It has been a little over two years now since Senate Bill 102, otherwise known as the Live Local Act (the “Act”), was signed into law. Although the dust is nowhere close to settling, since the various laws were enacted by the Act, we have seen several amendments modifying certain sections of the Act be signed into law and have witnessed a number of proposed amendments be introduced by Florida’s legislature.  Nevertheless, the vast majority of everyone’s focus has been on the Act’s county/municipality zoning preemption provisions under Fla. Stat. Sections 125.01055 and 166.04151 and its property tax exemptions under Fla. Stat. Sections 196.1978 and 196.1979 (i.e., the missing middle property tax exemption); which seem to overshadow other very important laws enacted by the Act. One major incentive - arguably the most significant incentive – that is often overlooked is the building materials sales tax refund available to developers of low-income housing tax credit (“LHTC”) projects added under Fla. Stat. Section 212.08(u) (the “Affordable Housing Sales Tax Refund”). 

The Affordable Housing Sales Tax Refund provides a project owner a refund for previously paid sales taxes paid on building materials used to construct new units that are (i) within a development subject to a recorded agreement with Florida Housing pursuant to chapter 420, to provide affordable housing to natural persons or families meeting the extremely-low-income (i.e., 30% median annual adjusted gross income (“AMI”)), very-low-income (i.e., 50%  AMI) or low-income limits (i.e., 80% AMI); and (ii) such units are restricted under a land use restriction agreement. Newly constructed units that meet the requirements in (i) and (ii) above are referred to hereinafter as “Eligible Units”.  
The term building materials is defined as any tangible personal property that becomes a component part of an Eligible Unit. The term includes appliances but does not include plants, landscaping, fencing and hardscaping. The term “newly constructed” means improvements to real property that did not previously exist or the construction of a new improvement where an old one was removed. The definition specifically carves out renovation, restoration, rehabilitation, modification, alteration or expansion of a building already located on a parcel on which the Eligible Unit is built. 

The Affordable Housing Sales Tax Refund applies to sales of building materials that occur on or after July 1, 2023, and takes the form of a post-construction refund to the project owner. The refund may not exceed the lesser of $5,000 or 97.5 percent of the Florida sales or use tax paid on the cost of the building materials per Eligible Unit. A refund will not be granted unless it exceeds $500. 

To receive the refund, the project owner must file application DR-26AH (the “Application”) with the Florida Department of Revenue.  Unlike other sales tax exemptions that require project owners to comply with tedious record keeping requirements and/or undergo costly reviews, the instructions to the Affordable Housing Sales Tax Refund’s Application appear to alleviate those issues by providing project owners several different methods to choose from to determine the costs of the building materials. The application must be submitted by the project owner within six months after the date the local building inspector determines that the Eligible Units are substantially completed; or by November 1st after the improved property is first subject to assessment. 

If you have questions about the Affordable Housing Sales Tax Refund, its application process or how it may benefit your affordable housing development, please reach out to the Affordable Housing and Tax Credits Team at Nelson Mullins.