Bill Would Impose New Property Tax, Expand Manufacturing Credit and Exemption

The House passed H.437 a revenue bill that would create a property transfer tax surcharge at the rate of one half of a percent on the value of property transferred over $1 million. The bill would also increase the annual amount available for the affordable housing tax credit, which would be dedicated to purchasing and restoring manufactured homes. Funds generated through the tax would support the expansion of the sales and use tax exemption for machinery, equipment, and ancillary processes deemed to be used as an integral or essential part of an integrated manufacturing operation.

This would be a move away from taxation at consumption theory and direct use standard to an integrated plan that proposes to make tax exempt the ancillary processes that occur throughout the manufacturing process, from raw materials in the beginning to the final product and packaging. To qualify for exemption these processes must protect the quality of the product and be part of the integrated production operation. Examples include air quality, cooling, heating, waste removal, and cleaning. Additional processes that occur after initial packaging, such as testing, inspection, quality control, and secondary packaging would also be exempt from the use tax under this proposal.

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