Vermont Legislature SmartTranscripts:

[Bridget Burkhardt (Clerk)]: Folks, we are here in

[Emilie Kornheiser (Chair)]: the Ways and Means Committee Room. It is Friday, March 2005. And we are working on our miscellaneous tax bill. While we have looked at all of the numbers in it in various delightful PowerPoint presentations, we have not yet seen the fiscal note. And so we're going run through the fiscal note with. And I don't imagine there are any surprises in this for anyone. So we've gone through all those numbers a few times, but it's good to go through the fiscal notes altogether.

[Chris Rutland (Joint Fiscal Office)]: Well, hello again. It's very lengthy fiscal note, so it's more than just one person. So good afternoon, everybody. Happy Friday. Chris Rutland from the Joint Fiscal Office and Pat Chittenden, also from the Joint Fiscal Office. And we are here today to share with you the draft of the fiscal note for this bill. You will see that once the bill is it's a little awkward because it's a committee bill that hasn't been introduced yet. So once it's introduced and has a bill number, we'll put the bill number in here and put a link to the text to put this online. But you're going to see the meat of what's in the note today. So, the first line will keep you on the edge of your seats. It proposes numerous changes to the state's various tax laws. We've tried to sum up all of the fiscal impacts in one chart right here on the front, you can see this without going into the weeds, which you can then do, and we can take you there later. But I'll just walk you through the row real quick that, you know, you'll see that the increase of the down payment assistance tax credits. You see any negative here represents foregone revenue or a cost to their respective funds. That's 350,000 in FY '27 and 70,000 in FY '28. Section 54 had the ten year tax study appropriation of $100,000 so the Joint Fiscal Office has the funding to do that work. Sections 55, sixty, and sixty one, all in the aggregate speak to the provisions that both link and decouple to various federal tax provisions that Pat can then go in the weeds on. But these totals reflect the roll up of the impact of all of those individual things cumulatively. So, you'd see the $3,960,000 hit to the general fund in FY twenty six, but then there's some positive revenue in the future years. And the R and D tax credit increase represents, since that has a later effective date, the impact of that begins at minus 1,740,000.00 beginning in FY twenty eight. The downtown and village center tax credit expansion by a million dollars, from 3,000,000 a year to 4,000,000 a year, represented by an additional million dollar cost in section 59. And then, what was that, Tuesday, when we went through all of the changes with purchase and use and meals and rooms tax across the three major funds, you can see all of that reflected together. And when you take a look at everything and you add it all up cumulatively, you'll see that for the general fund, when you look at FY '26 and '27 combined, the net impact of the bill is minus $610,000. The Ed fund is very close to neutral from the purchase and use of meals and rooms switching and ends up $900,000 ahead in FY '27, all based on the January consensus revenue forecast. And the T Fund would then be ahead by $9,900,000 as a result of getting that additional purchasing use FY '27, and then that would creep up a little bit in future years as the growth in purchase and use tax hits. So, that's the summary of all the fiscal impacts. This is a 10 page fiscal note. We're not gonna go line by line unless you really want to.

[Unidentified Member (House Ways & Means Committee)]: Thank you.

