Governor lets controversial H315 become law without his signature

Vermont Business Magazine Governor Phil Scott announced Saturday evening that he will allow H315 to become law without his signature. While the bill includes several important measures related to economic recovery from the pandemic, it also includes several points the governor said he cannot support. For instance, both for-profit and nonprofit organizations opposed the last-second inclusion of taxing Paycheck Protection Program grants as taxable income in next year's (2021) tax return.

Congress did not intend for these grants to be taxed. This aspect of the bill could be unwound in another bill, say, the budget bill. But to date, this has not happened. However both the governor and some legislators will endeavor to include such a provision in legislation still under consideration. See note below from Representative Mike Yantachka (D-Charlotte-Hinesburg) below.

The language of the original PPP language even confused the IRS and in December 2020 Congress had to take the extraordinary step in urging the IRS to reverse course and NOT tax the PPP grants (which ultimately it did), which was the original congressional intent.

Even the language describing the PPP action in H315 is nearly incomprehensible. See below. It also did not receive testimony before inclusion.

The governor issued the following letter to the General Assembly:

Pursuant to Chapter II, Section 11 of the Vermont Constitution, H.315, An Act Relating to Covid-19 Relief, will become law without my signature for the reasons stated herein.

H.315 started as a smart spending bill – about $62 million in total – to fund urgent pandemic needs, including business recovery grants that were a top priority in the budget adjustment proposal I proposed in January. The need was there in January and is still urgent today.

Over the two months it took the Legislature to pass H.315, it evolved into something much larger and more complex.

To the Legislature’s credit, the bill includes some valuable relief for Vermonters, including:

  • $47 million for budget initiatives I put forward, including economic aid to businesses, housing to immediately address emergency needs, brownfield remediation and environmental clean-up and VOREC community grants.
  • $5 million for foreclosure prevention.
  • $7.64 million for mental health services, recovery centers, New Americans, refugees and immigrants, and grants to Reach-Up participants.
  • Linking to federal income taxes for tax year 2020, which will exempt the first $10,200 of unemployment insurance income, as well as Paycheck Protection Program forgiven loan funds.

For these reasons, I’m allowing H.315 to become law.

Unfortunately, I cannot sign this bill because it includes policy and spending choices that suggest we have very different opinions about how best to deploy the federal recovery and economic stimulus funding.

As a result, I want to be clear: I feel very strongly that we need to invest federal American Rescue Plan Act (ARPA) money in a truly strategic and fully transparent way, preferably in a single piece of legislation. These investments should be in tangible infrastructure that provide the greatest economic benefits and will truly transform our economy – especially in the parts of the state that need it most. I will not support a piecemeal or diluted approach to the investment of ARPA funds.

We must not squander this unprecedented opportunity to transform the economy of our state. If we work together, we can make historic investments in climate change mitigation, water and sewer infrastructure, universal broad band, housing and more. All these investments, if planned and supported wisely, will be something we can point to as the silver-lining of this pandemic. We must not forgo the opportunity to maximize the benefit of this federal money simply because the federal timing did not align with the traditional legislative calendar or process. That would be profoundly shortsighted.

Similarly, I also feel strongly that the Legislature should reverse its decision to insert, at the last minute, a new and punitive tax liability on federal PPP loans. These forgivable loans were issued to help employers survive this pandemic and preserve jobs. And our businesses have applied for these loans with the understanding they would not be taxed. In addition, Senator Leahy’s office has confirmed that these resources were never intended to be taxed. The Legislature should be at their side, helping them up. Not on their back, trying to raise yet more in taxes.

I encourage the Legislature to take these concerns seriously – as they reflect core priorities that I will want to see reflected in the budget and other legislation as we move toward adjournment.

More specifically, rather than act quickly on H.315 with available state funds and federal Coronavirus Relief Funds – and without allowing for a transparent, tangible and transformative approach to investing $1 billion in federal American Rescue Plan Act (ARPA) funds – the Legislature chose to hastily deploy $59 million of ARPA funds unnecessarily. The initiatives in H.315 are not bad investments, but they should not be funded with ARPA money. Again, we owe it to Vermonters to spend the ARPA funds in a transparent way, preferably through a single spending bill, so Vermonters can easily understand the investments and can verify that the Legislature is maximizing the value of every penny to strengthen the economy in every county and every community.

