Vermont Legislature SmartTranscripts:

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: We are live. Are live. This is Senate Finance. We have four sessions. We're in a little long, so we are behind. So, we're gonna move. We're continuing. This is Senate Finance. We are continuing our discussion at this point of H-eight 85 and Courtney Harness and Beth Watson. 585. 585. Yeah. Okay. Yep. Are here from Blue Cross Blue Shield.

[Christopher Rupe (Joint Fiscal Office)]: And

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: come on up, I think You want to come too? Okay.

[Kirby Keating (Legislative Counsel)]: Thank you.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: So we don't have to make chairs. And I apologize for the lunch. Oh, please.

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: By all means. I had meetings all through. Lazy. Feel free. All through. So I will start if that's acceptable to you all. My name is Beth Roberts and I'm the President and CEO of Happy Cross Blue Shield Vermont. Thank you for having me here Caledonia today. Wanted to spend a few minutes explaining who I am a little bit, but importantly, share some comments about our bill. So first, it's been wonderful to come into the state of Vermont, buy a house in the state of Vermont, and become a member of

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: the state of the community.

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: I will start just by saying that I have a very long career in health insurance, and it has been really fun to come here and see how health insurance works here in the state of Vermont. So in the way of a bio, I've been in health insurance, it's embarrassing to say a number of years, but thirty seven years. Literally out of high school, I went into insurance then decided to go to college after taking the gap year and working in an insurance company and stayed in insurance that entire time. So thirty seven years in insurance, twenty three years with public health care. Some of the things that I would like to distinguish is one is all of my has been in New England states. So I've had the great pleasure of working through that insurance lens in every other state in New England except Vermont. So this is my cornerstone, a capstone if you will, of coming to a New England state and working in the insurance arena. I cut my teeth at Harvard Pilgrim by opening up the New Hampshire office and growing New Hampshire to be the second largest Harvard Pilgrim. Harvard Pilgrim became the second largest caviar. My work also extends to, for thirty of those thirty seven years, has been faced in some regard of either doing it directly or oversight of provider negotiations, so negotiating hospital and provider treatments. So, deep experience in provider contracting, really understand different markets, big and small, in New England, how they work, see similarities with Vermont, those other states, but Vermont is a very different market and fully enrolled in and brings that at the same time. So that's a little snapshot of me. I will say the last three and a half years of my career prior to coming to this role is something that I reflect on very positively. Lucky enough to work at Catharsia Lincoln Health, which is a very large system in Boston. 14 hospitals, 7,000 doctors, and my job was very, very easy. It was trying to make that system behave like a single system. So, I was the president of the accountable care organization associated with that system. And what that essentially meant is we were working every single day to improve quality of care for the patients that that system serves through the physicians and the hospital environment. So, I learned a lot. I learned a lot being an insurance executive and going into the hospital space and what it means to really form partnerships to drive for change. And that's a cornerstone of what we're doing at Blue Cross Vermont. Think I you all know Blue Cross Vermont serves a third of Vermonters with a local non profit insurance carrier. Very proud of the work this great organization has done. We believe in community and strengthening the healthcare ecosystem and strengthening the community. That's a pillar of growth each and every day. We want to make healthcare better for all the monitors. That is what our mission is, is to make healthcare better for all the monitors. Some of the things we've done just in the very short tenure at Bencam, started I in November but became CEO and an overlap, and I'm with the former CEO, and so I started on my own as CEO in January. In that short time, was lucky enough to join the organization when we were in the middle of a negotiation with UVM Health, And in that negotiation, we were able to pivot quite quickly and get

[Christopher Rupe (Joint Fiscal Office)]: two things done. One of the

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: things that we got done is the Green Mountain Care Board. They have got a very good goal of trying to reduce rates by approximately 8% for the system. Proud to say that partnership with Steve Leffler and myself, we were able to get to agreement on a reduction at UVM of 12.3%. Not only did we reduce unit cost 12.3% starting in January, so throughout this year, that is the contract that we negotiated, we also built a construct for a value based contract, which is new and different for the work that Blue Cross and UVM has done together historically. Furthermore, as of last Friday, we agreed to a full value based contract with UVM Health that will take effect January 27. So we're already seeing early progress in this partnership mindset to make sure we're accountable. We need to do the work that we need to do to drive to affordability in the state of Vermont. That includes Blue Cross doing things a little differently and leaning on a bit more than perhaps we have historically. And I think if I share that spirit with Steve Black Loor and that's how we got there. Also formed a partnership with the BOSS, so the hospital association, because I do think that there's a way to negotiate very, very good contracts through our partnership model. It doesn't have to be hitting each other over the head and pointing fingers in various directions. So that's one of the things we're very proud of. Another we heard, and we all know that people lost their subsidies in January. We have a few new products coming to market 01/01/2027. So listening to that and understanding that we need to get more affordable products in the market, we have since created those products. We are filing those products for review and approval by DFR and hope to have them in market for January 1 to be set up. So that's another way we're listening to the market, trying to do the best work that we can do. I want to pivot, if you'll follow me, to talk about board, because I think our board, in relationship to section one of the bill that you're discussing, there's a notion that two board members should be put on the Blue Cross of Vermont board. What I didn't say about my history is that I've had the pleasure of serving on nonprofit boards, leading nonprofit boards, and managing a nonprofit board. So at BILH, I reported directly into the board, an ACO board that was primary care doctors, specialists, hospital executives, and system executives. So I have a flavor of what a good board looks like, and what I would suggest to you and feel very confident in saying this is the Blue Cross board, is excellent. It is comprised of seven Vermonters and five Michigan folks, and I'll explain a bit more about Michigan. The seven Vermonters are people you likely know. There's people who are finance background, education background, sustainability background, excellent Vermonters who have lived in the state of Vermont largely their entire life. They run businesses or senior executives at businesses. Our board chair worked at AHS for a period of time. So we have a very well rounded set of reminders that represent all of us, the constituents here in Vermont, every single time they come to that board table. There is no lack of clarity. They are very, very clear on the fiduciary responsibility that they have and importantly, the mission responsibility they have to serve the waters. And so that I have never seen them fluctuate from that perspective. The beauty of having Michigan, so we have five Michigan members, and the reason for Michigan is Blue Cross Vermont is affiliated with the Michigan organization, Blue Cross of Michigan. I think it's important for me to per se why Michigan even affiliated with us. They came in because they believe true to the Blue Cross name, reputation, and what Blue Cross stands for in every community they serve, they felt it was very, very important to keep smaller Blues independent, local, and dedicated to the state they serve. And honestly, there is very little in the deal for Michigan. So they came forward because they wanted to see a local Blue Cross organization thrive. And what they have brought to the table in this affiliation is simply remarkable. What they have brought, just in summary, I think you all know we had some financial hardship. They brought forward a $30,000,000 surplus note in order to help us get on good financial footing. We have since paid that surplus note back. So they gave us $30,000,000. After that happened and we paid it fully back, they kept that as an ongoing opportunity because they know even though we have one year of good financial performance, we need more years than one to show that we are a financially sustainable organization. So they backstopped us with that same type of commitment. The other thing they did, think everybody knows, we had to remove ourselves from the Medicare Advantage market much like many That other health plans throughout the was very sad for us. We still serve Medicare folks through our Medicare supplemental products and our pharmacy products. However, Medicare Advantage was a very good mechanism for Medicare recipients to be insured. Unfortunately, it was financially very much underwater. If we, Vermont, Blue Cross Vermont, took on the full burden of loss for that Medicare Advantage book of business here in Vermont, we would not be sitting in front of you today. They absorbed double digits, millions of dollars in order to allow us to pay keep those in the folks insured and us to pay our claims debts through the, the duration of time that we need to. So two financial things they did for us that made a very meaningful difference for Vermonters. Over and above that, we work with Michigan with their expertise. We have we have connection points at every department within the the Vermont organization where we have the equivalent person in Michigan where we can bring so many ideas. We can ask them what they have done in certain circumstances. They do the same with us. Some of the Vermont ideas, they're very intrigued by. So it's a two way street, but isn't it lovely to be able to have that type of expertise that you could share back and forth and only get stronger and better? The last thing I'll say about Michigan is they're also they have a fully vetted list of vendors that they partner with, and with the Blue Cross organization that size is many. We need more vendors to help us do all the work that we do. They have a fully vetted list, legally and otherwise, and then we're able to leverage the Michigan and Vermont footprint of members together to get a better deal. So they're extending their contracts to us so that we're paying a lower price point for the things we need to do to make sure that we're a good health plan for all the launchers. So Michigan has paid dividends to Vermont, if you will. It has been very important for our sustainability. In that Michigan affiliation deal, this is the biggest point I want to make, not only are they excellent board members, which I didn't finish that thought, three of the Michigan board members are executives. The president and CEO of Blue Cross Michigan, which she is stellar and unbelievably smart and capable and helps us every day. So the president and CEO, the president of commercial business, and the president of emerging markets are the three roles from Michigan that are on our board. Wealth of knowledge. The other two Michigan roles are open for them to appoint, and they appointed two Michigan board members. So two of the members that are on their board are now having insight onto the Food Cross Vermont board. So you can hear that seven of the existing board members for our organization Arbor Mont, five of Michigan. I emphasize that because when we affiliated with Michigan, that board construct was decided. It is in our affiliation agreement, it is written in the affiliation agreement, and it was approved by the FBI. So, for a couple years later, to come back and try to change the composition of our board by either adding two or switching out two of those board members. First, I would suggest to you the two that would have to be switched out would be the Vermonters. I believe you got the vibes of the people on that board. I wouldn't have a clue who to take off that board. That board is an excellent board. So and to add to that changes the very essence of the affiliation agreement that we agreed to, again, approved by the regulators. So our Michigan affiliate is not very excited about this bill, as you can imagine, and leaning in really hard to say, we don't understand. But the strength of the board you have, the strength of the financial backing, the strength of our collective efforts to do good for Vermont, why are we even having this discussion? And they're having a hard time understanding that. I've done my best to represent what I've heard, but I stand in front of you today or sit in front of you today suggesting the same thing. I am not understanding the value that two additional board members would come in and do to an already very strong board that was agreed to in our affiliations. That's what she got. I am more than happy to take any questions that you may have. Thank you, madam chair.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Thank you for your testimony. That's really helpful. I have a series of questions Sure. Because you've perked my interest. First of all, what when you when and and I know you weren't here directing, but when Blue Cross Blue Shield of Vermont affiliated with Michigan, what was DFR's role in that? What what did they have to do? And I can ask them the same question.

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: No. It's okay. And and you can, but they have approved the entire thing. So it was they were part of the process as we were going through the affiliation. And so they saw the full every document associated with it, they were part

[Christopher Rupe (Joint Fiscal Office)]: of that entire process. And then

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: they approved it at the end. And that would have included the board composition. Okay. And what kind of ongoing oversight do you have with both DFR and, I know you're sort of duly regulated a little bit just, with D, with DFR and three Mount Care Board, and are there regulators in Michigan that have any? Okay.

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: So, but to your point, I'm on the program with DFR. I think that folks in the room would agree at least weekly, if not every other day. So, we talk to our regulators all the time. They see our board minutes, our board agendas. They see all our financials. They we go, and we talk to them about anything that we wanna do. I mean, it's a very open relationship with DFR. And, frankly, we partner on many things. Like, we have a lot of data, and we use that data to inform how to move forward in certain things. So, we talk to DFR all the time, and they see absolutely everything. That's the other thing that I'm glad you brought it up. I can't think of something that DFR doesn't see. And we just we we took inventory of it, and it's it's quite remarkable what we send to DFR. Green Mountain Care Board, certainly, they regulate us as well on the rate gearing side. So when we create products and we need to get rates approved, we go in front of Green Mountain Care Board. We also get requests from the Green Mountain Care Board for data. So along with Medicare initiative that's going on right now, they ask for data. We go and respond via data a lot, but they do not

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: have pay this Mhmm. And,

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: you know, Vermont is has a ton of nonprofit organizations, and I know you're a somewhat unique nonprofit organization, but not all nonprofit board members understand their Denise, especially their fiduciary duties. They sometimes people get it because they believe in the cause, but then they realize, oh, wait. We have to actually balance the budget Mhmm. And hire a CEO or hold the CEO accountable. And do you have training and criteria for the board members who are appointed so that it's somebody who has the skills and the knowledge to be able to actually do the job that is necessary? Could you

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: describe what those are? Sure. So first, the process to select board members includes a rigorous set of criteria. First, one thing that was agreed to an affiliation as well as every single Blue Cross Vermont board member needs to have Blue Cross Vermont insurance. So they have a perspective of being a member of our organization as well as being somebody in the community. So the first thing we do is we do look for people in senior executive roles that either run their own business or have very strong influence in their own business. We look for different types of backgrounds. So for example, when we lose Charlie Smith on a wheelchair who's retiring at the end of the year, we look for, okay, what is the the role that Charlie has been playing? And in his particular instance, he does know Vermont government very well because he's savaged in AHS for quite some time. So, if we lose somebody with a finance background, we look to recruit somebody in the finance area who's a lawyer on the board, we look for somebody who's a lawyer. So, we definitely try to round out the gaps based on who's already on the board today. Then we go through an entire, we have a list of 10 right now to fill Charlie's seat. We then go through and we distill it down based on criteria of what those various crops bring to the table, to the three, and then we do interviews with board chair, myself, and the other board member. And then we'll we onboard them very thoroughly. So we have a full onboarding so that they understand the responsibilities, both mission and fiduciary.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: And how do you remove a board member if they're not fulfilling their duties?

