The new law modifies Vermont's corporate minimum tax structure by increasing the minimum tax for C corporations with Vermont gross receipts exceeding $500,000. These changes brought about by 2022 VT SB 53 are effective for tax years beginning on or after January 1, 2023. The VT DOT has until January 15, 2024, to report to the Vermont House Committee on Ways and Means and its Senate Committee on Finance any proposed rules and any recommended legislative changes. The new law requires the Vermont Department of Taxes (VT DOT) to adopt rules on the changes made to the state's unitary combined reporting provisions, including the transition to the Finnigan methodology, in apportioning sales to the state. Thus, if one member of the unitary group has nexus with Vermont, then the Vermont sales factor numerator will include the Vermont sales of tangible personal property of all members of the unitary group. Thus, any such Vermont state tax credits cannot be combined to offset the income of other members of the group.įor purposes of determining the sales factor in a combined report, Vermont will switch from the Joyce methodology to the Finnigan methodology. State tax credits, however, are limited and can only be used by the group member to which the credit is attributed. The income, gain or losses of the combined reporting group members must be combined to the extent allowed under the IRC, as if the combined group were filing a consolidated return. Section 5862(d)text.) The new law further requires the unitary combined return to include the income and apportionment factors of any taxable corporation that has a unitary relationship with the taxpayer and is incorporated in the US or formed under the laws of any state, the District of Columbia or any US territory or possession. Under the new law, the definition of "overseas business organization" is repealed and the definition of "affiliated group" 2 is amended to specifically exclude "foreign corporations" instead of "overseas business organizations." Consequently, the new law will require overseas business organizations previously excluded from the Vermont combined reporting group based on foreign activity to be included in such a group going forward.Īs revised by the new law, " taxable corporation that is part of an affiliated group engaged in a unitary business shall be treated as a single taxpayer and shall file a group return containing the combined net income of the affiliated group … " (Italics indicates text added to 32 V.S.A. Specifically, an "overseas business organization" (i.e., a business organization with 80% or more of its payroll and property outside the 50 states and the District of Columbia) was historically excluded from a Vermont combined reporting group if certain tests were met. Corporations subject to apportionment must still report in-state and out-of-state property and payroll information to the tax commissioner.Įffective for tax years beginning on or after January 1, 2023, the new law repeals Vermont's so called "80/20" provisions. The law also repeals Vermont's throwback rule, which required sales of tangible property to be included in the Vermont sales factor numerator if the property was shipped from Vermont and (1) the corporation is not taxable in the destination state, or (2) the purchaser is the US government. 148 (2022 VT SB 53 or new law)), 1 makes significant changes to the state's corporate income tax laws and updates the state's conformity to the Internal Revenue Code of 1986, as amended (IRC).Įffective for tax years beginning on or after January 1, 2023, Vermont will shift from a three-factor (i.e., property, payroll and double weighted sales) formula for apportioning income to a single sales factor apportionment formula. Vermont enacts significant corporate income tax changesĪ new Vermont law (2022 Vt.
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