Vermont Legislature SmartTranscripts:

[Speaker 0]: There we go. We are live. This is Senate Finance. This is Wednesday, April 15. Before we start, we have a pretty heavy agenda today and it's probably going to be that way. Right now, Friday is open and we're going to stay here until we finish all the bills we have to get up. I wonder, just run by you, it is all right with this committee, to release that data center bill to natural resources. It's all on citing data centers, It's all on environmental impacts. And unless the committee would really like to take that up, they would like it and they have time. Will send it over.

[Unidentified committee member]: That's the

[Speaker 0]: House Bill? Yeah. Seven two seven? Yeah. Well, it's not a moratorium. It says if you need all of these criteria Regulatory. Yeah. It's regulatory. So if that's okay with you, ask for a script for tomorrow, and we will get that one moving, because I think they'll have a better chance of getting it out to you this year. Okay, so we're going to start on H519, and accolating the Vermont State Employee System group G membership. And Cameron, you're gonna walk us through this?

[Cameron Wood (Office of Legislative Counsel)]: Yes, ma'am.

[Speaker 0]: This is all for a vote in ten minutes.

[Speaker 3]: Yeah.

[Cameron Wood (Office of Legislative Counsel)]: Ten minutes? I I can probably get you through this in ten minutes.

[Speaker 0]: I actually got a little more time than but we're gonna try and guess who's out of here.

[Cameron Wood (Office of Legislative Counsel)]: For the record, Cameron Wood, Office of Legislative Counsel, I'll do a walkthrough of 05:19 as passed by the House, and then senator Caledonia has asked me to brief you on a possible floor amendment from that committee that is making some very minor technical amendments

[Unidentified committee member]: that need to be fixed.

[Speaker 0]: Well, then we could do those minor technical amendments in here, but

[Cameron Wood (Office of Legislative Counsel)]: You you absolutely could, and I will leave that to to you.

[Speaker 0]: I think he would like to on the floor, and that's fine.

[Speaker 4]: I will mention to him

[Cameron Wood (Office of Legislative Counsel)]: that, but I don't know that he felt the need to do it. It's something I brought to them, they had already voted it out of committee, so

[Christopher Rupe (Joint Fiscal Office)]: he was willing to do a

[Cameron Wood (Office of Legislative Counsel)]: board amendment to help address. So what this does, you have the state employees retirement system, and you have different groups and different retirement calculations for the different groups that are there. Over the past few years, you all created this new group, group G. The first employees that you moved into this new group were into To work at the Department Corrections, you know, providing so, yeah, I can mention it right here. That's the sub I, employees of the Department of Corrections who provide direct security and treatment services and and a few other positions. You move those individuals over to group g, and then a few years later, you've then moved sheriffs and deputy sheriffs into Group G, and the primary difference between Group F and Group G for these members, they were in Group F, is that they can reach their maximum retirement benefit after twenty years of service, kind of mirroring what other state police are eligible for, etcetera. So what this bill will do is there are three municipalities that participate in the state employees' retirement system. There is a state system, there's a municipal system, and there's three employers, three municipal employers that participate in the state system. It's Randolph, Bethel, and Danville. And so what this bill will do is it will say four employees of those three political subdivisions that have, this is the two and the three, so the one is employed by municipal employer participating in the state system, have obtained level two or level three law enforcement officer certification, and are required to perform law enforcement duties as part of the primary function of their employment, it will move those individuals from their current position in Group F over to Group G to mirror what you've done recently for, as I mentioned, the employees, the Department of Corrections, and the states, the sheriffs, the deputy sheriffs, etcetera. My understanding at this point in time is this although there are three municipalities, there's only one municipality, Randolph, that actually employs individuals that meet this definition. Yeah. I believe it is potentially five positions, I think is a

[Speaker 0]: potential macro And then there's three five. So it's three I think there's probably five employees.

[Cameron Wood (Office of Legislative Counsel)]: I think there's three employed right now. And so the primary purpose of this, from the town's perspective, Randolph, their town leadership has testified throughout this is to be more competitive for their law enforcement recruitment. As of right now, the individuals that are employed by the towns, they have less beneficial retirement package, if you will, because they have to work for a longer period of time in order to get to their maximum retirement benefit, and so that becomes a very challenging recruitment tool for them. So that's what this bill does. This amends the definition of the group G to insert those individuals. The next few changes throughout the next pages are going to be an amendment to the definition of normal retirement date to insert, as you can see here under sub seven, there's going to be a sub eight and a sub nine and this is to insert a definition for these employees to give them a retirement date in the system that is in alignment with the other members of Group G. So it's a retirement date as you can see there on the sub three following twenty years of creditable service at fifty five years they can reach maximum benefits at that point in time.

[Speaker 4]: Believe you have a question.

[Senator Ruth Hardy (Member)]: Can I ask you a question? Two things maybe you already said this or we're going to say but two two questions is one, the state retirement system versus the municipal. The municipal is more generous or or has an earlier age. So is that correct?

[Cameron Wood (Office of Legislative Counsel)]: Chris might be able to answer this better than I can.

[Christopher Rupe (Joint Fiscal Office)]: The Christopher of Joint Fiscal, they're very similar benefit structures. The municipal system and I'm using the word generous. You know? Like, I would say there's one provision that's different, and the municipal group d allows you to retire at 50 if you have at least twenty years of service for a normal unreduced retirement, or if you don't do that, it's 55 to 20. So that is sort of the one notable difference.

[Senator Ruth Hardy (Member)]: So this change would put these guys more on par with other municipal police

[Speaker 0]: Yeah. Absolutely. Absolutely. Retirement aid.

[Christopher Rupe (Joint Fiscal Office)]: And this would this is very analogous to deputy sheriffs. Exactly. I remember that. Yes. Exactly. I figured you would. Yes. And that really creates equity with them and avoids a lot of the complications of moving members from, like, one pension system into another pension

[Senator Randy Brock (Member)]: system.

[Christopher Rupe (Joint Fiscal Office)]: The folks in in v sirs, group f, are there for these town of folks are there for sort of historical reasons that likely predate a deviation of the other.

[Senator Ruth Hardy (Member)]: Okay. And that was my second question was why are these three random towns

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: Yeah. They're in it.

[Christopher Rupe (Joint Fiscal Office)]: It's it's a vestige of history. Okay.

[Senator Ruth Hardy (Member)]: It's not because they figured out something that the other towns didn't figure out or because we passed a law letting them in and not nobody else or something like that. Okay. Alright. Thanks.

[Cameron Wood (Office of Legislative Counsel)]: And so that's what you know there's nine pages here as I mentioned those are the definitions it's going in and providing a retirement date and moving these positions specifically into the definition of group G. Everything else in this bill are the necessary additional technical amendments to accomplish that. And so what you have here is just adding in the normal retirement date under the appropriate section for those positions. As you can see, seven and nine there, eight on the bottom, so just a technical change to ensure that it's referencing the definitions that we've created. The next section here outlines what group the employees for these municipalities go into. So as you can see there on lines eleven and twelve, it says these employees are considered group F members except, and then it excludes elected municipal employees, the sheriffs and the deputy sheriffs that have already been moved to group g, and now we're adding in the municipal law enforcement officers. So, again, just another technical piece to accomplish the goal. And then the last section here, this entire section four, is to outline the process where each time the body has moved individuals from one retirement group to another, You have a question of the point in time at which new employees go into the group, and then what do you do with the people who are already employed? Because they're already in retirement group f, and typically, you can run into issues if you unilaterally move them into another group because they technically have a contract with the state that gives them a specific retirement package, and so this section provides those employees with a one time irrevocable election to move to group G if they so choose. And so that would be section four and that's the bill goes into effect 07/01/2026.

[Speaker 0]: Okay. Senator Brock. Just ask

[Senator Randy Brock (Member)]: a question. If you have a deputy sheriff who performed law enforcement duties, but is currently group one, a level one employee, and they subsequently move to level two, does this go forward retroactively? Or does it go forward at that point in time or does it not go forward?

[Cameron Wood (Office of Legislative Counsel)]: It would be at that point in time that they meet the definition of an employee in membership group. It wouldn't be retroactive to my knowledge.

[Speaker 0]: And

[Cameron Wood (Office of Legislative Counsel)]: so very quickly, Madam Chair, amendment is, the amendment it's drafted right now, it's from Senator Caledonia, but this was as I walked through with the committee last week. The other members of the Senate Government Operations Committee have agreed to join in this amendment. And I used this version because it was easy for me to get to the highlighted changes to articulate what is being done here. It strikes section one, which is the definition section, inserts a new definition section, and the issue that I came across was when you all moved these positions for the Department of Corrections, and as you can see this happened, I think it was in 2022, there is a gap of time that isn't accounted for. So it says the following employees who are first employed after 07/01/2023 will be in Roce Gulick, or people who are members of the system as of 06/30/2022, and make that irrevocable election to move to Group G. So there's a gap.

[Speaker 0]: One year gap.

[Cameron Wood (Office of Legislative Counsel)]: A one year gap is not accounted for in the definitions. My understanding is this was just a you know, kind of technical error. I don't think there's any in there was any intention, obviously, of leaving those people out. I don't there wasn't no one was left out in making that irrevocable election. This is just a retroactive cleanup piece to make sure the statute accurately reflects what should happen. If if this change isn't done, then conceivably, the people within that year don't have a retirement date. I don't think that there would be any practical consequence. I can't imagine the state denying in anything, but they just wouldn't be covered in the statutory definition. So each of the amendments that are here are simply changing that from 2022 to 2023. There's a few of them. Again, as these definitions are somewhat lengthy, it's just in each of those instances making that change. And then the last one is just clarifying that it's on or after 01/01/2025. January 1 is a holiday. Someone state generally doesn't hire people on holidays. They have to start the beginning of a pay period, which typically can't begin on a holiday. However, in the effort of ensuring that we're not leaving anyone out for some unknown reason making that minor change to say on or after, and that occurs in two instances. So the amendment really is technical, but our office felt that it wasn't necessarily a technical amendment to go in the tech corrections bill. It does have a substantive impact, and so we felt that it should be in this. This bill is probably the best vehicle for making the change.

[Speaker 0]: And Senator Caledonia is going to make those changes on the floor?

[Cameron Wood (Office of Legislative Counsel)]: Yes, ma'am. As of this point in time, unless you all tell them not to.

[Speaker 4]: Well

[Cameron Wood (Office of Legislative Counsel)]: I know you're trying to vote this

[Speaker 0]: out. Be voted out five minutes ago. Yep. And we need to hear from Chris Ruth who'll cover our area, which I assume is the impact on the

[Senator Randy Brock (Member)]: I'll be very quick. Would

[Speaker 0]: you like me to come up? Whatever works.

[Senator Randy Brock (Member)]: I'll be respectful.

[Christopher Rupe (Joint Fiscal Office)]: Christopher, on fiscal, a fiscal a very short fiscal note is posted. I'm not gonna screen share it. I'll just give you the highlights, but the bill really is not gonna have any impact to, state revenues, and it's gonna have a de minimis impact to the state employees retirement system because of a few things. One is these towns that participate in the DSER system, they pay the cost of their members in the system. So the employer cost gets borne by the town and paid, it doesn't hit the state budget. The second thing is that group G, if you all remember, was intentionally designed to be cost neutral to the employer. So members pay for the more generous benefit in Group G through a higher contribution rate that is 4.68% higher than they would have otherwise paid had they remained in group debt.

[Unidentified committee/staff voice]: So the state doesn't pay any

[Christopher Rupe (Joint Fiscal Office)]: of these costs, falls on the towns, and the incremental cost of living these three to five people is borne by those individuals. So this is gonna lead to like an insignificant impact to the state employee retirement system, but since people are making contributions, those are revenues into the state system, that is why you all have the bill. This really does, I think in my view, it's a very simple and narrowly tailored approach to dealing with sort of a historical vestige that probably should have been dealt with when the deputy sheriffs were addressed a few years ago. I don't want people to have the impression that this is a bill that is specific just for one town. It just so happens that there's only one town right now that's presently impacted. So does anybody have any questions? Any questions?

[Senator Thomas Chittenden (Vice Chair)]: Sorry if this was clarified. I see the what, I see the GFO number, what the why? What are we trying to accomplish with enabling this possible move to the next? Sure.

[Christopher Rupe (Joint Fiscal Office)]: My understanding of what motivated this is these three individuals in this one town have a pension benefit in RUBF that's very different than their peers in either local or state law enforcement. And the biggest difference is what we call the multiplier, how much is a year of service worth? And the law enforcement pension groups, VMR's group D, VCR's group C, which is the state law enforcement, and group G, which is the deputy sheriff. So year of service is two and a half percent. So you hit 50% of your average final compensation after twenty years of service. If you were in group f, which these folks currently are, the multiplier is 1.67, so it takes thirty years of service to reach 50% of your IFC. So those it's it's more it's to have more parity in the benefit with similarly situated enforcement.

[Speaker 0]: And I would assume one of the recruitment areas, two of the municipals might be deputy sheriffs, so we would give them a disadvantage if they were going to a less rich

[Christopher Rupe (Joint Fiscal Office)]: retirement. And then other municipalities that are already in MERS or D already have that two and a The same thing. So it's

[Senator Randy Brock (Member)]: it's comparable with other towns also.

[Speaker 0]: Okay. Any question? We heard the word de minimis. Yeah. Our favorite word. I would love a motion unless someone would like We're

[Senator Ruth Hardy (Member)]: not doing the amendment here. We're really gonna let it Yeah.

[Speaker 0]: It looks fine. We'll let senator to call or do it. Okay. I will move 70. Concur?

[Senator Ruth Hardy (Member)]: Because it's not changing with the house version of h what is it?

[Speaker 4]: Five nineteen.

[Senator Ruth Hardy (Member)]: Five nineteen.

[Speaker 0]: It's five nineteen to send to us. Did they make any changes in?

[Kirby Key (Legislative Counsel)]: Did not.

