Senate Bill No. 1262 seeks to incentivize the construction of affordable housing by introducing a reduced sales tax rate of 3% on tangible personal property used in new residential development projects that either include at least 50 affordable housing units or designate at least 20% of their units as affordable. This new provision will replace the existing sales and use tax rate of 6.35% for these specific purchases, effective July 1, 2025. The bill also repeals subdivision (1) of section 12-408 of the general statutes and modifies existing tax provisions by deleting subparagraph (I) and replacing it with a new subparagraph (J) that outlines the new tax rate, while updating the numbering of subsequent subparagraphs.

In addition to the changes in tax rates, SB 1262 modifies the distribution of tax revenues, mandating that 10% of certain tax revenues be deposited into the Tourism Fund and adjusting allocations to the Municipal Revenue Sharing Fund and the Special Transportation Fund over the coming years. The bill also repeals and replaces subdivision (1) of section 12-411, establishing a consistent tax rate of 6.35% on the sales price of tangible personal property and services, with various exceptions. The fiscal impact of the bill is projected to result in an annual revenue loss of approximately $2.7 million for the state, with a one-time cost of up to $150,000 for the Department of Revenue Services to implement the necessary updates to tax administration systems.

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