be a responsibility to pay UI for that. So under this definition, that would be a long term rental. We'll have to walk through the others to show us. Is it okay to walk through that now? The alternative language, is, you know, doesn't conflict with the other definitions. It just adds more to it. So in this version, it says long term rental also means a dwelling used to house employees as a non monetary benefit of employment for at least six calendar months, which need not be consecutive in the current calendar year. As used in the subdivision B, employee means an individual who is reported by the employer for UI or an individual who is employed by a farm employer farming operation. So this is just taking the two definitions we just looked at. And then it says non monetary benefit of employment means housing owned or controlled by the employer, whether located on or off workplace premises and provided for the occupancy of the employee and the employee's family for household members for no payment other than the employee's labor. Payment of utility and fuel charges by the employee does not affect the designation of housing provided as a non monetary benefit of employment. This is filling gaps that exist with the other more basic definitions, gaps that the Department of Taxes would probably encounter and have to fill themselves if there wasn't statutory language or support for it. So that's your decision, is whether you want to try to fill these gaps in this way.

[Unidentified Committee Member]: I'll ask a question, but I'm going to

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: just jump in front of Carol for a minute. So this is does not consider whether or not that benefit is taxable for that individual. Because if it if the housing is provided off-site, it may not meet the requirement for being exempt from having to recognize it as taxable compensation.

[Unidentified Committee Member]: As far as I understand it.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Down, Breaking for one thing, the more basic definition does not have a component that's about non monetary benefit at all. So I would read that to not have that requirement. So you wouldn't even go into an analysis on that. It doesn't say one way or another, and so I don't think there is room there to read into it that there is a requirement that it would be a non monetary benefit. It could be that the employee is paying you rent. We're still going to call it a long term rental. By adding that element to it, it is a question that could come up and if you want to address it, you can address it. So looking at the second definition for non monetary benefit of employment, maybe the Department of Taxes uses the information it has available relating to income if it's relevant. But they would look at the income tax information possibly to see if it lines up with what's claimed for this purpose.

[Jake Feldman (Vermont Department of Taxes)]: And

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: I'm not sure, sitting here right now, whether there's anything useful on an income tax return. So, I guess that's the biggest difference between these definitions is whether you want to make non monetary benefit of employment a component of a requirement here.

[Rep. Emilie Kornheiser (Chair)]: I'm concerned that we're opening a Pandora's box of a whole other world of definitions that we don't need to in the context of this piece of language. And so if there's a way to thread the needle and not get into that, it seems like we will save time and energy by not doing that.

[Rep. Rebecca Holcombe (Member)]: Not

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: that I understand. I think this was just trying to be helpful.

[Rep. Emilie Kornheiser (Chair)]: Representative Ode? I I was just

[Rep. Carol Ode (Member)]: based on what you were asking about, chair Kornheiser, I was wondering, can you put in a statute, this is intended only for use in this particular paragraph, in this particular statute, and not intended to be used anywhere else in Vermont statute?

[Rep. Emilie Kornheiser (Chair)]: She

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: has to use, actually.

[Rep. Carol Ode (Member)]: I'm asking Kirby.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Okay. Yeah. So this is this is I mean, the the the way that the way that we draft the statutes, it's it's it is understood within the context of each one where the limits are for these definitions. And in this case, it's standard and we're doing the standard thing where the definitions that's used for tax classifications under this, I think we have a whole new chapter. Right? It says as used in this section. That language is substantive. I mean, it matters. You can't just take these definitions and pluck them somewhere else and throughout Vermont law and try to make a case. I mean, attorneys might try to do that at times where there's ambiguity somewhere else in the law and they may say, well, the same term is used over here. We don't have a definition, but there's a definition elsewhere in law. And sometimes that's helpful, but that's more of like a guidance when it comes to legal interpretation or something that's helpful. It is not definitive when that's done. Does that help?

[Rep. Carol Ode (Member)]: Yeah. Thank you.

