BCCO Act - Sales and Use Tax Exemptions
CECC, April 16, 2024
BACKGROUND
The following text is on the Office of the State Architect website:
Energy & Environment/Sales and Use Tax Exemption for Eligible Decarbonizing Building Materials
Beginning July 1, 2024, all sales of eligible decarbonizing building materials are exempt from state sales and use tax. The Office of the State Architect (OSA) is required to create a list of eligible materials and the manufacturers of those materials that will be shared with the Colorado Department of Revenue by January 1, 2024 (July 1, 2024, per OSA).
"Eligible decarbonizing building materials" are building materials that comply with the maximum acceptable global warming potential (GWP) limits as determined by the Office of the State Architect. Refer to the OSA Buy Clean Colorado (BCCO) Act webpage for the list of Eligible Material Categories and the OSA’s GWP limits.
The goal of providing the sales and use tax exemption for eligible decarbonizing building materials is to encourage businesses and individuals to purchase and use those building materials rather than industry-standard materials. Also, the goal is to encourage the industry to manufacture products that comply with GWP limits that encourage the growth in the company's decarbonizing building materials product alternatives and to support the reduction of carbon emission in the construction industry. A statutory town, city, or county may exempt the same items that are exempt from state sales and use tax pursuant to the act only by express inclusion of the exemption in its initial sales tax ordinance or resolution or by amendment thereto.
ANALYSIS
The Buy Clean Colorado Act, HB21-1303 was enacted in June of 2021, and focuses on requirements of GWP limits for seven materials: asphalt and asphalt mixtures, cement and concrete mixtures, glass, pot-tension steel, reinforcing steel, and wood structural elements. These limits are imposed on State funded projects that are awarded after January 1, 2024.
Colorado SB22-051 was enacted in June of 2022 in order to establish State sales and use tax exemptions for the seven materials defined in HB21-1303. This Act requires that C.R.S. 24-92-117 be modified to allow the sales and use tax exemption – this section was amended in August 2022.
In a conversation with OSA, they intend to publish a list of products and their suppliers that meet the requirements of HB21-1303 as verified by OSA on the OSA website by July 1, 2024. The Department of Revenue will be provided with this list of approved product suppliers as well.
Loss of revenue as described in SB22-051, Final Fiscal Note: “Starting in FY 2024-25, the revenue impact also includes a preliminary estimate of the sales and use tax exemption for decarbonizing building materials.” The expected revenue decrease for FY 2023-24, the year the exemption goes into effect, is $4.3 million, and for FY 2024-25 it is $5.8 million. These revenue decreases also result from the sales and use tax exemption for heat pump and residential energy storage systems.
CONCLUSIONS:
The Colorado State sales tax rate is 2.9%, and if the product is bought outside the state of Colorado, a use tax of 2.9% must be paid. Currently the sales and use tax exemptions apply only to public projects that receive State funding. The intent is to extend the sales and use tax to a wider range of projects. As a starting point, because Colorado is a home rule state, local jurisdictions need to rule to allow the State sales and use tax exemptions. It is unclear if private developers will be allowed to receive the State sales and use tax exemptions for use of approved products on their projects.
REFERENCES
[1] Office of the State Architect https://osa.colorado.gov/
[2] Colorado HB21-1303
[3] Colorado SB22-051
[4] Colorado SB22-051, Final Fiscal Note
[5] Colorado CRS 24-92-117
[6] Brief conversation with Bailey Vigil/OSA on April 16, 2024