AN ACT CONCERNING TAX CREDITS FOR THE CONVERSION OF COMMERCIAL PROPERTIES.

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General Assembly Raised Bill No. 254
February Session, 2026 LCO No. 1690

Referred to Committee on HOUSING

Introduced by:
(HSG)

AN ACT CONCERNING TAX CREDITS FOR THE CONVERSION OF
COMMERCIAL PROPERTIES.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:

Section 1. (NEW) (Effective July 1, 2026, and applicable to taxable years 1
commencing on and after July 1, 2026) (a) As used in this section: 2
(1) "Affordable housing" has the same meaning as provided in section 3
8-39a of the general statutes; 4
(2) "Commercial building" means a structure primarily designed or 5
used for nonresidential purposes, including, but not limited to, as a 6
hotel, retail space, office space or an industrial building; 7
(3) "Commissioner" means the Commissioner of Housing; 8
(4) "Conversion plan" means any construction plan and specifications 9
for the proposed conversion of a commercial building into a residential 10
development that contains sufficient detail to enable the commissioner 11
to evaluate compliance with the standards developed under the 12
provisions of subsections (c) and (k) of this section; 13

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(5) "Dwelling unit" has the same meaning as provided in section 47a-14
1 of the general statutes; 15
(6) "Industrial building" means a structure that is used primarily for 16
industrial activity and that is generally not open to the public, including 17
but not limited to, warehouses, factories and storage facilities; 18
(7) "Nonprofit corporation" means a nonprofit corporation 19
incorporated pursuant to chapter 602 of the general statutes or any 20
predecessor statutes thereto, and having as one of its purposes the 21
construction, conversion, ownership or operation of housing; 22
(8) "Owner" means (A) any taxpayer filing a state of Connecticut tax 23
return who possesses title to a commercial building, or prospective title 24
in the form of a purchase agreement or option to purchase a commercial 25
building to be converted into a residential development, or (B) a 26
nonprofit corporation that possesses such title or prospective title; 27
(9) "Qualified conversion expenditure" means any cost incurred for 28
the physical construction involved in the conversion of a commercial 29
building into a residential development. "Qualified conversion 30
expenditure" does not include: (A) The owner's personal labor, (B) the 31
cost of site improvements, unless to provide building access to persons 32
with disabilities, (C) the cost of a new addition, except as may be 33
required to comply with any provision of the State Building Code, State 34
Fire Prevention Code or the State Fire Safety Code, (D) any cost 35
associated with the conversion of an outbuilding, unless such building 36
contains one or more dwelling units, and (E) any nonconstruction cost 37
such as architectural fees, legal fees and financing fees; and 38
(10) "Residential development" means a structure that contains one 39
or more dwelling units. 40
(b) Not later than January 1, 2027, the Commissioner of Housing shall 41
establish a program to administer a system of tax credit vouchers within 42
the resources, requirements and purposes of this section for owners 43

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converting commercial buildings into residential developments or 44
taxpayers making contributions that are qualified conversion 45
expenditures. Any owner eligible to apply for a tax credit voucher 46
pursuant to this section shall be eligible for such voucher in an amount 47
equal to ten per cent of the total qualified conversion expenditure. 48
(c) Not later than January 1, 2027, the commissioner shall develop 49
standards for the approval of tax credit vouchers for the conversion of 50
commercial buildings into residential developments for which a tax 51
credit voucher is sought. Any such standards shall take into account 52
whether such conversion will create or preserve units for affordable 53
housing. The commissioner shall post such standards on the 54
Department of Housing's Internet web site. 55
(d) Prior to beginning any conversion work on a commercial building 56
for which an owner will seek a tax credit voucher under this section, 57
such owner shall submit to the commissioner (1) a conversion plan for 58
a determination of whether such plan meets any standards developed 59
under the provisions of subsections (c) and (k) of this section, (2) an 60
estimate of the qualified conversion expenditures made, and (3) any 61
other information prescribed by the commissioner. Not later than sixty 62
days after receipt of such plan, estimate and other information, the 63
commissioner shall determine whether such plan conforms to the 64
standards developed under the provisions of subsections (c) and (k) of 65
this section. 66
(e) If the commissioner certifies that the conversion plan conforms to 67
the standards developed under the provisions of subsections (c) and (k) 68
of this section, the commissioner shall reserve for the benefit of the 69
owner an allocation for a tax credit equivalent to ten per cent of the 70
projected qualified conversion expenditures. 71
(f) Following the completion of the conversion of a commercial 72
building into a residential development, the owner shall notify the 73
commissioner that such conversion has been completed. The owner 74