[Rep. Bridget Burkhardt (Clerk)]: Presenter, Bridget. So, Kirby, just so I understand clearly, we're we're talking about use only as talked about in this section. We wouldn't be talking about any other kind of use. Only employees who get housing as part of their job requirement or a job benefit. That would be far more personal, like the example that Rebecca gave us. Think that there are also other people who get

[Jake Feldman (Vermont Department of Taxes)]: housing, preachers get parsnitch.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: In that scenario, oftentimes that's going be an exempt property. All the tax classification stuff that we talked about is always just about the tax rate to be applied for education tax.

[Rep. Bridget Burkhardt (Clerk)]: It's very specific to this thing that we're talking about right here.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: It's very specific to education tax and it's very specific to the question of what rate should be applied to a particular property. And specifically, when we're talking about this farm worker and employee housing situation, it is to sort out for properties that have these kinds of situations, whether they're going to pay the non homestead non residential rate or the non homestead residential rate because they're not homesteads in this case. Like in these examples we're talking about, we're never talking about a homestead because if it is, then that answers the whole question for us. It's going to be the homestead rate. So it's really these situations in which you're trying to discern whether it's non homestead, non residential or non homestead residential. The presumption is that non homestead, non residential would be a lower rate. So a lot of this is about the General Assembly not inadvertently applying the entire rate to situations in which policy wise it does not want to do that.

[Rep. Bridget Burkhardt (Clerk)]: Yeah, I'm wondering about the guy who's married and has three kids and he's living in the house on the farm, on the third man's house, he's getting that. And then we have another pig down the road living at the ski resort, and he's just living there because he gets housing at the ski resort for doing his job during the winter. So the guy on the farm, I would look at that and I would think that's his homestead. He's got a family there and the wife there. But the kid on this, do you see what I mean? We want to make this so that everybody's the same. All of these employees, no matter what their circumstances are, we want it to be the same.

[Rep. Emilie Kornheiser (Chair)]: Representative Rutland, I guess I would say in all cases, it's someone in employee provided housing, and it's not about the taxation on the employee. It's about the taxation on whoever owns the property. And so if it's someone living with no matter how many kids they have, it's about if they own the property or not. And so if that farmer doesn't if the person farming does not own the property, then they're not subject to property taxation ever. Right? Like even at current law, right? Yeah, because they're not. Yeah. That's another.

[Unidentified Committee Member]: Yeah. That's it still applies.

[Jake Feldman (Vermont Department of Taxes)]: Yeah.

[Rep. Carol Ode (Member)]: And if other people have questions about the employee housing, I don't want to take us away

[Rep. Rebecca Holcombe (Member)]: from that.

[Rep. Carol Ode (Member)]: But I do have another tabletop exercise.

[Rep. Emilie Kornheiser (Chair)]: Okay, before we get to that. Anyone else have anything on the employee? It seems like folks are okay with the farm part. Yes? Okay. And then this expanded for ski or gravel pit or whatever employee provided health nurses. We're trying to find a path to make sure that we're not expanding the law beyond the scope, but we're pretty comfortable with our concept. Okay, great. Represent Burkhardt. So, Kirby, I had sent you an example.

[Rep. Bridget Burkhardt (Clerk)]: One thing I wanted to clarify in that So the example for everyone else, it wasn't included on email, is family who has an adult child with disabilities. They're going to have disabilities and need care really the rest of their lives. Parents want to make sure that this child is set up for the rest of their lives, whether they're not there to take care of them anymore. So the purchase of a separate house, not a duplex. So an off-site property, a separate house for this child and then it would be a living caregiver in part of the house. And potentially there is an extra bedroom. So potentially one day a roommate who may or may not care as well. That's a very specific example, but you could see other broader general examples where parents might set up an adult child in a house that over the long term will be that child's house. But for now, that child is paying them rent. And so it's not homestead, I don't think, because it's a completely separate property, it's a separate parcel. The question is how we make sure that we're not putting folks that are trying to figure out our lack of disability supported housing through other means, I don't want to put them in a situation where they would end up having to pay the non homestead residential rate, where they're trying to set up their family for care for the long term.

