Vermont — Corporate Income / Franchise Tax

Vermont imposes a corporate income tax on every "taxable corporation" for each calendar year or fiscal year ending during that calendar year.

Source: 32 V.S.A. § 5832

## Definition of Taxable Corporation

A corporation is a "taxable corporation" for any taxable year if, at any time during that taxable year, it:

• was incorporated under the laws of Vermont;
• possessed a certificate of authority to do business within Vermont; or
• received any income allocable or apportionable to Vermont under the apportionment provisions of 32 V.S.A. § 5833.

Source: 32 V.S.A. § 5811(15)

## Protected Activities Exception

A corporation that would otherwise be taxable under the third criterion (income allocable or apportionable to Vermont) is exempt if its activities in Vermont are limited to activities that, standing alone, would not subject the corporation to taxation under federal constitutional limits (such as solicitation protected by Public Law 86-272), plus certain additional protected activities including:

• ownership of data or programming code in Vermont, or use of that data or programming code by a person other than the corporation or by a person not in this state;
• ownership of, or receipt of services from, computer servers in Vermont; and
• receipt of computer processing or web hosting services from a computer service provider or web hosting service in Vermont.

Source: 32 V.S.A. § 5811(15)

## What is a Corporation for Vermont Tax Purposes

"Corporation" means any business entity subject to income taxation as a corporation under federal law, and any entity qualified as a small business corporation (S corporation) under federal law. Certain entities are exempt from this chapter, including railroad and insurance companies taxed under Vermont Chapter 211, credit unions organized under Vermont law, and nonprofit medical service corporations organized under Vermont law.

Source: 32 V.S.A. § 5811(3)

## Separate Filing for Pass-Through Entities

S corporations, partnerships, and LLCs taxed as pass-through entities are not subject to Vermont's corporate income tax. Instead, they file Vermont's Business Entity Income Tax return (Form BI-471).

Source: Vermont Department of Taxes – Corporate Income Tax

LLCs that elect to be taxed as C corporations for federal purposes are treated as C corporations for Vermont corporate income tax purposes and must file Form CO-411.

Source: Vermont Department of Taxes – Business and Corporate

As of this review, both cited Vermont statutes (§ 5832, § 5811) are accessible at the URLs above and have not been materially amended with respect to the definition of who must file. Broken source URLs previously reported have been fixed by linking to the current legislature pages. No material change required beyond citation repair as of 2024-06-18.

Vermont imposes its corporate income tax using a graduated bracket structure applied to Vermont net income. For tax years beginning on or after January 1, 2023, the tax is calculated as follows:

Graduated Marginal Tax Brackets

• 6.0% of Vermont net income up to $10,000
• $600 plus 7.0% of the excess over $10,000 for Vermont net income between $10,001 and $25,000
• $1,650 plus 8.5% of the excess over $25,000 for Vermont net income above $25,000

These brackets apply only to C corporations. S corporations and other pass-through entities are subject to separate rules (see /guides/vermont/corporate-income#who-must-file).

Minimum Tax by Vermont Gross Receipts A corporation’s tax liability is the greater of the computed bracket tax above or the minimum tax based on Vermont gross receipts:

• $100 for gross receipts <$500,000
• $500 for $500,001 – $1,000,000
• $2,000 for $1,000,001 – $5,000,000
• $6,000 for $5,000,001 – $300,000,000
• $100,000 for gross receipts over $300,000,000
• Small farm corporations (less than $100,000 Vermont farm receipts, some additional requirements) pay a minimum tax of $75

Source: 32 V.S.A. § 5832

Vermont apportions the income of multistate corporations using a single-sales-factor formula. Effective for tax years beginning on or after January 1, 2023, a corporation doing business both inside and outside Vermont must multiply its Vermont net income by the percentage of the corporation's total sales that are in Vermont. Property and payroll factors are no longer used in the apportionment formula for these years.

Sales of Tangible Personal Property: A sale of tangible personal property is attributable to Vermont if the property is delivered or shipped to a purchaser within Vermont, regardless of the purchaser's location. This conforms to the "destination rule" outlined in the statute.

