HF177

Purpose

To provide a refundable construction exemption for the construction of new single-family homes purchased by first-time homebuyers. The exemption targets materials, supplies, and equipment used in building the home, with the goal of lowering the end purchase price for eligible buyers.

Main provisions

• Adds a new Subdivision 55 to Minnesota Statutes section 297A.71, creating a construction materials exemption.
• Applies to materials, supplies, and equipment used or consumed in constructing a new single-family home for a first-time homebuyer.
• Exemption cap: applies only to the first $165,000 of costs for materials, supplies, and equipment.
• Qualified recipient criteria:
  • The recipient is the owner at the time the materials, supplies, and equipment are purchased and used in construction.
  • After construction, the owner and occupant must be a first-time homebuyer.
  • The purchase agreement must reflect that the tax savings from the exemption reduced the home’s purchase price.
• Tax treatment and refund:
  • Taxes on purchases exempt under this provision are collected as if standard rates apply, then refunded in the manner described in another statute (Section 297A.75).
  • The recipient must provide proof to the commissioner that the requirements are met before receiving a refund.
• Time limits:
  • This provision expires July 1, 2033.
  • The commissioner must not issue refunds after June 30, 2033.

How it changes existing law

• Creates a new construction materials exemption for first-time homebuyers of new single-family homes, adding a new subdivision (Subd. 55) under 297A.71.
• Establishes a refundable tax mechanism (via 297A.75) rather than a straightforward exemption at the point of sale.
• Sets an explicit expiration date to the exemption and refund eligibility (2033).

Eligibility and requirements (summary)

• Must be constructing a new single-family home.
• Buyer must be a first-time homebuyer at the time of purchase and after construction becomes the occupant.
• The purchase agreement must show the tax savings reduced the purchase price.
• Exemption covers the first $165,000 of construction materials, supplies, and equipment costs.
• Refunds require proof to the Minnesota Department of Revenue (or the relevant commissioner) that criteria are met.
• Refunds are not available after June 30, 2033.

Administrative and financial details

• The exemption is handled as if standard sales tax rates applied, with a later refund.
• Limits refunds to those who provide required documentation and meet all criteria.
• The policy has a defined end date, after which refunds are not issued.

Potential impacts (overview)

• May reduce upfront costs for first-time buyers of new single-family homes by returning paid taxes on eligible construction costs.
• Could affect state revenue during the period the exemption is in effect.
• Creates a time-bound incentive with an explicit expiration for refunds.

Relevant Terms construction materials exemption; new single-family home; first-time homebuyer; refundable exemption; tax refund; sales tax; construction costs; materials and equipment; owner and occupant; purchase agreement; proof to commissioner; expiration; 2033.