[Rep. Emilie Kornheiser (Chair)]: And I think that one is so complicated and yet fairly straightforward. Right?

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Yeah. It's I mean, it's it's it's pretty straightforward. I mean, you could always add clarifications for things like that to the language to make sure that the department lands where you want them to. But applying that, we look at whether it's a long term rental, a dwelling for which rent is paid. You're saying rent is paid.

[Rep. Bridget Burkhardt (Clerk)]: For now, while the parents are still in the picture. Yes.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Okay. Well, we can run through the scenario when that's not the case also. For which rent is paid for the right of occupancy for a period of at least thirty days. Sounds like we have that. With combined rental periods in the current year, that totally six months sounds like it's going to be year round. We got that. There's a bona fide landlord tenant relationship between the parties.

[Rep. Rebecca Holcombe (Member)]: That's a tricky

[Rep. Bridget Burkhardt (Clerk)]: thing because it's very subsidized rent and

[Rep. Rebecca Holcombe (Member)]: it probably will be as long it's rent.

[Rep. Emilie Kornheiser (Chair)]: But it's still rent.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: But since it's rent and it sounds like it's going to be similar to market rates, because it's being paid for by the US government, probably has some sort of chart for that sort of thing or something like that, That, you know, it would be up to the department to decide whether that's a bonafide landlord tenant relationship. Under these facts, I would expect that they would. But of course you can, you know, maybe when they're in here on this sometime they can chime in on that too. But that's what I would expect. I would expect them to find it to be a long term rental or more accurately, you know, this is going to be through an attestation and how dwellings are used. And on that attestation, the property owner will put long term rental and that's the position they'll be taking is that we think it's still long term rental. So process wise, would be whether the department even questions that. And if they do question it and look into the facts, whether they that's when they question the bona fide rental bona fide tenant relationship. Thanks.

[Rep. Emilie Kornheiser (Chair)]: Jake, you're going to do something if you ever want to say anything. Right? You're going to raise your hand or look at me if you ever wanna say anything.

[Rep. Rebecca Holcombe (Member)]: Yes. Great. Okay. Cool. Okay.

[Rep. Emilie Kornheiser (Chair)]: We're gonna

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: check this here for a second, Jamie. Yes.

[Rep. Rebecca Holcombe (Member)]: Please don't hold up. Check my exam my understanding on this one because we are in a very similar situation where families that have a trust to benefit an adult child with disabilities, and there is somebody who lives there free of charge, but the expectation is that they're gonna provide work, so that's non monetary compensation. But I think the rental would be that they're, I think you're looking at whether there's a financial relationship between the adult child with disabilities and the trust, and which benefits can. And so that would be what would determine the homestead piece, because that would trump the non monetary benefit given to the person who's staying to their

[Rep. Bridget Burkhardt (Clerk)]: house, if that makes sense.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: I have not done a ton of research on the bona fide landlord tenant relationship. This is the sort of thing that I would not be surprised if the department came out with a regulation on to break down what all of that means. But I think that, you know, the department will have an idea of and of course they'll be basing it off of, in fact, that's a term of art and what the law says about that, and apply it to these situations as they come in. I don't feel like I've done enough to be able to say what that's going to mean.

[Rep. Emilie Kornheiser (Chair)]: It seems to me that the secondary scenario that you've both mentioned of the person who's living there and receiving either very subsidized rent or not paying rent in order to provide, partly to provide care, care being defined very broadly, would fall under that employee situation as non monetary benefit of employment.

[Rep. Rebecca Holcombe (Member)]: What I'm unclear is if the trust is paying, how do handle the trusts paying half of the adult with disabilities as opposed to the adult with disabilities using SS? So

[Rep. Emilie Kornheiser (Chair)]: I think that's something that would need to probably happen in rulemaking with the department when we can

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: And there would be other options too. To try to find a way to set this up so that could be claimed as a homestead. Right. So it becomes a homestead.

