In a major shift from earlier proposals, the latest version of Vermont’s education reform bill no longer includes a separate tax category that would have targeted businesses. This change follows sustained advocacy from employers across the state and represents a significant shift for Vermont’s business community.

Following heavy outreach from businesses, the conference committee on H.454 has adopted a new draft that eliminates the creation of a standalone “business” tax class. Instead, the latest version consolidates commercial, industrial, and rental properties into a single nonhomestead nonresidential category, replacing the four-tier classification system with a three-tier classification system.

What the New Language Does

The revised draft includes detailed implementation rules for how real estate will be classified for property tax purposes, beginning with calendar year 2027:

• Every parcel on the grand list will be assigned one or more of three general classes:
  • Homestead: A parcel or portion of a parcel declared as a homestead by October 15.
  • Nonhomestead Residential: Year-round dwellings where no homestead was declared, and no long-term lease was reported.
  • Nonhomestead Nonresidential: All other property not meeting the definitions above, including businesses.
• Parcels with multiple uses will be classified proportionally based on the floor space used for each purpose. However, if a homestead contains 25% or less business use, it will still be treated fully as a homestead.
• Listers and assessors must update the grand list annually by June 1, with updates allowed after that date if taxpayers file or correct their declarations.
• The Commissioner of Taxes will amend and issue new forms for classification and will collect data in 2027 to assign and report classifications statewide by October 1 of that year.

Appeals of property classifications can be made through the existing valuation appeal process. These provisions do not impact the treatment of parcels enrolled in Vermont’s current use (use value appraisal) program.

A Step in the Right Direction

While this adjustment resolves the most significant concern for Vermont businesses in H.454, the bill remains large in scope. The revised classification system still segregates second homes as a standalone classification, raising long-term concerns about the sustainability of a model that places increasing financial pressure on second home property owners, particularly in communities that depend on tourism and second home investment.

Moreover, the broader challenge remains: Vermont’s education finance system continues to struggle under the weight of high and rising costs. Rather than restructuring who pays more, long-term reforms must focus on what is being spent and why. Cost containment, not cost shifting, must be the foundation of future action.

What’s Next

The H.454 Committee of Conference continues to remain at odds on other areas of the bill but is expected to finalize the full bill before Monday, June 16, when the Legislature reconvenes to pass a final education funding package and adjourn for the session. The Vermont Chamber will continue to monitor the negotiations and advocate for a fair, sustainable system that shares responsibility across all property types, and does not jeopardize the state’s economic competitiveness.

In the meantime, Vermont’s business community recognizes and appreciates the lawmakers who listened to Vermont employers and revised the bill in response to real-world concerns. This outcome reflects the power of direct advocacy and the importance of Vermont businesses remaining active participants in shaping the policy decisions that affect them.