Vermont Chamber Advocates for Additional Business Grants
House Committee Briefed on State of Manufacturing
Temporary Workers’ Compensation Changes Extended
Expansion of Manufacturing Tax Exemption Essential for Economic Development
Connectivity Bill Would Establish Broadband Oversight Authority
Higher Education: The Vermont State College, UVM, and VSAC
Ways and Means Considers Changes to Corporate Income Tax
Senate Committee Moves to Codify Remote Worker and Relocation Programs
House Committee Works to Understand Restaurant Industry Developments
Resource Roundup
In Case You Missed It
Vermont Chamber Advocates for Additional Business Grants
Charles Martin, Vermont Chamber of Commerce Government Affairs Director, testified in the House Committee on Commerce and Economic Development in support of the Scott Administration’s request for economic recovery grants to provide aide to pandemic-impacted businesses left out of federal and state programs. The testimony highlighted the reality that small employers, new businesses, seasonal businesses, existing businesses that changed ownership, growth businesses, and others that may have not had the time or resources necessary to navigate application processes, are some of those who were left out of one or more previously established relief programs. Business owners also testified in support of the proposal to increase the Committee’s understanding of factors impacting eligibility.
Many businesses are bracing for continued operating restrictions and reduced economic activity, even as vaccinations roll out. The Vermont Chamber will continue to prioritize advocacy for relief programs that provide a level of predictability and stability for businesses as they face an uncertain future.
House Committee Briefed on State of Manufacturing
The House Committee on Commerce and Economic Development heard updates from the Vermont Manufacturing Extension Center (VMEC) and AIV on the state of Vermont manufacturing. Manufacturing is a $3 billion industry in Vermont, representing 9% of the state’s Gross Domestic Product (GDP) and 1,200 companies with a combined total of 30,000 Vermont employees. In 2020, the pandemic’s impact to manufacturing included a 15% workforce reduction, which has rebounded by 60% since June. A pivot by manufacturers to online commerce, defense contracting, cybersecurity compliance, increased automation, and digitization of the supply chain has also aided recovery. The pandemic has also accelerated the adoption of Industry 4.0 and trends that favor artificial intelligence, 3-D printing, and augmented reality. Throughout this paradigm shift, the Vermont Chamber of Commerce, VMEC, and AIV have worked together on the COVID-19 sub-taskforce supporting Governor Scott’s Restart Vermont Guidance Advisory Council for Manufacturing, helping develop phased reopening policies and long-term economic recovery planning. While the overall industry remains stable, companies are cautious and continue to face challenges with finding skilled labor. The opportunity to hire and train Vermonters from more heavily impacted industries, such as hospitality and tourism, was discussed as an emerging trend to address labor shortages in the manufacturing sector. To learn more, please contact Vermont Chamber Vice President of Business Development Chris Carrigan.
Temporary Workers’ Compensation Changes Extended
Governor Scott signed a bill that continues certain workers’ compensation amendments related to COVID-19. The move extends a sunset on the temporary expansion of workers’ compensation eligibility enacted last year. The extension provides a continued rebuttable presumption that certain workers who contract COVID-19 are presumed to have contracted the disease at work, qualifying them for compensation. The extension allows this provision to remain in place until 30 days after the conclusion of the Governor’s state of emergency declaration. State officials have pointed out that outbreaks of COVID-19 are largely occurring through community transmission, rather than at workplaces operating in compliance with state and federal health and safety requirements.
Citing the potential for cost increases in workers’ compensation insurance rates, the Vermont Chamber worked to limit the scope of the bill last session. Changes passed this week extend the time in which the legislation is valid, without expanding its scope.
Expansion of Manufacturing Tax Exemption Essential for Economic Development
The Department of Taxes proposed an expansion of the Manufacturing Tax Exemption in the House Committee on Ways and Means. The expansion includes machinery and equipment used as an integral or essential part of an integrated production operation. This proposal is a move away from taxation at consumption theory and direct use standard to an integrated plan that proposes to make tax exempt the ancillary processes that occur throughout the manufacturing process, from raw materials in the beginning to the final product and packaging. To qualify for exemption these processes must protect the quality of the product and be part of the integrated production operation. Examples include air quality, cooling, heating, waste removal, and cleaning. Additional processes that occur after packaging, such as testing, inspection, quality control, and secondary packaging would also be exempt from the use tax under this proposal. According to the Department of Taxes, the use tax is a difficult audit area with taxpayer appeals and approximately 18 audits annually. It can also be vexing for taxpayers and small companies that do not have use and sales tax expertise.