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: I've been here long enough. I mean, is we have board criteria around that. We haven't found that to be the case, so we have not had to remove somebody on the board. And so I certainly get you that policy. I really don't know, so I'm sorry.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: No. That's okay. And that would be helpful if I if you could get that. And then do you know, I think we're all aware of the financial issues that have been plaguing Blue Cross Blue Shield for the last few years, and it's good that you're sort of coming out of that. But are there any recommendations you would have for further regulatory measures that could be done perhaps in addition to or instead of this Ford seat proposal. What could we do? What could DFR, Green Mountain Care Board, or the legislature, whomever, or the governor, whomever do better so that this wouldn't happen again. I

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: really sit in front of you today not knowing a good answer to that because I really believe that if the FR asked us for absolutely anything, they would get it. I mean, they see absolutely everything. I don't know what else there is to potentially manage or control. So when you talk about the financial standing of the organization, some of that happened nationally. And I know it hit really hard here in Vermont, but when you hear people talk about a claim surge and how we went from being okay, still not financially perfect, but okay, to in a really tough spot, That happened at a time of the claim surge that happened nationally.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yeah.

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: It was just so it is really hard to predict when that is going to happen. And consultants, insurance companies across the board all did not get that prediction correctly. So I am not sure by adding a board member, any type of board member, that would have been predicted any better. So that was really what happened to us in the financial crisis was that claim surge and going in front, getting insurance rates approved every year through the Green Mountain Care Board, they go through a very diligent process, but you will see in the record that we needed rate increases greater than we were given for quite a few years before we realized this claim surge then just put us totally upside down. So our insurance rates couldn't climb to cover the funding costs. Mhmm. And, yes, we have claim cost issues in The States, which we're working on very diligently. But it's hard for me to say what else to be done because I really think DFR sees absolutely everything about our business model and our business. So I'm not sure what else we can do to make them stronger or better. Okay.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Thank you, Any other questions from the committee? If not, it's starting to feel like old times in here. I know that we're not done with this bill. I can't help you. We were just longer than we were supposed to be.

[Christopher Rupe (Joint Fiscal Office)]: I am sorry. Well, it's not your fault.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: So, well, thank you. This has been very helpful. You're almost all.

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: Thank you very much for the opportunity. Have a great day. Thank you.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay.

[Christopher Rupe (Joint Fiscal Office)]: I'll connect you, sir. Anything else? Yeah. We'll Thank you. Good job.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: We're running up. I'm already getting dead lives. So I put miscellaneous checks at, like, out by the seventeenth or she gets lost. That's not sweet. I love that's what I said. So

[Kirby Keating (Legislative Counsel)]: They make 04:00. They get a week.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Representative Kimball, you wanted to walk through? At least give you an edge class. Yeah. Yes. Really 2,000 foot one.

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: Yes. This should be a very light topic for you, madam chair.

[Christopher Rupe (Joint Fiscal Office)]: Thank you. So I, for

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: the record, name is Charlie Campbell, representative from Woodstock, Virginia Woodstock, Gruy, and Plymouth. So I'm here on H 933, which is a miscellaneous tax bill. It's a sixty four secondtion bill, so my full report was only 17 pages, and I've certainly only ten minutes to deliver it, so it was a rapid fire. But I wanna highlight for you

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Sure everyone knew what they were voting on. Absolutely.

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: But there are really three key parts to it. The first is money. So it's about making the Vermont tax code to the federal internal revenue code. JFO worked with PACS very quickly and also from our chamber and outside organizations to figure out what the impact of HR one past 07/01/2025 was on Vermont revenues. And as you know, the original estimate was that it wasn't gonna be that much. But looking at it and greater to fail, the estimate was about $21,000,000 in fiscal year twenty six. So set about looking at the different elements of HR one and and what we could selectively decouple from. So there are a couple of major points of that. One was really dealing with foreign income for corporations, section two fifty deduction, and that's what

[Christopher Rupe (Joint Fiscal Office)]: they could deduct from their income. And

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: others regarded the research and experimentation deduction that companies could also take, and also bonus depreciation on the purchase of some kind of buildings and, really around both farming and chemical manufacturing. So, anyway, so we selectively decoupled from a number of those things, which actually then provided some positive revenue into the states by doing that from projections.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And I believe that 21,000,000 plus or minus dollars, we did not know about when the revenue forecast was done. So it is spent in the governor's and the house's budget.

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: That's right, madam chair. We did not know

[Christopher Rupe (Joint Fiscal Office)]: that the 21,000,000 would be negative. Right? So we spent it in there. Available and need more than that. Okay. Alright. Okay. Yeah. It was in

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: the it was in the governor's revenue forecast. Okay. Got it.

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: So the extra money that was then freed up from decoupling was then used for a couple of different things. One is the increasing the research and development tax credit for businesses that are domiciled in Vermont going to 75% of the federal amount, is the highest in the country as really an incentive for those businesses to continue to do research and development here. About eight a 184 companies that take advantage of that credit currently all across names you recognize, names you might not. Also, it's in the downtown village center tax credits, increasing that by a million dollars, actually, in the permanent statute, not one time. And also looking at renewing the down payment assistance program through VHFA. So that's been a very successful pro program to create wealth. Residential down payment assistance? Yes. Residential down payment assistance. $350,000 a year maxes out to about $1,800,000 when the five year tax credit overlaps with others. The other part of the money is so that increases the amount of revenue coming to the general fund, but then we also are trying to make up for the request to move money from the fed funds back into the transportation fund. And as you know, the governor had asked for gradual reduction in the purchase and use tax revenues. So this reduces the amount of revenue going from going to the ed fund from purchase and use by $10,000,000 and makes up the the whole of the ed fund by moving more money from the, rooms and meals tax into the ed fund. So it changes the percentages as to what is actually then remitted into one fund versus the other. So it ends up being net neutral in terms of revenue for both the ed fund. Transportation fund does get more revenue, it can pull down more money from the federal government. So that is the money piece.

[Christopher Rupe (Joint Fiscal Office)]: The general fund would have to take

[Sen. Scott Beck (Member, Senate Finance Committee)]: a hit there, right?

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: Yeah. The general fund does take a hit from the Rooms and Tax, made up for by that decoupling from the federal taxes. Okay, It also has technical changes, this bill does. There's 24 secondtions that change the word April to January. It's very important, but it's actually for the grand less maintenance.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And it just had on many, there's many of those changes. Yes. A whole bunch of pages.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Can I ask a question about that? So,

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: don't know if you were here,

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: so this also might be a question for Chip or Lodge Council, but I remember that we changed some of those, maybe not all of those a couple years ago when we did work on appraisals. And I thought we maybe changed it to April. But do do you know what I'm talking about? There we made some change with some of the tax appraisal dates

[Kirby Keating (Legislative Counsel)]: Yep.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Because they were out of sync with property tax payments. And I was trying to remember I was reading the bill earlier today. Was trying to remember what we did.

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: Yeah. I I believe we should give more color

[Kirby Keating (Legislative Counsel)]: on that history, but Ruby's nodding. So

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: Yeah. Yeah. So and there are several parts throughout statute where it had to be corrected to actually go from April to January. And that gives listeners more time to hear appeals so that in July, when you have to really have your list finalized, then, that information is all done. Appeal period is over and everything else.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: And were there any objections from clerks? Because I know January 1 is a tough day for clerks because they're not they're not there and then

[Kirby Keating (Legislative Counsel)]: Yeah.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Did they object to that?

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: We did not have any objections this year when we made this bill. We had a lot of conversations with folks last session about the changes in the regional assessment districts and the appeal process and everything else, separate bill, but we didn't have objections to this.

[Christopher Rupe (Joint Fiscal Office)]: No, we will.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: From the clerk yeah and the list I

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: mean it might be fine because they're not actually doing it on January 1 right yeah but it's just

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: great okay maybe an orange flag not quite a river Another

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: thing that's in here is to fund JFO to do the ten year tax study, the decennial tax study. This will be the fourth done over forty years, and that is to really measure what kind of income tax and other taxes Vermont has in comparison to the other states. Does their tax like the results because of it? And to the extent that we can identify where there are benefit programs that intersect with what the income cutoffs are. So that could be an additional study that we wanna do after that. So it's really a thorough analysis of where we are with all of the taxes we have in Vermont and coming back to the legislature in December. So it's a $100,000 application to joint fiscal office to hire a consultant and do the work. So it's a considerable amount of work that needs to be done.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Go through your appropriations committee?

[Kirby Keating (Legislative Counsel)]: It did.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay.

[Kirby Keating (Legislative Counsel)]: It did. And they loved it. No. Seriously, they

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Our our sister called the butcher, and he's nailing everything to the wall. Oh, perfect. Yeah. He just wanted to take several stops. Okay.

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: Sweeney Todd and so on. And that's a very high overview. There are several other sections that are in there. Some of it is language just to make sure the statute conforms to what we're doing on the budget side from the Budget Adjustment Act and what's in the 2027 budget.

[Christopher Rupe (Joint Fiscal Office)]: Okay. Thank you. Great. And I'll hang around if you

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: have questions for vice counsel and.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Let's hope. Yeah. Tell me. Questions. Okay. Kirby, you're the lead on this. And, yeah, this chair.

[Kirby Keating (Legislative Counsel)]: I will

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Patrick, Chris.

[Kirby Keating (Legislative Counsel)]: Right. Good afternoon.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Good afternoon.

[Kirby Keating (Legislative Counsel)]: Is that convincing, senator Chittenden? You sound sarcastic. Alright.

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: I'm just tired.

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: So

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Hidden men?

[Kirby Keating (Legislative Counsel)]: No. That's okay. We have we have the bill there that's passed by the policy, h nine thirty three. Kirby Keating legislative council. I've also shared with Charlotte a section by section summary. I'll show you the bill language as we go through. There are parts that are very so so I have a couple of just preface things. There are parts that are obviously very meaty and dense, and probably it's just that we don't have time during this initial walk through to tell me about all of that. So, you know, plan to get on the high stuff and probably have to revisit it. And with that, I would say that between Pat and I, Pat has done wonderful work on this. Chris has done wonderful work on this. When it comes to the corporate income tax stuff or just the income tax stuff in general, Pat and both give them presentations and ways to meet on various aspects so we can always come back and and provide some of that information. Also, just wanna flag that I have started an amendment in the case that you do have any changes because there's a few technical tweaks.

[Christopher Rupe (Joint Fiscal Office)]: Okay.

[Kirby Keating (Legislative Counsel)]: So just to make you aware of that, then I'll send them are a couple tweaks I'd like to make.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Thing I might like to add at this point is I haven't gotten any answers back from the property valuation. I have of the town of Warren has development that went up in the nineteen fifties, sixties, like, with eight of an acre camps, and we've put an amount of tax due before you could go to tax sale. Mhmm. Well, the taxes on the total taxes on these are, like, $200 or a $100. Half of them are in estates, so the people have forgotten they even own them. The town would like to be able to turn this back into a piece of property that could be developed Mhmm. Which in some cases means going to tax sale before it reaches, now is it 1,900 or some dollars?

[Kirby Keating (Legislative Counsel)]: 1,500 or something?

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yeah. Something over 1,000. And I'm trying to figure out a way to do that without creating a huge loophole. So if you all can think on that. I was I know that represent Kornheiser was thinking of going to a percentage. I was thinking on if the lot is not marketable under present, but just that's the one with the and they're very persistent over there. So I'm just thinking about it. Is there a way we could help them achieve that goal. Through the whole bill. Yeah. We're gonna go through it. Just wanna we can wanted to get the best minds in the state house thinking about that to see if we could find a solution that

[Christopher Rupe (Joint Fiscal Office)]: Okay. Would help

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: them just get this problem solved.