[Senator Ruth Hardy (Member)]: No. They they have yet to. That's what the amendment Okay.

[Speaker 0]: So most senator Hardy has moved that we approve h five nineteen, and it was voted from the house and sent to us from senate government operations. Is there any further discussion? Are there any amendments? If not, I'm gonna do this the easy way. All those in favor say aye. Aye. Folks say no. I've got that as seven zero zero. And if you would like to read one Yeah.

[Senator Ruth Hardy (Member)]: Sure. I reported to the sheriff.

[Speaker 0]: We're probably more familiar with this than the rest of us. Thank you. Thank you. That was easy. Now we're moving on.

[Cameron Wood (Office of Legislative Counsel)]: We're really happy.

[Speaker 0]: Okay. Alright. So I need to move Let's see if Joe is here for miscellaneous miscellaneous tax committing. We have a section by section. I believe it's on last Thursday or Friday. Mhmm. Ten minutes ago. From we have and we're gonna hear about it today. Yep. One, you just point to attention. You misunderstood. Yeah. When and Scott, you may have been around in the house. I don't think you were on any of the committees. I think it was four years ago, maybe three. We did I think it was July. It was burned into my mind because it was one of those omnibus bills that dealt with a whole bunch of utility regulations. And one of it was that they were the and the word that we were using was telecom. And then I think the whole tax on the poles and wires and all. Right? Oh, I think that was Probably that.

[Speaker 4]: I don't know if it's actually Yeah.

[Unidentified committee member]: Chris was insane. The idea.

[Speaker 0]: So you that was on it. There was part of it is they we said that utilities, communications companies would pay an inventory or property tax. Yeah. Their facilities would be treated as real property, and they would pay a property tax to the state. Well, apparently, the tax department has interpreted that to to also radio and television. So I guess I think the only one that was here I don't know if this was during It sounds vaguely familiar. Got into a big attacks on falls versus attacks on mileage.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: Yeah.

[Unidentified committee member]: It played out very differently in rural and urban.

[Speaker 0]: Yeah. Yeah. So, this was part of it, and I remember the tax department came in and said, we, we can't value some of this stuff, take it off. So anyway, they have now interpreted it as will look at poles and wires and cell phones and Internet. They are now interpreting this as broadcast. So I've heard from my local radio station, which is The Point. I've heard from Vermont public, and we will have a representative in here today because they have the the thing in the bill is about penalties if you don't pay, and apparently, they are the ones getting the overdue notices because they didn't think they were included. And being included is costly.

[Senator Thomas Chittenden (Vice Chair)]: So yeah, they've communicated with me as well. I reported this bill, so it's now Act 145, so I'm pretty familiar with it.

[Speaker 0]: You did report? Yeah.

[Senator Ruth Hardy (Member)]: So I wasn't on the committee. Catherine Stibbs was

[Senator Thomas Chittenden (Vice Chair)]: The house.

[Speaker 0]: Was in the house. Okay. Yes. He told me not.

[Senator Thomas Chittenden (Vice Chair)]: I was pretty familiar with this, and I do not remember it. It drew it directly or intending to catch one way communications. And so Wendy Mace had been in communication with me, and and so that, for example, act section two forty eight a, they can't go through that because it's not two way communications. And so this title was all about telecommunications and not broadcasters. So they're getting swept up in an interpretation. They I guess they're testifying today.

[Speaker 0]: They are testifying, and Jill Rebich has testified. And we will see, there's Jill.

[Senator Thomas Chittenden (Vice Chair)]: Hey, you're welcome.

[Speaker 0]: We're ahead of time, so you're I

[Senator Ruth Hardy (Member)]: time was is

[Speaker 0]: just telling the committee that we do seem to have a conflict over the definition of telecom or telecommunications. Guess, were you on this committee?

[Senator Thomas Chittenden (Vice Chair)]: I was on this committee and I

[Cameron Wood (Office of Legislative Counsel)]: were appointed to the first session from

[Speaker 0]: this committee. Your first session. So two of us were there.

[Senator Thomas Chittenden (Vice Chair)]: Senator Brock was here too. Was on

[Speaker 0]: a few That's days right. Okay. Senator Brock's been here almost as long as I have, so we

[Unidentified committee/staff voice]: are

[Speaker 0]: regulars. So we have got that to do. I'm looking for my section by section to see if we can get this out. Does anybody the bulk of this bill is all of those decouplings that we went over yesterday from the the feds and re coupling and is it last Friday? We got inspection by section the. No. It's b Yeah. It was last Thursday. It was Thursday. Was it the end of last week? So yeah.

[Senator Thomas Chittenden (Vice Chair)]: Section six, I think we're interested in.

[Speaker 0]: Yes. Well, I'm I'm trying to find out if tracks candidates for s corpore okay. One, two, three and four PBR conducted by unenrolled parcels. These are all pretty much housekeeping, I think, the tax department, calculation of payments, municipalities, tax loss due to flood or flood prone. These, I haven't heard any concern over. They really are. Chittenden, Quantum Sunset for five liter. Inflator references from NEEP to NIFA because NEEP no longer exists. Okay. I was seeing I remember that. And we did that review to NIFA yesterday. It's credit to be Caledonia, a 100% of the property tax liability. Alrighty. I'll admit that's the separation from divorce. State tax, why is the state flat threshold with tax, sends down payment assistance. Okay. That's one. We actually did that on another bill. The down payment assistance is on here. And then I think so does anyone have any problem with anything up to 17? Problem, not the right word. Alright. Issue. Change.

[Senator Thomas Chittenden (Vice Chair)]: Section six. So I think we have testimony today this afternoon. There is I did speak to about this. I'd love for her to testify on it, but there is a modest request that we have the effective date of section six applied to fiscal year '27. It's this new tax code from act one forty five that's coming into the line. This would is creating consternation, especially with removing people's appealable appealable appealability if they, aren't quite understanding what they need to report or not reports. They're just asking for another year before the non appealability goes into effect. Alright.

[Speaker 0]: Okay. That is section six.

[Senator Thomas Chittenden (Vice Chair)]: Section six.

[Speaker 0]: And that's the telecom people. Okay. And we will hear from them today. So section six is questionable.

[Senator Thomas Chittenden (Vice Chair)]: Relatedly, I think you were just mentioning when we it may it's on section six.

[Speaker 0]: It will be here. Yeah.

[Kirby Key (Legislative Counsel)]: She's interested to

[Speaker 0]: Yeah.

[Senator Thomas Chittenden (Vice Chair)]: Have us hear about the concerns with the tax interpretations of act one forty five

[Speaker 0]: Okay.

[Senator Thomas Chittenden (Vice Chair)]: And broadcast. And that's related to section six as well.

[Speaker 0]: Section six is the problem with all the other things in films. And we will hear from alright. Yeah. That's six. Seven clarifies the treatment of chimp sites to the same as tiff districts for the purpose of the equalization study. Anyone have any issues with seven? I think these are still warehouse. Study required PVR to use a 100%. We'll have Jill talk about the GLA. Extends the health IT sunset for five years. I am not sure who we where that one's coming from. I believe is technical since doesn't exist. Property tax, 100% of the tax liability. The party is separation with divorce. I don't think we've done that. Aligning the estate tax. Extending down payment assistance. I believe we've already voted to do that. So federal tax alright. Eighteen and nineteen is that federal $1,700 tax credit. We had a bill in here, remember?

[Senator Thomas Chittenden (Vice Chair)]: That's point 61 from the senate ed.

[Speaker 0]: It came from senate ed and their proposal was that we allow that tax credit, but that it would be designated to go do after enhancements for primarily low income kids. There was concern in here that we didn't that the rules hadn't been promulgated, and there was some concern that if we did anything and they got struck down, then maybe we would have endowments going to private schools. We didn't do anything. This expressly says that we're not gonna participate this year, and I believe it holds to the legislature to determine if we reserve the right to change our mind in future years depending on how the rules play out. And I believe, yeah, the general assembly would and will choose whether to participate. So it says the governor or another legal body. So this is really taking that authority and appropriating it to the general assembly and saying we're not going to do anything this year, we're going to wait and see how the rules play out and the next year we will do that. So there's that which could be a little controversial. '21 through '23 is that limits the Department of Wildlife's fee setting authority, but let's see if the department's regulation, yeah, takes away that. And I believe they got it increased in the budget to cover this seat what they would have made this So they're held harmless and they've sent out a report. They're yeah. They're coming tomorrow,

[Senator Ruth Hardy (Member)]: I think, and we took testimony on this in natural resources this morning. And,

[Speaker 0]: generally, I think everyone was okay with what's in the With what's here. With with what's here. Yeah. I don't I wanna

[Senator Ruth Hardy (Member)]: speak for staff, but that that's my impression. Every looks like the seats are

[Speaker 0]: Now we've got yeah. This is the grand list submission. This is, again, dates, statutory language, and power keeping supervised collection of delinquent taxes, and that think somewhat housekeeping, but alright. We're fifty two fifty three deletes the pilot special fund PVR expenses because you're not That's we'll we'll see that. Then there's funding for the JFO, and there's study, tax study, and then we start in '55 on down with the decoupling and recoupling. And those are the sections that are stopping us from losing money and in the end actually raises money, which then this it raises money. Are we getting this jealousy

[Senator Ruth Hardy (Member)]: or Are we here to testify on this right now? Yeah. But I'm

[Speaker 0]: trying to figure out where who I who we need to hear from. I see. There's this one, and the yield the yield bill does the money yes. The alteration of the taxes in

[Christopher Rupe (Joint Fiscal Office)]: No, that happens in this

[Senator Randy Brock (Member)]: bill at the very end.

[Speaker 0]: At the very end, Okay, purchase and use, yes. 62 through 63. That will also be contra maybe controversial. That's where we adjust the rates. We give a rate change for purchasing use, the amount purchasing use that goes to transportation to about 10,000,000, and then the 10,000,000, the Ed Fund gets 10,000,000 more from rooms and meals. So that's a wash. The general fund will thus be losing a million dollars of rooms and meals. That money is being made up in the $10,000,000 that we're raising in decoupling, and decoupling said this bill. Transportation hasn't been voted out yet and won't come to us until after we need They would like me. Chair transportation is. I know they are they are following the governors, at least this thing sit on the table at the moment. They are looking the latest proposal in there probably come out, which was the governor's proposal, which was to this year do a $10,000,000 transfer to the end fund and keep it to transportation, keep at whole this year, but then next year 20,000,000 there'd be no hold harmless and 20,000,000 would come out and then 30 and 40 and 50, so that after five years there would be a $15,000,000 hole in the education. But there is no proposal for how we close a $50,000,000 hole in the end the summer. So that's, I think I'm looking at Chris, if I cut on, did I miss any of the I

[Christopher Rupe (Joint Fiscal Office)]: think you summed it up perfectly, I'm sure.

[Speaker 0]: Valiant points. So all of these things hold together. We are going to have to make decisions before the transportation bill gets here.

[Senator Ruth Hardy (Member)]: One thing that I don't know what we do is on section 59, which is about the

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: tax credits.

[Senator Ruth Hardy (Member)]: We had passed earlier this session a bill where this committee changed it to 3,500,000.0. Right. This has four. So I don't know how we wanna deal with that as a committee if it's but just wanted to note that.

[Speaker 0]: That is there. The original bill, we dealt with that on came from economic development. It was to four. I don't know if this is that's where we wanna stand our

[Senator Ruth Hardy (Member)]: Well, it gives us a little

[Speaker 0]: bit of money maybe It does. To do something with.

[Senator Ruth Hardy (Member)]: I'm trying I've gotten some information on the renter credit and the municipal. Remember I mentioned this yesterday. I don't have enough. I need to talk to JFO now, but I got some information.

[Speaker 0]: He's got till Friday. So, I'll try.

[Senator Ruth Hardy (Member)]: They're busy people. So

[Speaker 0]: I know. So, anyway, that's where I think we are. If anybody at this point has a real the complete decoupling sections are the ones

[Unidentified committee/staff voice]: that

[Speaker 0]: are probably most significant. The budget is riding on them. And we're yeah. So if anyone has problems with anything in there, let me know. Okay. So now we're going back to the real agenda, and we are on miscellaneous tax. And Jill you want up? Or Rebecca, are you together? Abby's up there. Okay. This is tax dog and pony show. You have the floor, so do what works. Sure.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: Labby, was thinking I might start with sections eighteen and nineteen since we were just discussing them in committee, if that's okay. And then I'll kick it to Abby, we can end with comms property. Further, I'm Rebecca Samrapp, deputy tax commissioner. I'll admit I'm not an expert here. This is on the scholarship granting organization, which is a I think you summarized it really well. The provision of the federal law that allows a federal refundable or nonrefundable tax credit dollar for dollar up to 1,700 for folks making contributions to these scholarship granting organizations in states who have opted into the the program. So I just wanna flag from the administration's perspective, the governor is is not supportive of the language in this bill that takes him out of the process. I know the administration has been dealing with the US Treasury, and it's there's some excitement about how the federal program could be used in a Vermont context to tailor support, you know, through through a to a scholarship granting organization, you know, that would be stood out this year, to aftercare, to after school programs, and to tutoring. I think that everyone seems very philosophically aligned that in Vermont, we would not be trying to deploy this in the way that we're anticipating many red states would and, you know, sending kids to practice schools under magnet public school program. I think we're all kind of in agreement this would be for Vermont bugs, well, population.

[Speaker 0]: Yeah. Okay. None of us none of us wanna remain bush out

[Unidentified committee/staff voice]: of Yeah. Did.