The Vermont Chamber supports this proposal, as it would make Vermont competitive with the 33 states that have such an exemption, while also contributing to the growth of Vermont’s $3 billion manufacturing industry. Expansion of the tax exemption would also serve as an economic development tool to attract, recruit, and retain manufacturers, provide Vermonters with high-paying jobs, and grow our economy. To learn more, please contact Chris Carrigan.
Connectivity Bill Would Establish Broadband Oversight Authority
The House Committee on Energy and Technology continued review of a bill that would significantly limit eligibility for accessing State-administered financial resources for broadband projects. The bill also seeks to establish an 11-member board to administer a new Vermont Community Broadband Authority that would be responsible for a proposed Vermont Community Broadband Fund and Community Broadband Innovation Grant Program. Under the bill, the Authority would also take over administration of the previously established Connectivity Initiative. The legislation reduces the ability of the State to support connectivity investments in projects proposing less than 100 Mbps symmetrical speeds and amends the Broadband Expansion Loan Program to narrow eligibility for loans to communication union district borrowers alone. Current potential borrowers under the Broadband Expansion Loan Program include other units of government, cooperatives, for profit businesses, and nonprofit organizations. Further, the legislation would transfer Department of Public Service owned fiber-optic assets to the communications union district where those assets are located.
The expansion of broadband around Vermont requires equitable access to financing opportunities for both public and private entities. While the Vermont Chamber fully supports expanding broadband access to all Vermonters, we have serious concerns about limiting the feasibility of public and private partnerships in this area.
Higher Education: The Vermont State College, UVM, and VSAC
The pandemic has taken a toll on higher education in Vermont, impacting operations and enrollment. The Vermont State College (VSC) system is working to reimagine their future for students, the state, and their long-term sustainability. This week, Chancellor Sophie Zdatny requested $81 million in state funding for FY22, up from the annual appropriation of $30 million. While some of the increase will be funded through federal relief funds and a current year budget adjustment, a total of nearly $37 million more is needed. The Governor proposed $20 million more toward VSC in his budget announced last week. While this is a significant budget request, most legislators and policy leaders understand the importance of higher education to the state and particularly to the communities in which they are located. Chancellor Zdatny said that VSC is currently too big for the number of students they serve, and as they look at the reducing campus sizes, they are prohibited from abandoning leases without legislative approval. They are investigating innovative uses of buildings to house businesses where students could work and possibly housing for non-students.
University of Vermont President Suresh Garimella also addressed the committee, presenting UVM’s metrics on students and economic impact, noting half of Vermonters don’t pay tuition and 91% get financial aid scholarships. The 2020 Impact Report featured the opening of the Office of Engagement which is supported by a $1 million appropriation in the Governor’s budget to develop a talent and workforce pipeline, help UVM students find employment, and aid employers in understanding how to work with students. The Office of Engagement also plans to bring in grants and work with businesses, creating a significant increase in research and development in Vermont.
The Vermont Student Assistant Corporation’s (VSAC) mission is to create education opportunities for all students. Last year, the VSAC scholarship program provided awards worth $6.1 million. Their smallest and newest program provides microgrants of up to $400 for food, housing, and technology to help meet unexpected expenses. Meanwhile, their traditional full-time grant program funds 7,500 students pursuing degrees. The advancement grant allows students to take a non-degree training program or to apply to Vermont Community College. In the last 10 years, this program has grown by almost 40%, and additional opportunities for training exist. In Vermont, 55% of students go to 2–4-year colleges vs. 40% of students nationally. Nationally, 26% of students consider a 2-year degree, while in Vermont only 7% of students do.
Ways and Means Considers Changes to Corporate Income Tax
The House Committee on Ways and Means considered two changes to the tax treatment of corporate income that could be helpful to businesses. Currently, Vermont uses a three-factor calculation using a combination of sales, property, and payroll to apportion corporate income with a double weight on sales. Most states are moving toward a single-sales factor. Vermont is the only state in New England that continues to use a three-factor calculation. This increased utilization of single sales factor in other states creates a potential disincentive for jobs and property to locate in Vermont, because in a three-factor formula (property, payroll, and sales), the company’s taxes increase when additional payroll and property is placed in Vermont. The Committee is also reviewing the difference for the apportionment factor calculation between the “Joyce” method and the “Finnigan” method, with the former being calculated by each taxable entity separately and the latter calculating apportionment as a single taxable entity.