[Christopher Rupe (Joint Fiscal Office)]: Okay. Yeah. We can we can talk

[Kirby Keating (Legislative Counsel)]: about that. So I'll get into the I'll get into the walk through. Section one repeals a section of law, current law. By the way, I'll tell you when we depart from it that the beginning of this is going to be requesting the department as the miscellaneous tax bill tends to start with the administrative request that they've done. Okay. So this is an administrative request from the department from the beginning of the session where we we have a section of law that denies tax credits for s corporations for taxes paid to another state. This the history of this apparently is it goes back to the nineteen nineties where the department lost a court case over a tax credit for an s corporation, and it was unhappy and and asked to have the law changed. And so we're in a state now where LLCs and partnerships are able to receive a tax credit for their Vermont taxes for tax for credit for tax paid in the state, but s corporations are not because of this.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Law that we did because we already have it.

[Kirby Keating (Legislative Counsel)]: Yeah. The deputy commissioner referred to it as revenge. I thought that revenge is not part of their mission anymore. So that's why that's there and that's a department request. Section two relates to the property transfer tax. If you remember a couple of sessions ago, my first session, we made changes to the transfer tax to have a higher rate for transfers of properties that were going to be used as second homes was the goal, even though it's not directly called out for that higher transfer tax rate.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: It was small parcels.

[Kirby Keating (Legislative Counsel)]: Part of that related to, You could avoid having the higher rate if it was going to be rented out, and that was maybe was time to landlord certificate, which the landlord certificate is required if it's going to be rented out for long term for more than thirty days. Law firms within the state, some of them have caught on to the idea that, well, if we can have you rent it out for thirty days, if we can and there's lots of ways for us to to figure out how to do that, then you can get this transfer and not have the higher rate applied to you because you're either renting it out to a family member or yourself or you're having maybe an LLC purchase the property and then rent it to you. And so to avoid these these

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Creativity.

[Kirby Keating (Legislative Counsel)]: Creative attempts to work around all spherically legal because it is it fits within the way it was written, and I remember conversations in this room about this possibility

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: They always have thousands of we do.

[Kirby Keating (Legislative Counsel)]: Yeah. So so it's it was not unforeseen, but it's happening, and the department would like a language added in section two here that would allow an apartment when they go to compliance, look at those transactions, and if they're not bonafide landlord tenant situations, that they can deny the rate and and apply the hires. So that's section two. Sections three and four relate to land use change tax and current use. There's an issue on that just real quick. Sure. What if it goes the other way?

[Christopher Rupe (Joint Fiscal Office)]: What if somebody purchases a property, pays the higher property transfer tax, six months later they go, No, I'm going to rent it. Can they go back to the state and say, Hey, actually, I'm renting it?

[Kirby Keating (Legislative Counsel)]: I think the department could speak to that best, but at least in theory, there's a refund process where they could request it, and they said, As it turns out, I did qualify for this other rate. How the department would handle that is better than the second. Okay.

[Christopher Rupe (Joint Fiscal Office)]: Yeah. Thank you. So

[Kirby Keating (Legislative Counsel)]: okay. So sections three and four, like, you wanna use change tax. I'm gonna try to speed up. There's an issue when it comes to current use, when a portion of a parcel is being unenrolled or being developed under current law, the portion that's being unenrolled from the program has to be valued as its own separate parcel and then land use change tax is calculated based on the value of that slice, right, which requires evaluation to be done specifically for this change each time, and it's municipal assessing officials who are in charge of doing those evaluations, and some municipalities don't have the capacity to do that very quickly. So, PVRs have suggested making these changes so that if thirty days pass and the municipality's not able to do it, PVR could step in and do it, and then it sets out a process for that, for basically PVR doing these value durations to speed things up. And there's also a provision here where under current law, the municipality gets a payment for doing that, but it would not receive the payment if PVR is doing it.

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: And where does the payment come from?

[Kirby Keating (Legislative Counsel)]: It's 2 up thousand dollars of the land use change tax. Could be Okay.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Okay. I would just stay with this thing then. Mhmm. PDR doesn't. Okay.

[Kirby Keating (Legislative Counsel)]: So section four is also part of that, which is a conforming change for appeals, and then in section five there's changes to the calculation for municipal grant list stabilization. You recall on recent sessions there's this new municipal grant list stabilization program that was created to reimburse municipalities for property taxes lost when they purchase flooded or flood prone properties, but then those properties get taken off the grant list, so for ten years the state reimburses some of the lost grant list value there. The calculation change here is to use the tax rates for the previous year instead of the current year, which is in line with how pilot payments are calculated, and so it's really just a math related request. Section six adds provisions addressing cases where communication service providers fail to submit inventory to PVR for property valuation. So also recently the law was changed so that PVR would start to do the valuation of the communication properties for those businesses, so they're starting to do the valuation for that. It hasn't really started yet, but they noticed that there's nothing in the law currently about any repercussions for basically a business not participating. Under the way that this works, the businesses have to submit inventories of their property for PVR to the demolition. So it introduces the same penalties that had previously existed for that, which is a fine of not more than $100 for each violation.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: That's all we missed in that bill. No. Senator Hardy, do you hear that it was $2.79? Yeah. Yeah. It was And The long and complex film, somewhat disagreement between that one and the set.

[Kirby Keating (Legislative Counsel)]: There testimony that they don't anticipate that any businesses are going to receive any penalty, but the stone of words are. And

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: The sovereign is to do the right thing. Okay. Send your

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: She skipped over a paragraph in that section, and I had some people reach out to me over that second one scrolling down about the ability to appeal. So there's just been concern that they should be barred from any statutory appeal, and so I think we should hear from PBR concerns that this is still being worked out, and so to take away their appeal rights while the kinks are being addressed. I think the requests from advocates, and I'd love to know what PPR's thoughts are, is to push the effective date of this out a year, out of the vote where it currently is. I'm looking at these third line 17, shall be barred from any statutory appeal. That seems a little extreme when they're still working through the kinks.

[Kirby Keating (Legislative Counsel)]: I highlighted the language I highlighted is just to show that that happens if the provider willfully admits to make swear or submit inventory. If they submitted inventory and then there's disagreement over it, that would not trigger this, just for clarity. If we could hear from Sheila Korden. I

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: don't think so.

[Christopher Rupe (Joint Fiscal Office)]: No.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay. Yes.

[Kirby Keating (Legislative Counsel)]: Moving on, section seven equalization study. There's just some language here clarifying that for CHIP sites, for the purpose of the equalization study, it will need to be done the same as TIP districts. Section eight also relates to

[Christopher Rupe (Joint Fiscal Office)]: the utilization

[Kirby Keating (Legislative Counsel)]: study and changes it so that if the municipality has just finished a master reappraisal, under current law the PDR still has to apply this calculation that's here to determine what their CLA will be. This changes it so that the municipality would have a CLA of 100 the year following the mastery appraisal, and there wouldn't be a calculation that could result in getting that slightly different than 100.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yeah. I've seen about about a 112 since the year after they did the reappraisal. Doesn't do common sense. It seems like if you have an appraisal, you should be starting at base 100.

[Kirby Keating (Legislative Counsel)]: Yeah. Sections nine and ten extend the health IT fund for five more years. It sets us on set in 2026, especially since 2031.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: You remind us what that is.

[Kirby Keating (Legislative Counsel)]: I can't

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: We'll we'll get

[Kirby Keating (Legislative Counsel)]: Very very little do I know that it's

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: it's IT

[Kirby Keating (Legislative Counsel)]: boss for Help.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Good, Kirby. Yeah. Good job.

[Kirby Keating (Legislative Counsel)]: It's reflecting. Jen Hardy probably could have helped.

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: She's a vital PIPO.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Oh, okay.

[Kirby Keating (Legislative Counsel)]: But there's yeah. The health care claims taxes part of this. That's what I said.

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: That was a little sarcastic.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay. Oh

[Kirby Keating (Legislative Counsel)]: my. Oh, no. But, seriously, Jen Harvey would be a person to know, you know, and to announce that.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Don't be more. Okay. So I'm 11 to 14.

[Kirby Keating (Legislative Counsel)]: 11 to 14 this is in some of the ed finance sections of the law, and it changes inflators used in various places from using unique over to NIFA. NIFA is the National Income and Product Accounts Implicit Price Deplator. UNIQ does not exist anymore, it's not something that's available, and so in practice, NIFA is what's been used, so this is making the statute reflect actual practice.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Is the US Department of Commerce gonna actually continue to do this one, given that they're not

[Kirby Keating (Legislative Counsel)]: No idea except that. I think that there is a study underway on inflators, like a from a JFO study underway on inflators. Yeah. And so I imagine it's.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay.

[Sen. Scott Beck (Member, Senate Finance Committee)]: Kirby, you scroll past something that's kinda base education amount. Was that a change, or did I just Where? I don't know. You you scroll by it.

[Christopher Rupe (Joint Fiscal Office)]: Line 12. Oh, yeah. Line 12. Okay. I know what that is. Yep. Okay. No worries. Just caught my eye.

[Kirby Keating (Legislative Counsel)]: That's the that's the concern with sort of any of these pieces. People notice things that aren't

[Sen. Scott Beck (Member, Senate Finance Committee)]: Yeah.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yeah. Okay.

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: No worries.

[Christopher Rupe (Joint Fiscal Office)]: Yeah. Sorry. Okay. Okay. I'm gonna skip.

[Kirby Keating (Legislative Counsel)]: Section 15 allows the property tax credit to be calculated using 100% of the prop this is a so so far, we've gone through tax department requests. This one is the taxpayer advocate specifically. The the the only request from your taxpayer advocate this year was to change the homesteaded personal property tax credit calculation so that people who are in the process of getting a divorce or or a legal separation, There's in those cases, you'll often have both of the people would still be owners on the property. And at least under the letter of the law, if one of them is living in the homestead and the other one's living somewhere else, that means one of the owners is living somewhere else. So only half of the tax credit would go to the person living there. This is something that the taxpayer advocate said that they addressed through extraordinary relief when it comes up and requests are made to them, but they've asked to just have the law changed so they don't have to do extraordinary relief in these cases.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Ma'am, there is not that free chair over here. We have been this far.

[Christopher Rupe (Joint Fiscal Office)]: They haven't spoke. It's not.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Doesn't it? Yeah. So keep going.

[Kirby Keating (Legislative Counsel)]: Let's keep going. Section 16, it aligns the estate tax filing threshold with the tax liability threshold. This is a department request. Under current law, if an estate has if the sum of the federal gross estate and the federal adjusted taxable gifts as defined under federal law, maybe within two years of the day that death sentence death exceeds $2,750,000 there's under current law, you have to file under state tax credit, but if that estate isn't worth more than $5,000,000 no tax is actually owed, so the department has asked to make the LIDA tax liability threshold be the same as this filing threshold so that they will stop getting what they call zero returns, which are returns submitted, but in which no taxes can but still something that they have to process.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yes. A lot of paperwork that's Section

[Kirby Keating (Legislative Counsel)]: 17 is the Down Payment Assistance Program that Representative Kimbell mentioned. So this will extend the program through 2031 and also increase the annual allocations from $250,000 per year to $350,000 per year, and as mentioned, these allocations are each allocation is for five years, so it's $3.50 per year over five years in each of those years between 2027 and 2031, and I believe it's something that Chittenden will show

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: you a cool tarot. Probably a good thing it's on the wall because we did something similar to the housing bill, I believe. So these may they're either similar or the same, so I I wanna

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: But it was taken out. It's on the wall.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Everything is on the wall over Yeah. It's got a huge wall. I know. Andrew has a huge wall with lots of things tacked to appear. Because he dropped here. Wanna make sure that they all get put together in one place so it doesn't look like there's a 100,000, you know, that that that there's a double dip. If it's only a single dip, it's more likely to happen. So see if we can get that marked up. Okay.

[Kirby Keating (Legislative Counsel)]: Section 18 brings us to a topic that you know you're familiar with because

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yes.

[Kirby Keating (Legislative Counsel)]: There's a senate version of something similar.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yes. This is the new federal $1,700 tax credit.

[Kirby Keating (Legislative Counsel)]: Exactly. For contributions to, scholarship granting organizations. Fun fact with this one, this this language we're about to look at is from a floor amendment, so this is not the ways that it would means first with this.