[Speaker 0]: We did out a way, and I think it sounds like the goals are similar. We would like to be able to make sure this goes to Vermont public schools or additional after school additional services. Yeah. Our public school students are very yeah. Summer programs. Okay.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: I wanted to make sure that we were on the record on behalf of the administration for his request to be that this be removed from the miscellaneous tax bill. Wholesale, I think they're also, you know, much more amenable to the version that was passed unanimously out of senate education. You know, something something more along those lines where the executive branch isn't fully cut out. And I think part of the thinking there is that, you know, the first deadline, if we wanted if we wanted to stand this up this coming year, you know, the deadline is before this body meets again. Right. That was part of the concern. Right. Right. And they've been, you know, as I said, engaged with the US treasury who have not formally issued their guidance yet, which will be required before any state can take action. But that's been really fruitful conversations, and they like

[Speaker 0]: what they're hearing about how this could be tailored to those needs. Okay. If we put in something similar to Senate Education's bill, that will send us to conference. I don't think we could just take it out. I think there's too much concern that this could end up being a funding source for private schools. So I think we might replace this with something similar to the suggestion Sandra brought to us, which could then be refined in conference. I think if we just take it out Well, I think it it might be probably. Thank you. Check on it. Does it not give the governor pause that we we don't have the rules and guidance from

[Senator Ruth Hardy (Member)]: the federal government yet?

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: I mean, it it gives he must pause until those rules and guidance come out, but the you know, those are expected shortly. The IRS is getting a lot of pressure about it from all states. So, you know, I think the administration feels like the executive branch will be, you know, around and nimble to take that guidance and stand up an organization that can do. What it sounds like everyone's kind of on the same page about doing, you know, direct.

[Speaker 0]: But, I mean, we might be on the same page, and it's I don't think it's

[Senator Ruth Hardy (Member)]: a question of public or private. I think it's

[Speaker 0]: a question of who knows what's gonna come from the federal government and who knows what kind of scholarship granting organizations they're gonna want to crop up. I I can imagine some horrific scenarios, frankly, of organizations that might be anti LGBTQ or who knows? Mean, I'll yeah. So that is what worries me about not having a little bit more structure around this. And it sounds as though the governor's not even contemplating those possibilities, and that worries me. I guess I've heard the opposite,

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: that the governor has been engaged with US Treasury and really likes the flexibility that this program seems to provide states who don't wanna use use this to fund the

[Speaker 0]: He has more information than we have, sounds like, at this point.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: I mean, that's I I know. I'm not sure if there's been a larger delegation meeting with the US Treasury or if it's just an executive branch part. But it's like, I I will, like, acknowledge. I'm I'm sorry to be the messenger here because I'm I'm not received in this at all, but it is in our miscellaneous tax bill, which, has some fairly important things for my department and our taxpayers, you know, kind of hanging in the wings. So when I when I hear that his his support is wavering, I just wanna carry that

[Speaker 0]: message. Sounds like we may all want to accomplish the same thing. It's getting the wording that gives security to people that are afraid once we go home something very different than we might like. Again, the risk is one year, we will be back here, and we will fix it. So, manager, I think, you

[Senator Ruth Hardy (Member)]: know, we got testimony that said that after next year, we could still make changes that could be retroactively applied once we have more information. We often in this committee, and I can name a bunch of other times, just this session where we have been reluctant or decided not to move forward with something because we did not have the information. We don't have the federal guidelines on this. To senator Gulick's point, it is possible that the federal government will actually have guidelines about the types of these scholarship granting organizations that are allowed Right. Or press preferred or you know? And that that even if the governor or the legislature is involved in it, they may have not the ability to direct it toward the things that we allegedly all are in agreement about, which I'm not even sure we're all in agreement about. But I think the language that's in here right now protects the state from potentially being at the whim of federal government that is not playing by the same rules or having the same priorities. And we can always go back and retroactively change it next session.

[Speaker 0]: So, we can't go, can't, we will lose one year of funding for I thought we got testimony from our legislative council that says that we could We can rent we can join, but we can't give I don't think Kirby can we if he decided to join next May, can people claim a tax credit on the they filed yesterday to go to Vermont. I think we can retroactively decide to join in the program, but not. We would lose one year of funding.

[Kirby Key (Legislative Counsel)]: Kirby Key, legislative council, there's a lot to unpack there.

[Cameron Wood (Office of Legislative Counsel)]: Yeah.

[Kirby Key (Legislative Counsel)]: So 2027 would be the first year that states can opt in, and you have a little bit of leeway where you don't have turn in your list by January 1 necessarily that the the federal government may accept it later, but we still don't know exactly how late.

[Speaker 0]: First of twenty seventh.

[Kirby Key (Legislative Counsel)]: Of twenty seventh. But so that would mean you're identifying the organizations that taxpayers could give to, donate to in '27 when they go to file their taxes in '28 for tax year '27. So to the point where you're where where something could be missed out would be if Vermont does not submit a list for 2027 at all, then for tax year 2027, Vermont taxpayers would not be able to contribute to an SGO in Vermont Vermont. Would be would be the consequence of that, but it would not preclude you under the statute as it's written right now and under and, you know, and I don't anticipate the regulations changing that. It would not preclude Vermont from then having legislation in place and participating in 2028. Right. And I'll also remind you that if you do nothing at all, then the governor could just decide that Vermont will participate. Right.

[Senator Ruth Hardy (Member)]: Yes. So this just to clarify, that we can next year make changes because with this language that set that for Vermont participate in 2027.

[Kirby Key (Legislative Counsel)]: But the language that's in h nine thirty three right now

[Speaker 0]: Mhmm.

[Kirby Key (Legislative Counsel)]: Because of the timing of the January 1 they

[Speaker 0]: Getting the list.

[Kirby Key (Legislative Counsel)]: And the legislative session being very bad, the the the partner there. It's a bit ambiguous at the moment, but if you if you leave 09:33 the way it is, the and you and you want to opt in for 2027 for Vermont, you would have to try to pass legislation probably preferably earlier in the session. I'm not sure. But but and that legislation would under the provisions in September right now, you would the legislature would identify as GO's in that legislation to send a list to the IRS for for participation 2027. The ambiguous part is depending on how long it takes for you to do that, will the IRS accept it? I I I don't see any reason for you to be too worried about that, but it is ambiguous. It's like we're not

[Speaker 0]: sure. And and we will have a new legislature next year. We have perhaps a lot of members since the last few years is played out again, it typically gets off to a fairly slow start the first year. What's at risk is one year. If we If the IRS says, no, you can only go to private schools and you can only do this, then for one year until we get back and change it or opt out, we private schools are gonna get some money. If on the other hand, if and if we opt in and they say it's okay to go ahead, then the public school programs that we identify will get some money. If we do nothing, then there's a year lag where something we're risking one year at most because we can always come back next year and change it for the year for '28 without problems. It's so much harder to change things that are already in place than to than to start me with something, and we don't know what the federal requirements are really.

[Senator Ruth Hardy (Member)]: And we don't have a governor that's aligned with the legislature and or a legislature that's aligned on education policy.

[Speaker 0]: But on this one issue, it sounds like we might be aligned, and it might be a good thing I'm not aligned. That we're aligned. Okay. Let's move on. This one has got a red flag. Abby, I'll hand it over to you next. You're still there, Grace.

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: I'm still here, thank you. Abby Shepherd. I'm the policy director of the Department of Taxes. And I'm sorry to completely change gears. I have a few proposals that we would like to make if the committee is willing to give me a few minutes to talk about some very technical property issues.

[Speaker 0]: Okay.

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: Great, thank you. I'll try and be brief and please stop me if I drone on too long. So through the process of this bill being developed in a lot of the discussions this year about reappraisals and other property tax issues, we identified three other areas we'd like to ask the committee to add some statutory changes to. The first is relating to current use. So there is currently a requirement for forest management activity reports to be filed with PVR. When landowners are enrolled in current use, they have to let PVR know if they've done any sort of management activity on their property. And we, the current use system has been shifted over into our VTAC system, we have noticed that there has become quite a backlog because a current statute requires all of the owners to sign their forest management activity reports. So our first request here is to just change that requirement that all owners must sign these reports and instead ask that a owner or the forester who is helping that owner can sign and that you don't need every owner to sign. So that's the first very technical request. Jill is, I believe, in the room could speak to the fact that it would really help with our administrative burden and free up some very valuable PVR staff time.

[Senator Ruth Hardy (Member)]: Abby, do you

[Speaker 0]: know if we're in the bill? Can you orient us at all or?

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: Oh, so yes, these are new requests. These are not currently in the language as passed out of the house.

[Speaker 0]: Yeah, but like, is there a section that it would be added to or?

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: No. These, no, so this is a new statutory section. I'd be happy to flag them for you or for Kirby Keetner, legislative council. It's in title 32, section 3,755. I don't believe the bill has this particular section amended anywhere else in the bill.

[Speaker 0]: It's saying you have to go trace down all the owners, which might be an entire family, that either one owner or this forester could sign off saying you are doing your forest management plan. Okay.

[Unidentified committee/staff voice]: That's right.

[Speaker 0]: Easier to get okay. Especially if some of those owners might live out of country. I know many of them live out of state. Postal service being what it is. I hope you take online signatures, but that would make it easier. Okay. That does sound like housekeeping. We'll leave it to you and Kirby as to where it goes in this bill. Let's do the next.

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: Great, thank you. The next also came up in discussions actually in relation to the reappraisal system. We also sort of came across this section that our property hearing officer did flag for us as sometimes creating a lot of confusion. It's when there is this sort of very, I don't wanna say archaic, but there is this sort of unknown statute that allows a taxpayer, the select board or an interested party named by the town to object to an appeal from the Board of Civil Authority. So when there's a property valuation decision that goes to the Board of Civil Authority and then someone appeals, there is also an ability to object to that appeal because it's defective in some way. So looking at that statute, it's actually a very short appeal period, it's only fourteen days. So our first request is to extend that to thirty days given how there are a lot of delays in mail delivery at the moment, and in addition to change when the notice period begins so that it is linked to the PVR clerk letting all of the parties know, hey, we've received an appeal, there is this ability to object to the appeal, your your appeal period or objection period starts now. So we're just asking for clarity there so that the process doesn't trip people up who may not even know they have the ability to object and may just miss that objection period because of the short fourteen day timeline.

[Speaker 0]: Okay, any questions, any objection? No, at this point sounds like house briefing?

[Senator Randy Brock (Member)]: For clarification, the appeals period begins fourteen days after now and then your proposal thirty days after. After what?

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: So currently it's thirteen days after mailing of the notice by the town clerk to PVR that there has been an appeal from a BCA decision. We're asking to change it to thirty days after PVR has received the appeal. We will then notify all the parties and say, you have a thirty day period to object to this appeal.

[Senator Randy Brock (Member)]: And in sending it out to the parties, is there any requirement that PVR sends it out in a timely fashion? What if they wait twenty days before they mail it? How does that protect the person who has the right of appeal?

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: It would still run from the time that PVR sends out the notice of the right to object. So there are two different, there's the actual appeal of the property valuation, and then there's also this ability to object to the appeal. And all parties would receive the notice. And my understanding, and I apologize to put you on the spot, Jill, is that's currently happening now, that PVR is sending out a notice that there's been an appeal.

[Speaker 0]: Correct.

[Senator Randy Brock (Member)]: And how does notice have to be sent out in a certain manner? For example, does the property owner have to receive it by certified mail or are you just basing it on a date that you record within the department or agency?

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: Statute only requires mailing, but I, again, sorry to defer to you, Jill. I don't know what our practice is for the certification or other mailing?

[Speaker 0]: Very few of them require certified mail. Usually it's just mail. My question essentially is that if someone who ought to be a party to this says, I never got it. Nobody

[Senator Randy Brock (Member)]: ever sent anything to me. Does the agency, the department have the ability to say, we sent it on such and such a date and the person to be receiving it actually got it as opposed to we put it in the mail. I got a I I had a Christmas card returned. It was sent on December 22, and I got back last week from the postal service.

[Senator Ruth Hardy (Member)]: I had the same thing happen, Randy. Maybe they were doing all the Christmas card. But

[Senator Randy Brock (Member)]: but but I I I mean, for the person who has the right to appeal, and it got lost in the mail, they never got it, nobody notified them and so on, is that a potential issue here that we we should be be addressing?

[Senator Ruth Hardy (Member)]: Is this something that will become more clear when we see the language in terms of the timeline? I'm looking at Kirby's, but I haven't I don't know if you've looked at

[Speaker 0]: it yet.

[Unidentified committee member]: What I'm hearing is it's not

[Kirby Key (Legislative Counsel)]: it's not the appeal itself. In this case, the the the process just about the the notice of our right

[Speaker 0]: to Who that?

[Kirby Key (Legislative Counsel)]: I mean, issue that you're talking about, but the circumstance isn't as-

[Senator Randy Brock (Member)]: Not as serious as the notion-

[Kirby Key (Legislative Counsel)]: Not as serious as ability to excuse.

[Senator Randy Brock (Member)]: Have there ever been cases in the past where people have had this right and they said, well, nobody ever notified me?

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: That I can't speak to. I know that the department certainly does hear that folks haven't received the information, and I can follow-up with what our practices are for the mailing. We have a docket clerk who handles all of the notices, I can find that out for

[Senator Ruth Hardy (Member)]: you and let you know.

[Senator Randy Brock (Member)]: It would be useful just to have some background about what's happening in practice first, And second of all, of people who say they haven't been notified, do you have any examples of that as to how that's been handled?

[Speaker 0]: Okay. If you can find that out for us, we have till Friday. If we change something, then it can be done. So, if we just change a date or a date or something in this, it's open to being adjusted and committing a problem.

