OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 (860) 240-0200
http://www.cga.ct.gov/ofa
SB-1262
AN ACT REDUCING THE SALES AND USE TAXES FOR CERTAIN
GOODS USED IN NEW HOUSING CONSTRUCTION.
Primary Analyst: EW 3/10/25
Contributing Analyst(s): CW
Reviewer: CW
OFA Fiscal Note
State Impact:
Agency Affected Fund-Effect FY 26 $ FY 27 $
Department of Revenue Services Various -
Revenue Loss
2.7 million 2.7 million
Department of Revenue Services GF - Cost Up to
150,000
None
Note: Various=Various
Municipal Impact: None
Explanation
The bill results in an estimated $2.7 million revenue loss annually to
the state by lowering the sales tax rate from 6.35% to 3% on construction
materials for new residential development projects that has the lesser of
(1) 50 dwelling units of affordable housing or (2) affordable housing
units equaling at least 20% of all units in the development. By fund, the
revenue loss is anticipated to be $1.9 million to the General Fund and
$400,000 each to the Special Transportation Fund and the Municipal
Revenue Sharing Fund.
1
This analysis assumes 500 new units of housing would qualify 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
1
By 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%) is deposited into the General Fund. 2025SB-01262-R000071-FN.DOCX Page 2 of 2
materials and (2) number of qualifying construction projects, both of
which may fluctuate annually based on market conditions.
The bill also results in a one-time cost of up to $150,000 to the
Department of Revenue Services in FY 26 associated with programming
updates to the CTax tax administration system and myconneCT online
portal, form modification, and the development of an exemption
certificate and guidance to retailers.
The Out Years
The annualized ongoing revenue impact identified above would
continue into the future subject to inflation.