[Christopher Rupe (Joint Fiscal Office)]: Was it was it in

[Kirby Keating (Legislative Counsel)]: the bill? When it went to

[Christopher Rupe (Joint Fiscal Office)]: the floor, was it added in?

[Kirby Keating (Legislative Counsel)]: It was in the bill and changed on

[Christopher Rupe (Joint Fiscal Office)]: the floor. Changed on the floor. Okay.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Oh, okay.

[Kirby Keating (Legislative Counsel)]: Originally, ways and means more or less said Vermont's not gonna participate in this. On the floor, they changed it to I'll go to the one

[Christopher Rupe (Joint Fiscal Office)]: that says something. But the gist of

[Kirby Keating (Legislative Counsel)]: it is Vermont will participate, but the legislature will be the decision maker and year to year to sign who's going to participate.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay. Going to participate and in what form? Because the bill we had in here wouldn't

[Kirby Keating (Legislative Counsel)]: The bill you had in here was Vermont can participate and the governor can be the entity identifying SGOs within Vermont, but the SGOs that can be identified are gonna be limited to a smaller group than what the vets would So all three are

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And the holdup was that the IRS hasn't issued guidelines?

[Kirby Keating (Legislative Counsel)]: IRS has not issued guidelines which could affect the types of expenses that will be allowed for contributions and possibly the extent to which a state can limit SGO participation. So there's a there's there's some findings here, which is just calling out some things about section 25 f and title 26 of the federal law. And then the actual change says that annually the general assembly may elect to participate in the federal tax credit program in the following year by enactment of an act. The timing of this, you should be aware, is a little odd because these lists have to be submitted before January 1, so under this you would be deciding, let's say twenty twenty six right now, you would be deciding what is, not only will Vermont participate next year, but what are the SGOs that you'll recognize, but they will be for all the way until next year. So whatever you decide at this time of year will be actually submitted to the Fed It at the end of the

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: will be next year's federal taxes that you could take.

[Kirby Keating (Legislative Counsel)]: Alright. Well, it would be the SGOs that are eligible to contribute to the next year.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay. Federal just because credit, it just can't go to anything, not until we set up an SGO here, right?

[Kirby Keating (Legislative Counsel)]: Until, through this language, legislature has identified this particular organization qualifies, so next calendar year, people can contribute to it for purposes of the federal credit.

[Christopher Rupe (Joint Fiscal Office)]: So effectively, Vermont's out for twenty one seven because

[Sen. Scott Beck (Member, Senate Finance Committee)]: the legislature's not gonna be able to There's

[Kirby Keating (Legislative Counsel)]: an interesting provision in the federal law that for the first year there's not that hard deadline of January 1, but for the first year it says as soon as practicable. Okay. So it's a bit of an opening question. How late will the IRS would allow Vermont to be next year is a question that I'm not sure of the answer to, but it's possible you can pass something next session and federal law would allow a late submission during the legislative session next year.

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: I think it's an important point because this conversation goes on, even if we pass this language, making the legislature have to take action, Vermonters would still be able to take advantage of this credit by sending this money to other states' SGOs.

[Kirby Keating (Legislative Counsel)]: If if there if there are not Vermont SGOs, Vermonters could still contribute

[Christopher Rupe (Joint Fiscal Office)]: to other states' SGOs, even if

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: there are Vermont SGOs. But if this language passes, maybe that Vermonters will still be able to send theirs. And even if it passes, they can send that $1,700 to any other SGO in country.

[Kirby Keating (Legislative Counsel)]: Yeah. Whether it passes or not, they can do it. Okay. Nothing passes, then federal law allows the government to participate also. Thank you. I think you meant that. Okay. So I I think we've covered how this is how this is to work, so I don't need to dwell on that anymore.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Spent a fair amount of time. Yes. Okay. Last twenty four 21 through '23. That where we are? 2020. 01/20. No. That's I think that looked pulled off. Exception. Definition of oh, well, 20.

[Kirby Keating (Legislative Counsel)]: Definition of parcel is this is something that was in act 73 last year. It's kinda been pulled out of it because it was never part of educational reform. It was a technical request for the state mapping agency that for the purposes of the grand list, for mapping and for parcel payments, parcel means a separate sellable water piece of real estate. So you're you're changing the definition of parcel when it comes to the grand list here so that when it comes to property valuation or property taxes, it's being left alone. For purposes of mapping though, it would have the grand list state each parcel separately and sell a whole lot of piece of real estate. That means that you would not combine part parcels that are next to one another or adjacent to one another that have the same ownership currently go on the grand list as if they were one parcel.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: I own the lot next Just to my

[Kirby Keating (Legislative Counsel)]: for mapping.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: I have to buy mapping. State mapping. Yeah. The GSI maps. K. Because there's a lot

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: of mapping happening right now.

[Kirby Keating (Legislative Counsel)]: This is the the general, you know, you know, John Adams.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Yeah. So so if there are two parcels next to each other owned by these are my two parcels. I own this one and this one. Right now, they're combined, says Ruth Hardy on both of these parcels, but this change would make it so they're two deaths.

[Kirby Keating (Legislative Counsel)]: For the taxation, it would still it would still be as if you own one within Uh-huh. Taxation purposes. But for mapping purposes, that information,

[Christopher Rupe (Joint Fiscal Office)]: that data would at least

[Kirby Keating (Legislative Counsel)]: be on the grant list so that when they go to map, they'll know that there's actually two parcels there. Currently, that's a blind spot in their mapping.

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: Okay. Interesting. That could be helpful. We'll ask John to come

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: in and Yeah. Explain it. Alright. Yes. We finally got to a controversial search. Or maybe not in this but In general.

[Kirby Keating (Legislative Counsel)]: Yeah. Let's do it. Spot it. Section 21, you're 23. Fish and wildlife.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: That's from all the first juries.

[Kirby Keating (Legislative Counsel)]: You didn't say that. So sections 21 through 23 limits the Department of Fish and Wildlife's fee setting authority to licenses and tuition for certain uses and prohibits a license for public access. The backstory here is or or just the the general overview what's going on here is that it's for next year, starting next year, it would remove the fee setting authority that Fish and Wildlife has specific for access to their lands and property. There's other license to the fees that are out there, but it's not all of them. It's those those ones. Right? And in the meantime, this would have the department come back before next session and submit something to the legislature to say, would you put into statute these fees for us? And then the general assembly will have next session to decide whatever the extent of that, but it's it will be a process of starting to put the fees relating to access to fish and wildlife properties into statute.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay. Because unlike most other departments, fish and wildlife has the ability to set some fees. Right? Like the

[Kirby Keating (Legislative Counsel)]: Mhmm.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Rates for a campground at the state parks. I guess they do set fish and wildlife licenses, hunting and fishing licenses. But last year they announced that they were gonna put a fee on for using essentially hiking, snowmobiling, or whatever on state lands, that's just walking on state lands. Some people felt that might be overstepping their traditional ability to regulate. I gathered this is the house is compromised. It's no for this year, but you need to come to the legislature because these are essentially public lands.

[Kirby Keating (Legislative Counsel)]: Yep. And so so their fees are set through rule right now, and those rules under this language are being left alone for now, and it's next year that they would be repealed or replaced. And you mentioned the, like, the hunting fees. Makes it definite those fees are already in statute for Fish and Wildlife. There is the access to public lands fees here where there's a where they have a a more general authority over. And as far as other places in the law, I'm aware of parks and rec or forests and parks having a similar feed setting authority. And then I think storage preservation, there's a feed setting authority around that.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Otherwise remember sending feeds like to go into the Battle of Bennington monument or entering the Kent Museum. That I

[Kirby Keating (Legislative Counsel)]: tried I tried looking at that a little bit, and it just became probably the quaintest area of law we have where it's just, you know, to to build some stuff. Like

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay. So that will come back next year.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: I believe if I what I heard this morning was I don't know if you were still in the rooms that you're back, but the the they're they've made up the fees in the budget. They gave them a little general fund to to replace the fees. Yeah. That that's what I Okay. So that their whole They don't have a whole. They don't have a whole. They got us in general.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Sure. Yeah. Okay. So

[Kirby Keating (Legislative Counsel)]: I think we've covered those three sections. So the next 24 sections, 24 through 48, relate to the change of the grant list submission date from April 1 to January 1. Representative Kim will wrap this up. This is meant to be a change that's at least related to the RADS, the Regional Assessment Districts, and other reforms around property valuation, with the idea being that if the grant list needs to be submitted on January 1, then you have that would give you between January 1 and April 1 to do appeals, to do a lot of the administrative process that takes place with the grant list. So it it gives more time for municipalities, especially, to do their parts of things. So it's meant to be helpful. Because after the

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: floods, we had to extend those appeal dates because there were so many appeals from flood damage that Oh. The the boards of civil authority couldn't just couldn't process them, and they are volunteer boards. Right. They can only push them so hard.

[Kirby Keating (Legislative Counsel)]: So, yeah, so there is, you know, the the first the first opportunity to appeal when it comes to property valuation would be the grievance process, which is informal, and then that could lead to a formal appeal with the municipality. So, these there's more time for all of that before you get into, like, summer and fall

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: where there's other deadlines. So you should have more set grand list by the time you come to sending out property tax bills. You shouldn't still have things in

[Christopher Rupe (Joint Fiscal Office)]: conflict.

[Kirby Keating (Legislative Counsel)]: I think that's the how it is.

[Christopher Rupe (Joint Fiscal Office)]: Yeah. Okay.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yep. Thank you. Do you remember

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: what I was was that we changed some of these a couple when we did the the first I was thinking property asset.

[Kirby Keating (Legislative Counsel)]: I was thinking that maybe you were referring to some changes that were made with homestead declarations and extending the time at which those can be amended then.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Okay. I remember it was like an October and April change or something like that. Was that the

[Kirby Keating (Legislative Counsel)]: That's why I'm thinking that that because October 15 is something that I want

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: to think.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Yeah. Because people were not getting their homes their crap tax credit because they were missing the deadline on okay. That's what

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: it was. Okay. Yeah. Okay.

[Kirby Keating (Legislative Counsel)]: Okay. Section 49 is a times department request to remove parts of statute that have PVR overseeing tax collection. PVR is not currently doing that.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Have they ever?

[Kirby Keating (Legislative Counsel)]: Back when it was its own department, it seems like maybe there was at least an idea at some point that they would do that, but it's not something that they participate in at this point. So they've asked how that would be. Sections 50 through 53 are another change from the house floor. There were some sections here that were going to take part of the pilot special fund revenues or money that's in the fund to pay for some PVR fees related to the per parcel fees for municipalities that help with the stabilization study, and then with the grand list maintenance work that they do, and then there's a per parcel fee to help pay for master appraisals. And so it was going to shift those fees from general fund to being paid for through the pilot special fund. Turns out some folks in the house didn't like that. They have different ideas for the pilot special fund. So it was draws.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Everybody has ideas for the pilot. Yeah. Okay. And

[Christopher Rupe (Joint Fiscal Office)]: yeah. Alright.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And yeah. How much money were parking?

[Kirby Keating (Legislative Counsel)]: There's I think there's a there's a bill that has ideas for the.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yes. Don't have ideas. They have ideas for lots of funds.

[Kirby Keating (Legislative Counsel)]: Mhmm. So so that's that's what's missing there? Oh. Section 54 is the Vermont ten year tax study that representative Kimbell mentioned. This would be something conducted by the CFO, and it's something that's been done before. And there's a $100,000 appropriation for it. And with that, I think, you know, is gonna talk about it, and so he'll be doing it. Thanks, So Ten year just brought that up.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Conduct a ten year study on Vermont taxes. Mhmm. I assume the study's not going to last ten years. It's going to be the study all of our Ten years. I'll look around.

[Sen. Scott Beck (Member, Senate Finance Committee)]: It'll sit on the shelf for ten

[Christopher Rupe (Joint Fiscal Office)]: years until we we don't smoke.

[Kirby Keating (Legislative Counsel)]: But Chris is gonna work

[Christopher Rupe (Joint Fiscal Office)]: on everyone. In my time.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: It's built. It's very good.

[Christopher Rupe (Joint Fiscal Office)]: It was really

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: good. Just let me get one. I wanna make sure we word this correct.

[Kirby Keating (Legislative Counsel)]: It's not like the blue ribbon tax commission thing.

[Christopher Rupe (Joint Fiscal Office)]: Okay.

[Kirby Keating (Legislative Counsel)]: So that's it's not like that. It's a it's a JFO study.