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: Great, certainly. I will follow-up with that. The final change, and I'll try and be brief, is relating to what we call the contiguous parcel rule. Under current law, adjacent parcels of property that are owned by the same owner are required to be combined and treated as one parcel for property valuation, and importantly for current use for eligibility for that acreage requirement. Last year in collaboration with the Vermont Center for Geographic Information, TACS had proposed to change that rule, the language it's in statute slightly, but it ended up passing in a slightly different form than we had recommended, and it was subject to a contingent effective date in Act 73. So we had asked, and this is a section in this bill H933, it's section 20. We had asked just to clarify that we would like the contiguous parcel language to distinguish between combining parcels for property valuation purposes and for purposes of mapping. So this is why BCGI is interested in per parcel payments to make it clear that when mapping is done looking at grand list data, those different contiguous parcels, so there are two different parcels or three different parcels, that each is considered a separate parcel, And this will improve the mapping data. Many towns in Vermont are already reporting to BCGI and they are separating out multiple parcels that are owned by the same owner, but it's not done consistently. So we're just asking for a different clearer treatment. It would not affect property valuation, but it is within the title 32 property tax law. Also, are asking for the effective date that passed the house to be delayed one year so that we can have time. We were a little ahead of our skis and asked to have it effective for next grand list in 2027. We'd love to have just a little more time to work with listers because for those towns that aren't currently doing it, separating out these different parcels, we would like to have time to clarify what they need to change.

[Speaker 0]: Okay. Can you send that to Kirby? Kirby, there's actually 20 on the side by side. It's at the bottom, and then we go we go 18, 19, and 21 through 23. So I've just got a note section 20 needs some clarification. And

[Kirby Key (Legislative Counsel)]: The effective date change is what? Yeah. But I'll but I'll double check with that.

[Speaker 0]: It sounds like more housekeeping. Okay.

[Abby Shepherd (Policy Director, VT Dept. of Taxes)]: Great. Thank you for your time.

[Speaker 0]: Thank you. Okay. Jill? Structure. We think that gets us to section six, or do we have more? Oh, two. Good

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: afternoon. My name is Jill Remick. I'm the director of property evaluation and review for the tax department. I was asked to come in specifically about section six. I can just quick anecdote. The idea of the language that our hearing officer proposed is actually to ensure more time to notify taxpayers about their ability to object because we've had times where the hearing officer receives things and she's in a catch 22 because it's too late for the objection to appeal to be filed in the correct

[Speaker 0]: place. Fourteen

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: days from when the town mails it, it's very

[Speaker 0]: about mail service. Yes. They've got no they have no option except for two ninety appeal. Places in the capital city, never mind out in the booties where they don't get mail in two weeks.

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: Yeah. Section six in the miscellaneous tax bill is, again, that was a proposal from the tax department. It's a pretty, we consider it a pretty technical, straightforward correction. I do want to sort of distinguish between that particular item and that language, is related to failure to submit the inventory and sort of overall concerns about the communications property taxation change that we're in the midst of right now. So the language that is in the bills currently is language that we actually took from another part of statute regarding failure to return inventory. The way it's written in the statute currently is it's failure to return the inventory to the municipalities. So, this is saying, okay, well now that the tax department is the one responsible for collecting those, we're the place that those inventories will be coming to. We certainly, because we are quite literally right in the middle of collecting these inventories right now, never intended for this to be like a gotcha that was happening in the next two months. The seemingly tax bill, it might not get signed until whenever. But we're happy to acknowledge that if it provides a sense of comfort or definition to have it effective July 1 or January 1, as long as it's in place for the 2027 calendar year's grant list.

[Speaker 0]: Okay. The concern we've heard, and we're gonna hear from them, and if you can stick around help to get revival. But is that this has been interpreted as including one way communications broadcast. I was on I remember this bill. I believe it was seven ninety three, and I don't remember bill numbers even today because it was a very complex bill. This section was especially very complex. And I don't remember, and I'm looking at senator Chittenden and senator Scott who were also here. I don't remember talking about radio and TV at all. It was telecommunications, and it was telecommunication towers. And I remember discussion about the little house at the bottom and the stuff that's in the little house at the bottom of the tower. There's nothing about itself. We've got some people from the broadcast industry and give you a chance first and then rebuttal. Then we'll do a rebuttal rebuttal. Right. And just for

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: a little table setting, this Act 145, this was not a tax department proposal, by the way. No. It was pretty intimidating. This is an entirely new treatment of property. Yes. So it is a combination of adding a new category to the grant list, that's telecommunications property, communications property. TC is our acronym we went with in the grand list. From the telephone personal property tax, that's now repealed. The gross receipts tax, that is now repealed. There was business personal property that the municipalities that opted to tax business personal property fell into this category. There was also the personal property cable that was a category on the grand list. So we and and a year within a year of that bill being passed, the legislature did allow us a one year extension to implement this because this requires us to get an expert who does communications property valuation and can help us identify this inventory because that is not something that existed. This isn't just changing the taxation treatment of a bucket of properties. This is identifying all of those from these various buckets.

[Speaker 0]: Who goes with that little machine in the little hot

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: part of the tower?

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: So, we did hire a consultant this past year. We created the inventory forms. That consultant created the inventory forms. Frankly, there's six different forms because there are several different types of cable, fiber optic, and they're all different inventories that would be represented on those forms. So statically, the window in which we're operating in right now is we were required to send out those forms to the entities that, again, to the best of our ability, we're trying to cast that net wide. And they had to reprimand those by March 31. Obviously, this being the first year, it's a pretty in-depth inventory form that we're asking folks for. We're we're certainly granting extensions to anyone who's asking. So we're April 15 right in the middle of those extensions that we have offered. So we're definitely trying to establish the baseline of what this property would be. And so what happened is we again gathered a list of, to the best of our ability, what would be considered communications property. We went to the FCC sites. We got the Public Utility Commission identifications. We took the ones off the grant list. We sort of scoured the grant list to see what things might fit under there. And we sent out this mailing. This hundreds and hundreds of mailing to sort of cast that net wide. And we got something like, nobody's even been here for five years or this company doesn't exist. We had a lot of that. A lot of returned mail. And so part of that was these one way broadcasters. So we definitely agree with the general statement that it is clearly two way communication is what the definition is in the statute. We hope that folks could still either communicate to us, hey, this does not apply to us us individually as taxpayers. Right? I can't I can't sort of make a sweeping declaration in this room that assumes everyone who might have those sort of properties can, you know, not participate because there might be some that might be using those towers also for too big communication or even leasing them to a company. And it's we're really just trying to get the full picture of what could or could not fit under this. And so, yes, we cast that net very wide. I think it's easier to sort of shave things off as we refine this definition over the coming years, then start small and then try to convince folks that we need to add them on. Again, we're right smack dab in the middle of our very first year implementing this really complex treatment. We fully expect it, anticipate, and are prepared for, and in a way hope for, appeals and things like that so that we can also use those determinations to help us narrow what this definition of pins and is not.

[Speaker 0]: So agree that one way communications was not considered by the legislature.

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: Right. So, but if those towers, for example, also provide

[Speaker 0]: If they own a tower We at least

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: wanna know something else on Yeah. And most of those broadcast towers are maybe on the grant list already. They're not necessarily particularly high value. They wouldn't necessarily get that valuation treatment by our communications valuation person. But yeah, they should already be identified and on the grant list.

[Speaker 0]: Okay.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: And just to distill the fine point, as Jill's saying, not everyone who's received an inventory request from the tax department in this very first year of information gathering is gonna become a taxpayer.

[Speaker 0]: Not necessarily gonna get the tax bill next year.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: Yeah. And, you know, certainly not for everything that's on their inventories if they do end up having, you know, some aspects of tax. So perhaps, sales

[Speaker 0]: with panic use. Yeah, and anticipated.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: You know, this is We don't get to roll out completely new tax types all the time, but, you know, we have done it before. And, you know, this is it is, like, a really important part of the process to have this, you know, accessible, equitable, open appeals process where everyone can come and, you know, engage in the process we have here at State. And, you know, I think the questions about what should or shouldn't be taxable would be much better suited for next session when we've had at least one year under our belt. When, you know, any of the folks that are, you know, feeling a little agitated right now have actually seen a tax bill, but know know what ended up being determined as taxable and have had, like, a formal exchange with the department about that. So, you know, that's that's my 2¢ of process. If we probably shouldn't

[Speaker 0]: say at this point nothing at x y z radio or TV station. They're all tax exempt because they may be housing something else on a tower. They may they may be using it's not their broadcasting equipment, But you don't know what's out there.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: We don't know who's in the club and who's not.

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: So, you might find out who's out of the aircraft. Right.

[Speaker 0]: But it is agreed that the legislature be nodded. Right. It was ten, and it is now on

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: the record on putting forever

[Speaker 0]: that we did not intend to put broad one way communications under this taxation scheme. Okay. Senator Chittenden.

[Senator Thomas Chittenden (Vice Chair)]: Thank you for clarifying that, I'm sure, because definitely that's what I recall in reporting the bill, but my question really to the two of you is can you further articulate clarify where we are in the implementation timeline? Are these organizations receiving tax bills right now or just requests for property Would the if once you have that, they would start to owe taxes next year. Where is where is the timeline?

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: Right. So these would these are going on to the grand list for this year as real property. So whenever towns are mailing out their property tax bills in July, August, September, October, That would be the first time these entities would be getting that property tax bill from their town as real property. Now maybe some of them had done before or they may have been getting a bill from the town for the business personal property tax. They may still get that because one of the other pieces that was of concern in here that the Lynch Council made sure to address is it makes a bright line of what the definition of business personal property is. Because my concern, remember when I sat in the seat, was that it was gonna be a gray area and we were even gonna double tax or not tax off. So, Double were I right

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: tax.

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: Right, so the statutory timeline, we're right smack in the middle of right. We sent out the inventory forms as required by statute. The providers have until March 31, so a couple weeks ago, to get this to us. Like we said, we're we're still answering questions. Do I even have to fill this out? What is this? I just got this letter from you guys, or can I have thirty days because this is a lot of information you're asking for? Then are supposed to PVR is supposed to provide the values to the towns by May 1, and then that allows the towns to notify the taxpayers, for better or worse, has the two fifty one starting points for property appeals. So the towns will then notify that taxpayer of what their valuation is and their appeal rate. They can appeal that at the local level and then if they're not satisfied with that outcome, they appeal to the BCA and then they can appeal to the PVR hearing officers. So, they will get sort of a notice of value in May from the town that also boost their appeal rates. So, that kicks off that process. Ideally, right, the statutory timeline of that so that when property tax bills go out, they reflect that result of that appeal.

[Senator Thomas Chittenden (Vice Chair)]: Oh my god, so I heard you say that this is all anticipated, that you're expecting these appeals to work through these cases. Are you worried about the volume of appeals we're anticipating from what you're seeing so far in crunch time for both the organizations as well as our local municipalities and DCAs. Is this going to be overwhelming or is there anything we might want to consider to elongate this conversation?

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: It feels like a lot. I do think this year, if there's just going to be a volume, we've actually had our attorneys kind of write up a stipulation agreement that we can provide to towns so that they and the and the provider can just sort of skip over BCA or say, we're just appealing to the state. So that they only have to appeal one place or maybe a handful of places rather than two fifty one places. We did just this morning have a few hour long webinar with the town to kind of explain this. And I think this is complicated, but when you talk about leased land and valuation of the land and who wants to to the right? You bought the so the municipalities have another layer of sort of complex ion that they have to

[Speaker 0]: That's right.

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: They're working through. Because this is this is different. This is not how you had a new illness in the past. So, yeah, I mean, we're expecting and so sorry. From for the BCA, it can be appealed either to superior court or to the PVRI officer, and then from there to

[Speaker 0]: the supreme court. So, yeah, I think Thanks, Jill. That sounds like a lot.

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: I'm just wondering, are you asking for changes? That's what I'm unclear about. You're okay with what's in the bill right now. Okay. Right. We were just in here. Like I said, the the inventory what it read specifically is that failure to sort of willfully not participating in providing us inventory similar to what was in statute until this bill happened for providing that to municipalities. Exactly the same. Exactly the same. Yeah. So basically left out when we changed the bill.

[Speaker 0]: So there is a penalty for not providing the inventory. Right.

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: So what is is essentially if you sort of willfully disregard this and you don't participate, then we still have to come with a value. The state determines there's a property there, we use have what we have to come with that value. And if we're sort of put in that position, then you're forfeiting your right to appeal that valuation because you did participate in the valuation. And there's, I think, a $100 fine. Again, this has been the sixties, it looks like we just sort of copied and pasted. We're not interested in administering a fine unless we absolutely had to. We also definitely never meant for this to imply that there was not gonna be a pill raise this first year. If anything, like I said, we sort of welcome this so we can clear this up. So the only piece we were in here for is that adding that piece in the legislative tax bill because it wasn't originally included in that report.

[Speaker 0]: Oh, okay. So this puts a penalty on willing, fully not and I can see I haven't heard anything from the telecom providers.

[Unidentified committee/staff voice]: So

[Speaker 0]: but I can see with the broadcast, the one way communications people, apparently they got this notice and they're interpreting it as you're gonna take that and you're gonna tax all that in Tory, which depending on their financial situation could be a major impact. And so you're saying you need them to the inventory because parts of their inventory, if it's a two way communication, they've got a tower that lets them talk to their reporters on a closed network or something. It's a two way. You just need to know that. This is kind of a fishing expedition so we know what's out there because technology has changed so fast. How's it going with doing the polls? I shouldn't ask. I mean, that was pretty simple in comparison.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: Okay. But I think you're describing it right, it's really about wrapping wrapping our arms around everything that's there, including non taxable, we know And that it's non

[Speaker 0]: maybe you can we'll hear from the industry, but maybe you can have some private call discussions. Yes. See if there are any issues.

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: Right. And we definitely have I hope I hope folks feel like we have made ourselves and our our contractor and our attorney, we've held a lot of these calls to try to hash these things out. There's also, right, the technology has changed so much in companies by other companies, so there's been a lot of untangling in those conversations, and sometimes we're like, you know what? Yes, you're right. And so the one way broadcaster is getting this message, well, it probably was scary. Yeah. We just would prefer individual taxpayers who aren't sure, check with us or let us know, and be like, yeah, we don't have anything this. And we've gotten those. We've had plenty of people who have sent us a letter saying, hey, we got your letter. We don't fall under this or we don't exist anymore. We've gotten 60 or so so far. Like I said, the deadline was March 31, so we've gotten several already. So those folks are operating under the way the statute is currently written. Okay. I could see in future years either us or taxpayers coming back with some clarifying language, but we're still gathering information. It's still a bit okay.