[Rep. Emilie Kornheiser (Chair)]: Not necessarily.

[Jake Feldman (Vermont Department of Taxes)]: It could. It regulators could.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: I'm saying that the taxpayers could.

[Rep. Rebecca Holcombe (Member)]: Oh, they could. Yes.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Instead of keeping ownership, find a way to change the ownership to this person including there.

[Rep. Bridget Burkhardt (Clerk)]: So it would be their help set. So what I'm hearing is that it will likely fall either under homestead or non homestead, non residential, depending on who's housing it. So it's very, very unlikely that it would land.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: In this case, but I'm definitely, I want to be clear that there are scenarios that probably exist where something falls into non homestead residential that may be sitting here right now, you are not planning on?

[Rep. Mark Higley (Member)]: I can't think of that.

[Rep. Rebecca Holcombe (Member)]: And I

[Rep. Emilie Kornheiser (Chair)]: think we can trust the department to bring those to us and provide exceptions when needed and bring those to us. Engage in an iterative process with them. But I think it's interest I continue to be heartened by when we come up with these scenarios. Even the very variable fact patterns have places where they fall in. Do you have any other changes you want?

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Just more changes. Okay. Those were the two based off of feedback from last time, but there's some other things. The other question that came up actually, we haven't covered the show, was the mobile home, but what about other types of manufactured homes? Question. So there's some language here that says, you know, that non homestead residential does not mean a mobile home. That was from before. But I added a clarification. For one thing I put a definition and I can share this definition with you if you want to see it. I have it pulled up. There's a definition of mobile home from current law and then the clarifier, but not including other types of manufactured homes. And that works with the definition that's being referenced because that reference does refer to mobile homes as manufactured homes. This the clarifying language but not including other types of manufactured homes works with the definition that's being referenced because that definition says a a mobile home is a manufactured home that and then it goes on to define it. Do you have an interest in seeing the definition?

[Rep. Emilie Kornheiser (Chair)]: I do. Yes. And given that we're going to have extensive conversations about oh, I imagine we're gonna have extensive conversations about mobile homes in the next couple of weeks coming from House General. I I encourage us not to feel like we need to completely finish this.

[Rep. Mark Higley (Member)]: Just to add to that, I did look into tiny homes, which are manufactured similar to normal homes, but there's actually a classification currently in our Microsoft program that identifies it separately, so I think it will eliminate at least currently those sorts of tiny homes being included in the Kimbell loan as well.

[Rep. Emilie Kornheiser (Chair)]: Is it already defined in the Lister handbook, is that what you were saying?

[Rep. Mark Higley (Member)]: I don't believe it's in our list of handbook, it's in our Microsoft program, all the categories of camp, mobile home, and then there is a tiny home category. Separate from home, okay. Separate from the mobile home, there's a schedule that's affiliated to that category.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Some tiny homes are on wheels. I'm sorry? Because some tiny homes are on wheels.

[Rep. Mark Higley (Member)]: Absolutely. Okay,

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: so the definition that I'll link to is, as far as I know, the most basic definition we have for mobile home, that's out of title 10 under mobile home parks. Mobile home means a structure or type of manufactured home, including the plumbing, heating, air conditioning, electrical systems contained in that infrastructure that is built on a permanent chassis. That's going to eliminate a lot of the manufactured homes that are other things. Right? Designed to be used as a dwelling with or without permanent foundation when connected to the required utilities. Transportable in one or more sections and one of these two things, at least 80 or at least eight feet wide, 40 feet long, or when erected has at least three twenty square feet, or if the structure was constructed prior to 1976. This is, I think, having to do with how these are regulations about how these must be built. Or any structure that meets all the requirements, except the size requirements and for the manufacturer voluntarily files certification with HUD and complies with the construction safety standards established. So these last parts are about the size of that has to do with just other laws regulating the size of mobile homes. So that's the definition you have. I think that the permanent chassis part is going to be relevant.

