§ 5920. Returns and mandatory payments

(a) A partnership or limited liability company, which engages in activities in Vermont that would subject a C corporation to the requirement to file a return under section 5862 of this title, shall file with the Commissioner an annual return, in the form prescribed by the Commissioner, on or before the due date prescribed for the filing of the entity's federal return. The return shall set forth the name, address, and Social Security or federal identification number of each partner or member; the partnership or limited liability company income attributable to Vermont and the income not attributable to Vermont with respect to each partner or member as determined under this chapter; and such other information as the Commissioner may by rule prescribe. The partnership or limited liability company shall, on or before the day on which such return is filed, furnish to each person who was a partner or member during the year a copy of such information shown on the return as the Commissioner may by rule prescribe.

(b) The Commissioner may permit a partnership or limited liability company to file composite returns and to make composite payments of tax on behalf of some or all of its nonresident partners or members. In addition, the Commissioner may require a partnership or limited liability company that has in excess of 50 nonresident partners or members to file composite returns and to make composite payments at the middle marginal rate on behalf of all of its nonresident partners or members.

(c) With respect to each of its nonresident partners or nonresident members, a partnership or limited liability company shall for each taxable period be liable for all income taxes, together with related interest and penalties, imposed on the partner or member by Vermont with respect to the income of the partnership or limited liability company. A partnership or limited liability company shall declare estimated tax, and shall pay estimated tax, including applicable interest and penalties, on such liability in the manner and at the times specified in subchapter 5 of this chapter; provided, however, that a partnership or limited liability company with a single partner or member and a tax liability under this section of $250.00 or less in the prior year, and a partnership or limited liability company with two or more partners or members and a tax liability under this section of $500.00 or less in the prior year, may file the entire estimated amount on or before the fourth payment date, January 15. As used in this subsection, "estimated tax" as used in subchapter 5 of this chapter shall mean an amount equal to the next-to-lowest marginal tax rate prescribed under section 5822 of this title, multiplied by the partner's or member's pro rata share of the income attributable to Vermont.

(d) If interest or penalty is imposed upon a partnership or limited liability company for any underpayment of estimated tax under subsection (c) of this section, no interest or penalty shall be imposed upon a partner or member for underpayment of estimated taxes relating to the partner's or member's pro rata share of the income attributable to Vermont to which the interest or penalty relates. If a partnership or limited liability company shows to the satisfaction of the Commissioner that interest or penalties have been assessed against it in excess of the interest or penalties which would have been applied against the combined, actual tax liabilities of all nonresident partners or members, the Commissioner shall abate such excess interest and penalties. Nothing in this subsection shall be construed as authorizing a partnership or limited liability company to reduce its estimated tax payments.

(e) Any amount paid by the partnership or limited liability company to Vermont pursuant to this section shall be considered to be a payment by the partner or member on account of the income tax imposed on the partner or member for the taxable period pursuant to section 5822 of this title. A partnership or limited liability company shall be entitled to recover a payment made pursuant to this section from the partner or member on whose behalf the payment was made.

(f)(1) Subsection (c) of this section shall not apply to a partnership or limited liability company engaged solely in the business of operating one or more affordable housing projects in this State, provided such partnership or limited liability company shall notify its nonresident partners or nonresident members of their obligation under subchapter 6 of this chapter to file Vermont personal income tax returns and under subchapter 2 of this chapter to pay a tax on income earned from such investment; instruct each nonresident partner or nonresident member to pay such tax; and in addition to filing copies of all schedules K-1 with its partnership or limited liability company return shall file with the Commissioner segregated duplicate copies of all nonresident schedules K-1. In this subsection, "affordable housing project" means a rental residential development that is intended primarily to benefit low income Vermont residents throughout the period of the investment and that is subject to one or more of the following:

(A) a housing subsidy covenant that has been granted to the Vermont Housing and Conservation Board;

(B) a regulatory agreement or LIHTC housing subsidy covenant that has been granted to the Vermont Housing Finance Agency;

(C) a housing assistance payment contract with the U.S. Department of Housing and Urban Development pursuant to 24 C.F.R. Part 883;

(D) a regulatory agreement that has been granted to the Farmers Home Administration of the U.S. Department of Agriculture.