[Speaker 0]: Yes. So you still don't you don't know enough to ask us to Okay. Fix Senator Chittenden?

[Senator Thomas Chittenden (Vice Chair)]: Just to clarify, the first thing you said in the testimony, wanna make sure that I heard it correctly, but you are comfortable, if not supportive of, for Section six, the synchronization language is pushing it out a year so it's effective for fiscal year twenty seventh.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: Correct.

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: So it's in place for the 2027 new tax, brand listed tax billing cycle.

[Kirby Key (Legislative Counsel)]: Supportive of that.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: Yes. And that's like, you know, how we would have administered or expected that to hit our administration either way. But happy to clarify that.

[Speaker 0]: Anything else?

[Jill Remick (Director, Property Valuation & Review, VT Dept. of Taxes)]: Another piece about how the language was written referenced submitting taxable property to us, and I think that was written for the long term that the companies are required to submit their taxable inventory to us. That also does not negate the appeal rates. You can fill up the inventory to the best of your abilities. And if you want to appeal and say, you know, you added this to the inventory, but it's not taxable, that's also appealable. So you can appeal the methodology. You can appeal what we included in in the You can appeal the number itself.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: You could write down the inventory that you don't agree this is taxable, but understand you're being asked for it, and that will not waive your appeal rates either.

[Senator Randy Brock (Member)]: Okay.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: And your inventory to protest. Stand under protest.

[Speaker 0]: Absolutely. Absolutely fine. Okay. I wish that's all

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: I mean, something tackled up, but think that's it.

[Speaker 0]: Alright. Well, at this point, we're still working through this. We brought up the poles because they're pretty easy. Can see them. And but newly, it's going to end in a world that is changing on a face to face. It's going to take some work and we're probably late in getting to it. Yeah, it

[Senator Ruth Hardy (Member)]: is very it is multilayered. It is changing. It's complicated, and I I have apologized to providers. We are asking for a lot of detail. We have to. It's a lot of work. Hopefully in future years, they can just resubmit the same form with a few updates. But it's a lot of information. There's a lot of different ways we communicate now that the staff is having us catch up with. We're doing the best we can to try to cast our net and implement it to the best we can, but yeah.

[Speaker 0]: Okay. Any further questions? Thank you. And I'll just

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: add that I'm not able to stay through this afternoon, but I was planning to just be available tomorrow afternoon when you're all doing your markup, and

[Senator Ruth Hardy (Member)]: if there's Markup. Yeah.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: That would be fine. Follow-up questions, I'm happy to be able to go those.

[Speaker 0]: Yeah, we've actually changing subjects shortly. And, again, I don't see. Okay. So next, we have Wendy Mays. Come on up, Wendy. I hope you're feeling better after this discussion.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: I did print a few copies of the one that my friend was talking about. I thought I printed seven of them, and then I got here in

[Senator Ruth Hardy (Member)]: the Rite Aid course, so thank

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: Since you're did not do me great a thing, but I it is I did send it to Charlotte, so it is

[Speaker 0]: also Oh, okay. Then it's it's hosted on the website. It is. Oh, it is? Yeah. Yeah. Go ahead. Thank you. To introduce yourself to the record.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: Thank you. For the record, my name is Wendy Mays, and I am the executive director of the Vermont Association of Broadcasters. We're the nonprofit trade association that unites, supports, celebrates, and advocates for all of the over the air radio and television broadcasters that are operating around the state of Vermont. Thank you so much for allowing me to come in and propose a simple amendment to section six of H. Nine thirty three that we think will help clear up some confusion about Act 145. I'm asking your committee to please add the definition for communication service provider. Right now, Act 145 does not define what a communication service provider is, which has led the Vermont Department of Taxes to wrongfully include traditional one way broadcast during their interpretation of who is subject to Act 145. So, I know we already heard about this, but I'm gonna go ahead and just sort of summarize what happened. In February, broadcast radio and television station received the form letter that was spoken about from the Department of Taxes, which instructed them to complete the Act 145 Communications Property Inventory Form, so that taxes can be assessed.

[Senator Ruth Hardy (Member)]: Okay, that

[Speaker 0]: sent a panic through the industry. A 100%, yes. Okay.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: And it also came out of nowhere because they just got this letter and it came out of nowhere with no warning. So, The VA looked at it, we looked at the original bill, we reviewed Act 145, and quickly concluded that the Department of Taxes or their third party company, I'm not sure which one it was, got a little overzealous with their interpretation of the generic term communications. So, I

[Speaker 0]: just would like to

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: go over with you, and those are the bullet points on the document that I provided, we are one way broadcast and why it does not pertain to us. First of all, broadcast, broadcast radio, broadcast television, they don't appear and are not implied anywhere in Act About 45. Second, communications property is defined as tangible personal property of use to enable real time, two way electromagnetic transmission of information, such as audio, video, and data, that is so fitted and attached to be as part of a local, state, national, or international communications network. Broadcast radio and television is one way communications. I think we've already established that, so I won't, you know, beat that too badly, but it is true it is not two way. Broadcast is also not part of any sort of communications network, local, state, national, or otherwise. Because broadcast does not fit the definition of communications property, and nor should it, we are a completely separate industry from telecom. The only thing that we have in common is that we both use the word communications in our company culture and test status. Broadcast infrastructure, in addition to being one way, is expressly used to broadcast news, weather, sports, entertainment. That's our content that we produce, which is listened to and watched by your launchers for free. Broadcast does not have subscribers or customers paying for a service, nor do we provide any communication service. To further illustrate my point, it's important for you to know about a ruling that happened in 2020. Vermont Public Radio needed to do some work on their tower, and they applied to use Act 248A, an act I know you're familiar with because you heard testimony about it. Oh, we're still working. The State of Vermont Public Utility Commission denied Vermont Public Radio use of Act two forty eight, because they classified broadcast as one way communication, and said that Act two forty eight aims only for two way communication. I do have a copy of that. That's a denial if anybody is so inclined and wants to read it. The VAE went to a public expense to hire a tax attorney to communicate all of these facts to the Vermont Department of Taxes, so that we could get the estate fixed, In an email dated on March 23, Will Baker from the Department of Taxes General Counsel conceded, in an email to the VAU's attorney, that, quote, If a tower has only radio or television one way communication, it is not communications property. Although that should have been enough to fix the mistake, the Department of Texas has not offered any formal ruling or official delete notification to the broadcast groups who received the letter in error. That is why we have come to you today and are asking your committee to add a definition for a communication service provider to section six of H. 33 that will resolve this issue once and for all.

[Speaker 0]: Okay, and I think with the tax department, so they agree, you're not covered. What they don't know and they're trying to find out is, do you have an attachment to one of your broadcast towers? You know, that things are so complex, and it sounds like they might have been able to be a little clearer in their definition as to what they were looking for.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: It's actually not as complex as you think it is, because the industries are very separate, and so are there wireless towers that broadcasters rent space on for their antennas? Yes. Are there, but those towers would be included in the wireless or the telecoms communication Yeah. Do some broadcasters own their towers and rent out a three by three space for a wireless provider's antenna or satellite. In some cases, they might. However, that antenna would be covered under the telecom's communications property. And, let me just make a point that I think will make this really clear. There are some farmers that rent their space on their silos, for There what I are churches. Yes. Farmers, churches, where does it stop, where does it end? Where it stops and ends is that the telecom company is going to be the one that is including those pieces of equipment on their communications property.

[Speaker 0]: Okay, I think that's what we need to make sure of, is that it's clear that if their box, whatever, is on a broadcast tower that I can understand the tax department is in a brave new world, and we're trying to get a whole picture. And also understand that, you know, we did not 10 when we did this bill to roll in. So but I can see where we do need to know if there are things on your towers, if they're in the silo, they're owned by the telecom company, just to make sure that it gets reported and make sure that the appropriate party knows they need to report it. It sounds like the appropriate party may not be you.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: I'm not sure I understood that part of that question.

[Speaker 0]: Well, I was with that, right now, it sounds like if you do what the tax department adds, you've gotta say, we've got Tower A, and, oh, by the way, you know, Comcast or Verizon has a box on it. Maybe there's, you know, and your local fire department has a box on it and the tax department I think needs to know those boxes and it's just making clear who is responsible to report them. Right now if the fire department reports it, and I don't even think they do it, we used to have a local it's the first tower in the area, and everybody booked on the it was a paging service. Hooked on their tower, but who is make sure that it gets reported and reported appropriately. So would that not be the telecom who owns it? I think that would be the telecom that owns it. We just need to make sure that it is clear that they are responsible for doing it. Doesn't seem to be any argument that we ever meant to rope in broadcast. This was a purely tele well, no. It was a very goblin. I

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: don't envy you of having to look

[Speaker 0]: at It was a long bill. And so and we make mistakes.

[Senator Thomas Chittenden (Vice Chair)]: This might be best answered by somebody at gallery, but I'm curious what the net implications are of conforming or complying with the filling out of this form. Can you just elaborate on to your members what does it need to have an inventory, the stuff that you are pretty sure does not actually need to be inventory?

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: Absolutely. I am thank you so much for that question, because I was gonna answer that. Okay. A lot of these broadcast radio stations that I'm that I represent, that I'm talking about, they have a staff of maybe five people, and they can't afford to even have an engineer on staff anymore. An engineer would be the only person that would be able to do that type of laborious inventory, so they would have to go out and hire someone at, a At

[Speaker 0]: more than they're probably getting paid per hour.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: Exactly, like getting paid a lot to have to do this. And so, part of the panic that came from my industry was the fact that the inventory themselves are so laborious that it would, it was just, it was making eyes pop. We are not talking about businesses that have the type of human resources or labor that can do this type of inventory. That's one of the reasons why we have tried to drive the point home so clearly, that we are not a communication service provider. We are, we don't fit the definition of Act 145, and really just want to be relieved of it all together. There are, and this is further down, and I don't want to repeat myself, but I just want to make sure. Sometimes this happens where people are like, Oh, they both use towers, so they're almost exactly the same. Telecom and broadcast are so different from each other,

[Senator Ruth Hardy (Member)]: and they're really not even related at all.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: And so I really feel like this net got passed so, so large, and it scooped up all of these little broadcast fish who are just trying to survive right now. And it is like that, it is a daily struggle.

[Speaker 0]: I'd surprised we didn't hear from the ORCA and our other local.

[Senator Thomas Chittenden (Vice Chair)]: Can you remind us where WCADX

[Unidentified committee/staff voice]: No.

[Speaker 0]: No. Those are universal. This is the local news, what is they called? Local Yeah. Yeah.

[Senator Ruth Hardy (Member)]: I mean, yeah. We just

[Speaker 0]: The broadcast industry is in many areas. And, yeah, because it's moved to the Internet and it's moved.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: Our advertising revenue has been demolished. It is, we fight for everyone's route that we can get on a daily basis. I will convince you. That dire situation is not an over exaggeration. The burden that would be put on broadcasters if they had to do this, that's where the panic came from my understanding. So, that's why I've come to you asking if there's any way that a simple definition could be amended to it that doesn't exist already in it.

[Speaker 0]: I think everyone agrees that you're not in the definition. I think it may Hurry up. Hurry Hurry up. Up. They must be doing something on the house. It might just be as simple as telling the tax department this isn't what we intended. Nobody disagrees that the legislative intent included, it didn't include fraud status. It was never mentioned.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: The VAB invested $5,000 of money that we didn't have to pay a tax attorney to talk to them because tax attorney needed to talk to the tax attorney in that language. And we still didn't, they conceded and yet didn't offer up They want

[Speaker 0]: you to still fill out the inventory, certainly means Right, that you

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: and our entire argument is we are not subject to Act 145, therefore we do not need to fill out

[Speaker 0]: this What they're saying is, yeah, maybe they don't know that we might be doing some two way communication somewhere. Think we can decide whether or not that somewhere is gonna be worth it to put everyone through the kind of pain and expense that you're going through.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: Can we add the language?

[Speaker 0]: I mean, what's stopping

[Christopher Rupe (Joint Fiscal Office)]: us

[Senator Ruth Hardy (Member)]: from not adding parafide?

[Speaker 0]: We just lost our track. This it will be gets at. Great. And I wanna let them know, you know, that we're gonna do that. Okay. Well, can you remind me of questions? And I apologize for the panic and

[Senator Ruth Hardy (Member)]: the hard work. It's section six.

[Speaker 3]: Okay. Thank you. Yeah.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: Thank you very much for coming out.

[Speaker 0]: I really appreciate your No. We did not know this was happening until probably a week ago when our emails blew up. I think, Scott, I've got you on the end of the day, but before we go to the banking insurance, it might Can you do it, like, five minutes?

[Senator Randy Brock (Member)]: I hope so. I thought it lasted. Great.

[Speaker 0]: Two minutes over time, so March 5 will be with us.

[Scott Mackie (Lobbyist, on behalf of AT&T, T-Mobile, and Verizon)]: Thank you, Senator Scott Mackie, the owner of public affairs. I'm here on behalf of the tax department for AT and T, T Mobile, Verizon. So our issue is a little different. And I'm not gonna talk about the appeal issue because it sounds like we've got agreement that it was not the tax department's intent to foreclose our ability to appeal, and they're gonna they're agreeing to the change. What I wanna talk about is the tax department's interpretation of what's in the communications property tax inventory. We're not arguing that we're not subject to it. We we lost that ballot in 2024, and we're subject to the bill. The question is, what is subject to the inventory? The legislative history on this, and it was it was actually House 657 that's burned into my mind, apparently, more than in New Jersey, senator Cummings. But so the house sent over a bill that really taxed everyone. I mean, they said the definition that came over, and this is the definition of communication property, said wires, bolts, cables, plugs, pipes, antennas, bolts, towers, machinery, hubs, splitters, switching equipment, routers, servers, power equipment, and any other network equipment. So the bill that came over from the house was extremely broad. It was everything. This committee looked at that bill and said, That's too much. And initially, the committee said, We need another year to study this. So the Finance Committee report on the bill that came out on a seven nothing vote took the whole thing out and said, We're gonna study it for a year. But subsequent to that, and it was at the end of the session, Senator Chittenden had conversations with the House, and they agreed that there would be a compromise that narrowed the definition of communication property. And basically what the Chittenden amendment did on the floor was put a period after wireless towers. So, basically, machinery, distribution, all that stuff, I guess, we're gonna catch all any other network equipment is taken out of the bill. Just a really quick start,

[Senator Thomas Chittenden (Vice Chair)]: it was advice from Jill Brenek. So Jill, the tax department actually recommended the Chittenden amendment period.