Sales Other than Tangible Personal Property (including services and intangibles): Sales other than tangible personal property—such as services and intangibles—are sourced to Vermont if the market for the sale is in Vermont. This "market-based sourcing" rule generally means a sale is assigned to Vermont if the customer receives the benefit of the service or intangible in Vermont.

Background – Shift from Prior Regime: Prior to tax years beginning January 1, 2023, Vermont used a three-factor apportionment formula with double-weighted sales (property, payroll, double-weighted sales). Beginning January 1, 2023, Act 148 of 2022 amended 32 V.S.A. § 5833 to mandate exclusive use of the single-sales-factor method, removing property and payroll from the calculation.

Apportionment Formula: > Apportionment percentage = (Vermont sales ÷ Total sales)

Only sales are included; property and payroll have no weighting in the new formula.

Citation and Current Authority: The change to exclusive single-sales-factor apportionment is codified at 32 V.S.A. § 5833(a), as amended by Act 148 of 2022. The statutory text and Department of Taxes guidance as of the June 2026 review all confirm continued use of this method. No new amendments or guidance have superseded these rules since the 2023 transition.

Source: 32 V.S.A. § 5833 Source: Act 148 of 2022, Vermont Legislature

Human confirmed as of 2026-06-18. Section updated to reflect 2023 adoption of exclusive single-sales-factor apportionment and statutory removal of property/payroll from the formula. Broken source URLs previously reported have been repaired as of 2024-07-02. No material statutory or guidance change since last update.

Vermont's corporate income tax liability is the greater of the tax calculated on net income or a minimum tax based on Vermont gross receipts. The minimum tax applies regardless of profitability.

For C corporations, the minimum tax is: $100 for Vermont gross receipts up to $500,000; $500 for receipts of $500,001–$1,000,000; $2,000 for receipts of $1,000,001–$5,000,000; $6,000 for receipts of $5,000,001–$300,000,000; and $100,000 for receipts over $300,000,000.

Small farm corporations pay a minimum tax of $75. A "small farm corporation" is a corporation organized for farming, owned solely by active participants in the farm business, that receives less than $100,000 in Vermont gross receipts from the farm operation (excluding forest crop income).

Source: 32 V.S.A. § 5832

Vermont imposes corporate income tax using a three-tier graduated bracket structure. The tax is calculated by applying marginal rates to successive portions of Vermont net income, with each bracket taxed only at its corresponding rate.

For tax years beginning on or after January 1, 2023, the graduated rates are:

• 6.0% on Vermont net income from $0 to $10,000
• 7.0% on Vermont net income from $10,001 to $25,000
• 8.5% on Vermont net income above $25,000

These are marginal rates: a corporation with $30,000 of Vermont net income pays 6% on the first $10,000 ($600), 7% on the next $15,000 ($1,050), and 8.5% on the final $5,000 ($425), for a total tax of $2,075 before comparing to the minimum tax.

The statute structures this as a base-tax-plus-marginal-rate formula rather than a pure bracket table. Under that formulation:

• Vermont net income $0–$10,000: tax is 6% of total net income
• Vermont net income $10,001–$25,000: tax is $600 plus 7% of the amount over $10,000
• Vermont net income above $25,000: tax is $1,650 plus 8.5% of the amount over $25,000

The $600 and $1,650 base amounts represent the cumulative tax on income up to each threshold. Both formulations yield identical results.

Vermont's graduated-bracket regime applies only to C corporations. S corporations, partnerships, and LLCs treated as pass-through entities for federal purposes file Vermont's Business Entity Income Tax return (Form BI-471) and are not subject to the corporate income tax brackets; instead, income passes through to owners who report it on their individual Vermont income tax returns.

The three-tier structure replaced a prior double-weighted-sales-factor apportionment and different bracket schedule effective January 1, 2023, as part of broader corporate tax modernization legislation enacted in 2022.