[Rep. Emilie Kornheiser (Chair)]: Chassis. Chassis. I wasn't trying to correct you. Was really like my brain was

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: excruciating. It's not a way to say it? No. Ever? No. I've gotten this I was Really? It sounds today old. I was born in Kentucky.

[Rep. Bridget Burkhardt (Clerk)]: That's how we say it in Kentucky.

[Rep. Emilie Kornheiser (Chair)]: I have to also wrap Born in Kentucky, so I don't know if we can write everything off the Kirby's birthplace here.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: But I was born in

[Unidentified Committee Member]: White County.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: You were probably born in what, Louisville?

[Rep. Emilie Kornheiser (Chair)]: I was born in Louisville.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: I was born in the Northeast Kingdom Of Kentucky. That's good. Anyways, if someone in the techie said chassis, would say that's probably not right. That's probably how we got here. This is the definition we have for a mobile home manufactured home. Should I go back to the other link?

[Rep. Emilie Kornheiser (Chair)]: Please. Because I'm now back on a question of, I think one of our broad policy goal is to not be discriminating between thick built buildings, thick built housing, and manufactured housing, because they're both wonderful places to live. I don't know why we actually need to have this carve out if it can be a

[Rep. Mark Higley (Member)]: home. Yeah.

[Rep. Emilie Kornheiser (Chair)]: So I might be, like, overthinking here. Yeah. That's gonna

[Jake Feldman (Vermont Department of Taxes)]: be what you're be.

[Rep. Emilie Kornheiser (Chair)]: Like, I don't it's it's a home. It's a built it's a house. I don't I guess I just don't feel I'm not sure why we're excluding it. And there might be a really good reason that I lost track of some time between last week and this week, so I'm happy to be reminded.

[Jake Feldman (Vermont Department of Taxes)]: I mean, it's it's in

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: the act 73 report as a recommendation, so I would defer to tax.

[Rep. Emilie Kornheiser (Chair)]: Me, Jake, why we might wanna do that?

[Jake Feldman (Vermont Department of Taxes)]: Sure, Jake Governing, tax department. Also in the act submitted through the report is observation that we don't have perfect compliance on homestead declarations. It's probably a gap of around 10,000 at least. So the question is like who's not filing your homestead declarations and in a world where the you know, the second home tax, would they get subject to it? My suspicion, and sorry I don't have the data to support it, but if you're in Vermont, your homestead declaration is essentially attached to your personal income tax return, which is a little bit unusual. In other states, you do this with the property tax administrator, so it's a weird triangle. But if you don't have to file personal income taxes because your income is low, you may be forgetting to also file a smolested declaration form. So the reason that I showed up on the report is to try to cut that off as a potential problem, I understand the chair's point too, some policy choice there. Maybe there's another way to encourage better compliance on homestead declarations. You'll see this on my tax mark, my app, there's this new classification network and I need to go talk to somebody, that's a depression. Did you

[Rep. Rebecca Holcombe (Member)]: identify yourself for the record?

[Rep. Emilie Kornheiser (Chair)]: Oh great, cool, great, thanks. So if it's a portion of a parcel with a dwelling that is not a mobile home, Would someone put a mobile home up on one end of their property and have a palatial second home on another end of their property and then wind up exempt?

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: There'll be two dwelling units. So it would use the mixed use. You could get some tax savings doing that based on the land value, though. I

[Rep. Emilie Kornheiser (Chair)]: would love for people to just think on this one unless someone has it. We're going to be spending more time on mobile homes.

[Jake Feldman (Vermont Department of Taxes)]: I was just going say, I think

[Unidentified Committee Member]: the bill that we're getting from House General might help lead

[Jake Feldman (Vermont Department of Taxes)]: this conversation. I think so. Okay.

[Rep. Emilie Kornheiser (Chair)]: What else have you done?