Another area for review that could be helpful to business is the throwback rule requiring a company to add income earned in another state to its Vermont state tax base if the other state chooses not to tax that income or is prohibited from doing so federally. This makes a Vermont company’s tax liability dependent on how it is measured in another state. The elimination of the throwback rule could also align with Vermont’s move to market-based sourcing for sales of services and intangibles.
Senate Committee Moves to Codify Remote Worker and Relocation Programs
The Senate Committee on Economic Development reviewed legislation to codify the remote worker and relocation programs that were both successful prior to pandemic. The Scott Administration proposed adding $500,000 to this program to award incentive grants to qualifying new employees who may receive up to $7,500 if they become a resident of certain rural areas in Vermont. Individuals who settle in other areas will receive a maximum of $5,000. To qualify, a new worker must be a full-time resident and full-time employee of a Vermont business. Remote workers also need to perform the majority of their employment duties remotely from a home office or a co-working space located in Vermont. Qualifying expenses include relocation costs, connectivity, specialized tools, and more.
Commissioner of Economic Development Joan Goldstein highlighted the success of the program that resulted in 586 new Vermonters, a figure that includes both grantees and their families. Any new funds should include a set-aside for BIPOC workers, targeted marketing for veterans, nurses, tradesmen, and educators, where some of the greatest workforce needs exist. In additional testimony related to workforce, the Committee also heard from Sarah Buxton, State Director of Workforce Development, who highlighted programs in the Department of Labor aimed at connecting businesses with job seekers through labor exchange platforms and direct recruitment. The Department also connects job seekers with employment opportunities through the provision of information and basic career services. Career services include training programs, funds for supplies and equipment, on the job training funding, and more. The Vermont Chamber recognizes the value of attracting new families to live and work in Vermont and fully supports programs to improve and expand workforce.
House Committee Works to Understand Restaurant Industry Developments
The House Committee on Ways and Means continued discussions regarding the tax treatment of third-party meal delivery platforms. Language proposed in the Miscellaneous Tax bill would clarify that online delivery platforms are required to collect the Meals and Rooms Tax on transactions completed on their platform, including service and delivery charges. This largely mirrors tax treatment applied through other third-party platforms. The Joint Fiscal Office presented an analysis of how Vermont’s approach compares to other states.
The Committee formed a working group to gain a better understanding of third-party delivery platforms and impacts on Vermont’s restaurant industry. In partnership with Vermont Independent Restaurants (VTIR), the Vermont Chamber will continue to engage with the Committee on this issue. If you have questions or concerns about this issue, please contact Vermont Chamber Vice President of Tourism Amy Spear.
Resource Roundup
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VT Economic Conference Recording: Funding Vermont Through the Crisis
About 150 attendees joined the Vermont Chamber on Wednesday for our Vermont Economic Conference seminar, where they heard from Administration Secretary Susanne Young, Finance and Management Commissioner Adam Greshin, and Tax Commissioner Craig Bolio. The discussion included the overall picture of our state’s budget, Governor Scott’s one-time initiatives in the FY22 Budget, and plans for future business relief grants. Watch the recorded event.Register for the rest of our Vermont Economic Conference through February 17. - Middlebury College Professor of Economics Jessica Holmes gave a presentation this week to the House Health Care Committee on Understanding the Market for Health Care and Performance of the U.S. Health Care System. You can watch it here.
- NAMI Vermont is a non-profit organization that supports, educates, and advocates so that all communities, families, and individuals affected by mental illness or mental health challenges can build better lives. NAMI offers multiple support groups that meet each week to provide an ongoing opportunity to discuss the challenges of living with a mental health condition and techniques for maintaining wellness. Learn more about the groups and joining the meetings at namivt.org and https://namivt.org/support/peer-support-groups/.
In Case You Missed It
- Senate Rejects Governor’s Executive Order to Restructure Act 250 Review
- Lawmakers Call for Investigation of Department of Labor Data Breach
- Scott Predicts No Increase in Property Taxes
- Vermont Businesses to See Decrease in Workers' Comp Rates for 5th Year in a Row
- How the State Decided Who Should Get the Vaccine First
- In a Remote Democracy, Lobbyists Adapt to Remain Relevant
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