In addition to unnecessarily expending ARPA funds, H.315 also spends about $4 million in Elementary and Secondary School Emergency Relief (ESSER) funds. Congress explicitly appropriated this money to the Vermont Agency of Education. In H.315, the Legislature added their approval as an additional requirement. This will prevent the Agency from moving quickly to meet the needs of our children. The fact is our kids are not doing okay in the hybrid learning environment and they should not have to wait for the Legislature’s appropriations process.

The need for flexibility should be apparent and the expertise and judgment of the professionals at the Agency ought to be respected, not micro-managed. I intend to use all the tools at my disposal to take advantage of these grants.

Again, I want to underscore how strongly I feel about the need for an agreement between the House, Senate, and the Administration on how to spend ARPA funds. This should comebefore any additional funds are expended. I also want to reiterate that I do not support deploying these funds in a piecemeal fashion across a hodgepodge of bills and programs. These funds are meant to expedite recovery, revitalize our economy, and make a difference in the lives of Vermonters well into the future. They are not to provide short-term, unsustainable band aids for complicated issues or plug ongoing budget holes.

In conclusion, because this bill contains urgently needed funds for Vermonters, I am allowing it to become law. But the Legislature should take note that I will not support any additional, unnecessary, or unwise use of ARPA or ESSER funding. I urge the Legislature to work with me to take a more collaborative, transparent, and strategic approach to allocating the remaining ARPA funds and maximizing the transformative economic benefits of these once-in-a-lifetime funds for Vermonters.



Philip B. Scott


To view a complete list of action on bills passed during the 2021 legislative session, click here.

Message sent from Representative Mike Yantachka:

If the loans were forgiven in 2020, they are not taxable by Vermont on the 2020 tax return. This federal provision passed very late in the year and our tax department had already released forms and guidance for a Vermont link-up, which was endorsed by language in H.315.However, if the loans have been forgiven in 2021, then current law would make them taxable on next year's 2021 VT tax return to the extent that they exceed expenses such as payroll, rent, supplies, etc. H.315 did not change this policy because of timing and the need for more testimony since it would affect FY22 revenues, but there is a discussion of changing it as part of the budget that will be voted on later this session. So, this is yet to be determined.



Rep. Mike Yantachka

Charlotte-Hinesburg (Chittenden District 4-1)
House Energy & Technology Committee

In response to:

Dear Legislators,

I am writing today to express my concern over the House Ways and Means and Senate Finance Committee changes to the language in H.315 and taxation of PPP loans. Taxing these loans is a terrible idea, and goes against the goal of the loans - to help businesses keep people employed and not filing for unemployment.

All of my companies are service related and are payroll heavy. 1 week prior to receiving our PPP loan, our line of credit was tapped, cash was close to zero and we had reduced our head count from 30 to 5. The remaining 5 only had 2 more weeks of $$ until we were out of business and in the unemployment line (including me). The PPP $$ saved my companies and 30 jobs. After we received our PPP $$, we immediately hired everyone back and 100% of that $$ went directly to our employees.

100% of our PPP $$ has already been taxed through payroll taxes. It is irresponsible and egregious to tax it again. It is already very difficult to operate a small business in Vermont and this “Double Dip Tax” just makes it worse. The business community has been telling you for years that Vermont is not business friendly. I have heard many of you ask how you can help improve this? – here is your chance to help VT small businesses who employ Vermonters that voted for you. VOTE NO on H.315.

I'd appreciate knowing where you stand on this issue.

Dear Business Owners,

Link to find your state rep is here:


Best Regards,

Mike Dunbar

Middlebury Fence/RenoVaTe/SecureVT/Charlotte Crossings

Open Letter from For-Profit and Non-Profit Organizations

Members of the Vermont Legislature,

We, the undersigned organizations, representing cumulatively more than 9,500 employers with more than 200,000 employees implore you to conform with the federal treatment of forgiven Paycheck Protection Program (PPP) loans in the tax year 2021, just as you did in tax year 2020. This is important for the following reasons:

Taxing PPP loans would negate the purpose of the program. When PPP was first created under the CARES Act, the legislative intention was that these loans would be non-taxable. Congress saw this as so important to the program’s desired impact that they took the extraordinary step of reaffirming this in the subsequent Consolidated Appropriations Act.

