Important Changes To Vermont Corporate Income Tax

AAFCPAs would like to make clients aware, if you are subject to Vermont’s corporate income tax, there are several significant changes instituted pursuant to S.B 53, an act relating to changes to Vermont corporate income tax and conformity to federal tax laws, which will be effective for tax years beginning on or after January 1, 2023.

MINIMUM TAX

Under current law, the highest minimum tax is $750 for corporations with Vermont gross receipts over $5M. Under S.B. 53, the tiers will be as follows:

• $100 tax for Vermont gross receipts from $0 to $500,000
• $500 tax for Vermont gross receipts from $500,001 to $1 million
• $2,000 tax for Vermont gross receipts from $1,000,001 to $5 million
• $6,000 tax for Vermont gross receipts from $5,000,001 to $300 million
• $100,000 tax for Vermont gross receipts greater than $300 million.

APPORTIONMENT

Under S.B. 53, the apportionment formula will change from a three-factor, double weighted sales factor to a single sales factor. In addition, Vermont will no longer require corporations to “throw back” to Vermont sales of property shipped from Vermont into a state where the corporation is not taxable.

REPEAL OF FOREIGN CORPORATION EXCLUSION

Under current law, domestic or foreign affiliated entities with 80% or more of their payroll or property sourced outside of the US are excluded from a Vermont affiliated group. Under S.B. 53, all foreign corporations will be excluded from a Vermont affiliated group regardless of their US activity.

IRC CONFORMITY

References to the Internal Revenue Code are updated to the IRC as amended through December 31, 2021 (previously December 31, 2020).

These changes are an important consideration in any tax forecasts or planning that include state effective rate calculations.

If you have any questions or need help managing your tax compliance, please contact Kelly Zack, MST at kzack@aafcpa.com, 774.512.4001; or your AAFCPAs Partner.