[Jake Feldman (Vermont Department of Taxes)]: Over there, hyping. Great.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: I want to remind you, part of step two we covered last time, before I move on, was to start the data collection necessary for this. And there's the provision that we already had from last time adding to the grand list data collection relating to the dwellings for each parcel. What's not here though is the pay question that came up. So just just a flag that in the x 73 report, the department has suggested finding a way to pay for this work to be done, especially in the first year they flagged where the initial setup to go from now where we don't track dwellings to within a year locating all of those will be a large task. And the way that this is being structured is going to put that task onto assessing officials. So that's not here. Just does apply. The next the next part is getting into the step two, step three recommendations from Act 73. We haven't seen language on this before, but the language here would add a dwelling use attestation to the homestead section, the homestead declaration section of law. I did not phrase it so that this requires the dwelling use attestation to be on the homestead. It just kind of heavily implies it because they're there together. So it says annually on or before the due date for filing the Vermont income tax return without extension, each owner of a property with a dwelling as defined under the dwelling definition we were looking at a moment ago, that includes a dwelling that is not declared as a homestead pursuant to this section shall file a dwelling use attestation describing how the dwelling will be used in the current year for purposes of assigning a tax classification. What is not addressed here is the five or more units issue. I'm not sure. The department had suggested we'd be like excluding dwelling units and properties that have five or more units from the second home classification and possibly excluding it from the requirement to have to claim the dwelling. So I did not exempt. I'm not adding language exempting that situation, although the act 73 report does suggest to do that, but I wasn't I wasn't sure where the committee was on that. So the commissioner may collect an additional any additional information to the asset station as required to administer classification of properties. One example of additional information could be a person saying, yes, this would technically be a second home except it's exempt. And so having other fields on there for this additional important information. And I try to just write that broadly so that the department if something else comes up that the department needs additional information on, it can just be included.

[Rep. Emilie Kornheiser (Chair)]: And to be I guess more questions for you, Jake. Will you go up just a little bit? The filing a dwelling use attestation describing how the dwelling will be used in the current year, it's not that everyone's going to need to file an essay or create a form that will have a checkbox on it. Right?

[Jake Feldman (Vermont Department of Taxes)]: Yeah. Okay. Thank you. Great.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: For every single parcel well?

[Jake Feldman (Vermont Department of Taxes)]: Development tax department, the way it's framed in the report is that if you own a parcel home between one and four dwelling units, you would need to file this form. And then as you wrap up homesteads, homesteads would be easy, it would be basically the same as now, but thinking of like a landlord who has like a four unit building, they don't have to do that now, but in a new world they would say for my four units I check the box long term rental for each of them. And yeah, so that's what's envisioned.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: I have a clarifying question for Jake. Does that exist? Yes. Are you imagining using the landlord certificate as a way to supplement the gap in knowledge on the five plus units? Were you because my reading of the report was that you were imagining that you don't need that information at all because the classification was going to be done differently.

[Jake Feldman (Vermont Department of Taxes)]: Yeah, they would be subject to separate potential. Yeah.

[Rep. Emilie Kornheiser (Chair)]: What about if, Jake, if someone like, I know of properties in my area, not Praddleboro, but that are five or more units where each one of those five units is a short term rental. Would it be the landlord certificate that is there a cross reference on that? And they're not run as IANs. They're not commercial properties. Right.

[Jake Feldman (Vermont Department of Taxes)]: Right. Yes. And there are a pros exactly, who also knows about a property like that? Can vary. At least at first, we were thinking to keep it simple. We know that there are about 16,000 short term rentals in the state, and we know that about 2,000 of them are apartments. So of those apartments, how many are in bigger buildings? What share, and so is the juice sort of a squeeze of having a landlord who has like a 100 apartment building going through and checking the 100 roads, say long term, long term, long term, long term, long so you can potentially get that one that's short term. So at least at first you keep it simple, but if it's a perceived loophole then maybe in subsequent years you close it fixed. So default to non homestead, non residential. Yes, and you

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: believe your five, what? Yes.