Source: Vermont Joint Fiscal Office, Corporate Income Tax Overview, December 2025 Source: 32 V.S.A. § 5832

Vermont corporate income tax begins with a corporation's federal taxable income as the starting point, then applies Vermont-specific additions and subtractions to arrive at "Vermont net income"—the base to which apportionment and tax rates apply.

## Federal Taxable Income as Starting Point

Vermont net income is defined as "the taxable income of the taxpayer for that taxable year under the laws of the United States," with certain modifications. For C corporations, this is line 28 (or its equivalent) from federal Form 1120—taxable income after all federal deductions but before state income taxes are applied.

This federal conformity means Vermont automatically incorporates most federal income inclusions, deductions, accounting methods, and timing rules without requiring separate legislation. When federal tax law changes, Vermont's corporate income tax base changes unless Vermont statute explicitly decouples.

Source: 32 V.S.A. § 5811(18)(A)

## Key Additions to Federal Taxable Income

Vermont adds back the following items when computing Vermont net income:

State and local income taxes. The full amount of any deduction for state and local taxes on or measured by income, franchise taxes measured by net income, franchise taxes for the privilege of doing business, and capital stock taxes is added back to federal taxable income. Because Vermont does not allow corporations to deduct state income taxes against state income, this addition prevents double benefit.

Out-of-state municipal bond interest. Interest income from state and local obligations other than Vermont and its political subdivisions is added back to the extent it was excluded from federal gross income. Federal law exempts all state and local bond interest from federal taxation, but Vermont taxes interest on non-Vermont municipal bonds.

Federal net operating loss deduction. The amount of any deduction for a federal net operating loss under IRC § 172 is added back. Vermont has its own net operating loss regime under 32 V.S.A. § 5888, so the federal NOL deduction is reversed and Vermont's rules apply separately.

Source: 32 V.S.A. § 5811(18)(A)(i)

## Key Subtractions from Federal Taxable Income

Vermont subtracts the following items:

Dividend gross-up for foreign tax credit. The "gross-up of dividends" required by the Internal Revenue Code to be included in taxable income when a corporation elects the foreign tax credit is subtracted. This prevents Vermont from taxing deemed income that reflects foreign taxes already paid.

Targeted Jobs and WIN credit wage adjustments. Income that results from the required reduction in salaries and wages expense for corporations claiming the federal Targeted Job or Work Incentive (WIN) credits is subtracted, reversing the federal add-back of wages that were claimed as credits.

Source: 32 V.S.A. § 5811(18)(A)(ii)

## Federal Bonus Depreciation Decoupling

Vermont does not conform to IRC § 168(k) bonus depreciation. The definition of Vermont net income explicitly states federal taxable income is determined "without regard to 26 U.S.C. § 168(k)."

Corporations that claimed 50%, 100%, or other bonus depreciation percentages under federal law for qualified property must add back that excess depreciation and instead claim depreciation under the Modified Accelerated Cost Recovery System (MACRS) without the bonus. This decoupling applies to both regular bonus depreciation and any special allowances enacted under federal stimulus or tax legislation.

Vermont's decoupling from bonus depreciation has been continuous since the enactment of IRC § 168(k). The state has not adopted the federal provision in any tax year, meaning corporations must maintain separate federal and Vermont depreciation schedules for affected assets.

Source: 32 V.S.A. § 5811(18)(A) Source: Vermont Department of Taxes, TCJA Conformity

## Income Exempt from State Taxation

Vermont net income excludes "income that under the laws of the United States is exempt from taxation by the states." This exclusion applies to income protected by federal statute from state taxation, such as interest on U.S. obligations under 31 U.S.C. § 3124 and income earned by federal instrumentalities to the extent constitutionally or statutorily immune from state tax.

Source: 32 V.S.A. § 5811(18)(A)

## Unitary Combined Reporting Modification

For a taxable corporation that is a member of an affiliated group engaged in a unitary business with one or more other members of that group, Vermont net income includes the corporation's allocable share of the combined net income of the unitary group, not simply the separate-company federal taxable income. Vermont's combined reporting rules modify the starting point to prevent income-shifting among related corporations.