[Chris Rutland (Joint Fiscal Office)]: But in the interest of trying to be helpful to everybody, because we realize this language can be really technical and dense. In the past, we tried to put a summary table together in here that just gives you the ability to see what in one or two sentences is happening in each section. And then, if we elaborate more, if it's something we thought was needing more context and would fit in the table, we'll put a little note here that says See Description. The descriptions then follow this not very brief summary table. The descriptions begin on page six, and again, this doesn't speak to every 60 plus number sections in the bill. These are really the things that we thought were most interesting and most in need of some additional context. So, I don't think there'll be any surprises. We can run through these or take questions or whatever. That first section, since it's one sentence, we just wanted to remind you all that that had to do with the credit for taxes paid in other state by S corps. If you see that text in the very early way, what is this thing? That just reminds you, we don't expect that's moving the needle on revenues. There's the property transfer tax, closure of a potential loophole. Common level of appraisal tends to get people's interest. So we talked about that provision of having a CLA being 100% in the year of the reappraisal. That's helped deal with the odd things that can happen with the snapback and everything that Jake Feldman explained a few weeks ago. Health IT fund and healthcare claims tax sunset extensions, it seems to come up every year. And if this passes, we won't talk about it for another four years. It was a five year extension. The down payment assistance credit is here in section 17. And this credit operates a little differently than some of the other ones in that there's that first year allocation, but that amount carries forward in the same amount in future years. So, we thought BHFA's graphic was really, really instructive at showing how these layers work. But the bottom line up front is that provision is an additional $350,000 increase above current law in FY '27. You'll see it ramps up a little bit, and then ramps back down as the credits age out. The Department of Fish and Wildlife rulemaking authority language is in sections 21 through 23. And just wanted to reiterate that while this language prohibits the agency from setting the through rule making, setting a fee to access land or requiring a license to access land, we just wanted to reiterate for the committee that that requirement has not been implemented yet. So, this isn't revenue we necessarily need to find anywhere. But we did put the estimates in that Fish and Wildlife provided in their budget testimony, but they thought the potential would generate. Sections 24 through 48 is a massive chunk of the bill that essentially changes deadlines from April to January. And that's all related to all these sections of statute that deal with grand lists, DVR, everything that goes along with it, and that has a domain effective date until 2031. But it's a whole lot of language that when you go through, it's really just moving up deadlines through the month. Sections 50 through 53 relate to PVR expenses related to towns, and that is the language amending the various statutes around the pilot special fund. This language does not make appropriations out of the pilot special fund. It just changes the verbiage in the greeting books around allowable uses. And flagged here that the language that is in this bill is consistent with the approach that was taken in the BAA that has already been signed into law, as well as in the governor's recommend for a 04/27. Tenure tax study, I don't think we need to talk about that anymore, unless we want to. Sections 55, sixty, and sixty one all pertain to the federal linkup, as well as decoupling. So, you'll see the annual conforming language is in here that updates our link update, but there's also a lot of language that decouples us from provisions related to federal tax law. Pat has walked you through a lot of the specifics of that, and he can answer more specific questions that you may have. The section 58 deals with the expansion of Vermont's research and development tax credit from 27% of the federal credit to 75%. And this provision, which took effect beginning in fiscal year 2028, not in 2027. Section 59 is that $1,000,000 increase to the Downtown and Village Center Tax Credit. And table two breaks all of the tax policy provisions out by section. So you can see Earlier, you saw the aggregate totals for these, but this will show you every section, every line, and what the impact of the provisions were. So at the end of the day, the the tax policy provisions, the stuff about the link up and the decoupling as well as the tax credits, have a negative 3,960,000 impact to the general fund, 14,250,000.00 in FY '27, 13,500,000.0 excuse me, 13,450,000.00 in FY '28. These ups help offset the downs that are in section sixty two and sixty three related to shifting around the meals and rooms of purchase and use tax, because you remember that as a result of all of that, the general fund at the end of the day would lose 4% of the meals and rooms tax. So that means the general fund would be losing $10,800,000 of revenue beginning in f y twenty seven. So I'm gonna make you all dizzy and go all the way back up to the top. And hopefully, all of that still ties out in the first table, and you can see how the ups and the downs, when you add them all together, result in the cumulative impacts of the three major funds that are shown at the bottom of the table. Does anybody have any questions? Because I covered a lot in not a lot of time. It's impressive.

[Emilie Kornheiser (Chair)]: I think that you two have covered it very well over the last many months. Thank you.

[Bridget Burkhardt (Clerk)]: This is amazing. Thank you so much. Does this go from last two appropriations?

[Chris Rutland (Joint Fiscal Office)]: Yes.

