Tax officials warn refundable caregiver credit would be hard to verify and could expose sensitive medical data

Tax department officials told a Vermont legislative committee on Oct. 11 that a proposed refundable tax credit for unpaid family caregivers raises substantial verification and privacy issues that could make administering the program by the tax code difficult.

"We're really good at verifying the presence of income, not so much the absence of it," said Deputy Commissioner Rebecca Samraff, Department of Taxes, explaining why the department has concerns about verifying unpaid caregiving and hours worked. The proposed credit would require claimants to be unpaid, to provide at least 20 hours per week of care, and to provide medical verification that the care recipient needs help with activities of daily living.

Samraff said the department is worried that claims would rely heavily on personal attestation and that the agency would receive sensitive medical information about people who are not the taxpayers filing the return. "The bill... would be a little like, this is unprecedented and a little awkward for the department as well because we would be receiving very sensitive medical information about an individual who is not even the taxpayer," she told the committee.

Department staff flagged three main administrative challenges: verifying that caregivers are unpaid (the department can readily verify income but not the absence of compensation), confirming that a claimant provides 20 hours per week of care (which the department said would be difficult to verify beyond simple attestation), and handling sensitive medical documentation submitted to the tax agency.

Committee members asked whether the caregiver credit would overlap with existing programs such as Medicaid's Choices for Care, which pays family members in some situations. The tax department clarified that Choices for Care is a Medicaid program and is distinct from a refundable tax credit aimed at unpaid family caregivers. The committee also discussed whether someone could receive both Medicaid‑paid caregiving and a state tax credit for unpaid care in the same household; staff said the current draft envisioned the credit for unpaid, informal family care.

Tax staff suggested the credit might be better implemented through a human‑services program rather than as a refundable tax credit and recommended further administrative study and summer work to design verification procedures. Committee members and staff encouraged additional study to estimate costs and potential savings compared with institutional care for conditions such as Alzheimer's disease.

Next steps: No final action was taken. The committee asked for additional information from the Department of Taxes on administrative options, privacy safeguards, and how other states handle verification before pursuing the refundable credit further.