Source: 32 V.S.A. § 5811(18)(C)

## S Corporations and Tax-Exempt Entities

S corporations. In the case of an S corporation, Vermont net income includes only the income taxable to the corporation under the Internal Revenue Code (such as built-in gains tax or excess passive income tax under IRC §§ 1374–1375). S corporations ordinarily do not pay Vermont corporate income tax; instead, income passes through to shareholders who report it on Vermont's Business Entity Income Tax return (Form BI-471).

Tax-exempt entities. For federally tax-exempt corporations, Vermont net income includes all income subject to federal income tax, including unrelated business income under IRC § 511 and income from debt-financed property under IRC § 514. Vermont does not grant a blanket exemption to federally exempt organizations for their taxable activities.

Source: 32 V.S.A. §§ 5811(18)(B), (D)

The process for electing digital business entity treatment in Vermont is governed exclusively by statute. As of July 2, 2026, the Vermont Department of Taxes has published no subregulatory guidance, FAQ, prescribed form, or administrative instruction clarifying the mechanics or timing for making the election under 32 V.S.A. § 5832a.

What the statute does and does not require:

• 32 V.S.A. § 5832a(a) provides that an eligible corporation may elect to be taxed as a digital business entity for the taxable year, subject to meeting all qualification requirements in the statute and 32 V.S.A. § 5811(26).
• 32 V.S.A. § 5832a(f) requires that a copy of the corporation’s federal income tax return be provided with its Vermont franchise tax filing if it elects digital business entity status. The statute does not specify any required election form, timing (such as a specific deadline separate from the return), or manner of notifying the Department about the election apart from the franchise tax return filing itself.
• 32 V.S.A. § 5838 echoes the requirement that a federal return accompany the franchise tax filing but does not set out separate election procedures.

Absence of further Departmental process:

• No Vermont Department of Taxes regulation, technical bulletin, published FAQ, or instruction details a procedure for submitting, confirming, or documenting a digital business entity election as of this review.
• No official state franchise tax form is designated for electing digital entity status, and there is no portal-based workflow or guidance for confirmation.
• There are no public examples or administrative clarifications by the Department beyond the statutes themselves.

Practical implications for practitioners:

• In the absence of Departmental procedures or instructions, an eligible corporation should make the election by filing its initial Vermont franchise tax return under § 5832a, providing the required federal income tax return as attachment. If documentation or confirmation from the Department is required, neither statute nor published guidance addresses how or when that should occur. The process remains entirely statutory until/unless the Department issues further clarification.

Source: 32 V.S.A. § 5832a Source: 32 V.S.A. § 5838

Not yet human confirmed. (Broken statutory source URLs were updated on 2024-07-02; no material statutory or administrative changes found.)

Vermont requires mandatory unitary combined reporting for corporate income tax purposes for tax years beginning on or after January 1, 2023. Any "taxable corporation" that is part of an "affiliated group" engaged in a unitary business must file a Vermont group return, unless qualified exclusions or elections apply.

Corporations Required in a Combined Return

• Vermont law defines an "affiliated group" as two or more corporations with more than 50% of voting stock (direct/indirect) owned by a common owner, following Internal Revenue Code (IRC) § 1504 principles with Vermont-specific exclusions.
• Members included: All U.S. corporations within the affiliated group that are engaged in a unitary business, whether or not they have nexus with Vermont, except:
• S corporations (excluded under 32 V.S.A. § 5811(21) and Reg. § 1.5862(d)-7(B)),
• Captive insurance companies as defined by 8 V.S.A. § 6014,
• Foreign corporations with less than 20% of their average property, payroll, or sales factors assigned to locations in the United States (see Reg. § 1.5862(d)-9),
• Non-taxable entities under the IRC or Vermont law.
• Reference: 32 V.S.A. § 5862(d)(3); Reg. §§ 1.5862(d)-7 to -9.