[Emilie Kornheiser (Chair)]: Any questions for President Biden?

[Unidentified Member (House Ways & Means Committee)]: The only thing in this whole thing that I don't really understand is Section 17. Oh, sorry. Go ahead. It's okay. Sorry.

[Emilie Kornheiser (Chair)]: No, no, no, please go ahead. I'm sorry.

[Unidentified Member (House Ways & Means Committee)]: Everyone's talking all the time, but Section 17. I don't understand what we're doing there and why it's called down payment. It's $350 for a down payment.

[Chris Rutland (Joint Fiscal Office)]: That's a great question. So I'm gonna quickly exhaust my knowledge on this topic, but the way this works is there are a certain amount of tax credit allocations that are granted to the HFA every year. The HFA will then sell those tax credits to banks or insurance companies, and then use the proceeds to fund their down payment assistance program. So, yeah, you're not giving $350,000 to one person's down payment. It's an amount of tax credit that they're allowed to sell, and then they use the proceeds to pay for that program. And my understanding, not knowing all the weeds about the program works, it essentially works as a revolving loan program for the recipient. So once you receive that assistance, if you refinance your mortgage or sell the house, that proceeds then goes back.

[Emilie Kornheiser (Chair)]: It's usually around about 5,010 thousand dollars that gets then paid back. And Mora Collins is who presented, did a very deep presentation on it, if you remember that.

[Chris Rutland (Joint Fiscal Office)]: And she put this excellent graphic together that we thought was so good, we couldn't replicate it in a way that was better. So we just gave them the credit for it at the top. But it really shows how the we talk about the first year allocations, but they really do have a tail on them. So we're coming off of a previous round of credits that were issued in prior years. So you're not necessarily starting from a zero position, like we had in expense in the past, but those are those blue cells. But the program would be continuing for future years at a slightly higher rate every year.

[Unidentified Member (House Ways & Means Committee)]: Okay, thank you. Anyone else?

[Emilie Kornheiser (Chair)]: Thank you both very much. Anyone have any questions for Kirby?

[William Canfield (Vice Chair)]: Okay, Madam Chair, I move that we Favorable. 20 six-seven 27, an acronym to miscellaneous administrative policy changes to the tax laws.

[Chris Rutland (Joint Fiscal Office)]: Thank you. I would

[William Canfield (Vice Chair)]: second that.

[Emilie Kornheiser (Chair)]: Representative Canfield moves that we find our miscellaneous tax bill with a very nice number on it favorable and representative Kimbell seconds. Any community discussion?

[William Canfield (Vice Chair)]: Yes, I'm not Not comforted with the way we've handled federal tax credit for scholarship granting organizations, sections eighteen and nineteen. Yes. I plan to vote yes for the adult.

[Chris Rutland (Joint Fiscal Office)]: Briefly, again, your concern, I remember yesterday, but I haven't done it at the tip of my brainpower.

[William Canfield (Vice Chair)]: Federal tax credits for scholarship granting organizations.

[Chris Rutland (Joint Fiscal Office)]: Right, understood.

[William Canfield (Vice Chair)]: I'm not confident that the way we handled that in this bill, I'm still ready to vote for the rest of the

[Emilie Kornheiser (Chair)]: President Higley, do you

[Unidentified Member (House Ways & Means Committee)]: want to take it?

[Mark Higley (Member)]: Sure. So this is on section twenty one and twenty three. You may remember, we put in limits on the Department of Fish and Wildlife setting fees. Burkhardt LaGrady came in, talked about the rule process that we just passed and it might have been my misunderstanding, but I certainly felt uncomfortable that I'd missed something in the rule process. And so I read through the rules, because I was assuming what Ledge Council Michael O'Grady had said was that those new fees for users fees for some facilities, know, the $5 a day or $20 for the year, were in that rule. And so I read the rule again, I reached out to Michael and he said it wasn't in there. And that he was just assuming that the way it was written at the end that they could possibly do it. But again, I just want to make people aware that it wasn't in the rules to go forward with that. It wasn't mentioned, wasn't talked about. Anyway, that's basically all I want to say.

