AN ACT ESTABLISHING PILOT PROGRAMS EXEMPTING HUBZONE BUSINESSES FROM THE SALES TAX.

OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 ¯ (860) 240-0200

http: //www. cga. ct. gov/ofa

sHB-5317

AN ACT ESTABLISHING PILOT PROGRAMS EXEMPTING HUBZONE BUSINESSES FROM THE SALES TAX.

Agency Affected	Fund-Effect	FY 07 $	FY 08 $
Department of Economic & Community Development	GF - Cost	See Below	See Below
Department of Revenue Services	GF - Revenue Loss	See Below	See Below

Note: GF=General Fund

Municipal Impact: None

Explanation

The bill will result in an indeterminate revenue loss from the Sales and Use Tax to the General Fund. The revenue loss is from the sales tax exemption given to certified HUBZone businesses established in this bill. The revenue loss is indeterminate because it is unknown what businesses are going to receive the sales tax exemption.

Requiring the Department of Economic and Community Development (DECD) to establish and administer 3 HUBZone pilot programs, will increase costs to the DECD. It is estimated that the DECD will require an Economic Development Specialist with an annual salary in FY 07 of $65,000 plus fringe benefits¹ and associated other expense costs of $5,000 - $10,000 to establish and administer the program.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

¹ The fringe benefit costs for state employees are budgeted centrally in the Miscellaneous Accounts administered by the Comptroller. The estimated first year fringe benefit rate as a percentage of payroll is 23. 6%, effective July 1, 2005. The first year fringe benefit costs for new positions do not include pension costs. The state's pension contribution is based upon the prior year's certification by the actuary for the State Employees Retirement System (SERS). The SERS 2005-06 fringe benefit rate is 34. 7%, which when combined with the non pension fringe benefit rate would total 58. 3%.