[Unidentified Committee Member]: Just while we're talking about this, Jacob, I'm just curious, not questioning it by any means, I'm just curious, was there any data behind the fiber more or is it just like a logical assumption that the text of reference did?

[Jake Feldman (Vermont Department of Taxes)]: It was just a data point that I just mentioned about of the 2,000 short term rentals that are required to be where they'd like to fall. And then the other thing about five or more is that we're also trying to get my support from local officials and they have already separated out buildings with five or more units into its own categorization. So if you take that off their plate then it maybe makes this whole thing a little bit easier.

[Rep. Mark Higley (Member)]: Can you repeat one more time? We'll work with whoever has to file the attestations.

[Jake Feldman (Vermont Department of Taxes)]: Sure, somebody who has a parcel between one and four, That's generally it. I will say that in Vermont you can declare a property that's a homestead, even if it's like a seasonal can, so it wouldn't even show up. As there's no law against that. So really it's anyone with between one and four and twelve units, and if your property is not technically available to fix your homestead, you can also use this form to report that. If that makes sense. How are we gonna know that? Okay, so our thinking was that, so it's a new requirement and we were hoping that the first step would be identification of dwelling units, then the tax department would be sitting on a brand list that says, you know, here are all the parcels with dwelling units, and there could be outreach that would happen in 2027 to say, there's this new requirement you need to know about, and in 2028 you're going to need to do this. So that is the hope. This version has that happening in 2027, so it makes it

[Rep. Emilie Kornheiser (Chair)]: clear to me. I want to just So there's definitely pressure in various places in the building to speed up the timeline on a lot of this, particularly coming from the Senate. And there's a number of reasons to sort of go at pace for this. One, setting a rate before you actually understand the base is just not good practice for tax policy. And so really want to be sort of collecting these forms fully for a year before we set the differing rates. And then also to really give folks a year to be catching up on these forms and give the tax department a year to be catching up on these forms. So this policy is really important to me personally as a legislator. And it's a five year timeline, and we've been working we're in year two or three of a five year timeline. And we're all sort of doing our work on it. And the patience is hard, but I think it matters to

[Rep. Mark Higley (Member)]: do the work well.

[Jake Feldman (Vermont Department of Taxes)]: I mean, you could ask for it in 2027. And in that case, people even want vote if that's, I think, in a lot of cases, but maybe that's good, because maybe 2027 gives them a year to get used to it, and then in 2028 it's primetime, and we were thinking, we're hoping that in FY 2029 the whole of the education transformation package is starving. So that's a possibility.

[Rep. Bridget Burkhardt (Clerk)]: Let's go back to Kirby and where are you?

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: I highlighted the language here. Just a reminder that the language you're looking at does include the provision that puts the five or more unit buildings directly into non homestead, non residential. Just to be aware that's in there. Which and if you want to keep that, then I should turn this blue language into real language. Also, before I proceed, I want to flag we were talking about timelines. If you keep the current Act 73 timeline of having this all become effective 01/01/2029, then what we're looking at right now is not a passing for you.

[Rep. Bridget Burkhardt (Clerk)]: That's right.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: It's it's not mandatory to keep up with the timeline. This could be done next session. If you do have the if you have the 2029. If you're thinking of making it 01/01/2028, though, it would be a reason to make sure you go ahead and get this done.

[Rep. Emilie Kornheiser (Chair)]: I think it's good to get it done regardless.

[Rep. Rebecca Holcombe (Member)]: Mhmm.

