2018 Vermont Legislative Wrap-up

Here are some highlights from the final days of the Vermont Legislative Biennium. There is bound to be a special “veto” session sometime in the coming weeks.

  • Vermont Legislature Adjourns as Veto Threat Looms (7Days)
  • Top Ten Bills Approved by the Vermont Legislature (VTDigger)
  • The Debate Over How the Minimum Wage Bill Would Impact the State (VPR)
  • A Five Minute Wrap-Up on What Got Done (VPR)

According to VTDigger.org: At least a third of the top bills face a veto threat. In March, Gov. Phil Scott vowed to veto any legislation that has an increase in taxes and fees. Lawmakers did not reach a deal with the governor on budget and taxes, and Senate President Pro Tem Tim Ashe and House Speaker Mitzi Johnson have said they will not schedule a veto session. That means the governor will have to call lawmakers back for a special session to allow lawmakers to pass new budget and other bills with a simple majority vote. (In a veto session, they can only take up legislation that the governor has vetoed and a two-thirds vote is required for passage.) Scott and the legislative leadership have been at an impasse for weeks and have not even begun bargaining over a compromise. If they can’t agree to a solution before the end of the fiscal year on June 30, the state faces the threat of a government shutdown. Read More.

For those who have been following H.911, the income tax and education financing bill, the Conference Committee approved a cap on charitable giving up to $20,000 each year, which will now be subject to a 5% cap for all taxpayers.

Christine Zachai of Forward Philanthropy is now actively advocating against the cap with the Executive Branch:

I’m writing to ensure that you know about legislation just passed in the Statehouse that affects your donors’ charitable deduction. H. 911 eliminates the state charitable deduction, and substitutes a 5% tax credit with a cap of $20,000. This means that a donor will receive 5% of the total value of their annual giving as a tax credit, up to $20,000.

The good news is that this tax credit will be available to all donors, regardless of whether a donor itemizes. The bad news is that a donor who gives $20,000 annually will receive the maximum $1,000 tax credit; any giving over $20,000 annually will receive no tax benefit.

Not only will this affect the incentive for donors who give to your annual campaigns and capital campaigns, it will likely also affect the willingness of donors to donate land or easements, or engage in bargain sales. It also reduces the incentive for donors to dedicate significant new assets to charity through the establishment of foundations or donor advised funds.  

The Legislature just sent this bill to Governor Scott on Saturday. Fortunately, Governor Scott had originally proposed this charitable tax credit months ago, with no cap. Because the majority of H.911 deals with an update to our income tax system, and education financing, the Governor has already strongly indicated he will veto this bill.

I have been advocating in the Legislature, and will now turn my attention to the administration. If expressing your opinion on this legislation feels right to you,

my lobbyist friends suggest that the nonprofit community consider two actions:

1) Write a letter to the Governor, expressing your appreciation for the Governor’s support for a 5% tax credit with NO CAP. You might consider joining forces and writing a joint letter signed by as many of your nonprofit peers as possible.

2) Write letters to Representative Ancel explaining the specific impact of a cap on the charitable tax credit on your nonprofit. You might want to articulate the impact on land trusts’ ability to conserve land, and to raise cost-effective funds from major donors.

For additional background on this legislation:

Seven Days article:

https://www.sevendaysvt.com/OffMessage/archives/2018/04/19/nonprofits-urge-vermont-lawmakers-to-ditch-tax-change

Common Good article, including a number of helpful links:

http://blog.commongoodvt.org/2018/05/senate-finance-committee-removes-charitable-giving-cap-on-h-911-but-anticipates-a-long-road-ahead/

Interview with Representative Janet Ancel, Chair of House Ways and Means, the primary proponent of the cap on the tax credit (she’s at 6:40 in this video, just fast forward):

https://www.cctv.org/watch-tv/programs/legislative-update-closer-look-h-911-proposing-changes-personal-income-tax-and-edu

Final language for H.911:

(3) Individuals shall receive a nonrefundable charitable contribution credit against the tax imposed under this section for the taxable year. The credit shall be five percent of the first $20,000.00 in charitable contributions – 4486 – made during the taxable year that are allowable under 26 U.S.C. § 170. This credit shall be available irrespective of a taxpayer’s election not to itemize at the federal level.

https://legislature.vermont.gov/assets/Documents/2018/Docs/CALENDAR/sc180512.pdf#page=1

Last, while lifting the cap created an $8MM in lost revenue, the Senate passed a bill with no cap that was revenue neutral by reducing the tax cut for the wealthiest Vermonters. So, the Senate’s approach creates tax policy that incentivizes philanthropy. The House’s proposal gives wealthy Vermonters a larger tax cut. The compromise legislation that passed, with a $20,000 cap, does not incentivize major gifts.

 

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