Most tax-exempt nonprofit organizations do not have to file a Vermont corporate income tax return or pay corporate income tax or the minimum business entity income tax. If the IRS has determined your organization is exempt from federal income tax, you are not required to file a Vermont corporate income tax return.
Exception for Unrelated Business Income
If your organization has earned income that can be classified as Unrelated Business Income as defined by the IRS, there may be a filing requirement with Vermont.
Unrelated Business Income Is Taxable In Vermont
Read Technical Bulletin 59 to learn more about Unrelated Business Income
Unrelated Business Income is defined as income:
- from a trade or business which is
- regularly carried on by an exempt organization and
- not substantially related to the organization’s exempt purpose or function, except that the organization uses the profits earned from this activity.
Unrelated business income may be earned from the following:
- owning property that yields rental income
- having an office where employees engage in activities not substantially related to the nonprofit’s exempt purpose
- performing services that are not substantially related to the nonprofit’s exempt purpose
A tax-exempt nonprofit organization which produced unrelated business income subject to federal income tax with gross receipts greater than $1,000 in Vermont during the tax year is subject to Vermont corporate income tax laws and provisions.
If you have unrelated business income, you must file Form CO-411, Vermont Corporate Income Tax Return, and pay the calculated tax.