[Christopher Rupe (Joint Fiscal Office)]: It seems like that's not a. Okay. It's not a person.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Is JFR one person? Yes. JFR is not a person. I don't have I don't have read that. No. The first one, the the commission was very balanced in the middle. Michael Costa was the director, and it it was his first job here. And there were some very conservative people and some very liberal people on there. And but we asked them very specifically to look at our tax structure, yeah, relative to our ability to be competitive with surrounding states. So the next one just kind of did its own thing and I just want to make sure that we're clear in the wording because the second one never really

[Kirby Keating (Legislative Counsel)]: So, again, again, this this is not that. Yeah. It's not that. This is Okay. An analysis. Done. So section 55 is has a lot. Oh. Has a lot. It changes our income tax definitions, and it is the part of the bill that where the decoupling mostly occurs. With decoupling With decoupling federal law on on certain areas of income tax.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay, personal or corporate? Both. A

[Kirby Keating (Legislative Counsel)]: lot of the changes apply to individual personal income tax and corporate. There's one that is personal income tax only because it's not something available on corporate income taxes.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Okay.

[Kirby Keating (Legislative Counsel)]: That's that's the level. I'm gonna I'm gonna go through them. To kinda set the stage, as a reminder, HR one, you know, passed last July 4, it was when it was signed, last July 4, and had over a 100 sections of changes to federal tax code. Pat Okay. And I and part of taxes have worked to make sure that we understand everything that was happening and and to identify the things that that would flow through to Vermont. We did that, ways and means worked on this and walked through all of the things that could impact Vermont, and this is five or six areas where Vermont would decouple, And so there's also the annual link up here, which means that all of those other changes that happened are one that Vermont will couple to.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay.

[Kirby Keating (Legislative Counsel)]: So I don't want that be lost to think that, like, when it comes to all those changes, Vermont is coupling to most of them. Right. And a lot of the and a lot of the changes also do not look similar to Vermont, so there's nothing to couple or decouple from. Okay. So just make sure that, yeah, that So

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: we will spend a great deal of time on coupling or decoupling.

[Kirby Keating (Legislative Counsel)]: Oh. And yeah.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: It is probably the one where that has the most monetary impact. Mhmm. And what and where we will want to put.

[Kirby Keating (Legislative Counsel)]: So to give you the quick version with completely assuming Pat and at least we'll be back to talk about this more in force, I'll just give you the quick versions of the things if that's okay for today. Okay, so the first one is, President Kimball mentioned HR1 started allowing something called bonus depreciation for qualified production property was the term used. Currently, Vermont is decoupled from bonus depreciation for business personal property. So there's already some president from Martine Kaplan from federal when the feds allow bonus depreciation. Bonus depreciation is allowing depreciation on property to be done all in the first year. To take all of depreciation off your taxes in the first year, otherwise depreciation for property would be done using these tables the IRS has. For this qualified production property, it's all non residential real property, so under the IRS tables it would be thirty nine years is how long it should normally take to depreciate that property. The bonus depreciation that's what's allowed in RHR1 would be thirty nine years, it could all be appreciated in the first year, so it's deduction for all that value in the first year. There's a bunch of rules that come with it, of course, and the property has to be held for a certain amount of time and other things like that. That's the difference, and so it's a timing of when those deductions are allowed to be taken, so a timing of when there's going to be revenue needed as far as how much property tax is collected. So one change is that under this language, Vermont's not allowing that, but Vermont is allowing regular depreciation, just not allowing the bonus depreciation. Whatever

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: number of years is in the table.

[Kirby Keating (Legislative Counsel)]: And just like with the current law, how Vermont doesn't allow bonus depreciation for the business personal property, Vermont has allowed regular kind of depreciation. One change though that the language is making is we're trying to flesh out, and this is where the tax department has been extremely helpful, cannot say enough how helpful they've been in working with staff here to make sure that we're getting this all right and that it's a good place where there's not a lot of confusion and where everything's well served. That said, in the past, when we decoupled from bonus depreciation, the drafting was in this part of taxable income, it says, without regard to 26 USD section 168 k. That's the that's the business personal behind the bonus depreciation. That was without regard as pulling a lot of work because there's a lot of questions that come out of, like, what do you mean? Like, can we depreciate it at all? Can we do this, can we do that? So we do have language now that not only addresses the qualified production property bonus appreciation that's being decoupled from, but also the bonus appreciation that we've already decoupled from. That's a change that's in here. The second thing that the language was decoupled from is changes at the federal law relating to domestic research and experimental procedures. The Tax Cuts and Jobs Act have made a change Referendum. Sorry. So that before Tax Cuts and Jobs Act, domestic research experimental procedures, 2017, there was a deduction that could be taken all at once for your expenses for those. And Tax Seps and Jobs Act changed it so that businesses actually had to amortize it over five years. So they had spread out the deduction for those expenses over five years instead of taking it all in one year. HR one reverts back to the old way, and so started allowing businesses to take those expenditures all in one year for that deduction. Because it's been amortized up until for the last few years, this was going to be a big revenue bid specifically for this year because all of the all of the past expenses could have been taken all at once. The way that this is being handled here is Vermont is decoupling from the change to allow those expenses to be deducted all in the first year, but it's keeping the amortization over the five years for the businesses that are considered small businesses. Or wait. Small businesses, although they're allowed immediately. Right?

[Christopher Rupe (Joint Fiscal Office)]: District and joint physical office, yes. So small businesses can fully claim in the in the year the expenses were incurred. For larger ones, it's the amortization schedule.

[Kirby Keating (Legislative Counsel)]: Yeah. Thank you, Pat. And we've got

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: small business, the 200 employees.

[Kirby Keating (Legislative Counsel)]: In this case, small business means gross receipts of 31,000,000.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay.

[Kirby Keating (Legislative Counsel)]: And that's and that's also indexed for inflation, and it refers to the federal definitions for that. Okay. Again, to Pat for my moment of panic there. I'm like, wait, I'm missing something. Small businesses can take it immediately. They get to use the federal treatment. In other words, not decoupling for those. Only decoupling for the businesses that have gross receipts of more than 31,000,000. And in that case, they're gonna follow the Tax Cuts and Jobs Act treatment and and those expenses for five years. And we also have a lot of a lot written in here to cover the situations like when a business has gross receipts over and under 31,000,000 and it's moving back and forth. And so there's a lot we have to to consider for that, part was really helpful. But we do have language to cover those situations, and it's covered in a logical way where if a business becomes a small business, they can start expensing all in a all at once, but not for the previous years. They can continue to amortize. Okay. Then and then vice versa.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Five years for the stuff you got last year, but this year

[Kirby Keating (Legislative Counsel)]: Last year, you were a big business and had to amortize, and you're gonna continue to amortize those expenses.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Big business, but this year, you're a small business.

[Kirby Keating (Legislative Counsel)]: This year, you're a small business, so you can actually work for this year's expenses, can amortize it all down or you can deduct someone else. Another area where this language decouples is something called the Section two fifty deductions at the federal level. Under Tax Cuts and Jobs Act, there were two types of income that corporations could have from their activities outside The US. Gonna try to avoid getting into to the weeds of of all of that and just say that tax cuts and jobs ask try to identify certain types of foreign income that were related to US corporations through ownership and control controlling foreign corporations and such. The first attempt, it was at least it was written as if to try and get at people partially to get at in like, intellectual property that was held overseas and, like, a stop that was getting moved around. And that was kind of the policy logic for starting to tax this new area. HR1 changed it. For one thing, they more or less stopped pretending like it was about intangible property and just said, well, know what? We just think that some of that income should be taxed here. That it's not all just because from your foreign activities. Some of it's related to stuff happening in The US. So the big revenue changes under HR one were, were certain deductions that were made less favorable, but at the same time, there's a tax credit for taxes paid to another country that was increased. So at the federal level, there was an up and a down balancing. The way that things flow through is the deduction that was no longer as generous would flow through to Vermont. The tax credit for the taxes paid to another country though is not something that Vermont has and it's not something that applies to Vermont. So this HR one change would have increased for this type of income how much revenue comes to Vermont, like this would not have been a revenue loser. But when Ways and Means looked at it, they said, okay, we're looking at this, and I don't to speak for them, but the policy side of it, but instead of responding directly to HR1, what this does is it just says we're not going to allow any of the deductions that exist at the federal level for this income because Vermont already uses sales factor deduction. Corporations only pay taxes to Vermont based on sales into Vermont, and these deductions exist at the federal level because the feds are recognizing, hey. Some of this we think is US income. Some of it we think is it's it's legitimately foreign, and that's why those deductions exist, to say some of this is legitimately foreign activity and and not related.

[Christopher Rupe (Joint Fiscal Office)]: Okay.

[Kirby Keating (Legislative Counsel)]: The logic is Vermont is apportioning it based on sales center Vermont, so we have a mechanism for weeding out what should go to Vermont for proportion. There's no such thing as federal apportion. That's why the deductions or part of why there's a deduction and why there's a tax credit for tax opinion.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: So we're decoupling from them.

[Kirby Keating (Legislative Counsel)]: We're just so this language decouples from those deductions.

[Christopher Rupe (Joint Fiscal Office)]: Yeah.

[Kirby Keating (Legislative Counsel)]: And and says that we're gonna let our apportionment, sales factor apportionment, figure that out. And as a reminder to all of you, when thinking about corporate income tax, I think you probably get it, but I'll say it here. We have the single sales factor. Vermont does not tax corporations based on corporations being located in Vermont. It has nothing to do with it. It's all about sales interquant. So can be easy to start thinking about it, let me think about other things in taxes, but it's really quite different. Okay. So that's the section two fifty changes. The other big change, or big decoupling, I should say, is only for personal income tax, and it has to do with something called qualified small business stock.

[Christopher Rupe (Joint Fiscal Office)]: Section

[Kirby Keating (Legislative Counsel)]: We're on section 55. We're on we're on the qualified small business stock decoupling provision. Okay.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Now I've done.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: And which one is it? Because there are whole bunch of things listed, and they all look kind of the same. Kinda. Mhmm. Because it's just referencing federal.

[Kirby Keating (Legislative Counsel)]: And a lot I I mean, a lot of the language you see is just dealing with different situations, like some of the stuff I was walking through with, like, companies going back and forth in their size

[Christopher Rupe (Joint Fiscal Office)]: and stuff like that.

[Kirby Keating (Legislative Counsel)]: Whole time small distance stock is

[Christopher Rupe (Joint Fiscal Office)]: should be sectioned in. Yeah. This is it's five. So

[Kirby Keating (Legislative Counsel)]: it's not 18. Tax one and cover 21 and square up would be inclusive. And it's on line seven, page 42. In section 1,200 So this this is this is how federal treatment of qualified small business stock works. If a corporation qualifies as qualified small business, which after HR1 means it has assets of 75,000,000 or less, It's able to there's requirements and things, but they're able to issue stock, and for that, qualified small business stock. And so if if an individual, we're talking about individual income tax as far as this goes, buys the stock and under federal law, they hold it for at least five years. They don't have to pay tax on any of the gain on it up to after HR1, up to 15,000,000 in gains. And that's for each issuer, so you could invest in multiple of these and the 15,000,000 would be for each one individually. So if you have a lot of money to invest, you're investing in these qualified small businesses, that could be a lot of tax that you don't owe at all. It's just excluded from your account. So the change in HR one was to expand how much can be have to be excluded from your income per issuer, expanded the size of the corporation. It used to be before HR one, it was 50,000,000 in assets. It's the size for qualified small business, and now it's increased to 75,000,000. And then there were also changes to how long it had to be held before you could exclude the gains versus the sale of stock. It used to be after five years, you could exclude 100% of it. The change is under HR1, so you can exclude 50% of your gains if you held it for three years, 75% if you held it for four years, 100% if you held it for five. So with all of those changes, what Ways and Means did was say, we're not gonna allow these things to be excluded in Vermont. That's what this language does.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And we tax it. Different percent.

[Kirby Keating (Legislative Counsel)]: Will start to tax it except that Vermont does have a partial exclusion for capital gains. So we have a 40% exclusion, which could could be used, and I think that is capped at 350,000 in in gains. So so Vermont has that that could be used to these gain all these gains, And and Ways and Means was clear about that because in working this out in the department, at one point, there was some language in here to not allow the Vermont exclusion and Ways and Means said, no. No. No. We we we do wanna allow that what exists in Vermont exclusion. There's just not enough to allow for that.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Like deal with the person who sells their business or their bank memo card or

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Martine's not here and Mickey Mantle would

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: but it it's treating capital all capital gains to the same, essentially, because this time it's been qualified to start capital gains.