[Speaker 0]: Jill had said they didn't have the skills to do a lot of this. There was a lot

[Unidentified committee member]: Right. Of- To be disruptive.

[Scott Mackie (Lobbyist, on behalf of AT&T, T-Mobile, and Verizon)]: Yeah. Okay, so imagine our surprise when we get the request for the inventory. By the way, the statute says, does not say the tax department shall inventory every piece of property someone has. The statute says, and I've got it right here, it says it's worth an inventory of its taxable communications property. So when we got to Christopher the inventory, we're like, what? All this stuff that was taken out of the bill by the Senate and ultimately passed and signed by the governor, they're asking for an inventory. They must be trying to tax it. So we had a meeting with the companies and the tax department, Jill, and the consultant, and we basically laid out our case. And they said, No, we don't interpret to build that way. We we we think that that list is just basically descriptive, and it's not basically, they're they're ignoring the senate taking out all that other stuff and saying we believe all that is taxing. And and I have a letter, from the tax department. They did reply to us in writing saying that the tax department's position in the global communications property in this in VSA thirty six zero two b is not limited to wires, cables, conduit, antennas, poles, and wireless towers. So their position is that that nothing in the sentence indicates that the definition is limited to the example items. So our issue is beyond we totally agree with the broadcasters. It's one way. That's a slam dunk. But our concern is that the tax department is interpreting what's in the base to be much, much broader than what the Senate language that was adopted and ultimately signed into law. And the reason why this is a problem for us is that, and it was alluded to earlier, so we are subject to the municipal property tax, business personal property, in those communities that have elected to tax it. And we have to report that property to the local jurisdictions attached with no personal property unless it's in the state statute. And so now we have this situation where it's like, woah, we think that the tax department's listed taxable property, the way we brought it, we should only have to report taxable property. And by the way, we still need to report the rest of the property that's subject to the business personal property taxes directly to those 40 something municipalities that elected to tax business personal property. So the the tax department says, we'll just report everything, and we'll sort it out later. Well, that's great, but if we report something to the state, even though we believe it's not subject to the tax, we feel like we should be reporting it to the municipalities because if it's not in the state tax, it's still subject. So it's one thing to just say, you know, let's just have everybody report everything and sort it out afterwards, but it's not that simple because if we do that, and then the municipalities come back to us and say, well, you should have reported the stuff that wasn't listed in the statute. So we're sort of in this really difficult position where we feel like the department has significantly exceeded the legislative intent for what you guys agreed to put in the law and were concerned about the interaction between municipal reporting and what we report to the state. And, you know, by the way, we only have two weeks to implement this once we figured it out. The the tax department did get an additional year, but we didn't find out until the February that there there was this additional property that we thought was was not subject to the state evaluation. So that's kind of the situation we're in. So what we're looking for the committee to do is to go back into the law and clarify that actually the only communications property that's subject to state valuation and assessment by PVR is the stuff that you specifically listed in the statute, not the stuff that you removed by amendment. Because at the end of the day, if it's just a list, It just seemed like there was a compromise, then the department is just ignoring that and saying, that list was just advisory, so by striking all that stuff, it was really meaningless. And we continue to think that everything the wireless companies own that is that sort of isn't listed is subject to taxation. It must be reported. So

[Speaker 0]: Okay.

[Scott Mackie (Lobbyist, on behalf of AT&T, T-Mobile, and Verizon)]: I hope I was fast enough. I'm sorry if I've sped through

[Speaker 0]: enough that we have your testimony. Yes.

[Senator Thomas Chittenden (Vice Chair)]: The only thing I'd I'd add, I did report that bill, and I had spent a lot of time about it. The things that were dropped after the period were because what I recall from Joe Remick, and I think she she would echo this very femoral short life lived. I mean, they had a lifespan of two to five years. All the other things that we do include have twenty, thirty, forty year lifespans. And so to price out a server that you bought two years ago and appraise that on a gong way cycle, that's why we're like, no. That shouldn't be. So that's why we drop those things. That's why I really love.

[Speaker 0]: I think they came in at one point and said they didn't know how to appraise it, and they wanted it. So okay. We will see if we can find some clarifying language when I will need to talk and see where this goes. If that I'm not seeing the committee disagreeing if you need to clarify this. It sounds like all kinds of people are going through all kinds of work that is probably not going to yield anything worth the effort. So let's see what we can do.

[Scott Mackie (Lobbyist, on behalf of AT&T, T-Mobile, and Verizon)]: Thank you. I mean, it it you know, to the broadcaster's point, I mean, it would be as if you you were to say to homeowners, well, just report your automobiles, your computers. Even though it's exempt, we just want you to report it so we'll know where it is. I I mean, could imagine the deal in. It just doesn't seem like the effort of putting taxpayers that clearly aren't. Right. I mean, theirs is a different we just need some clarification on what we're supposed to do. He says, we either have to report it to the state or to the communities that taxes this personal property.

[Unidentified committee/staff voice]: Okay. Thank you for

[Speaker 0]: your help. We're gonna have to move on. We're going to 04/06/1948, which is this banking insurance and securities for housekeeping stand. Joe Gulick is sitting here very quietly. This is a housekeeping

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: bill. I

[Speaker 0]: know there were a couple of questions that came up. Do you have?

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: Yes. So we have a short agenda. Joe Valentini, director of policy at VFR. For the record, I do also have a handout that I had to pass around that I also had sent in earlier today. So the three things that we wanted to offer quickly today are quick review of the the different banking definitions. Since there were questions about that last time, this handout does walk through all of them, and I have someone from our legal division on Zoom who can answer questions if we have any on the definitions. So first is banking definitions. Second is securities. Our securities division was not able to join last time, and our deputy commissioner and our director of enforcement are on Zoom if there are any questions about the restitution and education fund, referrals for criminal prosecution, etcetera. I also do have a little bit more information to share on crypto kiosks since that was a topic that was raised last time. Deputy commissioner Farrance is traveling today. I know he may try to hop on Zoom, but I'm here in the event he's not. And then we have the Bank's Summit Credit Union here to talk about a few of the other provisions in

[Senator Thomas Chittenden (Vice Chair)]: the bill that you want questions on. Okay.

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: So first off, in terms of the definitions, again, the goal here was to add some specificity. There are a number of places where we refer to financial institutions where that meeting may, be nonspecific. And in colloquial terms, in this or as far as the state of Vermont is concerned, a financial institution is a bank. There are categories within that, and some of those are on the back side of the sheet, middle on the right that Vermont financial institutions are primarily banks chartered in Vermont. Financial institutions are those chartered in other states. National financial institutions or banks chartered federally. And this is important because if you look in other places and other times, sometimes financial institution includes credit unions, sometimes it doesn't. Grand Ridge Bladley Act, I believe it includes a wide variety of actors. So we are we are referring to banks, and we are referring to the specific type of institution for each section. So in some of these sections, we use the term regulated entity instead of financial institution. In some, we're using lending institution because it really is pertaining to that not only Vermont banks and credit unions, but Vermont licensed lenders. We refer to insured depository institutions instead of federally insured and reference the specific federal laws. And then on the back, again, we have Vermont Financial Institution is clearer than financial institution with their principal place of business in the state. We turn depository institution into financial institution. And then lastly, financial institution into person because for those sections, as I recall, those are the reverse mortgage sections. You do not need to be a financial institution to be in

[Cameron Wood (Office of Legislative Counsel)]: that market. So this is all

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: in the name of greater specificity. I will leave it to Diane. Is there anything that I missed or forgotten?

[Diane Sherman (Legal, VT Department of Financial Regulation)]: No, I think that was great, Joe. This is Diane Sherman with the Department of Financial Regulation.

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: So the only other piece on this, and I'm happy for

[Unidentified committee/staff voice]: Diana and

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: me to take any questions. There was a debate last time around Section 22, which dealt with the Community Reinvestment Act and whether it should be Vermont Financial Institution, Vermont Person, another term, that was the one

[Speaker 0]: It was the Vermont Yeah. Person term.

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: Yeah. Recommendation there, we do not believe that we need additional clarity in that section. The banks that are subject to the Community Reinvestment Act know that they're subject to it. It's a federal law. So we would recommend you let let's counsel know that we'd be fine just taking section 22 out of the bill

[Senator Randy Brock (Member)]: Okay. For

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: that is not in the team over

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: since that is something that we're proposing

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: to take.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: This was changing in person.

[Senator Ruth Hardy (Member)]: Right. Yes. This was the one that I was like, this is not consistent.

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: Right. Right. If you changed it to right. That there was we didn't have an appropriate change, and I think we did not after we reviewed it further, we didn't feel like the pain was necessary.

[Senator Ruth Hardy (Member)]: So you would propose if we picked this out, it would

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: just stay as financial institution in this case? Yes. Yeah.

[Speaker 0]: Okay. Any questions? Anything else?

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: Anyone? So that is the first item. Second item was securities, restitution, and enforcement. And I know there was a very, very brief remarks. I think deputy commissioner Smith was hoping to make that a topic, and primarily, it's just an opportunity for any questions since last time.

[Speaker 0]: What section is that?

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: The restitution fund, I believe, was section 54. 54.

[Unidentified DFR Securities Deputy/Representative]: So Joe, if I heard you correctly, you wanna talk now about the restitution fund or are we talking more about criminal referrals? I'm sorry if I missed.

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: Sure. No, why don't you You can just start very quickly with the Restitution Fund and then criminal referrals and any questions that the committee might have.

[Unidentified DFR Securities Deputy/Representative]: Okay, right now, do you guys have any specific questions regarding the restitution fund? I missed testimony last week, but the group did a great job of what we're trying to accomplish with our changes in Section Section 54. If not, I can have Sarah Haim, our Director of Exams and Enforcement,

[Speaker 0]: talk to you about Can you Go ahead.

[Senator Ruth Hardy (Member)]: We've just gone through a ton of different bills, so trying to remember what our concerns were on this specific section. If you could just tell us what's section 54 on page 75, bottom of page 75.

[Unidentified DFR Securities Deputy/Representative]: Yep. So, in, yep.

[Senator Ruth Hardy (Member)]: Remind us of what we might have been looking for my notes. So

[Unidentified DFR Securities Deputy/Representative]: in 5616, what we were doing, we had a few changes, adding the definition of a claimant, moving some information around under the eligibility section, adding the definition of a dependent child based on the federal tax code, amending the text to say vulnerable adult versus vulnerable person to match Title 33 for consistency. Cleaning up our reference in A, it says 6014, but it needs to be 34 because that's the incorrect reference. And then in my page numbering, what I have printed out, might be different than y'all's under C eligibility number 2A, clarifying that the victim needs to be a resident of Vermont at the time of that securities violation. And then further down, just adding clarity regarding the process and the violation for restitution. And then in number five, Again, my page number might be different in yours. Just clarifying that the following information needs to be provided in an application to us, but clarifying that the information we receive is confidential. And that's in item number five. And then in J, including that the Commissioner can adopt rules to implement this section. And that's all I have in my notes for that.

[Senator Ruth Hardy (Member)]: My recollection was that we

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: were just

[Senator Ruth Hardy (Member)]: We had questions about how this worked, I remember the commissioner sent us a website to show what happens when there's a restitution case. Yes.

[Unidentified DFR Securities Deputy/Representative]: Yes. Okay. Yep. Yep. So, I'll have Sarah Haim, our Director of Exams and Enforcement. She can share that information with you.

[Senator Ruth Hardy (Member)]: Yeah, the Commissioner did send us a website, but we, I think we were just, this is my recollection of what we were trying

[Speaker 0]: to get. Yeah, understand how they were concerned about it. It was just how does it work? It was information. I don't have notes about concerns. Okay.

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: And then the other, I think the other topic from last time, if there are already remaining questions, about referrals for criminal prosecution. Anyone wants to ask our security provision folks about that.

[Speaker 0]: And which section of the bill is that? We are

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: not addressing that in the bill today. I think it was just a general question.

[Senator Ruth Hardy (Member)]: Oh, right. Yeah. Whether that happened. Yeah. And how that happened.

[Unidentified DFR Securities Deputy/Representative]: Yep. And again, if y'all want information on that, Sarah on the call can give you some great information about that.

[Speaker 0]: I'll let you share some brief information. Okay.

[Sarah Heim (Director of Examinations & Enforcement, DFR Securities Division)]: Hi, this is Sarah Heim. I'm director of examinations and enforcement for the Securities Division at Vermont DFR. I think we touched on this a little bit or Joe touched on this a little bit last time in front of you all, but just to give a brief overview. The answer, the short answer is yes, we do sometimes refer cases for, to criminal authorities. It really depends on the facts and circumstances. A lot of the cases we deal with are really focused on securities violations, so violations of the Vermont Uniform Securities Act. But if there is a potential criminal violation as well, we can refer cases to federal authorities as well as to state and local authorities. We also sometimes receive complaints from individuals who have been the victims of fraud and come to us and unfortunately we don't have jurisdiction over those claims because there's no securities hook and we do refer those folks out to local police. We urge them to file a police report and also to file a report with the FBI through IC3. In addition to referring cases to criminal authorities, we can also refer cases to the Securities and Exchange Commission or other state regulatory authorities.