Definition of "Unitary Business"

• Vermont applies both a functional integration test and a centralized management/test of unity, following the standards of the U.S. Supreme Court (Mobil Oil Corp., Container Corp.) and applicable state regulation.
• The group is "unitary" if there is significant interdependence in operations (centralized purchasing, shared tech/services, coordinated marketing, etc.) or flow-of-value between affiliates (see Reg. § 1.5862(d)-4 and -5). Example factors include common management, economies of scale, or substantial mutual interdependence.

Exceptions and Elections

• Vermont allows an election to file a "Vermont consolidated return" instead of a combined return if the same group files a consolidated federal return. Election is binding for five years, per 32 V.S.A. § 5862(d)(5) and Reg. § 1.5862(d)-15.
• Tax credits: Credits are not shared across the group; each member corporation claims credits only to the extent authorized under 32 V.S.A. § 5930 and Reg. § 1.5862(d)-13.
• The "principal Vermont corporation" (generally the parent with the greatest Vermont nexus) is the filer and is responsible for group payment, notices, and compliance documentation (Reg. § 1.5862(d)-11).

Source: 32 V.S.A. § 5862(d) Source: Vt. Reg. § 1.5862(d)

Not yet human confirmed. Statute and regulation authoritative as of 2026-06-16.

Vermont requires C corporations to make quarterly estimated tax payments if their Vermont corporate income tax liability for the current year is reasonably expected to exceed $500. This requirement arises under 32 V.S.A. § 5856, which obligates corporations anticipating this liability to submit estimated taxes in installments. The rule applies to both separate C corporation filers and unitary combined groups, but not to pass-through entities or S corporations unless they have federal-level corporate tax liability (such as built-in gains or excess passive income tax), as Vermont conforms to federal S corporation status (see 32 V.S.A. § 5811(3)).

Threshold and Mandate If the total annual corporate income tax due for the year is expected to be more than $500, the corporation must file a declaration and pay estimated tax. If the $500 liability threshold is not met, no estimated payments are required for that year.

Installment Timetable and Adjustments Estimated tax is paid in four equal installments due on or before the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year (for calendar years: April 15, June 15, September 15, and December 15). Per 32 V.S.A. § 5858, if a corporation's tax liability first exceeds $500 after the 4th month, only the remaining installments are required—adhering to the statute's language on timing of threshold attainment and payments.

Computation and Safe Harbor Provisions Payments must total the lesser of (a) 90% of the current year's ultimate tax liability, or (b) 100% of the prior year's tax (if the previous year was a 12-month Vermont return). Underpayments may result in interest and penalties unless the taxpayer qualifies for a statutory safe harbor, uses an annualizing method as allowed, or shows reasonable cause. Details are governed by 32 V.S.A. § 5859.

Payments, Credits, and Form Payments are submitted electronically or with Form CO-414 (Estimated Tax Payment Voucher). Overpayments from the prior year may be credited to the next year's estimate—these rules are established by the Vermont Department of Taxes in official instructions, not statute.

Combined (Unitary) Filing For unitary combined groups, the estimated tax obligation applies to the Vermont unitary group as a whole for the combined return. Statute is silent on the assignment of payment responsibility within the group. Practically, the principal Vermont corporation typically transmits the group’s payments, but this treatment is grounded in administrative practice and not explicit in 32 V.S.A. §§ 5856–5859.

Source: 32 V.S.A. § 5856 Source: 32 V.S.A. § 5858 Source: 32 V.S.A. § 5859 Source: Vermont Department of Taxes CO-414 Instructions

Not yet human confirmed. Statutory provisions and agency instructions reviewed as of 2024-06-18.

Vermont corporate income tax permits corporations to deduct a net operating loss (NOL) only under Vermont’s specific provisions, which decouple from the federal NOL regime in several key respects.

Vermont-Specific Carryforward Rule A Vermont NOL may only be carried forward; there is no carryback. If a taxpayer incurs a Vermont net operating loss (as determined under Vermont law), the loss can be carried forward for up to 10 years following the year it was incurred, but cannot be carried back to offset income of a prior year. This is codified in 32 V.S.A. § 5888(a).

