Download HF2527

SALES AND USE TAX
Low-Income Housing Construction
April 13, 2010
Yes
Department of Revenue
Analysis of H.F. 2527 (Davnie) / S.F. 2229 (Moua)
F.Y. 2010
General Fund
Natural Resources and Arts Funds
Total – All Funds
No
DOR Administrative
Costs/Savings
$0
$0
$0
Fund Impact
F.Y. 2011
F.Y. 2012
(000’s)
($400)
($440)
($20)
($30)
($420)
($470)
X
F.Y. 2013
($450)
($30)
($480)
Effective for sales and purchases made after June 30, 2010.
EXPLANATION OF THE BILL
Current Law: A sales tax exemption applies to materials and supplies used or consumed in and
equipment incorporated into the construction, improvement, or expansion of low-income housing
projects. The owner of the project must be one of the types or entities listed in the statute.
Proposed Law: The bill would extend the exemption to include a limited liability corporation
which is a wholly-owned subsidiary of a qualifying nonprofit entity and to a limited partnership
in which the sole or managing general partner is this type of limited liability corporation.
Note: The analysis was conducted assuming that limited liability corporation refers to a limited
liability company (LLC). Also, the language used in referring to LLCs generally refers to the
LLC consisting of a sole member rather than as a wholly-owned subsidiary and the analysis was
conducted under this assumption as well.
REVENUE ANALYSIS DETAIL
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Information was not available on the number entities or housing units that would be
exempted under this bill.
In the absence of specific information, the estimate assumes that 142 units would be affected.
This number is equivalent to about 25% of the average number of units added each year.
Based on information developed for the 2010 Tax Expenditure Budget, 40% of the units
constructed are new construction and 60% are rehabilitation. The average sales tax per new
housing unit was estimated at $3,500 at the 6.875% rate. The average sales tax per
rehabilitated unit was estimated at $3,100 at the 6.875% rate.
The GDP price deflator was used to estimate the sales tax growth of 1.3% in FY 2011, 1.5%
in FY 2012, and 1.6% in FY 2013.
Fiscal year 2011 was adjusted for an effective date of July 1, 2010 (11 months of impact).
Source: Minnesota Department of Revenue
Tax Research Division
http://www.taxes.state.mn.us/taxes/legal_policy
hf2527(sf2229)_1/lcb