[Speaker 0]: Okay. Thank you. Any questions, committee? I think a lot of these were just

[Christopher Rupe (Joint Fiscal Office)]: hard

[Speaker 0]: technical understanding. Yeah. Was making sure we understood, Bill, that we were Yeah. And

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: so the last item that I have then, before turning it over to the other witnesses, is the issue of the cryptocurrency kiosks. I did want to, provide a little bit more information. So as a reminder, we have two currently active cryptocurrency kiosks in the state, one in Brattleboro and one in Essex Junction. And under current law, the moratorium on new kiosks expires June 30. So we looked into the matter. We recommend that the committee either, and and, again, the existing language does not address the continuation of kiosks in any way. We recommend either extending the moratorium to prevent new kiosks from entering the market we're considering a ban on these kiosks if you choose to go in that direction. By our most recent estimate, it's a small fraction of 1%, so far less than 1% of all Vermont crypto transactions under our money transmission lace licensees took place at a kiosk in the past year. We're not aware of any complaints that have been filed since last year's protections went into effect. Now there have been allegations made by two state attorneys general in other states, one in Iowa, one in DC, that they both claimed that as part of their investigations, over 90% of transactions at kiosks were fraudulent. We don't have any, sense of whether that holds true here. Wow. And it is a very like I said, it is a very tiny share of transactions in the crypto market. But as you look at the picture nationally, there have been many associations between kiosks and fraud, and that's why we had asked for the protections to be put in place last year, such as the transaction daily transaction limits and refund protections and warnings and other things.

[Speaker 0]: What's in the bill,

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: if anything? Currently, the only thing the bill does is is moves definitions as a housekeeping matter. You would need to add any specific language that you would want. Okay.

[Speaker 0]: So we need to ask the moratorium for extension for extension for a van. We did this the last Put

[Senator Ruth Hardy (Member)]: in those protections last year. That was

[Speaker 0]: We only did a year. It was last year.

[Speaker 3]: Yeah. No. We only did it for a year?

[Senator Ruth Hardy (Member)]: Yeah. Well, the the protections

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: remain, but the moratorium on new kiosks was extended for just what's going to inspire was extended for one more year.

[Speaker 0]: So we could extend the moratorium for we've got two, which so far, it's minimal transactions, and as far as we know, they haven't had fraud, and they've been very active in keeping that. We can we can say, you can get two more and anyone, I mean, at this point, given the timeframe we're looking at, an extension of another year might be the easiest thing if we haven't had a problem. Japan would have to take a lot more testimony.

[Senator Randy Brock (Member)]: Well, just in terms of the statistics of what we're talking about, there's something elsewhere in the two states that have looked at this, they have, how many transactions have they had? Do you have any on this? I don't Is there a to help us frame what does that

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: The overall volume, I do have looking national I did look nationally at complaints about crypto kiosks that, like I said, we have not received any to my knowledge, but the FBI's IC3 was referenced a few minutes ago. This is the Internet Crime Complaint Center. Mhmm. So they take all different kinds of complaints around fraud. They have received, last year, over 13,000 complaints about crypto ATMs or kiosks. Now to put that in context, that is it's a small share of the overall complaints. They've received a little over a million complaints last year. So it's 13 on all kinds of fraud and scam topics. But the amount of losses were $389,000,000 nationally, and the number of complaints had increased 23%. The amount of losses had increased 58%. So it is a growing concern.

[Senator Randy Brock (Member)]: It's a question of what percentage of the total amount of transactions are fraudulent, and what's a dollar amount per transaction? If you look at a dollar amount, for example, that's been lost compared to how many transactions. That gives you an idea of what the extent of the fraud is, one, and also, what's the magnitude of it using this particular medium compared to other mediums. Right.

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: The FBI data are broken out by state level for some things and not others. Mhmm. They do have a state by state number for all crypto, whether it's from a kiosk or from another source, and their number there was that there were about 13% of the IC Greet complaints from Vermonters dealt with crypto in some form, whether it was at a kiosk or not at a kiosk. There were $7,500,000 in reported losses related to crypto in Vermont reported to the FBI. Again, if you don't know how many of those were from the kiosks themselves, but if you do the math there, that's an average of $35,000 per loss.

[Senator Thomas Chittenden (Vice Chair)]: So I definitely support extending moratorium, and I'd I'd also support banning these things. Well, you have to remember the testimony we got from the AARP is so much of the clon that happened at small dollar amounts of thousand dollars aren't reported. People are ashamed, and when the 60 are targeting with these things, they don't wanna lose their financial independence, so they don't come forward. This is and the problems are escalating if you do a new search.

[Speaker 0]: So

[Senator Thomas Chittenden (Vice Chair)]: I definitely don't want any more of these, then I'd be happy to shut them

[Joe Valentini (Director of Policy, VT Department of Financial Regulation)]: all down. And the the one other bit that is new Increase. I think two things are new since we met last week. Easy. One was the IC three report. This came out on April 6, but, again, I have to share it with folks. I think the other is that when we entered last week, Indiana had had passed a ban on kiosks in March. Just two days ago, the governor of Tennessee signed into law a bill banning kiosks. There's a law in Minnesota. There's a bill in Minnesota that's passed one house that's under review in the other. Just to say that we wouldn't if you chose to go in that direction, we would not be the first to do so. There are about there are 20 some states that have some form of a protection, you know, generally along the lines of what what Vermont says. It feels

[Senator Ruth Hardy (Member)]: pretty bipartisan too, given those states.

[Speaker 0]: Yeah. I'm gonna move this along because if we are gonna discuss a ban, we're going to have to take more testimony. This bill doesn't have to be out of here by Friday. So if

[Senator Ruth Hardy (Member)]: we're gonna keep going, I'm

[Speaker 0]: gonna finish out the testimony today. We will have to notify the industry, if they aren't watching and don't know already, that this is under consideration, and we'll have I believe he's the gentleman with the glasses that can translate into any language you or from any language into English and other things.

[Speaker 4]: I

[Senator Thomas Chittenden (Vice Chair)]: missed that one.

[Speaker 0]: He's got these new classes that yeah. As you're walking down the street and they're sort of being Swahili, it could translate into English.

[Senator Ruth Hardy (Member)]: How does this relate to crypto?

[Speaker 0]: No. That's just it's the whole tech industry. Yeah.

[Senator Thomas Chittenden (Vice Chair)]: So we got it. That's the. Okay. Got you.

[Speaker 0]: Yes. She will be back.

[Unidentified committee/staff voice]: Are you following? No. Yeah. Okay.

[Speaker 0]: Alright. I bought a pair

[Senator Thomas Chittenden (Vice Chair)]: of those metaglasses, but they don't

[Speaker 4]: need facial recognition, so I no problem.

[Speaker 0]: So, anyway, we will have to let him

[Senator Ruth Hardy (Member)]: know the job. I've got three more

[Speaker 0]: people to get to, and we've got three more items on the agenda. So I'm gonna move this along. I'm gonna go to Christina. Thank you. Thank you. And we will put this on for some time next week. We'll start getting more students. Okay.

[Christopher Mattos (President, Vermont Bankers Association)]: Good afternoon, Madam Chair. Christopher Mattos, your president of Vermont Bankers Association. I'm gonna offer just a couple of comments real quick. With your permission, turn it over to Jeff Esplink and then be in the chair still for any questions or comments. So the particular sections that you were looking at related to banking were thirty six and thirty seven. The first one in 36 dealt with the number of board meetings and what happens during the interim, nobody had any questions related to that. 37 deals with the loan authority, And Jeff is gonna speak to that, and I'll offer any supplemental comments. The one thing I just wanna share with you initially is we would not bring anything to you that was controversial in the DFR bill because it's not a controversial bill and it hasn't been for years. So this is something that we worked with DFR during the fall. Jeff and his folks brought it to DFR. I got involved and the goal was to make sure that we were all in agreement with the process to go forward and that this would be the vehicle. So from the industry's perspective, and mean, mentioned the other day, we'll probably mention today that we're all on board with this, and there's good reasons for us to be on board. And I wanted Jeff to be able to share with you the actual implications in the field that they've been experiencing. With your permission, Robert.

[Speaker 0]: Okay. So Jeff, we just ask you to introduce yourself for the record and tell us who you represent, and the floor is yours.

[Jeff Hessling (Chairman & CEO, The Business Bank)]: Sure, well, thank you very much. I'm delighted to have this chance. This is my first opportunity to speak in front of any sort of legislative committee or board. So thank you. My name is Jeff Hessling. I'm chairman and CEO of the Business Bank. Business Bank was a bank formed just over three years ago in the state of Vermont. I think if Aaron were here, he'd tell you it was the first bank chartered in the state of Vermont in thirty three years or so. So I spent all my life in Vermont banking, former employer was Merchants Bank. That's me and my background. Chris, do you want me to just dive into the topics that the committee focused on last time?

[Unidentified committee/staff voice]: Yep.

[Jeff Hessling (Chairman & CEO, The Business Bank)]: Sure. I think one of them, there was a lot of good questions around proposed change in statute that related to the current statute that says any loan over 10% of the bank's capital must be approved by a board of directors. And what we are proposing is to change that statute and say the board of directors will set the credit policy for the bank based on all of the factors that a board would consider in creating a credit authority policy in a way to get belongs with the board rather than sort of one size fits all state statute. And why that's very, very important for my company, this is the most important part of, I will tell you, for our company, this is the most important part of the proposed statute changes, is this statute that requires a loan over 10% of the capital be approved by the board. And let me tell you why. I started this bank because there was a need in the community. Probably some of you may be aware, but there's been sort of mass consolidation happened in the banking industry in the last thirty years, right? Banks are big, it's a scalable low margin business, it's ripe for consolidation. So what happens in consolidation is decisions get centralized, there's a loss of discretion, and there's significantly reduced service levels for small and medium sized businesses. Those small and medium sized business owners have loan decisions that are made by people they don't know, out of state, and those decisions take a very long time to happen. That's frankly why I raised $35,000,000 from Vermonters and started a bank, was to fill that niche. We take care of small and medium sized businesses, and we do it with speed in decision making, and certainty in execution. We do what we say we're gonna do. And I can't overemphasize, that is our competitive advantage, is that we can take care of our customers with responsive speed. This statute that requires the board of directors to approve loans over 10% of the capital just runs against that. It takes away my competitive advantage. It makes me like, right, because I can't ask the board to be available every day. I've got customers that need me nonstop. So it takes away competitive advantage, and it is, it's untenable. Can't overemphasize the importance of this change to me. And again, the board, the proposals have the credit approval lending authority approved by the board. So the main reason for me is it takes away our competitive advantage. I will also say, and Chris confirmed this, starting twenty years ago, the industry really moved away from board of directors approving loans for the simple reasons they're not qualified. Assessing repayment ability and making loan approval decisions, that takes a lot of experience and skill and training, and bank board directors are just unqualified. They don't have the training and the skill set to do it. And I will tell you, any medium sized bank in the country does not go to the board of directors for loan approvals. Those don't happen. So for me, it's mainly competitive advantage, but I think there's, it's more in tune with sort of prudent business practice. Executives should approve loans. Objectives with the skill set and training should be approving loans. The board should be providing governance and oversight, and that happens very well. There's no proposed changes to that. Banks under statute were required to provide a detailed analysis of loan portfolio to board of directors quarterly. These are all big loans, industry exposures, any problem loans all get reported out. That's, again, no proposed changes to the government oversight, that works perfectly. It's just the proposals to get the board out of

[Speaker 0]: the approval aspect of that. Okay. Just for clarity, and I've got a question. I'm looking at page 51. Correct. And this price, pregnant

[Senator Randy Brock (Member)]: of

[Speaker 0]: ten percent shall be approved by majority. Correct. So your testimony is in support Correct. Of this. Yes. Okay. Great.

[Jeff Hessling (Chairman & CEO, The Business Bank)]: And Exactly. Yeah. It's the most important to yep.

[Senator Ruth Hardy (Member)]: Alright. Senator Hardy. Thank you, madam chair. So, Jeff, thank you for your testimony. My concern was not actually about that piece. It was about If you look I don't know if you have the bill in front of you, but it's lines fifteen and sixteen, or 14 through 16, really. It's the extensions of credit at one time to a borrower in excess of 20% of the bank's capital or to a corporate group in excess of 50% of the bank's capital. And my concern was that that was a lot of risk for a small bank to take on 50% of your capital. And I mean, it's your business, not mine, but I just that I worry about bank failures. So just wondered if you could reassure me on that one.

[Unidentified committee/staff voice]: Yeah. And that's the second So

[Jeff Hessling (Chairman & CEO, The Business Bank)]: that's the second part.

[Unidentified committee/staff voice]: I'm sorry. I'm sorry. And we Derek, will you

[Speaker 0]: I will not have We

[Jeff Hessling (Chairman & CEO, The Business Bank)]: we agree completely. Why why don't I just cover that one too? Because they're kinda related and then I'll happen to answer any questions. So current banking statute says that a bank can't make a loan to a customer or related groups of customers in excess of 20% of the bank's capital. That is a great law. I'm not recommending any changes to that. That should stay. It's proposed to stay. Frankly, you all should know, yes, we are very judicious with our capital and it would be uncommon for a bank to go up to that limit. So there's no proposed changes to that law. What is proposed is this idea of 20% of capital to quote a related borrower, What does that mean? Frankly, the current statutes ambiguous on that point. So we're proposing is let's get super, super clear on what related borrowers are. And we just said best practice, let's adopt the OCC language, which by the way was scrutinized in chains after Dodd Frank, and related borrowers at the highest level committee are defined as borrowers that there's one source of repayment, right? If two companies rely on the same source of repayment, we have to consolidate those for what we call legal lending purposes, This 20% of capital rule. So one source of repayment, financial interdependence, it's pretty broad, so we capture a lot there. Control, one borrower controls another, and then 25% common ownership. Those are the main criteria to say, okay, if there are two, let's say company A and company B meet any one of those criteria, this 20% holds. We cannot put more than 20% of our capital at risk. It would be imprudent to do that. So that's what all that language is, it's just trying to take away the ambiguity and line it up frankly with current tried and true definitions of related borrower. The 50%, that was a great catch. I listened to the the testimony, the recording of the testimony, that was a great catch. Because 50%, you should go, ugh. What is that right? That's too much capital to anyone instead of borrowers. That's, you should know that language is diverted by DFR, Denise Dechains, and it's to address the new world where there are very complicated ownership structures and really sort of private equity or bigger investment groups, right? So take an example of company A and company B, and they don't meet any of those four criteria we talked about, financial interdependence, one source of repayment control, or 25% common ownership. But say for instance, they're in a part of a larger conglomerate or private equity enterprise, where the common controls at the top does bone both of those entities that again didn't trigger the 20%. This 50% is on top of that that says, irrespective of whether they're consolidated by those 20%, if it's owned by this control group that's above them in any other way, there's a further cap. You can't have more than 50% of your capital in that. And today, by the way, a statute doesn't address that. It's unlimited. So when Denise brought this up reflection of really this should change in the world, right, this more privately owned entities and not controlled by one group, but where nobody has 25% ownership, right, it's just reflective of that. So that's where the 50% is. It's on top of the 20%, if you will. There is no proposal that changed to 20%.