[Kirby Keating (Legislative Counsel)]: Yeah. Would be treated

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: kind of Mickey Mouse.

[Kirby Keating (Legislative Counsel)]: It would be treated like any capital gain. And my understanding of this of the qualified small business stock is that it comes up with, you know, startup companies, and sometimes they're receiving little trade stock for some of the property that they need to set up or they're getting payroll to get the company going. So I haven't gone into all of the conforming stuff, but I did cover the major big decoupling changes. Okay. And say that there's, you there's a lot of conforming language here to make sure that everything's spelled out well. There's at least one reference that I need to correct. Challenge anyone to try to find it before I correct it. There's there's one subdivision, the cited wrong by one.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Just way to red flag. I'm like, I really

[Christopher Rupe (Joint Fiscal Office)]: wanna find it, but I bet I won't.

[Kirby Keating (Legislative Counsel)]: Probably, I better spend otherwise, probably.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Probably. We will need that view to bring the script news.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: It'd be even better if I found one that you hadn't already.

[Christopher Rupe (Joint Fiscal Office)]: That would be

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: me or. We found an e left off homelessness in health and wellness. That has been the editor of Central.

[Kirby Keating (Legislative Counsel)]: So, like, how was that? There

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: was an e left off. It was h o m l. Oh, e. That is not for you. This was in

[Kirby Keating (Legislative Counsel)]: Yeah.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: The almost spelled cut. It was just that was lost. The left left off, so you need several several checks. Alright. Okay.

[Kirby Keating (Legislative Counsel)]: So sections fifty six and fifty seven are part of the income tax changes. This is actually a cleanup the current law. It came up. The department pointed this out when talking about doing conforming changes for decoupling. There are some issues with how we do apportionment when it comes to personal income taxes, so under corporate income tax, which has been something where single sales factor was redone a few years ago, and that's in pretty good shape as far as how it works. So how it works for corporate would be you take all of the income the taxpayer has everywhere, you portion it down to Vermont, and then you put tax on it. The way the letter of the law for a personal income tax apportionment, which has not been revisited a long time, is you take all of the income and you put tax on it, and then you apportion it. It leaves out, this process leaves out the additions and subtractions, so in other words, the decoupling that Vermont's done from

[Christopher Rupe (Joint Fiscal Office)]: the federal tax laws. That's a pretty big one.

[Kirby Keating (Legislative Counsel)]: It can result in, so if there's a person, give you an example, they can go both ways as far as the person paying way too much tax or way too little. One example would be Vermont's not allowed to tax federal bond income here. Let's say a person had a million dollars federal bond income and they didn't believe in Vermont, but they had $10,000 of rental income from place they owned in Vermont. They went to file for Vermont and the way that the apportionment works under the letter of the law would be we're gonna take all that money and at the end of the day, we're gonna say, you made $10,000 in Vermont, you owe us $15,000 in taxes, because we're not taking the additions and subtractions in the I account think the department has tried to implement this in a logical way, but when it's in the taxpayer's favor, they can say, Statute says that, so what are you gonna do about it?

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: So we need

[Kirby Keating (Legislative Counsel)]: to So it's a clarification that's needed, that's what fifty six and fifty seven are doing, is to spell out that the additions and subtractions that we use to decouple will apply to the personal income tax enforcement.

[Christopher Rupe (Joint Fiscal Office)]: Section 50A

[Kirby Keating (Legislative Counsel)]: has changed the ways that Ways and Means did relating to the decoupling from the research and experimental procedures. They wanted to give something back as far as some of the revenue that was being gained in the corporate income tax changes, so section 58 increases the Vermont Research and Development Tax Credit from 27 of the federal credit to 75% of the federal credit for the expenditures that take place in Vermont. That's how that tax credit works, and that tends to be how state tax credits versus R and D work.

[Christopher Rupe (Joint Fiscal Office)]: That's a huge jump. From what to 75?

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: From 27 to 75%. That's huge.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And we will look at it.

[Christopher Rupe (Joint Fiscal Office)]: Okay. Trying to move this Okay. Think I'm gonna take this up.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: This is our first walk through.

[Kirby Keating (Legislative Counsel)]: Almost there.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And they want us to decide here by the seventeenth votes.

[Kirby Keating (Legislative Counsel)]: Section 59, Representative Campbell mentioned this one, fifty nine increases the amount of the Downtown and Village Center tax credit that can be awarded annually by a million. So under current law, it's capped at 3,000,000 a year. This one increases to 4,000,000 per year. That's the one that's been in another

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: went through. Here, we took out 500,000. We just it went from two to

[Kirby Keating (Legislative Counsel)]: I you I do remember you made a change when it came through here.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: $33,500,000.0. Yeah.

[Christopher Rupe (Joint Fiscal Office)]: And rather than 4. Yes. Then it was butcher.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Yeah. Then it was put on the wall.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: The wall over there, and they need shop. I just wanna make sure that they get coordinated somewhere and don't have two different tax credits going. I guess it's whatever gets passed last, but it should be accounted for in the budget. So Yeah. We'll just make sure after and make some pay. I That's bill money? Yes. There is a $100,000 in here, so this will go next door. So

[Kirby Keating (Legislative Counsel)]: section sixteen sixty one are the annual link up. This is done every year, alright? It was

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: This seems so simple compared to

[Christopher Rupe (Joint Fiscal Office)]: I know. I know.

[Kirby Keating (Legislative Counsel)]: But these are the very important parts that say that all the other stuff that we have decoupled from previously here, Vermont is coupling to. Okay.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Below the line or above the line. Below the line.

[Kirby Keating (Legislative Counsel)]: All the below the line. Yep. Yep.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Sixty two and sixty three, is this

[Kirby Keating (Legislative Counsel)]: It's the shuffling around revenue deposited into funds so that transportation fund ends up getting approximately somewhere around I'm not just gonna I'm not gonna say numbers, GFO a certain amount of purchase and use tax will will go will more would go to the education funds, and a percentage more meals and room tax would go to the education funds to make up the difference.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: There's lots of moving proposals at the moment. I think a different one is likely to arrive in the transportation bill, which will be coming here, I think, shortly. Yeah. Everyone without raising new money is trying to find more money for transportation for Mhmm. At least the Senate Transportation Committee is. The governor suggested moving purchase and use tax. We get a portion of that. Well, they wanna take 10,000,000 a year transportation up to 50 or 60,000,000. This would do this is another way to get money. There will be this year, there will be no impact because the general fund, think, unless they change it, to where I spent lunchtime today, will general fund will will give 10,000,000 of general fund dollars Okay. To transportation. Next year, there will be that 10,000,000 plus I think 10,000,000 more if they're following the governor's proposal of the education fund. I've been very clear that with all the change and confusion that's going on in education and the education fund, I don't think this is a year to play with it, and I believe it will result in over the tax increase next year. So but it's all coming here. And at some point, we're gonna have to talk about it. Yeah. There was a reference. I mean, we're messed up. I actually thought senator Beck got scissors, and he was going to cut it up, but he didn't cut one out. Cut my cart? No. No. That's the thing. Opening the cookies. Okay. No ice cream.

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: The increase from 25 to 29 to from meals and rooms going into the Ed Fund is currently that is that taking from the general fund? Okay. So the one thing I just wanna put out there that somebody smart and that I respect mentioned that the other option that we could consider, and I I just put it out there for JFO and others, making sure I don't get it dropped, that universal meals is not necessarily education, and if it were to reside in AHS over the general fund administered through them, that would be a way to lighten the property tax load, which would effectively not require this $10,000,000 shift. I just don't know smarter minds than I have been thinking about just moving universal meals to be housed into another fund or an organization that would oversee it that is funded primarily through other revenues other than property taxes.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: All of the school lunch programs are run through a community of education and there are many of them. So moving the administration of it, what doesn't make sense? You can always move the funding force without moving it to a different org agency. It's fine. Which is what I tried to do actually in an earlier bill, Thomas that you were against.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: We're not getting into that. The bottom line is right now, without a new source of revenue, we don't have enough to do everything that needs to be done. And if we move whatever we move out of Ed into general fund is going to have to be taken out of another program, which we will probably like equal as well in the general fund, or we're going to have to raise some taxes. My point No one likes.

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: Because that's what they're effectively doing with the meals and rooms shipped

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yeah.

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: To the Ed Fund. So I just say another approach.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: But if Ed Fund doesn't do it already

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: suggested that

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: We can wholeheartedly stand our ground and say, sorry, transportation fund, but can't afford to give up $10,000,000 which would result day one in a property tax increase, unless we can find another way to raise money.

[Kirby Keating (Legislative Counsel)]: Yeah. The the these are the last section of the.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Okay. Is it are we doing is is JFO coming up now? JFO? March coming up. Okay. So I have a question.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Our early days are over. We are into crunch time. Eventually, we will get warnings. They're still trying to set that date. I don't usually I don't wanna let this bill go. I'm being asked to let it go because it is our one vehicle as we get to the end to put anything related. Why are you being asked to let it go? They're trying to just set a schedule so that we can get out of here before the July 4. I don't know you I don't know if

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: this one move, you see.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And that's what I'm I've been asked. I've said it would be a real stretch.

[Christopher Rupe (Joint Fiscal Office)]: Yeah. And, madam chair, Christopher joined fiscal just to give the committee a little context, it's because decisions that live in this bill depend, like what happens with the budget and the T bill depend on what happens with this bill, so everything is very interconnected this year. The other two bills cannot easily be navigated out of the Senate without having

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: other We shouldn't have to give up this bill before we get the T bill because the T bill has a different contract.

[Christopher Rupe (Joint Fiscal Office)]: You'll be getting the T bill next week, I believe.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay. We're getting the T bill. We will look at we've got a construct here. We've got a different construct in the T bill. All of the constructs don't do what transportation committee feels they need to do, which is a long range plan. We can get them through this year. But if we take anything out of the Ed Fund or switch general fund in there, which is not guaranteed, there is money out there which we're using to buy down the property tax. And it's not in this bill, I don't think, so it must be in the education bill that's coming. That will be more controversial. This is pretty much housekeeping. Well, when are

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: we getting the yield bill? No,

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: the yield bill has been released to us. We're taking it up too. Okay. That's your buy Maybe that may be with the buy down. Yeah. So the yield bill got released yesterday, and we're taking that up. But the heavy lift, from what I'm understanding, will be in the education bill, and we will just start taking testimony. We probably won't get it first because it's the education bill, but we will start working through the financing section.

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: In the interest of time management, so if you are going to try to stick to getting this out next Friday, I have been working with Legion Council on two amendments and I don't have them finished. I just would leave the committee a heads up. You're you're aware this is not chair. I cc'd you. One of them is s two seventy five, if you remember that creation of the cemetery vandalism response fund that we didn't try to move out during crossover, but it's stay stay on the wall because we had concerns about how the fees would be collected and routed to the third party. So we just

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Oh, the cemetery. So I'm gonna propose

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: just for discussion. I I sense, and since then other advocates have reached out, and I I sense support for this to if the committee's amenable to have that money not go to a third party, but instead collect the fee, keep it in the state, and then work at an appropriation. But I was gonna bring that forward as a possible thing to hang on this Christmas tree, and then I have Burlington. I'm trying to understand it. It's asking me to clarify some TIF language. So if I feel comfortable with that, I would be bringing

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: it forward. Absolutely. If we start dealing in TIF language, we'll be out of here by then.

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: But I might have that amendment for us next week too to consider.

[Kirby Keating (Legislative Counsel)]: I think both of those are John Gray's, by

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: the way. Yeah. Mean, for That would be if they're tiffs. Yes. The Burlington tiff is its own creature. K. Got established prior to there being a statewide standard. I don't know what it does. I'm working on that. Good.

[Christopher Rupe (Joint Fiscal Office)]: Let me

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: find the auditor's office because there were some pretty There's What? Discussions between the auditor and the finance director of the city two years ago. Yeah.

[Kirby Keating (Legislative Counsel)]: And so my colleague, Calgary is looking at that issue currently.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: So we'll take a look at it. It's the reason I don't want to say this.

