By Nancy Remsen
Free Press Staff Writer
MONTPELIER — The Flynn Center in Burlington hopes the Legislature will help resolve a dispute it and potentially other nonprofit entertainment organizations have with the state Department of Taxes over when they have to pay sales tax on income from ticket sales.
The Senate amended a tax bill Monday to provide a retroactive remedy that could spare the Flynn from having to pay $190,000 in back taxes — despite objection by the Douglas administration.
It was one of two last-minute changes made to pending tax legislation before senators gave the bill final approval by a vote of 24-2.
The other amendment supplemented a provision already in the bill that tries to prevent wealthy property owners from paying lower school taxes because some of their income and assets don’t count in determining their eligibility for the state’s tax adjustment program. Monday’s addition would require a declaration of net worth and disqualify households with net worth greater than $1 million.
Senate President Pro Tempore Peter Shumlin, D-Windham, stepped down from presiding over the Senate debate to offer and argue for both changes.
Shumlin said the Flynn’s tax problem came to his attention late last week. He offered an amendment he said would serve as a “placeholder so we can try to resolve this question.”
While the House and Senate negotiate the differences in their versions of the tax bill, he said the Senate Finance Committee would have time to look into the dispute over the tax on ticket sales.
Finance Chairwoman Ann Cummings, D-Washington, warned lawmakers that the issue was complex and the proposed remedy might be costly. “If it looks like we can do something and not cost the state a lot of money, we’ll do it.”
Flynn’s situation
The controversy over taxes on tickets goes back to a Grateful Dead concert in Highgate the early 1990s, said Andrea Rogers, the Flynn’s executive director. The Flynn sold the tickets.
This combination of a profit-making venture and a nonprofit theater prompted tax questions, a new law and Rogers said she believed a resolution of the question of when taxes were due. She understood that nonprofit organizations would be exempt from paying tax on tickets when they “presented” performers. She said the Flynn never partners with performers, but takes all the risk. It does pay bonuses if ticket sales achieve certain targets spelled out in contracts, she said.
Molly Bachman, an attorney for the tax department, said the 1990s law did tighten up the rules and made clear that when nonprofit organizations jointly put on entertainment with profit-making organizations such as bands, they have to collect and pay the tax.
“That is what we enforce,” Bachman said. She wouldn’t comment on the Flynn’s situation, but noted, “A lot of nonprofits do it the right way.”
Rogers said the Flynn ran afoul of the tax department as a result of an audit begun last fall. In March, the tax department presented the Flynn with a bill for $190,000 in taxes due since 2006.
Rogers said she turned to the Legislature in hopes of resolving the dispute faster, without protracted legal appeals, because the theater is booking new acts all the time. “It is important to us to get this clarified.”
Senators agreed to the placeholder amendment on a voice vote.
Millionaires
Shumlin’s millionaire amendment also came up without much review by the Senate’s budget-writing committee.
“This seems like a very good idea and a simple idea,” Cummings said, “but it needs to be worked on.” She noted that the tax department has no means to judge net worth.
Sen. Doug Racine, D-Chittenden, noted the proposal would “play well on Main Street.” Shumlin and Racine are Democratic gubernatorial hopefuls.
Still Racine worried the proposal wasn’t workable. How would the tax department decide if taxpayers filed accurately about their net worth?
“We use estimates of net worth all the time,” said Sen. Randy Brock, R-Franklin, who had joined Shumlin in sponsoring the amendment. He said people seeking mortgages or college loans have to list net worth.
Sen. Robert Starr, D-Essex/Orleans, questioned why this wasn’t an easy amendment to support. “We are sitting here arguing about whether we should give tax dollars to millionaires,” he said, explaining that the Education Fund makes up the difference between property taxes based on assessed value and payments based on a household’s income.
Cummings objected to Starr’s dismissal of the concerns she and Racine had raised. “This has been a debate over process and whether this amendment is ready for prime time.”
Senators voted 21-5 to add the millionaire amendment despite Cummings’ objection.
This article appeared in the Burlington Free Press
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