[Senator Ruth Hardy (Member)]: Okay. So if I might, just to make sure I'm understanding So this if you have, I'm just gonna use the round numbers. So you, you loan 20% or you extend credit to 20% of your credit to one entity. Then you have another entity that you might extend another 20% to. Then you have a third entity that you would extend 10% to. Then if you climb up the ladder, they're all owned at the very top by the same corporate structure, but down below, they're not. So that's when you would hit the 50%. So beyond that, you can blend

[Jeff Hessling (Chairman & CEO, The Business Bank)]: That's that's what the 50% intended to do.

[Senator Ruth Hardy (Member)]: Okay. And I think I heard you say that this adding these 50% is actually more conservative than current law. Current law, there's no cap. There's no cap.

[Unidentified committee/staff voice]: Is that You do you

[Jeff Hessling (Chairman & CEO, The Business Bank)]: don't agree with that, Chris? Look. I'm not an attorney or a legend. I I hate to be giving you a wreck, but that's my read of it.

[Unidentified committee/staff voice]: So currently statute, there's no cap. And when we looked at this, looking at what the federal banking regulations say, Office of the Comptroller Currency is the language that we work on. They were one of the most conservative ones out there. They have a 50% rule that was just looked at in January 2012 to implement a Dodd Franklin provision. So we said that's the standard for the national banks, parity for the state chartered banks, again, conservative with a cap, seem to make sense. 50% will carry forward in Vermont statute. Right now, there would be nothing.

[Senator Ruth Hardy (Member)]: There's no cap. Okay. And Jeff, as a banker, is it common to get this high in percentages of?

[Jeff Hessling (Chairman & CEO, The Business Bank)]: No, it would be rare for a bank. I can tell you, a merchant's bank, we had 2,000 loan customers, where one or two of them near the 20% maybe, It would be very rare. Your senses are accurate, right? This is a risk business, and having a disproportionate amount of anyone's capital to anyone business, no matter how strong, runs against the principles of diversification and whatnot. So the 20% is a good rule. It's really, this 50% cap I think is good because there's none exist today. And do I think a bank would wanna make loans because again, there's these private equity investment groups that are owned by, maybe there's 101% owners. Maybe they own a widget manufacturer aerospace, and then maybe they own a distribution company that, you know, moves transports, I don't know, something, you know, across the country, we would want to maybe do both of those loans, but to a limit, right? No more than 50% of capital. Again, completely unrelated borrowers, different repayment sources, no control, no interdependence, but if they are owned by one entity, there probably should be a limit on that as well. And as Chris said eloquently, I think, look, the OCC is really, really good at this. They're the most conservative of the regulators, and if they think that's a good limit, what landed well would be too.

[Unidentified committee/staff voice]: Okay. Great. Thank you. Finally say all of that is subject to scrutiny during the examination process where DFR comes in. Okay.

[Jeff Hessling (Chairman & CEO, The Business Bank)]: That's right. That's right. And you also see in the statute, right, that the the as it relates to this, the commissioner has has and should retain the right to say, hey. I can also outside of the the well defined definitions, the commissioner has the right to aggregate credit. Right? And that's part of the exam process that works really well, because you have to be able to apply judgment to these things, right? Yeah. So, and I think that authority is where it belongs, and that's where the commissioner.

[Speaker 0]: Thanks

[Senator Thomas Chittenden (Vice Chair)]: for this testimony. Really resolved any concerns I had from the last time. Thanks for opening up a bank in Vermont. It's been too long. It's

[Speaker 0]: a lot

[Jeff Hessling (Chairman & CEO, The Business Bank)]: of fun.

[Unidentified committee member]: It's been a lot

[Jeff Hessling (Chairman & CEO, The Business Bank)]: of fun. And we've look, the company's grown dramatically, far greater than my expectations, frankly, and that's evidence of a couple of things, right? There's a real need in the marketplace for small and medium sized businesses, and we're happy to fill it. We're doing a nice job. You should know this company didn't exist, today we have a $300,000,000 balance sheet, so we have $250,000,000 in deposits and $200,000,000 in commercial loans, less than 10% out of the state that we are growing to other states because it's worked well, but almost all in Vermont. So we're doing a good job and it feels nice.

[Unidentified committee/staff voice]: Recently used to be the bank of ground, just you should not be familiar with the, oh, made change.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: Think And what is this that?

[Senator Thomas Chittenden (Vice Chair)]: That's right.

[Jeff Hessling (Chairman & CEO, The Business Bank)]: It's called the business bank, because it worked. Model is so much in demand. We've opened an office, and it's gonna be a very nice company. We've opened in Springfield, Massachusetts sort of early last year, and then in the last year, we opened in Portsmouth, New Hampshire. So my beloved Bank of Burlington name didn't travel so well to those other We changed the name to the business bank now, but it's We're going to fill a niche as the consolidation occurs in the banking industry, we're going to take care of small and

[Senator Ruth Hardy (Member)]: medium businesses. Just don't sell yourself to a big big phase. Yeah.

[Unidentified committee member]: Keep your

[Cameron Wood (Office of Legislative Counsel)]: headquarters equal. Yeah.

[Speaker 0]: Yeah. Right.

[Senator Ruth Hardy (Member)]: Stay stay small and nimble

[Unidentified committee/staff voice]: and local.

[Jeff Hessling (Chairman & CEO, The Business Bank)]: I literally built this thing from a back of a napkin. I have no intention. So I worked at Merchants Bank for a large part of my career, and that public company ultimately gets old, and trust you, it is my objective to keep this, not sell this company into Cano to grow and take care of businesses.

[Speaker 0]: Thank I can see that. All set. Chris, any

[Unidentified committee/staff voice]: I'm good.

[Speaker 0]: Fear good? Some vision? Are we good? No? That was the one place I had stars that we had questions. Yeah. So that is helpful. Thank you. You. Okay. Terry.

[Jeff Hessling (Chairman & CEO, The Business Bank)]: Thank you very much. I sign off now, right?

[Senator Ruth Hardy (Member)]: You. Next shift. Go stick.

[Jeff Hessling (Chairman & CEO, The Business Bank)]: Okay. Yeah. I just want to make sure I was doing it right. Thank you all very much for your time.

[Carrie Allen (President, Association of Vermont Credit Unions)]: Bye. Good afternoon, committee. I'm Carrie Allen. I'm the president and the Association of Remote Party. It's nice to meet all of you.

[Speaker 0]: You were the new show.

[Wendy Mays (Executive Director, Vermont Association of Broadcasters)]: Oh, it's the new show.

[Carrie Allen (President, Association of Vermont Credit Unions)]: I yeah. All city haven't been referred. Yes. Well, was in Washington finance. Yeah. I was in Washington earlier this or I guess in March now, and Bernie Sanders said, Joe had much better ties than you did. I was Oh, great. Awesome. Thank you. Yes. So, yeah, I am the new president after forty seven years who had a change in leadership, but certainly long history in Vermont Credit Unions. I was in Natural Person Credit Unions as a senior leader for fifteen years. I was on the board of directors at the association for a dozen years, and I've been on staff for about a year and a half now. So excited to be with you and certainly happy to share the impact to credit unions. We are supportive of the updates in this proposed legislation for Vermont Credit Unions. Four points are reflective of what we see at the federal level for our federal chartered credit unions. And so I think, making sure that we have equity and competitiveness in the chartering system is very important to credit unions. And so we see this as a positive path forward, but certainly happy to answer any questions. I believe that the committee had some questions about the merger update, which was section 42. In the event that there was a proposed merger, that current statute requires state chartered credit unions to receive an affirmative vote from both the surviving credit union membership as well as the merging credit union membership. And the proposal in this legislation is that only the merging credit union members would need to agree to the proposed merger. And again, this is something similar to what we see with federally chartered credit unions. In general, there is little impact beside the potential of growth for the surviving membership. And so we we don't often hear of any concerns from the surviving members. But certainly happy to answer any questions that committee may have around

[Speaker 0]: that or other issues. And just, we haven't done it in a while, Chris is still here, but our regulations regulate state registered banks and credit unions. And so we've been trying to keep the regulations kind of in line so we don't encourage migration to the federal system, which is one reason you'll hear about this. Any questions?

[Carrie Allen (President, Association of Vermont Credit Unions)]: I think I'm just looking at this section and the surviving, quote, unquote, surviving credit union. Usually, the bigger is it usually the bigger one? Like, the smaller one is merging into a big one? Often, although we have seen recently a merger of similar sized credit unions. Mhmm. So it's not necessarily always based on size, but traditionally, that would be the case. And is there a is there ever a case where the surviving one would be destabilized by a merger and might not not want to do it? Or is it usually Well, definitely, is a long vetting process in any merger, and DFR and regulators would be very actively involved to try to assess that. In addition to, a financial analysis, there are other considerations in terms of services provided to the members, whether that's an expanded opportunity, oftentimes to the merging credit union membership. So lots of factors go into it. But, you know, if, for example, there was a financial challenge credit union that was being absorbed in a merger, then there could be an impact to the financial statement. But as I said, that's a very well vetted process, and the regulator, DFR, is very engaged in that process.

[Speaker 0]: Okay. Thanks. Okay. Any other questions? Thank you. Thank you so much. I had hoped to book this out, and we are actually ahead of schedule. You might drop Tanya Morehouse see if she's available. I have this one put on for a vote, but then we dropped the little crypto thing. And, apparently, if we don't do anything, the moratorium ends and then can they come in if we do nothing?

[Unidentified committee member]: July 1, subject to the new projections.

[Speaker 0]: So we need to remove something.

[Senator Ruth Hardy (Member)]: We're moving section 22.

[Rebecca Samrapp (Deputy Tax Commissioner, VT Dept. of Taxes)]: That's right.

[Senator Ruth Hardy (Member)]: And then there was something wasn't weren't we gonna do something with the broadcast section?

[Senator Thomas Chittenden (Vice Chair)]: Well, so this is the banking bill you talked about. The broadcast is on the miscellaneous.

[Speaker 0]: It's on miscellaneous. Oh, right. Is this is DFI. I think the only one in here is crypto.

[Senator Ruth Hardy (Member)]: And then there were And we actually just wanna

[Speaker 0]: do moving 22. Where persons got confused. Oh, we don't

[Unidentified committee member]: There were two items that we had discussed last time. One of them was on, I believe, page two, just changing registration to license, and there was a change on page 72. All of those are with Lyft Counsel.

[Speaker 0]: They're all so Who's the bank account? The with me. Yeah.

[Senator Ruth Hardy (Member)]: Kirby? And Maria. Maria.

[Speaker 4]: Makes a lot

[Senator Ruth Hardy (Member)]: of sense.

[Speaker 0]: That's right. We couldn't get Maria. She's out today, but she I need to follow-up. That's right. I've heard she's in about as good shape as Jimmy. They both got no voice. Oh. Apparently something's going around. Yeah.

[Senator Thomas Chittenden (Vice Chair)]: You said they were in the banking bill, right? We could do it next week?

[Speaker 0]: We can do it, yes. That is not we have to have it out this week. We can't do something to crypto without giving the industry full voice. So I think the Show Dice Association is their lobbyist. We had there was last year, and we'll let her know that we're gonna make a decision to kill them or turn it wide open or extend the just the you know, just extend the tool we've got for x amount of time. So I think that's we've got a couple technical changes. I think that's all we have with that bill. So while we're waiting for the I can give you a break, but I have another bill on to be voted out. It needs to be out this week, and that is the yield bill. Is has a couple things in it, so I need you to know what you want, and then I'll give you a ten minute break. It has the workaround for the transferrin bill, which adjusts it puts in more That's in the yield bill? Believe that's in the yield bill.

[Senator Thomas Chittenden (Vice Chair)]: Mean, that's in

[Speaker 0]: No. The No. That's the thisylane. Okay. Then the one thing in the yield bill, There's too many interrelated bills. One thing in the yield bill that and I have a feeling it's an up or down vote. The yield bill uses the million plus or minus dollars from last year's surplus to buy down property tax, it spreads it over two years. A 100,000,000. A 100,000,000. It's like 52 this year. $524,000,000. Yeah. It's it it spreads it out, which means there's less of a decrease this year, and the numbers are there. I think it's something like the average is seven percent as opposed to three. If we do it, it's like a 3% average, 3%. So that means some are gonna be higher. So it's three or seven. And if we do seven, then some will be at the double digits in all probability. If you see That that is the one thing in there, and I don't I have a feeling that witnesses aren't going to change anything, then that's going to be an up or down vote. So I'd like to get that on for both so we get one bill out of here. And with that, I will give you a ten minute break to meditate on that cortisol and maybe stretch your legs, and then we'll come back. We're gonna give Tanya on the Burlington shift, which I'm looking at the makeup of this committee.