Without PPP, the unemployment rates would have been much higher, more businesses would have closed their doors, and the economic fallout would have been more severe. As our state’s unemployment system was strained and crashing, PPP created a parallel unemployment system to spread the load, with many employers simply using PPP funds to pay their employees to “stay home, stay safe.” There is a trauma associated with losing one’s job, even with UI, PPP kept this trauma from occurring by keeping employees on the employer’s payroll. Furthermore, personal income tax revenue to the state was not decreased due to these loans.

To tax these loans, which were always presented as a tax-free lifeline, would penalize employers who did the right thing and now do not have the funds. If these loans were to be taxable suddenly, most employers would be met with a surprise tax bill they have no way to pay after a year of being closed through no fault of their own. To have the loan forgiven implies that the employer spent the loan, in its entirety, on payroll and eligible expenses, leaving them with nothing to show.

Retroactively changing the circumstances around the assistance will be unfair, inequitable, and create turmoil. The money to pay tax on these loans is not there as most employers have done what the program told them to do - spend the money right away. Given the state is conforming to federal treatment in TY 2020, those least served by the program and who only gained access in 2021 will receive inequitable treatment. An unforeseen tax bill will prolong the economic impact of the pandemic. Many of the businesses that were late to access this program have been the hardest hit by the pandemic and the least served by the program in its earlier iterations. Finally, businesses had no control over when their loan is ultimately forgiven, as procedural hurdles prevented rapid forgiveness, dragging them into 2021 and therefore receiving that year’s tax treatment.

There is no double benefit. For example, if an employer has $100,000 of a PPP loan forgiven, they can and should deduct those expenses. Taxing what otherwise would have been deductible means that the employer is in a worse place than if they had laid off employees and sent them to the UI system. Furthermore, the state already collected revenue from PPP loans in the form of payroll taxes.

In conclusion, taxing PPP loans would negate the purpose and promise of the program. Without PPP, the unemployment rates would have been much higher, more businesses would have closed their doors, and the economic fallout would have been more severe. To tax these loans, which were always presented as a tax-free lifeline, would penalize employers who did the right thing and now do not have the funds. Furthermore, retroactively changing the circumstances around the assistance will be unfair, inequitable, and create turmoil. Finally, there is no double benefit if they can deduct payroll and expenses, as not deducting is the equivalent of paying the loan back in the form of taxes.

We the undersigned organizations, implore you to conform with the federal treatment of forgiven Paycheck Protection Program loans in the tax year 2021, just as you did in tax year 2020.

Signed on,

Lake Champlain Chamber

Vermont Chamber of Commerce

Vermont Ski Areas Association

Vermont Businesses for Social Responsibility

Let’s Grow Kids

Vermont Medical Society

Vermont HealthFirst

Main Street Alliance of Vermont

Vermont Retail & Grocers Association

Vermont Lodging Association

Vermont Association of Wedding Professionals

Vermont Bankers Association

National Federation of Independent Business

Association of Vermont Credit Unions

Vermont Association of Broadcasters

Association of General Contractors of Vermont

Vermont Forest Products Association

Vermont Groundwater Association

Vermont Vehicle & Automotive Distributors Association

Barre Granite Association

Mad River Valley Chamber of Commerce

Vermont Builders and Remodelers Association

Regional Development Corporations

Vermont Veterinary Medical Association

Vermont Insurance Agents Association

Vermont Society of Certified Public Accountants

Renewable Energy Vermont

Vermont State Dental Society

South Burlington Business Association

Source: Lake Champlain Chamber. Burlington. 4.14.2021

H315 PPP



Notwithstanding 32 V.S.A. § 5824 and any other provision of law to the

contrary, the exclusion of income associated with the forgiveness of a covered

Paycheck Protection Program loan from gross income pursuant to the

Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Pub. L. No.

116-136, § 1106(i), as amended, and the Consolidated Appropriations Act,

2021, Pub. L. No. 116-260, § 276 shall not be allowed in computing taxable

income under 32 V.S.A. chapter 151. As used in this section, “covered loan”

has the same meaning as in the CARES Act, § 1106(a), as amended. Nothing

in this section shall affect the deduction of expenses to the extent that payment

of the expenses results in forgiveness of a covered loan pursuant to the CARES

Act, Pub. L. No. 116-136, § 1106, as amended, and the Consolidated

Appropriations Act, 2021, Pub. L. No. 116-260, § 276.

Source: Montpelier, Vt. - Governor 4.17.2021