The VEGI program provides performance-based cash incentives to businesses that are expanding in, or relocating to, Vermont. Businesses can earn incentives for creating new qualifying jobs, increasing payroll, and making capital investments that go beyond typical growth. There are no restrictions on business size, type, or minimum number of jobs.
To qualify, a business must:
- Show that the project would not happen, or would happen in a significantly less desirable way, without the incentive.
- Demonstrate that new activity will generate more tax revenue than it costs the state.
- Be welcomed by the community and follow local/regional plans.
- Comply with all Vermont laws and regulations.
- Avoid unfair competition in local markets.
The application process begins with an online Pre-Application to estimate potential incentives. Businesses can then seek Initial and Final Approval from the Vermont Economic Progress Council (VEPC).
- Initial Approval can be granted early, even before final project details are available.
- Final Approval must occur in the same calendar year the project begins, and it sets your annual performance targets.
To receive incentive payments, companies must meet job and payroll performance requirements each year. Incentives are paid in five annual installments once those benchmarks are achieved and maintained.
Step 1: Submit Pre-Application
Before applying, contact VEPC to create a user account on the VEGI online application system. File a Pre-Application online to get an incentive estimate.
Step 2: Receive A Pre-Application Estimate
VEPC will send you an estimate within a week of filing your Pre-Application. Based on the estimate, decide whether to move forward with an application. Proceed with either an Initial Application (Step 3) or skip to Final Application (Step 5).
Step 3: Submit Initial Application
File an Initial Application in the online system by the first Friday of the month in which you want VEPC to review it. VEPC reviews Initial Applications on the last Thursday of each month.
Step 4: After Initial Approval
Conduct due diligence and finalize your project plans. Officially begin the project!
Step 5: Submit Final Application
File the Final Application through the online system by the first Friday of the month in which you want VEPC to review it and no later than the final VEPC deadline for the calendar year in which your project begins (typically November). Data from the Initial Application carries over and can be updated. This application sets your annual performance targets.
Q. Does my business have to have a Vermont income tax liability to receive an incentive payment under the VEGI program?
A. No. The incentive consists of cash payments and does not offset a state tax liability. The incentive is not a tax credit.
Q. Can my business seek approval for VEGI incentives if my business is in arrears with any State of Vermont taxes?
A. No. An applicant must certify that the business is “in good standing” with the Vermont Department of Taxes.
Q. Can my business get an estimate of VEGI incentives for a project we are considering?
A. Yes. Contact VEPC and file a VEGI Pre-Application. A Pre-Application can be filed anytime, has no deadline, and is an informal process that does not involve a Board decision. It is not an approval for incentives.
Q. Can incentives be authorized for jobs and payroll that my business has already created or other economic activity that has already occurred?
A. No. The incentives are for prospective economic activity.
Q. How many years of incremental economic activity can be covered by an application?
A. The minimum is one year, and the maximum is five years.
Q. Once I file an Initial or Final application, how long does it take to get incentives authorized?
A. If a complete application (not a Pre-Application) is received by the due date for a scheduled VEPC meeting, the application is normally considered on the last Thursday of that month. So, approval can occur within 30 days of applying.
Q. What if the economic activity my business is considering will not occur for several months?
A. File a Pre-Application as early as possible, even as early as a year in advance. If you wait until all decisions are made and the activity is about to commence, you will miss the opportunity for incentives. You must then file a formal (Initial or Final) application before the business decides to commence with the activity in Vermont.
Q. What if our business needs to get authorization for incentives so leadership can make decisions, but we do not yet know the full details of the project scope?
A. VEPC can give an Initial Authorization based on projections known at that time. The business must then file a Final Application by the end of the calendar year in which the project commences that finalizes projections, sets the incentive amount, and the annual performance requirements that must be met to earn the incentive.
Q. Can I calculate the potential value of an incentive if I know the economic activity I may undertake in the future?
A. No. The incentive value is based on many variables that generate incremental tax revenue and losses to the state. Also, the background growth of new jobs and payroll must be discounted from the calculation using historic data for your industry.
Q. The economic activity my business is planning will occur through different entities (i.e. an operating business creating jobs and a real estate holding business investing in a building). Can these companies apply for incentives together?