[Kirby Keating (Legislative Counsel)]: So before I pass things off to JFO, I do wanna make sure that you're at least aware of some of the timeline things and the effective dates. Think the biggest things to be aware of are that the the grant list is not until 07/01/2031, as in the movement from the April to the January. That's meant to line up with the timeline for the RADS under the education bill.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay. They have fleshed out a lot of things like that in regional, appraisal, risk. Yes. And you'll be

[Kirby Keating (Legislative Counsel)]: And we won't be You'll be hearing me talk about that at some point. Yeah. Yeah. When it So first, Whether you want to or not, is that your preference? Yeah. And then the research and development tax credit change, it's that is pushed out to 01/01/2027. So for tax years, beginning 01/01/2027. So that's not right away. The decoupling and the link up, that's all there's no gap between there's no there's no gap there. Like, that will that will be immediate. But that one tax credit change, they're not the gas, because that's not gonna be paid for right away. It's gonna be a revenue expense in the future.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Can Can I just ask you, are we gonna have

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: sort of a classic markup session on this pill or if we have things we wanna bring out, should we be doing that today? No.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: This is our first walk. Okay.

[Patrick (Pat), Joint Fiscal Office analyst]: I just

[Sen. Thomas Chittenden (Vice Chair, Senate Finance Committee)]: wanna give it a

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: That we will have a markup, hopefully on something like the section by section, not word by word, but we will be looking at the right to do that.

[Beth Roberts (President & CEO, Blue Cross Blue Shield of Vermont)]: Okay. Can I ask a perfect question?

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: And this might have led into a Patrick question. But just looking at the the JFO fiscal note, for the link up to the business interest deduction and the the depreciation of assets and the small business RD, they're all negative revenues for the state. And I thought that what we were trying to avoid was the negative revenues to the state by decoupling. So But it looked

[Christopher Rupe (Joint Fiscal Office)]: like we're

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: linking up.

[Kirby Keating (Legislative Counsel)]: Those were all items that were related to change from HR one.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yeah.

[Kirby Keating (Legislative Counsel)]: But that Ways and Means decided not to decouple from him. So that's why they're showing us negative there. Oh. Yeah.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Okay. So there's I misunderstood it when you were explaining it then.

[Kirby Keating (Legislative Counsel)]: All the things I went through were decoupling. But it wasn't the entire universe of all the HR one changes. There were many changes that Vermont did effectively couple to, because we're doing the lead up and we're not decoupling from.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Okay, so the biggest one that we're decoupling from is the section two fifty deductions, biggest in terms of monthly. Okay. Because the the business interest deduction, that's not nothing. What was the reason you did that? We didn't Okay. Why don't we

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: get cervicaloscopy?

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: You didn't answer that question? Okay.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay. I just it seems inconsistent that that's one that was. So I know, but this Patrick, do you wanna come up together? Do you wanna

[Christopher Rupe (Joint Fiscal Office)]: Why we why don't we do this, madam chair? How about I just in the interest of space, I can sit in up here, then Pat can chime in.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Okay.

[Christopher Rupe (Joint Fiscal Office)]: And we can defer just to each

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: pull up chair up there.

[Christopher Rupe (Joint Fiscal Office)]: And since we're doing and for the record, was just joint fiscal, I know it's a little late in the day, and this is the first walk through We're of getting used

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: to this. It is going to be late days.

[Christopher Rupe (Joint Fiscal Office)]: Yeah. And I figured you're gonna take more testimony on this bill. Oh, yeah. So I was hoping that we would give sort of a ten minute rundown of the fiscal note and help the committee sort of drill down on what you wanna hear more on. Okay. And then we can come in with more details about different sections. Because I know, like, with the corporate link of indecoupling, Pat has got a slide deck that, you know, he can go through separately and really get into the weeds on that. Can't do that level of detail with this link up, but I'll pull this up real quick. It shows us, it gives me approval. Oh, this is not bad. Alright. That remotely visible, people? Mhmm. Alright. So as you all have heard, this bill proposes numerous changes in various tax laws. What we typically do with the miscellaneous tax bill is since it's so big, we try to give you a with the fiscal note, a very brief section by section summary, and then leave some bread crumbs to point to the things that actually have fiscal significance or that have some more description. So I am not gonna repeat everything in here that Kirby already went through, but let me just show you the top ones where the money impacts show up. So this table shows you everything across the entire bill, across all the elements. So anything that's a negative number means it's foregone revenue to the state. Anything that's positive is, you know, a revenue revenue increase. So just to give you a a little map here, section 17 is that the increase in the down payment assistance program tax credits, and I have more verbiage around this, you'll see that that the impact of that begins in f 1.7 at greater than 50,000 of foregone revenue, and then we'll escalate in future years as additional Yeah. Additional layers of the credit come in.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: We've seen that Yep. Graph. Yep.

[Christopher Rupe (Joint Fiscal Office)]: The ten year tax study appropriation is a one time appropriation of $100,000 to GFO. I can send you all around. The last time we did this study, it was in January 2017. It is a very deep dive into our tax structure and who bears the tax responsibility in our state compared to other states. It really is a very thrilling project for us to work on, and we're very excited about it. Is not not not a commission or anything like that, as was mentioned. This is something that, you know, we dug up the old studies going back to the nineties. We do this every ten years. It's a ten year look back. And then we see how do we compare to other states, and there's often some discussion about whatever the hot topic is in the legislature at that time. Last go around, you know, we were coming out of the Great Recession.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: You've just done a whole decoupling,

[Christopher Rupe (Joint Fiscal Office)]: Exactly, and all, yeah, and there was a focus on how do we compare to some of our other states and how do our taxes hold up in the event of economic volatility. There was also some discussion around what impact will Vermont's demographics have, That led to a whole body of research that our former colleague Joyce then put out. As Kirby mentioned, I think the focus this year around will be taking a look at any potential areas of benefits cliffs in terms of eligibility criteria for certain programs and how they intersect with our tax code, and also look at issues around wealth. So that's the ten year tax study. '55, '60, and '61, that line rolls up all of that, the netting of the net impact of the linking and the decoupling to various tax provisions. So you will notice that there is a small hit in FY '26 that is accommodated in the House budget. And the way that's accommodated was the budget had originally contemplated carrying forward around $74,000,000 from '26 into '27, and a lot of that would be used to buy down property taxes. The budget just carries forward 3,960,000.00 less because we'll have an bump in '27. So that's really simple shuffling around from year to year. That r and d tax credit expansion will have an impact of 1,740,000.00 of foregone revenue, and that begins in FY '28. The expansion of the Downtown and Village Center tax credit by a million dollars has a predictable impact beginning in FY '27. And then this shuffling around of purchase and use and meals and rooms tax revenue has some different impacts to the three major funds. So we can go into this in some more detail, but this is how the transportation fund gets about $10,000,000 of additional revenue this year is the house decided to do that by increasing the amount of purchase and use tax that does the T fund from the current 66.7, you know, two thirds, up to 73%. That in turn drops the amount that goes to the upfront 33 down to 27%. And the net impact of that is very close to neutral on the Edmond Fund, and I have a chart at the end that shows that. Then, you know, roughly 4% of the meals and rooms tax corresponds to roughly $10,000,000. So in order to offset the impact of the Ed fund by losing some purchasing use to the T fund, the Ed fund would get 4% more of the meals and rooms tax that the general fund would give up. I'll be very, very clear about how I explain this because I've seen this characterized inaccurately elsewhere in the building and from outside groups. But this is not a one year fix for FY '27. This change in the revenue allocation would begin in FY '27 and continue until a future legislature decides to do something different. Okay. But

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: is any meals in the rooms, the purchase and use now going into the general fund?

[Christopher Rupe (Joint Fiscal Office)]: Yeah. Right now, the general fund gets 69% of the meals in rooms.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: That's what so they are taking the general fund is taking permanent $10,000,000.

[Christopher Rupe (Joint Fiscal Office)]: Correct. It's the 10,000,000, it's the percentage equivalent using whole round numbers that gets you as close to $10,000,000 as makes sense. But as you all had heard, the governor had proposed in his budget a five year step down of the purchase and use tax revenue that goes to the Ed Fund, and then it would shift that all to the T Fund. This sort of commits the construct to step one, but doesn't take steps two through five to get to, you know, this deals with the first 10,000,000. It's an open question about what to do with the young leaders.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Still we're further down the road with the educational change bill. Yeah. Are able to start figuring how much money we're likely to make with the second home's tax, which is the one fee change that revenue source that's coming in. We don't know how much money we don't know how much we're gonna need. We don't know how much we're gonna make at this point. I'm assuming that if they are setting a differential rate, which I understand they are, that this building is working on the assumption that the local listers will have their grand list up to you. Yeah.

[Christopher Rupe (Joint Fiscal Office)]: I think there's a lot of open questions around Yeah. What's going on. And, yeah, I try to, like, wouldn't speak for any committees or legislators, but I think this question is why there was some hesitation in the other body around committing to something that would add $50 plus million of pressure over five to education property taxes. So the net impacts across all the major funds are at the very, very bottom there. You can see that the Ed fund is pretty close to neutral as a result of all of this. The T funds, you know, in the neighborhood of about $10,000,000 in it. And, you know, when you look across FY '26 and '27, the general fund is slightly behind, but these are pretty small numbers. I just wanna remind the committee that the way the house built its budget was, there was the budget and then there's the miscellaneous tax bill. So the miscellaneous tax bill is almost self contained in its own box, and the revenue changes in here from the coupling and the decoupling pay for some of the other things in here, including the downtown tax credit and that appropriation. So that's my way of saying, we're on it, you're not gonna double dip. We'll make sure that what goes on across the hall and what goes on in this room complement each other and harmonize each other and you're not overspending in one way.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Because a few years ago, Ways and Me sent out several bills with a tax increase attached to claims and warrants programs in the bills, and they didn't go through the appropriations committee in the house. And so they weren't weighed against all. And I just when I see money being brought in and then being spent in this bill, I just wanna make sure that the spent gets put on the wall and evaluated like

[Christopher Rupe (Joint Fiscal Office)]: Okay, this is all over our spreadsheets. There's probably half a dozen bills that are floating out that have some small appropriations in them, and they're all sort of captured in the budget construct and in the bank picture. Chris, just to put a nail on

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: this one, the purchase and use increase and the meals in a

[Christopher Rupe (Joint Fiscal Office)]: row, that construct there is permanent, both of us. Until the future legislature decides to have something else, but it doesn't have a sunset, it's not a mixed. I'm gonna skip down to the end there, talk about that, and I can go back, but They haven't changed since 2000. No. No. It's making sure both of them work. Yeah. So it's not it's not a it's not just for f y twenty seven. It it's a change of and it doesn't change the rates. It doesn't change anything like that. It's just a matter of which major fund does the revenue go into. So at the very, very end here, I'll go back, but I skipped ahead, and this describes what's going on. It tries to give you a chart that's a little bit more detailed, but, you know, by shifting the, you know, the roughly 7% or so, six to 7% of the purchase and use tax revenue equals about $10,000,000, So we were asked to model this out using whole round percentages that made sense and get you as close to 10,000,000 as possible. 9,900,000.0 is pretty close to 10. And we we're asked to do the same thing with the meals and rooms, and a 4% shift in our revenue is about as close to 10 to $10,000,000 as we can get. So you can see how everything nets out, you know, in the context of a 2 and a half billion dollar hedge fund that's essentially neutral.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: That's the deal does.

[Christopher Rupe (Joint Fiscal Office)]: So, yeah, on an ongoing basis, the transportation fund's gain is the general fund's loss. That's nondeninimis. It is nondeninimis. Not quite de maximis, but it's somewhere between.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And just history. When we did act 60, we raised the gas tax as part of

[Christopher Rupe (Joint Fiscal Office)]: the financing. And some of that went to the end fund.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yes. Went to the EDD fund. So so

[Christopher Rupe (Joint Fiscal Office)]: when people wanna ask why does any purchase in use tax go to the EDD fund, I mean, there is a history.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And at at some point, it was getting administratively difficult to divide up the gas tax, and the purchase and use or that percentage of the purchase and use was about the same revenue. And so the purchase and use came here, the gas tax went, but we we did not steal it. It wasn't even strong.

[Christopher Rupe (Joint Fiscal Office)]: You're absolutely right. And I think this happened in, like, 2003 or so to take effect in about 2005. And when this was done, it was to be revenue neutral where the t fund kept that get all of that gas tax, and then the ed fund got a piece of the purchase and use. What has happened in the twenty ish years since then is that that happened right around the time when gas consumption was peaking.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yes.

[Christopher Rupe (Joint Fiscal Office)]: And gasoline consumption has been declining ever since. Yep. And purchase and use tax have thrown them. So there's been a little bit of a alligator situation Cost going

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: of cars has gone up. Well, right now, we should be doing really well.

[Kirby Keating (Legislative Counsel)]: Alright, thank you.

[Christopher Rupe (Joint Fiscal Office)]: Ask with the GATP tax, ask us in a couple months.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: It's not a percentage.

