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OLR Bill Analysis
HB 6630
AN ACT CONCERNING THE RATE OF THE REAL ESTATE
CONVEYANCE TAX ON CERTAIN CONVEYANCES.
SUMMARY
This bill lowers the state real estate conveyance tax rate on new
homes sold for more than $2.5 million by certain new home
construction contractors and housing ownership businesses.
Under current law, all sales of residential property are subject to the
state real estate conveyance tax at the following marginal rates: (1)
0.75% on the first $800,000 of the sales price, (2) 1.25% on any portion
of the sales price that exceeds $800,000 and is less than or equal to $ 2.5
million, and (3) 2.25% on any portion of the sales price that exceeds
$2.5 million. Connecticut residents who paid the tax at the top
marginal rate may claim a personal income tax credit based on the
amount they paid in conveyance tax at that rate (see BACKGROUND).
The bill eliminates the top marginal rate (2.25%) for “new homes”
sold by (1) state-registered “new home construction contractors” or (2)
a partnership, limited partnership, limited liability partnership, joint
venture, trust, limited liability company, or association that has
housing ownership as one of its purposes. Thus, under the bill, these
sales are subject to conveyance tax at the rate of (1) 0.75% for the first
$800,000 of the sales price and (2) 1.25% for any portion exceeding
$800,000.
The bill also makes several technical and conforming changes.
EFFECTIVE DATE: July 1, 2021
NEW HOMES AND NEW HO ME CONSTRUCTION CONT RACTORS
The bill applies to sales by new home construction contractors
registered as such with the Department of Consumer Protection who 2021HB-06630-R000652-BA.DOCX
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contracted with a consumer to construct or sell a new home, or any
portion of one, prior to occupancy. A “new home” is a newly
constructed (1) single-family dwelling unit; (2) dwelling consisting of
two or fewer units; or (3) unit, common element, or limited common
element in a condominium or common interest community (CGS § 20-
417a).
BACKGROUND
Property Tax Credit Against the Income Tax
Beginning with the 2021 tax year, taxpayers who paid conveyance
tax at the 2.25% rate may claim a property tax credit against their state
income tax liability based on the amount they paid in conveyance tax
at this rate. (By law, eligibility for the property tax credit is limited to
state residents.)
Taxpayers may use the conveyance tax payment as the basis for the
property tax credit for three years, beginning in the third tax year after
the year in which the taxpayer paid the conveyance tax. The credit in
each year cannot exceed 33.3% of the amount of conveyance tax the
taxpayer paid at the 2.25% rate. If a taxpayer does not use the full
credit in a given year because it exceeds what the taxpayer owes in
income tax or paid in property tax, then the taxpayer may carry the
unused portion forward for up to six successive tax years (CGS § 12-
704c(d), as amended by PA 19-117, § 335).
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable
Yea 47 Nay 1 (04/22/2021)