A. Yes. The incentive would be assigned and distributed to the entity creating the jobs. However, both entities must meet the applicable performance requirements. If the performance requirements are not met by either entity, the incentives assigned to the operating business would be impacted.
Q. What if my business applies and is authorized mid-year?
A. The incentive can be earned for activity during the partial calendar year and then for the remaining four calendar years. Or, the authorization can be effective at the start of the calendar year following the authorization. The incentive can only be calculated and earned for jobs, payroll, and capital investments that occur after the Activity Commencement Date designated by the applicant. If the business is approved during the calendar year for activity that will occur that same year, the Year 1 performance requirements must be met by December 31 of the first year; the business does not have a full twelve months to meet the first-year targets.
Q. What if my business operates on a fiscal year that does not end on December 31?
A. The business fiscal year does not impact the incentive. The application must be completed based on the calendar year, the incentive is calculated on a calendar year basis, and filing a claim for an earned incentive is based on a calendar year.
Q. Are there any annual reporting requirements with this program?
A. Yes. Once authorized, applicants become claimants and use the same secure online system that is used for applications to file an annual incentive claim, which is examined by the Vermont Department of Taxes. The reporting consists of a claim form, an employee benefits form, and four Excel workbooks, which must be completed and uploaded to show detailed employment, payroll, and capital investment data supporting the claim.
Q. How are the annual performance requirements set to earn the incentive?
A. The applicant sets their own performance requirements in their Final Application. Once a Final Application is approved, these requirements cannot be adjusted.
Q. How is “meeting annual performance requirements” defined?
A. To “meet” annual performance measures means:
- To maintain base payroll and headcount; and
- To meet the new qualifying payroll performance requirement; and
- To meet either the new qualifying employment or the new qualifying capital investment
- performance requirements.
Q. So a business can meet only the new qualifying payroll and new qualifying employment performance measures each year and still earn the incentive?
A. Yes. However, because the incremental tax revenues of the new capital investments related to the project were included in the incentive calculation, reconciliation at the end of the authorization period is required.
Q. Can the incentive be partially earned if the performance requirements are partially met?
A. No. But the program does include “grace periods” during which performance requirements may be met and still earn the incentive. No incentive is paid until the performance requirement is met.
Q. What is new “qualifying payroll”?
A. Only the new payroll generated by the creation of new qualifying jobs can be counted in the incentive calculation. A new qualifying job is a job created because of the incentive for employment in Vermont, that:
- Is full-time (35 hours or more per week);
- Is permanent (not part-time, seasonal, contract, agency);
- Is not an owner;
- Will earn a wage or salary that is above the VEGI Wage Threshold; and
- Qualifies for certain employer-supported benefits.
Q. How is the cost-benefit modeling performed?
A. VEPC employs an economic consultant to operate a model that has been approved by the Joint Fiscal Committee of the Vermont General Assembly. The model uses the applicant’s existing and prospective employment, payroll and capital investment data as inputs in an economic input-output model that calculates the multiplier effect on the Vermont economy. The model then translates that economic impact into the new tax revenues that will be generated for the State of Vermont by the activity. The total net tax revenue benefit generated to the State of Vermont for the five-year authorization period becomes the starting point to calculate the incentive amount.
Q. How is the background growth rate determined?
A. The background growth rates utilized in the incentive calculation are determined and published annually using 15 years of historical data for each North American Industrial Classification System sector. The rates are in effect for each calendar year and are multiplied against the business’s base full-time payroll to determine the level of new payroll to be considered background or organic growth
Q. If the annual performance measures are met, how will the earned incentive be paid to the business?
A. The earned incentive will be divided into five installments and paid out to the business as a cash payment, if the performance requirements are maintained. The first installment of each earned incentive will be adjusted for partial-year hiring.
Q. Are the incentive payments taxable?
A. Yes. The cash incentive payments are considered taxable income by Vermont and the IRS.
Q: Am I eligible for a Labor Market Area Enhancement?
A: An enhanced incentive may be available for a business in a labor market area with where the average annual unemployment rate is greater than the average annual unemployment rate for the State or where the average annual wage is less than the average annual wage for the State. Due to federal designation changes that took effect in 2025, sub-state regions will now be county-based instead of town-based. For the period of July 1, 2025 to June 30, 2026, applicants located within all counties except Chittenden County and Washington County are eligible to apply for a labor market area enhancement.