Senate Bill No. 1262 aims to incentivize the construction of affordable housing by reducing the sales and use tax on certain goods used in new residential development projects. The bill proposes to repeal subdivision (1) of section 12-408 of the general statutes and replace it with a new provision that establishes a reduced tax rate of three percent on tangible personal property purchased for construction projects that include either at least fifty affordable housing units or at least twenty percent of units designated as affordable. This new tax rate will not apply to projects that qualify for existing exemptions under section 12-412. The bill also includes modifications to the distribution of tax revenues, mandating that a portion of the collected tax be allocated to the Tourism Fund and the Municipal Revenue Sharing Fund, with a phased increase in allocations to the Special Transportation Fund.

Additionally, the bill repeals and replaces subdivision (1) of section 12-411, which pertains to the excise tax on the storage and use of tangible personal property and services, establishing a new tax rate of 6.35% with specific rates for certain services and high-value items. The legislation is expected to result in an annual revenue loss of approximately $2.7 million for the state, with the General Fund losing about $1.9 million. The Department of Revenue Services anticipates a one-time cost of up to $150,000 for necessary updates to tax administration systems. The changes outlined in the bill will take effect on July 1, 2025, and are designed to support affordable housing development while adjusting the state's tax revenue structure.

Statutes affected:
Raised Bill: 4-66o
HSG Joint Favorable: 4-66o
File No. 71: 4-66o