Vermont Tax Department outlines $37.2M FY26 budget, highlights IT modernization and service gains

The Vermont Department of Taxes presented a $37.2 million operating budget request for fiscal 2026 to the House Appropriations Committee on Feb. 11, focusing on staffing, IT modernization and modernization of the paper-based current use program.

Tax Commissioner Greg Bolio and Andrew Stein, the department’s chief operating officer, told the committee most of the requested operating budget — about 90 percent — is for salaries, benefits and IT. Bolio said the department is investing in technology and staff to speed processing and reduce errors. “When we shift and modernize a tax type into a modern system and we have talented people who are programming that system, we see improvements in integrity…and we see improvements for service because things get processed much quicker,” Stein said.

The department emphasized three priorities: improving service and voluntary compliance, reducing the tax gap and promoting a healthy organizational culture. Officials pointed to several projects funded by the budget request: a multi-year digitization and migration of the current use program into the department’s integrated vTax system; completion of the Vermont Property Information Exchange (VTPi) property tax IT system; and a multi-phase scanning project to digitize paper returns and checks.

Current use — the program that enrolls roughly half the state’s land — was identified as the department’s worst-performing program. In calendar year 2024 the department reported an average of 244 days to process current-use applications and said the program provides roughly $76,000,000 in benefits to landowners, with about $21,000,000 of the cost impacting the general fund next year. Stein said the department will digitize paper records and integrate them into taxpayer accounts to automate checks and verification and to reduce processing time.

Officials also described the VTPI property system as a challenging, nearly completed implementation that must reconcile wide variation in municipal billing and appraisal practices. The department contracted with an outside vendor (Catalyst) and with the Vermont Center for Geographic Information on mapping and rates-and-boundaries work used by remote sellers and software providers.

Stein highlighted performance improvements that the department said the current investment has supported: 97 percent of requested personal income tax refunds were issued by June 1 in the most recent year; 96 percent of renter credit claims were processed within 60 days in 2024 (up from 5 percent in 2018); and the department handled about 6,000 taxpayer calls in 2024 with an average wait time of 1 minute, 23 seconds. Stein said those metrics are central to improving voluntary compliance and returning money to households quickly.

On implementation of newly enacted policies, the department described the rollout of the childcare contribution withheld through payroll as a cost-saver that used the existing withholding framework, reducing administrative cost by about $2,000,000. Early collections were below original projections in November (about $13.5 million) but rose to roughly $17.8 million by December, and the department said they expect additional self‑employed and corporate filings in April.

The testimony also covered municipal transfers and special funds administered by the department, including pilot payments in lieu of taxes (PILOT) for state-owned buildings. The department said FY24 was the first full year of funding the pilot program and that the FY26 budget includes roughly $12.2 million for those municipal payments. Officials explained how the program’s calculation uses insured replacement value rather than grand-list assessed value and noted the legislature has previously capped some payments in specific years.

Staffing needs and classification updates were flagged as a budget driver. The department said it plans a class-action classification review for 62 affected positions and specifically noted 10 audit/examiner positions (six tax examiners and four field auditors) that are being reclassified to reflect modern duties; the change is expected to increase salary costs when implemented. Stein said some of those cost increases are accommodated in the FY26 request and that efficiency gains from scanning and other automation helped absorb other staffing costs.

Committee members asked about local option sales taxes, the administrative burden when multiple nearby jurisdictions have differing local-option rules, and the department’s rates-and-boundaries file used by remote sellers and tax software providers. Bolio and Stein described outreach to businesses, neighboring communities and remote sellers ahead of new local-option votes and noted a statutory “limiter” passed last year that lets the commissioner stagger implementations if many towns opt in at once.

Bolio and Stein asked legislators to sustain investments in IT modernization and staffing to preserve processing gains and to support planned modernization of current use and property systems. They also noted ongoing interagency coordination with the Joint Fiscal Office, Attorney General’s Office, Agency of Natural Resources and the Agency of Administration on several programs and payments to municipalities.

The department concluded its presentation and took committee questions; no formal committee votes were recorded during the testimony.