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Sales and Use Tax Exemption for Low and Moderate Income Housing Facilities Conn. Gen. Stat. §12-412(29)
This publication has been superseded by PS 96(6.1)
PURPOSE: This Policy Statement describes the scope of the exemption in Conn. Gen. Stat. §12-412(29) for purchases of tangible personal property acquired for incorporation into or used and consumed in the operation of low and moderate income housing facilities; as new procedures to be followed in applying for and obtaining a determination from the Department that a facility qualifies for the exemption; and use of a new certificate when making purchases pursuant to the exemption statute. The Policy Statement also explains the relationship of Conn. Gen. Stat. §12-412(29) to Conn. Agencies Regs. §12-426-18(b) regarding construction contracts with nonprofit housing organizations, and to Conn. Agencies Regs. §12-426-15.
EFFECTIVE DATE: Effective upon issuance and applicable to all open tax periods.
STATUTORY AND REGULATORY AUTHORITY: Conn. Gen. Stat. §12-412(29) and Conn. Agencies Regs. §12-426-18(b).
SCOPE OF THE EXEMPTION: Conn. Gen. Stat. §12-412(29) provides an exemption from sales and use taxes for sales and the storage, consumption or other use, of tangible personal property (but not services) when such tangible personal property is either (a) acquired for incorporation into housing facilities for low and moderate income families and persons, or (b) used and consumed in the operation of such housing facilities. To qualify, a low and moderate income housing facility must be (a) constructed under the sponsorship of a nonprofit housing organization, and (b) either owned or operated by a nonprofit housing organization.
The exemption is available to persons that make purchases of such tangible personal property in connection with such qualifying housing facilities, including sponsors, owners or operators of facilities, and contractors with sponsors, owners and operators, such as construction contractors, repairers, renovators, landscapers, maintenance and janitorial service providers. Purchasers need not be nonprofit housing organizations or other tax exempt organizations.
TERMS DEFINED IN THE EXEMPTION: A nonprofit housing organization is any organization which has as one of its purposes the development, construction, sponsorship or ownership of housing for low and moderate income families, which has received an exemption from federal income taxes under Section 501(c) of the Internal Revenue Code, and which provides in its corporate charter (or certificate of incorporation), if incorporated, or its constitution or its bylaws, if unincorporated, that no officer, member or employee shall receive or at any time may receive any pecuniary profit from the operation of such organization, except reasonable compensation for services in effecting the purposes of the organization.
Housing facilities are facilities having as their primary purpose the provision of safe and adequate housing and related facilities for low and moderate income families and persons, notwithstanding that said housing provides other dwelling accommodations in addition to the primary purpose of providing dwelling accommodations for low and moderate income families.
Related facilities (as used in the definition of housing facilities) are facilities defined in Conn. Gen. Stat. §8-243(d), which defines related facilities as "commercial, office, health, welfare, administrative, recreational, community and service facilities incidental and pertinent to housing as determined by the [Connecticut Housing Finance Authority]."
Low and moderate income families are families as defined in Conn. Gen. Stat. §8-243(h), which defines low and moderate income families and persons as "families and persons who lack the amount of income necessary as determined by the [Connecticut Housing Finance Authority], to rent or purchase safe and adequate housing without special financial assistance not reasonably available."
APPLICATION FOR EXEMPTION: Persons wishing to apply for the exemption available under Conn. Gen. Stat. §12-412(29) should complete Form REG-19, Low and Moderate Income Housing Facilities, Application for a Facility Approval Letter, which was newly issued in May 1996, and supersedes Form REG-17. The applicant must be a nonprofit housing organization that sponsors the construction or renovation of the low and moderate income housing facility. Each application must be filled out completely and accompanied by all information necessary to the Department to determine the eligibility of the project for the exemption. At a minimum, this information will consist of:
a full description of the housing project, including its location and its dates of construction and commencement of operation;
the certificate of incorporation of the sponsoring organization, if it is a corporation, and the constitution and bylaws of the organization, if it is not, indicating that it qualifies as a nonprofit housing organization (i.e., the necessary language regarding its purpose and regarding officer, member or employee compensation);
a copy of the organization's current, valid determination letter issued by the United States Treasury Department indicating that the organization has received exemption from federal income tax under Section 501(c) of the Internal Revenue Code;
the organizing documents (certificate of incorporation or constitution and bylaws) of the owner and the operator of the facility, if different from the sponsoring organization, and proof that either the owner or the operator qualifies as a nonprofit housing organization;
documentation establishing that the construction project is being sponsored by the sponsoring organization;
documentation establishing that the facility is being or will be operated by the person identified as the operator (including a copy of the management or operating contract, if available); and
the effective date of the requested exemption. (This may be no earlier than the date by which both the sponsor and the owner or operator qualified as nonprofit housing organizations and the agreement to sponsor the facility was made. In no event will the effective date stated extend the limitation period for refund requests set forth in Conn. Gen. Stat. §12-425.)