[Emilie Kornheiser (Chair)]: I really appreciate you looking into it because I was also confused by the idea that you would have missed UN, Representative Ode would have missed that in rulemaking. And so I was really glad to hear that you didn't miss that because I actually take a lot of comfort in the fact that two of our members are on, LCAR. And appreciate you clarifying that.

[Mark Higley (Member)]: Well, not to say that I won't miss something at some point, because I

[Unidentified Member (House Ways & Means Committee)]: wouldn't say anything. But

[Mark Higley (Member)]: again, when I feel comfortable that I don't remember any testimony, and again, even Michael and I said, you would hope that if they did proceed with that, with an amended rule or whatever, it would have to go through public hearings. There was nothing in there, no public comments. Anyway, thank you.

[Emilie Kornheiser (Chair)]: And what I saw Michael said to you in response is that they still can do this under the law unless this passes. But on the roll, yeah, thank you. Anyone else?

[Chris Rutland (Joint Fiscal Office)]: I would just go along Senator Canfield on his concerns about the SROs as well. Thank you.

[Emilie Kornheiser (Chair)]: Okay. Really appreciate all the work of staff on this bill and how much everyone has dug into all of these different sections. It's a lot to track a bill across the entire first half of the session and keep on stepping away from it and coming back to it. And I really appreciate how much everyone sort of oriented and reoriented to it and were curious about this really fairly difficult moment that we found ourselves in. So thank you. If the clerk could please call the roll.

[Bridget Burkhardt (Clerk)]: Representative Branagan? Yes. I'll vote yes. Is representative Burkhardt? Representative Higley?

[Mark Higley (Member)]: Yes. Representative Polka? Yes. Representative Kimbell? Yes.

[Bridget Burkhardt (Clerk)]: Representative Masland? Yes. Representative Foti? Yes. Representative Page?

[Woodman Page (Member)]: Yes.

[Bridget Burkhardt (Clerk)]: Representative Waszazak? Yes. Representative Canfield?

[Chris Rutland (Joint Fiscal Office)]: Yes.

[Bridget Burkhardt (Clerk)]: Representative Kornheiser? Yes. We have voted the

[Emilie Kornheiser (Chair)]: bill favorable, eleven-zero-zero. Thank you very much, everyone. Representative Kimbell is going to report the bill. It needs to get a bill number still because it's a committee bills, and then go to appropriations. It'll be a little bit that's off. Okay. We are going to talk about alcoholic beverages now, which seems appropriate for our final call on Friday. Oh, We're not. Patrick's not here. Let's start with Ted. I'm just doing like I'm doing a reverse we're doing reverse order on all our smaller bills.

[Bridget Burkhardt (Clerk)]: Except for the

[Bruno (Joint Fiscal Office)]: Joint Fiscal Office, Bruno. So my part is short. I did not even enter the Zoom. I will note that this bill has an estimated minimal fiscal impact. It removes a sunset that would have occurred for special venue serving permits for retail establishments. They removed the sunset, so retail establishments will be able to continue to have their special venue serving permits. The permit cost is $20 The idea for this permit is that it's really for bookstores, art galleries, museums. If they're going to, at an open for something, going to serve beer and wine, That's what the permits are intended to do. At $20 unless they became the largest program at DLL, licensing program, they're not going to have it. It's maintaining a minimal amount of revenue that goes to the enterprise.

[Chris Rutland (Joint Fiscal Office)]: That's all I have. That is the only fiscal impact in the bill.

[Emilie Kornheiser (Chair)]: Thanks so much. Yes. Do guys have any questions? Okay, thanks. We're gonna take a brief recess. We have to hear the bill first.