Vermont Business Income Tax Return Instructions

•

Vermont Statements or Explanations – as required by the

include only entities that have income allocated or apportioned to

instructions below

Vermont. To elect the consolidated Vermont return, you must file

Form BA‑410, Affiliation Schedule, with Form BI‑471, Business

•

Federal Information – The first 4 or 5 pages, as appropriate,

Income Tax Return, each year. Once the election has been made,

of the federal income tax return filed. Federal Schedule

entities must continue filing on a consolidated basis until the

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

Commissioner of Taxes authorizes separate filing. (Refer to Form

Vermont Department of Taxes reserves the right to require

BA‑410 for further guidance.) NOTE: The Corporate Income Tax

a complete copy of the federal income tax returns and all

Affiliation Schedule, Form BA‑410, is used by both Corporate and

federal schedules at any point during review or audit of

Business Income Tax filers.

the Vermont filing.

Composite Returns

Estimated Taxes and Estimated Payments

(See Technical Bulletin (TB-05)

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

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

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

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

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

Who May File: Any entity with eligible nonresident shareholders,

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

partners or members may file an election for composite filing. An

Income Tax Payments For Nonresident Shareholders, Partners

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

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

unless the election is revoked for failure to meet the requirements

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

for composite filing. Such an election shall be made prior to the

Corporations, Partnerships and Limited Liability Companies

date that the first quarterly estimated payment is due.

may file and remit the estimated tax payments on behalf of

Every eligible nonresident shareholder, partner or member must be

nonresident shareholders, partners and members annually, on

included in a composite filing unless the taxpayer has specifically

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

applied for and received permission from the Department to exclude

have a single (nonresident) shareholder, partner or member

a specific eligible nonresident shareholder, partner or member.

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

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

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

or less in the prior year.

exclude specific eligible nonresident shareholders, partners or

members, such permission shall constitute an election to exclude

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

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

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

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

Tax Rate: The composite filing tax rate is 8.5%.

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

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

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

natural shareholder, partner or member be less than the minimum

payment.

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

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

had not been relieved of a Vermont filing requirement because of

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

its inclusion in the composite filing.

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

web site under the headings of “Legal

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

Interpretations” and “Forms”, respectively.

nonresident shareholders, partners or members, the refund shall be

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

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

Other requirements: A signature on a composite return indicates

the average prime rate.

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

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

Consolidated Returns

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

Affiliated entities with identical ownership may elect to file a

confidential information pertaining to the return.

consolidated Vermont return. Income of Subchapter S Subsidiaries

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

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

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

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

2002 are still valid.

Vermont Business Income Tax Return Instructions - 2011 Page 2

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