(2) In this subsection, "low income" means income that is less than or equal to area median income based on statistics from State or federal sources.

(g)(1) Subsection (c) of this section shall not apply to a partnership or limited liability company engaged solely in the business of operating one or more federal new market tax credit projects in this State, provided such partnership or limited liability company shall:

(A) notify its nonresident partners or nonresident members of their obligation under subchapter 6 of this chapter to file Vermont personal income tax returns and under subchapter 2 of this chapter to pay a tax on income earned from such investment;

(B) instruct each nonresident partner or nonresident member to pay such tax; and

(C) in addition to filing copies of all schedules K-1 with its partnership or limited liability company return, file with the Commissioner segregated duplicate copies of all nonresident schedules K-1.

(2) As used in this subsection, "federal new market tax credit project" means a business that is intended primarily to benefit low income Vermont residents throughout the period of investment and that is subject to the following:

(A) has been determined by the U.S. Department of the Treasury to be a community development entity;

(B) has been awarded an allocation of federal new market tax credits under 26 U.S.C. § 45D; and

(C) is a partnership or limited liability corporation which is a pass-through of the federal new market tax credit to the nonresident investor.

(h)(1) Notwithstanding any provisions in this section, a publicly traded partnership as defined in 26 U.S.C. § 7704(b) that is treated as a partnership for the purposes of the Internal Revenue Code is exempt from any income tax liability and any compliance and payment obligations under subsections (b) and (c) of this section if information required by the Commissioner under subdivision (2) of this subsection is provided by the due date of the partnership's return.

(2) Publicly traded partnerships shall provide to the Commissioner in an electronic format, according to rules or procedures adopted by the Commissioner, an annual return that includes the name, address, taxpayer identification number, and other information requested by the Commissioner for each partner with Vermont source income in excess of $500.00.

(3) A lower-tier pass-through entity of a publicly traded partnership may request from the Commissioner an exemption from the compliance and payment obligations specified in subsections (b) and (c) of this section. The request for the exemption must be in writing and contain:

(A) the name, the address, and the account number or federal identification number of each of the lower-tier pass-through entity's partners, shareholders, members, or other owners; and

(B) information that establishes the ownership structure of the lower-tier pass-through entity and the amount of Vermont source income.

(4) The Commissioner may request additional documentation before granting an exemption to a lower-tier pass-through entity. As used in this subsection, a "lower-tier pass-through entity" means a pass-through entity for purposes of the Internal Revenue Code, which can include a partnership, S corporation, disregarded entity, or limited liability company and which allocates income, directly or indirectly, to a publicly traded partnership. The exemption under subdivision (3) of this subsection shall only apply to income allocated, directly or indirectly, to a publicly traded partnership.

(5) If granted, the exemption for the lower-tier pass-through entity shall be effective for three years following the date the exemption is granted. At the end of the three-year period, the lower-tier pass-through entity of a publicly traded partnership shall submit a new exemption request to continue the exemption. The Commissioner may revoke the exemption for the lower-tier pass-through entity if the Commissioner determines that the lower-tier pass-through entity is not satisfying its tax payment and reporting obligations to the State with respect to income allocated, directly or indirectly, to nonresident partners or members that are not publicly traded partnerships. (Added 1995, No. 169 (Adj. Sess.), § 24, eff. May 15, 1996; amended 1997, No. 50, §§ 21, 22, eff. June 26, 1997; 1999, No. 119 (Adj. Sess.), § 3b, eff. May 18, 2000; 2005, No. 14, § 4, eff. May 3, 2005; 2005, No. 207 (Adj. Sess.), § 2, eff. May 31, 2006; 2011, No. 45, § 21, eff. May 24, 2011; 2011, No. 143 (Adj. Sess.), § 17, eff. May 15, 2012; 2015, No. 57, § 70, eff. June 11, 2015; 2015, No. 97 (Adj. Sess.), § 66; 2019, No. 51, § 10, eff. June 10, 2019.)