February 5, 2021
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.
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
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. 
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. 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.
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. 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 districts 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. 
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 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. 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 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 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.  
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. 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 Vermont Chamber recognizes the value of attracting new families to live and work in Vermont and fully supports programs to improve and expand workforce.  
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.  
The Vermont Chamber of Commerce is collecting resources for employers and businesses throughout Vermont, produced by the Chamber and externally. View this week's roundup for information about a presentation to the House Health Care Committee by Middlebury College Professor of Economics Jessica Holmes and the recording from this week's seminar in our Economic Conference, featuring Administration Secretary Susanne Young, Finance and Management Commissioner Adam Greshin, and Tax Commissioner Craig Bolio. If you are interested in submitting helpful content to our resource roundup, please send it to us by email.
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In business since 1912, the Vermont Chamber of Commerce is a private, not-for-profit business organization with 1,500 members employing 45,000 people and representing all sectors of the state's economy. Our mission is to create an economic climate conducive to business growth and the preservation of the Vermont quality of life. Copyright ©2018 The Vermont Chamber of Commerce. All Rights Reserved.

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