HB 5977 — AN ACT EXEMPTING THE SALE AND USE OF CERTAIN TANGIBLE PERSONAL PROPERTY FOR MIXED-INCOME DEVELOPMENTS FROM THE SALES AND USE TAXES.

House of Representatives General Assembly CommitteeFile Bill No.

5977854 January Session, 2025 LCOHouse Bill No.

71805977 ReferredHouse toof Representatives, May 8, 2025 The Committee on FINANCE,Finance, REVENUERevenue ANDand BONDINGBonding Introducedreported by:through REP.

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AN ACT EXEMPTING THE SALE AND USE OF CERTAIN TANGIBLE PERSONAL PROPERTY FOR MIXED-INCOME DEVELOPMENTS FROM THE SALES AND USE TAXES.

(29) (A) (i) Sales of and the storage, use or other consumption of tangible personal property acquired for incorporation into or used and consumed in the operation of housing facilities for low and moderate income families and persons and sales of and the acceptance, use or other consumption of any service described in subdivision (2) of section 12-407 that is used and consumed in the development, construction, rehabilitation, renovation, repair or operation of housing facilities for low and moderate income families and persons, provided such facilities are constructed under the sponsorship of and owned or operated by nonprofit housing organizations or housing authorities, as defined in subsectionHB5977 (b)/ ofFile sectionNo. 8-39.

The854 nonprofit housing organization or LCO 7180 1 ofHB5977 4File Committee Bill No.

5977854 housingsubsection authority(b) sponsoring the construction of orsection owning8-39. or operating such housing facility shall obtain from the commissioner a letter of determination that the housing facility has, to the satisfaction of said commissioner, met all the requirements for exemption under this [subsection] subparagraph and subparagraph (B) of this subdivision.

The nonprofit housing organization or housing authority sponsoring the construction of or owning or operating such housing facility shall obtain from the commissioner a letter of determination that the housing facility has, to the satisfaction of said commissioner, met all the requirements for exemption under this [subsection] subparagraph and subparagraph (B) of this subdivision.

[(ii)] (II) "housing facilities" means facilities having as their primary purpose the provision of safe and adequate housing and related facilities for low and moderate income families and persons, notwithstanding that said housing provides other dwelling accommodations in addition to the primary purposeHB5977 of/ providingFile dwelling accommodations for low and moderate LCO 7180 2 of 4 Committee Bill No.

5977854 income2 families;HB5977 File No.

854 purpose of providing dwelling accommodations for low and moderate income families;

"Median income" means, after adjustments for family size, the lesser of the state median income or the area median income for the area in which the municipality containing the mixed-income development is located, as determined by the United States Department of Housing and Urban Development, and LCOHB5977 7180/ 3File of 4 Committee Bill No.

5977854 "mixed-incomedevelopment"meansadevelopmentinwhich(I)notless3 thanHB5977 fortyFile perNo. cent of the dwelling units will be conveyed by deeds containing covenants or restrictions that shall require that, for at least forty years after the initial occupation of the proposed development, such dwelling units shall be sold or rented at or below prices that will preserve the units as housing for which persons and families pay thirty per cent or less of their annual income, where such income is less than or equalto eighty per cent ofthemedianincome, and (II)ofthe dwelling units conveyed by deeds containing covenants or restrictions, a number of dwelling units equal to not less than fifteen per cent of all dwelling units in the development shall be sold or rented to persons and families whose income is less than or equal to sixty per cent of the median income and the remainder of the dwelling units conveyed by deeds containing covenants or restrictions shall be sold or rented to persons and families whose income is less than or equal to eighty per cent of the median income.

854 "mixed-incomedevelopment"meansadevelopmentinwhich(I)notless than forty per cent of the dwelling units will be conveyed by deeds containing covenants or restrictions that shall require that, for at least forty years after the initial occupation of the proposed development, such dwelling units shall be sold or rented at or below prices that will preserve the units as housing for which persons and families pay thirty per cent or less of their annual income, where such income is less than or equalto eighty per cent ofthemedianincome, and (II)ofthe dwelling units conveyed by deeds containing covenants or restrictions, a number of dwelling units equal to not less than fifteen per cent of all dwelling units in the development shall be sold or rented to persons and families whose income is less than or equal to sixty per cent of the median income and the remainder of the dwelling units conveyed by deeds containing covenants or restrictions shall be sold or rented to persons and families whose income is less than or equal to eighty per cent of the median income.

Section 1 October 1, 2025, and 12-412(29) applicable to sales occurring on or after October 1, 2025 FIN Joint Favorable LCOHB5977 7180/ 4File ofNo. 4

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854 The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 26 $ FY 27 $ Department of Revenue Services Various - 2.25 million 3 million Revenue Loss Department of Revenue Services GF - Cost Up to None 100,000 Department of Revenue Services GF - Potential 75,000 100,000 Cost State Comptroller - Fringe GF - Potential 30,533 40,710 Benefits1 Cost Note:

Various=Various;

GF=General Fund Municipal Impact:

None Explanation The bill results in an estimated $2.25 million revenue loss in FY 26 and $3 million revenue loss annually thereafter to the state by exempting certain tangible personal property for mixed-income development from the sales and use tax.

By fund, the annualized revenue loss is anticipated to be $2.5 million to the General Fund and $250,000 each to the Special Transportation Fund and the Municipal Revenue Sharing Fund.

This analysis assumes up to 300 new units of housing would qualify 1The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller.

The estimated active employee fringe benefit cost associated with most personnel changes is 40.71% of payroll in FY 26.

2By statue, 0.5 percentage points of the 6.35% rate (or 7.87% of collections) is deposited into the Special Transportation Fund and Municipal Revenue Sharing Fund each.

The remaining 5.35 percentage points (or 84.25% of collections) is deposited into the General Fund.

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854 for this exemption under the bill with an average construction cost of $160,000 per unit.

The actual revenue loss is dependent upon the (1) cost of materials and (2) number of qualifying construction projects, both of which may fluctuate annually based on market conditions.

Department of Revenue Services Costs The bill also results in a one-time General Fund cost of up to $100,000 to the Department of Revenue Services (DRS) in FY 26 associated with programming updates to the CTax tax administration system and myconneCT online portal, as well as development of an exemption certificate.

To the extent the number of units that must be certified by the DRS commissioner is significant, there is a potential ongoing cost of $105,533 (partial year) in FY 26 and $140,710 in FY 27 for one auditor position (annualized cost of $100,000 for salary and $40,710 for fringe benefits).

3 The Out Years The annualized ongoing fiscal impacts identified above would continue into the future subject to inflation.

3To receive an exemption under the bill, the DRS commissioner must certify that all units are ina development in which, for at least 40 years after initial occupancy, at least 40% of the units are deed-restricted so they must be sold or rented (1) at or below a cost equal to no more than 30% of the annual household income of those earning no more than 80% of the applicable median income and (2) to households below certain income thresholds.

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