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shall provide the commissioner with documentation of any work 75
performed on the commercial building and shall certify the cost 76
incurred in converting such building into a residential development. 77
The commissioner shall review such conversion work and verify its 78
compliance with the conversion plan. Following such verification, the 79
commissioner shall issue a tax credit voucher to either the owner 80
converting the commercial building or the taxpayer named by the 81
owner as contributing to the conversion. The tax credit voucher shall be 82
in an amount equivalent to the lesser of (1) the tax credit reserved upon 83
certification of the conversion plan under the provisions of subsection 84
(e) of this section, or (2) ten per cent of the actual qualified conversion 85
expenditures. In order to obtain a credit against any state tax due that is 86
specified in subsection (h) of this section, the holder of the tax credit 87
voucher shall file the voucher with the holder's state tax return. 88
(g) The owner of a commercial building converted into a residential 89
development shall not be eligible for a tax credit voucher under 90
subsections (f) and (h) of this section, unless the owner incurs qualified 91
conversion expenditures exceeding fifteen thousand dollars. 92
(h) (1) The Commissioner of Revenue Services shall grant a credit 93
against the tax imposed under chapter 229 or 208a of the general 94
statutes, as applicable, in accordance with the following: 95
(A) (i) For a taxpayer described under subparagraph (A) of 96
subdivision (8) of subsection (a) of this section holding a tax credit 97
voucher issued on or after January 1, 2027, under subsections (b) to (g), 98
inclusive, of this section, against the tax imposed under chapter 229 of 99
the general statutes in the amount specified in the tax credit voucher. 100
(ii) If the amount of the tax credit voucher exceeds the taxpayer's 101
liability for the tax imposed under chapter 229 of the general statutes, 102
the Commissioner of Revenue Services shall treat such excess as an 103
overpayment and, except as provided under section 12-739 or 12-742 of 104
the general statutes, shall refund the amount of such excess, without 105

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interest, to the taxpayer; and 106
(B) (i) For an owner that is a nonprofit corporation holding a tax credit 107
voucher issued on or after January 1, 2027, under subsections (b) to (g), 108
inclusive, of this section, against the tax due under chapter 208a of the 109
general statutes in the amount specified in the tax credit voucher. 110
(ii) Any unused portion of such credit under this subparagraph may 111
be carried forward to any or all of the four income years following the 112
year in which the tax credit voucher is issued. 113
(2) The Commissioner of Housing shall provide a copy of the voucher 114
issued under subsection (f) of this section to the Commissioner of 115
Revenue Services upon the request of the Commissioner of Revenue 116
Services. 117
(i) A credit issued under this section shall not exceed thirty thousand 118
dollars per dwelling unit for a commercial building converted into a 119
residential development for an owner that is not a nonprofit 120
corporation, or not exceed fifty thousand dollars per such dwelling unit 121
for an owner that is a nonprofit corporation. 122
(j) The aggregate amount of all tax credits that may be reserved by 123
the Commissioner of Housing upon certification of conversion plans 124
under subsections (b) to (d), inclusive, of this section shall not exceed 125
three million dollars in any one fiscal year. 126
(k) The Commissioner of Housing may, in consultation with the 127
Commissioner of Revenue Services, adopt regulations in accordance 128
with the provisions of chapter 54 of the general statutes to carry out the 129
purposes of this section. 130
This act shall take effect as follows and shall amend the following
sections:

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Section 1 July 1, 2026, and
applicable to taxable years
commencing on and after
July 1, 2026
New section

Statement of Purpose:
To establish tax credits for the conversion of commercial properties into
housing.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
underlined.]