Bill H.164 proposes to amend the distribution of local option tax revenue to municipalities, increasing the percentage allocated from an unspecified amount to 80 percent. Additionally, the bill seeks to address the surplus in the Payment in Lieu of Taxes (PILOT) Special Fund by appropriating any surplus revenue proportionally to the municipalities that contributed to it. This change aims to ensure that municipalities receive a fairer share of the tax revenue generated within their jurisdictions.

Furthermore, the bill directs the Joint Fiscal Office (JFO) to prepare a report on transitioning to a system where the State retains only the necessary funds to manage the PILOT Special Fund, thereby preventing the accumulation of future surpluses. This legislative change is intended to enhance local government funding and improve the financial relationship between the State and municipalities in Vermont.