THE House of Representatives, by a vote of 18 to 1, on Friday passed House Bill 23-120, which would ensure that the 3% construction tax proposed by H.B. 23-74 would not apply retroactively to project contracts awarded on or before Dec. 31, 2024.
Rep. Thomas John Manglona, who voted against H.B. 23-74, cast the lone dissenting vote.
H.B. 23-120 now goes to the Senate.
H.B. 23-74, which the House passed on Sept. 24, 2024, was still on the desk of Gov. Arnold I. Palacios as of Friday. He was expected to sign it.
Authored by Rep. Ralph N. Yumul, the bill would impose a 3% tax on construction project revenues with a $350,000 expenditure threshold. The tax would not apply to revenues attributable to residential construction.
H.B. 23-120, authored by Speaker Edmund S. Villagomez, states that “revenues from construction activities derived from Qualifying Construction Projects arising from contracts on or before Dec. 31, 2024, are exempt from the tax imposed by this Section. The tax imposed by this Section shall apply to any and all Qualifying Construction Projects arising from contracts awarded or executed on or after Jan. 1, 2025.”
H.B. 23-120 also clarifies that a subcontractor’s revenue is exempted from the 3% construction surtax.
Prior to the House vote on the bill, Speaker Villagomez offered a floor amendment to further clarify that there would be no retroactive application of the construction tax “unless there is change order and the change order happens after Jan. 1, 2025.” For example, if a contractor is awarded a contract in September 2024, S.B. 23-120 would not apply to that contract. However, if a change order occurs after Jan. 1, 2025, the 3% tax would then apply.