[Christopher Rupe (Joint Fiscal Office)]: Well, a piece of it is calculated as a percentage, but it's based on a lag on the average quarterly retail price in the prior quarter. So I think we're the know well now. We're not gonna know for a while because gas was really cheap in January and February, and then it spiked at the end of the quarter. Yeah. And we are not we're not seeing, like, any impact any positive impact from that now in the current quarter. Talk to us in the summer when we'll see how long Sure. Yeah. Yeah, so I scrolled back up. I'm not going through this line by line, but I just wanted to give you a sense of this sort of convalesce curvy section by section and gives you some bread crumbs to figure out what you should really pay attention

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: to. I like the de minimis.

[Christopher Rupe (Joint Fiscal Office)]: And I also pointed out areas where, you know, to see description, there is a description that follows. So I will go down to the end here.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Stop.

[Christopher Rupe (Joint Fiscal Office)]: Thank you all dizzy in the process. So I think Kirby did an excellent job talking about Section one, the vengeance provision, and Section two, the loophole on the PTT and the CLA. The sunset on the health IT fund, my colleague Nolan wrote an issue brief on this that is on the JFO website that we can send around that explains this in great detail. But every few years you all have been bumping out the sunset on the health IT fund and the point 199%, claims tax that funds the health IT fund. I think you did this, like, a year or two ago, and the governor had proposed doing another short term extension. This bill does a five year extension, so it helps it out. That keeps about $6,000,000 a year of revenue going into that fund that helps support IT systems the healthcare sector. And there is a link here at the bottom to Nolan's issue brief, so if anybody has any interest, that's absolutely an excellent additional background.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: You can't sleep tonight.

[Christopher Rupe (Joint Fiscal Office)]: Tell me about it, Senator. Section 17 is that down payment assistance tax credit. You all have authorized blocks of these tax credits in the past.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: We've been to this. Think was in the Housing Economic Development bill. Yeah, they got taken out crop. And then- Well, all the wall.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Laura came in and talked to us about this earlier right now.

[Christopher Rupe (Joint Fiscal Office)]: You know, we put- Did get the chart? Yeah, the chart is excellent. It's so good that I couldn't make a

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: better one, so it's like, let's just put

[Christopher Rupe (Joint Fiscal Office)]: a credit on them, credit is due, but this will show you how the layers of the tax credit work over time and how the cost impact phases in and phases out over time. So the blue, that's current law, that's tranches of credits that are phasing out at that $250,000 a year level, and the green would be the proposed. So you see that beginning in FY twenty seven, there would be an additional 350,000 of foregone revenue. That goes up as things phase in and then goes down as things phase out, but you see that there's a bit of a tail on current law that will come out by FY30. This is not a huge net change, but it is sort of a continued extension of what had been longstanding practice at a slightly higher level over here.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And coming up with a down payment, when you're paying rent is probably one of the most difficult things

[Christopher Rupe (Joint Fiscal Office)]: for first time homebuyers to do. Yeah, and again, tell me that, Senator.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yeah, I know.

[Christopher Rupe (Joint Fiscal Office)]: And the way this works is it's a tax credit that the VHFA sells, and then they use the proceeds of that to pay for.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Like we do for housing development and downtown, and it is foregone revenue. It's not money that the state is putting out.

[Christopher Rupe (Joint Fiscal Office)]: Did you have any other questions about the fish and wildlife? What's going on with that? I did wanna just point out that there was a a $50,000 assumption in their f y twenty seven budget from these new, what they were proposing for the new access fees. This bill obviously says those access fees are not gonna take effect this year, so the House budget does backfill $50,000 for the general fund if you do it in court that whole.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: I was wondering how they're going to enforce that. Just forced that. There's so many access fees. Unless you go through a gated position, there's so many accesses to Hubbard Park, including through about 100 backyard.

[Christopher Rupe (Joint Fiscal Office)]: This would be like the fish and wildlife access, like the sites that they

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: don't have. Okay. Use the boat

[Kirby Keating (Legislative Counsel)]: Right, as

[Christopher Rupe (Joint Fiscal Office)]: so it's my understanding of the proposal is, you know, it would require either a hunting or a fishing license or an access to you to be paid if you don't have one of those.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Because they kept talking about hiking.

[Christopher Rupe (Joint Fiscal Office)]: There is conceivably places to hike on Fish and Wildlife lands.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yes, there is, but I'm wondering where the checkpoint is that they charge you the fee. Okay. Can you

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: I think we've talked about

[Christopher Rupe (Joint Fiscal Office)]: that, and you can look at the language in the bill for more specifics. The federal leg up in decoupling, Pat can really give you a detailed walkthrough at a future date, but what I really wanted to point out is we put a chart in here that just looks at the impacts of all of the tax policy provisions in a handful of those sections. So these feed up into that summary chart at the very, very beginning on the front page. But this goes sort of provision by provision to show you what the estimated impacts are. So, know, section 17, that's the state down payment credit. So that's sort of separate, but 55, sixty, and sixty one, that all has to deal with the makeup and the decoupling of the various provisions. So you can see which ones move the needles in which directions and by how much. You can see the increase in Vermont's R and D tax credit with take effect in '28, and I see Pat has something insightful. Before we moved on from this, I wanted to answer a couple of specific questions I heard in some of the previous conversation.

[Patrick (Pat), Joint Fiscal Office analyst]: So Senator Hardy, you had asked about why some of those provisions in there that have a negative revenue impact that House had decided that they were going to act with the government.

[Christopher Rupe (Joint Fiscal Office)]: I'm sure you'll have tax in at some

[Patrick (Pat), Joint Fiscal Office analyst]: point, but they did go to that committee and expressly say that some of those provisions in there that are being done to would be extremely difficult, if not awful for them to administer if we weren't to decouple from them. So there was a real administrative challenge. So specifically, one that you were involved to hear the business interest deduction.

[Christopher Rupe (Joint Fiscal Office)]: Okay. And that's sort

[Patrick (Pat), Joint Fiscal Office analyst]: of, you know, it's a two way street. The administration or the tax department also came in and said, please decouple from that bonus depreciation because we wanna be consistent with how we administer this type of deduction with the other folks' appreciations

[Christopher Rupe (Joint Fiscal Office)]: that are out there. Okay. And so the second thing, I did hear some gasps when the percent of the research and development tax credit was mentioned.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yeah. It just went up

[Christopher Rupe (Joint Fiscal Office)]: a lot.

[Patrick (Pat), Joint Fiscal Office analyst]: So 27 to 75%. So the last tax expenditure report we had estimated total, it's about a $7,000,000 in its existing state. But there's some important things to know about how it's calculated that maybe will explain why that number in the table looks a lot smaller than you would expect.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Yeah. True.

[Patrick (Pat), Joint Fiscal Office analyst]: So it's it's it's calculated based on 20% of those expenses that you incur in a given year over the base amount, and the base amount is the average from the previous four years. So it's the increment so, basically, to keep claiming it, you keep having to increase your r and d spending every year to consistently claim it.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Do you have a list of who's gotten this credit?

[Patrick (Pat), Joint Fiscal Office analyst]: Is that We absolutely do, and it's one of the only places I've ever seen this in statute where it's in statute that the tax department has to publish a list of every company that's blamed

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Okay. By credit. Can you send that?

[Patrick (Pat), Joint Fiscal Office analyst]: I'd be happy to send that to you.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yes. Okay. Thank you.

[Patrick (Pat), Joint Fiscal Office analyst]: Oh, and another just key piece of that, if there's not the existing tax liability to claim the credit against, like a credit bigger than your liability, there's a ten year carry forward.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Okay, so it's

[Christopher Rupe (Joint Fiscal Office)]: So I guess

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: It's not a refundable tax credit. You have to have liability. Yes. But you can't care. Okay. Got it. Okay. Okay.

[Christopher Rupe (Joint Fiscal Office)]: And I also just wanted to point out that the link up to the Child Independent Care Tax Credit expansion, that is one of the few individual provisions of HR1 that actually does flow through Vermont. Because that, we are tied to the federal credit. So, right? Yes, and I also just want to reiterate something Kirby mentioned. A lot of these business related taxes do ultimately end up on personal income tax schedule.

[Patrick (Pat), Joint Fiscal Office analyst]: Because it depends on how the business is misled credit, whether it's C corp or Yep. Pass

[Christopher Rupe (Joint Fiscal Office)]: And and I also just wanted to mention, I think you all know this, but not everybody watching this always knows this, and things can get a little convoluted when we talk about things. So when we talk about linking up and decoupling, what flows through and what doesn't, like, if we're decoupled from a federal provision like this, it doesn't mean that the taxpayer doesn't benefit from the federal provision. It just means that Vermont isn't adding on to that benefit.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: It doesn't. Yeah. It still gets the federal benefit. Right. It just doesn't count it on. You mean they can't override federal tax law?

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Is that what you're saying? No, my

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: point here would be to put you as x percent of your federal tax law.

[Christopher Rupe (Joint Fiscal Office)]: Well, think, yes, but a whole lot of states who are tightly coupled are now scrambling to You figure know, we, Prior legislatures exercised a great deal of wisdom by tying to AGI.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: I that was Stephanie's idea.

[Kirby Keating (Legislative Counsel)]: There are

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: With the state tax.

[Christopher Rupe (Joint Fiscal Office)]: Yeah. Because there are states that are coupled to, you know, federal taxable income, and they're scrambling because some of this, you know, the deductions on overtime and

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: Yeah.

[Christopher Rupe (Joint Fiscal Office)]: Tipped income and some of those other things are flowing through to that, and they're not flowing through that list, because that happens after AGI's approval. So that is, like, the meat of the fiscal note. Okay. And you guys are probably really sick of hearing from us by

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: the most of what we can absorb today.

[Christopher Rupe (Joint Fiscal Office)]: And we're happy to come back.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: Yeah. We will have you back. I may have to start clearing decks next week. Already sent some invitation for fall, Thursday afternoon. Okay. But I they want this out of here on Friday, so we may have to do some other things. Dow. This is the big one. So we'll talk about Beautiful. Senator

[Kirby Keating (Legislative Counsel)]: Cummings. It is. Yeah. That's You you think that you need us to come back, like, with any educational presentations, or is it more come back and just see what the committee helps as far as the change in select Well,

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: I think has slides. Yeah. I might obviously have 20 slides.

[Christopher Rupe (Joint Fiscal Office)]: Slides, if that would be helpful.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: We've heard they're really good. Yeah. But then we can propose some changes or modifications. Yeah. I have I think

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: first we need to understand what they did before we decide to well, we wanna change. With decoupling this cop is

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: is just, or is it just the

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: decoupling, I

[Patrick (Pat), Joint Fiscal Office analyst]: have slides that focus on the length of life. So it would be, it would cover both things that we're linking up to the pull through and what would be coming from. And I can also include materials on the R

[Christopher Rupe (Joint Fiscal Office)]: and D tax credit, for example, which is a state level.

[Kirby Keating (Legislative Counsel)]: We could we could also give more background on the way the system works and stuff like that too. So that's kind of what my question is. What are you what are you looking for?

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: I don't know. Well,

[Christopher Rupe (Joint Fiscal Office)]: I have some of those materials already from from your joint session. Yeah. Yeah. First week of so And

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: that might just a reminder of yeah. If we didn't decouple, what would happen? Because when we did it, like, the first week, we thought we were looking at decibel stuff, and then as it started to wash out, it got to be more like topsoil that we were gonna I mean, it was it was much more significant number.

[Kirby Keating (Legislative Counsel)]: And I'm I'm happy to Yeah.

[Patrick (Pat), Joint Fiscal Office analyst]: Walk the committee throughout that process of updating

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: When and this is the solution as to decoupling.

[Christopher Rupe (Joint Fiscal Office)]: I'd also mention, but I'm sure while we're still on the record, that the tax department was hugely helpful

[Rep. Charlie Kimbell (House Ways & Means; presenter of H.933)]: to JM's while I'm walking and working through all of

[Christopher Rupe (Joint Fiscal Office)]: these estimates. These are consensus estimates, and they've just been a great partnership.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: And we will have them in. The good part of this is their, really, housekeeping section. They did walk me through it before we even had the bill and we'll have them, I guess, back up and be over and see if can get her to walk us through their sections very briefly because most of them aren't too controversial. Not quite as bad as the 88 page, 10 of which is changing capital I to a small I.

[Sen. Ruth Hardy (Member, Senate Finance Committee)]: That was fun, madam.

[Sen. Ann Cummings (Chair, Senate Finance Committee)]: I did. About his house keeping, be careful. I need a reporter for that. Yeah. Either you