[Rep. Emilie Kornheiser (Chair)]: It's good to have people have a lot of time to adjust before rates change.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: It's really just the classification appeals is all we have left if you want to try to get all of the legislative work done needed. Okay. So returning to the dwelling use subdivision two here says if the commissioner determines, this is about fraudulent return or fraudulent filings or failure to file. If the Commissioner determines that a filed dwelling use attestation contains errors or admissions or a taxpayer failed to file an attestation as required by this subsection, and further finds that the filing or failure to file was made with fraudulent intent, the underlying municipality shall assess the taxpayer penalty and amount of a 100% of the education tax on the property, which is that is the placeholder I put in here because this is the actual penalty for if you try to fraudulently file a home debt declaration under current law. So I'm not equal to a 100 of the education tax plus any interest in late payment fee or commission that may be due. Any penalty imposed under this section, any additional property tax interest and late payment fee or commission shall be assessed and corrupted by the municipality in the same manner as taxes, property taxes. The municipality I added this provision because it was silent on this, but, like, who keeps it? And as the placeholder, I said that the municipality keeps it. They're going out and collecting it. They can hold on to it. That's that's what I prepared for today for the dwelling use attestation. I think there could be other things that come up that you might want to to also include here. I went ahead and drafted out the repeals or the placeholder last time, but the repeals here are the grand list provision that's included here that's redundant with Act 73, section 61 of Act 73, which is what this is doing, but fleshing out the tax rate multipliers intent language, was just some session law saying, hey, we're planning on changing the tax rate multipliers. I've put that in here as something to be repealed just to avoid any perceived conflict with with that and this because and then the same thing with 61D, was the perspective repeal. Well, we're already repealing what section 61D would have repealed in Act 73 in order to replace it here. So just just to prevent any possible confusion about about what does 61 d mean now, now that the the thing it was prospectively repealing is already repealed.

[Rep. Emilie Kornheiser (Chair)]: I I want us to be careful that folks don't think we are I want to make sure folks understand that we still have an intent of sending rate multipliers. I don't know who folks are in this scenario that I'm talking about, though. It's a ridiculous That's why always Sorry. And that it doesn't seem that we are repealing the contingency around full implementation. Both agreed upon intents that I don't would take a lot of everything to So

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: I can move those over that language over into into this. And it sounds like that's what you're asking. Yeah.

[Rep. Emilie Kornheiser (Chair)]: As much as I don't want everything to be contingent on everything, it is. And I don't know if today is the day to change that. Yeah.

[Rep. Mark Higley (Member)]: In regards to the time line, when are you thinking we would be looking at those rate multipliers?

[Rep. Emilie Kornheiser (Chair)]: Once we understand the base, which would probably be next year. Right? Or is it two years? I've lost my timeline. Think that's two years. The Yeah. Next year, we'd collect forms, and then we'd have the base information. So it would be 2028 legislative session It's a lot. For 2029 fiscal year.

[Jake Feldman (Vermont Department of Taxes)]: Right.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: On July 1.

[Rep. Mark Higley (Member)]: In the tax report, they already had a few recommendations based on what we considered it would cover. And

[Rep. Emilie Kornheiser (Chair)]: I think we also, there's a requirement for those that to be updated for, in '28.

[Rep. Mark Higley (Member)]: Thanks.

[Unidentified Committee Member]: Just minor semantics thing, not even though I'm willing to die on bad news, but I just think that having long term rentals be under a non homestead, nonresidential is just counterintuitive. I still think we should just do nonresidential a and b because either way, we're gonna have

[Rep. Emilie Kornheiser (Chair)]: to provide definitions to folks. You could spend some time not here thinking about something that's, like, has words rather than a and b, but is more descriptive without bringing a wordsmithing situation into the committee room, that would be cool. Genuinely. Like, I

[Rep. Rebecca Holcombe (Member)]: think wordsmithing. I don't like it. I think it's

[Rep. Emilie Kornheiser (Chair)]: a genuine service, and I just want to be careful about the Pandora's box that such activities. Yep. Thanks. Anyone want to review anything that we've already gone over here? Okay. I will work with Kirby and anyone else that wants to hang out for the conversation sometime this week to sort of remove yellows and blues. And then we'll send it around to the committee and stakeholders for comment. Sound good? Okay.

[Kirby (Legislative Counsel, Office of Legislative Counsel)]: Thanks.

[Rep. Emilie Kornheiser (Chair)]: We're back downstairs at 01:15 for a joint hearing. That would be Room 11. Was it ten earlier? No. It was never