Vermont Business Income Tax Return Instructions (For Subchapter S Corporations, Partnerships, And Limited Liability Companies)

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Federal Information – The first 5 pages of the federal

parent’s Federal return. A consolidated Vermont return must include

income tax return filed (1065 or 1120S). Federal Schedule

only entities that have income allocated or apportioned to Vermont.

K‑1s are not required with the original filing. However, the

Attach a statement to the BI‑471 including the name and FEIN of all

Vermont Department of Taxes reserves the right to require

companies included in the consolidated return. Once the election

to file consolidated has been made, entities must continue filing

a complete copy of the federal income tax returns and all

federal schedules at any point during review or audit of

on a consolidated basis until the Commissioner of Taxes authorizes

the Vermont filing.

separate filing.

Estimated Taxes and Estimated Payments

Composite Returns

For tax years beginning January 1, 1997, Subchapter S Corporations,

(See Technical Bulletin (TB-05)

Partnerships and Limited Liability Companies are given pass‑

Definition: A composite return is a return filed by an entity on

through tax treatment whereby tax is imposed on the income of

behalf of its eligible nonresident shareholders, partners or members

the business only at the shareholder, partner or member level. The

stating the income allocable to each shareholder, partner or member.

pass‑through entity is liable for the minimum annual (entity) tax of

Composite returns relieve the included shareholders, partners, or

$250 for each taxable year beginning on or after January 1, 1998.

members from the responsibility of filing individual income tax

The entity is also obligated to make payments for nonresident

returns.

shareholders, partners or members for the income attributable

Eligible nonresident shareholders, partners or members: In

to Vermont at the second lowest marginal rate. Each payment

order to be eligible for inclusion on a composite return, a nonresident

is a credit against the shareholder’s, partner’s, or member’s

shareholder, partner or member cannot have any income taxable to

individual income tax liability. Estimated payments are due on the

15th day of the 4th, 6th and 9th months of the tax year and the 1st

the State of Vermont other than that which is to be included in the

composite return; and cannot have income attributable to Vermont

month of the subsequent year. For calendar year entities, these dates

in excess of $300,000.

are normally April 15th, June 15th, September 15th, and January

15th. These payments are made using Form WH-435, Estimated

Who May File: Any entity with eligible nonresident shareholders,

partners, or members may file a composite return. An election for

Income Tax Payments For Nonresident Shareholders, Partners

composite filing shall be valid for a period of five years unless

or Members. Other methods of payment may result in both the

entity and its members not receiving proper credit. ** Certain S

the election is revoked for failure to meet the requirements for

composite filing. Every eligible nonresident shareholder, partner or

Corporations, Partnerships and Limited Liability Companies

may file and remit the estimated tax payments on behalf of

member must be included in a composite filing unless the taxpayer

has specifically applied for and received permission from the

nonresident shareholders, partners and members annually, on

Department to exclude a specific eligible nonresident shareholder,

January 15th, instead of quarterly. To qualify, the entity must

have a single (nonresident) shareholder, partner or member

partner or member.

and a tax liability of $250 or less in the prior year, or 2 or more

In the event that an entity applies for and receives permission to

shareholders, partners or members and a tax liability of $500

exclude specific eligible nonresident shareholders, partners, or

or less in the prior year.

members, such permission shall constitute an election to exclude

such person for a period of not less than five years.

Technical Bulletin 5 (TB‑05) provides for a “catch‑up payment” for

estimated payments due on or after April 15, 2005. This “catch‑up

Tax Rate: The composite filing tax rate is 7.8%.

payment”, if required, is made at the time that the entity files its

In no event shall the pro rata composite tax attributable to a non

business income tax return or extension request. The “catch‑up

natural shareholder, partner or member be less than the minimum

payment” is sent in with a completed Form WH‑435 and the

tax due that would otherwise have been due from that entity if it

payment.

had not been relieved of a Vermont filing requirement because of

If any partner or member is another entity, the minimum annual tax

its inclusion in the composite filing.

is $250 for each one. For additional information see VT Technical

Bulletin 5 (TB‑05) and VT Technical Bulletin 6 (TB‑06) at our

Refunds: To the extent that the composite tax due is less than

the estimated tax payments made by the entity on behalf of its

web site under the headings of “Legal

nonresident shareholders, partners or members, the refund shall be

Interpretations” and “Forms”, respectively.

paid to the entity and not to the individual shareholders, partners

Interest, Late Fees, and Penalties

or members.

Interest is charged on payments not made on or by the statutory due

Other requirements: A signature on a composite return indicates

date. The rate of interest is established each year with reference to

that the information presented on that return is true, correct and

the average prime rate.

complete. Nonetheless, the Department of Taxes may contact

Payments not made and returns not filed when due are subject to

the Subchapter S Corporation, Partnership, or Limited Liability

a failure to pay/file penalty of 5% per month of the outstanding

Company for further information about the return. It is recommended

liability up to 25% for taxable years beginning on or after

that composite filers maintain a power of attorney (POA) with their

January 1, 2002. If the filing is over 60 days late from the original

records that is signed by each qualified nonresident shareholder,

due date, even if no tax is due, a $50 late penalty applies unless

partner or member. The POA gives the Sub‑chapter S Corporation,

timely filed under extension. The Commissioner of Taxes may

Partnership or Limited Liability Company the authority to act on the

abate penalties for reasonable cause.

shareholder’s, partner’s or member’s behalf. The Department may

ask the composite filer to submit a copy of a POA before disclosing

Consolidated Returns

confidential information pertaining to the return.

Affiliated entities with identical ownership may elect to file a

See the Department of Taxes’ web site under “Forms” for POA

consolidated Vermont return. Income of Subchapter S Subsidiaries

requirements effective July 1, 2002. POA’s executed prior to July 1,

(QSSS’s) are included in the parent’s return if it is included in the

2002 are still valid.

Vermont Business Income Tax Return Instructions (For Subchapter S Corporations, Partnerships, And Limited Liability Companies) - 2012 Page 2

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