ISSUANCE OF FACILITY APPROVAL LETTER: Upon completion and submission of Form REG-19 by the applicant and approval of the application by the Department, the Department will issue to the applicant a signed, dated Facility Approval Letter on Department letterhead, which will acknowledge that tangible personal property acquired for incorporation into or used and consumed in the operation of the low and moderate income housing facility named in the letter is exempt from sales and use taxes. A copy of the Facility Approval Letter must be attached to the CERT-126, Certificate for Exempt Purchases of Tangible Personal Property for Low and Moderate Income Housing Facilities newly issued by the Department in July 1996, or to the Contractor's Exempt Purchase Certificate (see below) by persons who wish to make exempt purchases for the facility.
USE OF CONTRACTOR'S EXEMPT PURCHASE CERTIFICATE: Conn. Agencies Regs. §12-426-18(b) provides that, where a contractor enters into a construction contract with a nonprofit housing organization qualifying as such pursuant to Conn. Gen. Stat. §12-412(29), it may purchase such materials and supplies as are to be physically incorporated in and become a permanent part of the project being performed under the contract without payment of sales and use taxes. The regulation prescribes the form of the Contractor's Exempt Purchase Certificate for this purpose. However, the use of a Contractor's Exempt Purchase Certificate is appropriate only when the contract is directly with a qualifying nonprofit housing organization for the repair, alteration, improvement, remodeling or construction of a low and moderate income housing facility. Contractors wishing to utilize the Contractor's Exempt Purchase Certificate must obtain from the sponsoring, owning or operating nonprofit housing organization a copy of the Department's Facility Approval Letter for the facility, and attach it to the Contractor's Exempt Purchase Certificate when making purchases.
USE OF CERT-126: For contractors that contract directly with persons other than nonprofit housing organizations for the repair, alteration, improvement, remodeling or construction of low and moderate income housing facilities (such as contractors that contract with for-profit owners or operators of such facilities), and for persons other than contractors who wish to make exempt purchases under Conn. Gen. Stat. §12-412(29) (such as owners or operators of such facilities), the newly-issued CERT-126, Certificate for Exempt Purchases of Tangible Personal Property for Low and Moderate Income Housing Facilities must be used, and a copy of the Department's Facility Approval Letter must be attached to the Certificate.
CERT-126 may also be used by contractors in lieu of the Contractor's Exempt Purchase Certificate.
EFFECT OF CONN. AGENCIES REGS. §12-426-15: Conn. Agencies Regs. §12-426-15(c) specifically relates to sales to nonprofit housing organizations, and the general requirements of subsections (e) and (g) of the regulation also purport to apply to nonprofit housing organizations. The regulation incorrectly implies that sales of services are exempt under Conn. Gen. Stat. §12-412(29). That statute exempts only sales of tangible personal property. Also, the definitions in Conn. Agencies Regs. §12-426-15 of the terms "related facilities" in subdivision (c)(1), and "low and moderate income families and persons" in subdivision (c)(2), are superfluous, since those two terms are adequately defined in Conn. Gen. Stat. §12-412(29) itself. Therefore, Conn. Agencies Regs. §12-426-15 should not be followed with respect to §12-412(29), and will not be applied by the Department, and its provisions and requirements are of no effect in connection therewith.
EFFECT ON OTHER DOCUMENTS: Form REG-17, Nonprofit Housing Organizations Application for the Recognition of Exemption From Sales and Use Taxes, is superseded by Form REG-19, Low and Moderate Income Housing Facilities Application for a Facility Approval Letter.
EFFECT OF THIS DOCUMENT: A Policy Statement is a document that explains in depth a current Department policy or practice affecting the liability of taxpayers. Unlike a Ruling, a Policy Statement does not apply a policy or practice to a specific set of facts but it may be referred to for general guidance by taxpayers. Unlike a Special Notice, it does not announce a new policy or practice in response to changes in state or federal laws or regulations or to judicial decisions.
Sales and use taxes