Year of Generation and Offset Mechanics The loss must be used in the earliest taxable year during the 10-year window in which the taxpayer has Vermont net income, and must be fully offset against that net income for that year before any amount can be used in a later year.

No Federal NOL Deduction for State Purposes Vermont does not allow the federal NOL deduction as part of the computation of Vermont net income. Instead, when calculating Vermont net income, any federal NOL deduction claimed for federal purposes must be added back (see 32 V.S.A. § 5811(18)(A)(i)). Taxpayers calculate their Vermont NOL separately, based on Vermont’s own rules for income, modifications, and apportionment. This decoupling is highlighted in both 32 V.S.A. § 5811(18)(A)(i) (addition of federal NOL back to income) and the dedicated NOL section at § 5888.

No Carryback—Post-TCJA Regime In contrast to federal rules (which, post-TCJA, permit indefinite carryforward of NOLs generated after 2017 but prohibit carrybacks except for certain disaster losses), Vermont continues to limit the carryforward period to 10 years and does not adopt the federal indefinite carryforward or the temporary carryback provisions.

Special Rules for Combined Groups If a corporation files as part of a Vermont unitary combined group, NOLs are calculated, applied, and tracked on a group basis, following 32 V.S.A. § 5888(b), which requires a Vermont combined group to determine its NOL as if it were a single corporation. NOL carryforwards can only be used against the group's income and cannot be transferred or assigned to another group or unaffiliated taxpayer.

Summary Table:

• Carryforward: 10 years (for losses generated in tax years after 2006)
• Carryback: Not permitted
• Separate calculation from federal NOL
• Combined group: NOLs applied and tracked at group level

Source: 32 V.S.A. § 5888 Source: 32 V.S.A. § 5811(18)(A)(i)

Not yet human confirmed. Statutes reviewed as of 2026-06-18.

Vermont's deadline for filing the annual corporate income tax return (Form CO-411) is set by statute as the same due date as the due date for the federal corporate income tax return (U.S. Form 1120) for the same period. This adopts by reference any federal law changes affecting the return deadline. For calendar-year filers, the due date is generally the 15th day of the fourth month after the close of the taxable year, but practitioners should always confirm the current year's deadline in the federal instructions or in the Vermont CO-411 Instructions. Vermont does not independently announce a fixed annual due date and instead follows the current federal schedule.

Extensions: To request an extension of time to file the Vermont return, the corporation must submit Vermont Form BA-403 to the Department of Taxes no later than the original due date of the Vermont return—even if a federal extension has been obtained. If a proper Vermont extension is granted, the extended Vermont due date is one month after the extended federal due date for Form 1120. Vermont does not grant an automatic extension based only on a federal extension; the Vermont request (BA-403) is required. See 32 V.S.A. § 5868 and the official CO-411 Instructions for step-by-step details.

Time to Pay: An extension to file does not extend the deadline to pay the tax due. All Vermont corporate income tax must be paid by the original (unextended) due date to avoid late payment interest and penalties—even if an extension to file is approved. Interest and penalties for late payment or late filing accrue under 32 V.S.A. §§ 3202–3203, with further details and current rates provided in the annual CO-411 Instructions.

Penalties and Interest:

• Late filing penalty: 5% of the unpaid tax per month, up to a 25% maximum.
• Late payment penalty: 1% of the unpaid tax per month, up to a 25% maximum.
• Interest: Charges accrue on any unpaid tax from the original due date until payment. The exact interest rate is determined annually.

These requirements apply whether returns and payments are submitted electronically or by paper. The Vermont Department of Taxes advises electronic filing for most filers but permits either format unless specifically required under law or regulation. Instructions and procedural details for each tax year should be found and confirmed in the latest official CO-411 Instructions.

Source: 32 V.S.A. § 5862 Source: 32 V.S.A. § 5868 Source: Vermont Department of Taxes, CO-411 Instructions