House Bill No. 5977 aims to exempt the sale and use of certain tangible personal property related to mixed-income developments from sales and use taxes, effective October 1, 2025. The bill repeals and replaces subdivision (29) of section 12-412 of the general statutes, introducing new provisions that allow for tax exemptions on tangible personal property and services used in the development, construction, rehabilitation, renovation, repair, or operation of housing facilities for low and moderate-income families. These facilities must be owned or operated by nonprofit housing organizations or housing authorities, which are required to obtain a letter of determination from the commissioner confirming their eligibility for the exemption. The bill also establishes a new subparagraph (C) that defines mixed-income developments as projects where at least 40% of the dwelling units are sold or rented at prices affordable to families earning 80% or less of the median income.

To qualify for the tax exemption, the Department of Revenue Services (DRS) commissioner must certify that at least 40% of the units in the development are deed-restricted for a minimum of 40 years, ensuring affordability for households earning no more than 80% of the applicable median income, with at least 15% of these units reserved for households earning 60% or less of the median income. The bill is expected to result in an estimated revenue loss of $2.25 million in FY 26, increasing to $3 million annually thereafter, primarily impacting the General Fund. Additionally, there will be a one-time cost of up to $100,000 for the DRS to update its tax administration systems, along with potential ongoing staffing costs if a significant number of units require certification. Overall, the bill broadens the scope of eligible developments to enhance support for mixed-income housing initiatives.