Governor Calls Another Special Legislative Session to
Remove Barrier to Coast Housing
From: Office of the Governor Filed 10/2/06
Governor Haley Barbour announced today, Monday Oct. 2, that he has called
a Special Session of the Mississippi Legislature for Thursday, Oct. 5, to
ask legislators to reduce the cost of construction of new homes on the
Mississippi Gulf Coast.
The Governor said the Special Session will convene at noon on Thursday,
October 5, 2006, and legislators will be asked to reduce the state's tax
on modular homes as a means of reducing the cost of new homes for Coast
families by $4,000 to $6,000 per home. The measure is the same he sought
in a special legislative session in August; it unanimously passed the
Senate, but was killed in the House Ways and Means Committee, when it was
never brought up for a vote.
"The number one priority and challenge in Mississippi caused by Katrina is
housing," Governor Barbour said. "We must act now to remove barriers to
building housing on the Gulf Coast, and reducing the tax on modular homes
is a necessary step toward that end."
"Rebuilding our housing stock is a massive undertaking. To rebuild quickly
and efficiently, we must be innovative and creative and not just rely on
pre-Katrina housing solutions," Governor Barbour said.
More than 240,000 units of housing were damaged by Katrina statewide,
representing 23 percent of the state's occupied housing units. Nearly
80,000 units of housing suffered major or severe damage, or were
destroyed, approximately 53,000 of which were in the three coastal
Governor Barbour said due to labor supply constraints, the State must
encourage alternatives to conventional, site-built, "stick-built" homes.
One such alternative is modular housing, which under Mississippi law is
taxed at 7 percent while manufactured housing is taxed at 3 percent.
"Modular homes" are often confused with "manufactured housing" (also
referred to as mobile homes) since they are both "manufactured" in a
plant. However, there are substantial differences between the two. Mobile
homes are built to the HUD code, which is a national code governing the
manufactured housing industry. Modular housing is built to comply with
local building codes governing conventional construction, e.g. the
International Residential Code; therefore, the construction of modular
housing is virtually the same as a conventionally built home and qualifies
for conventional mortgage financing.
What are modular homes?
A modular home is built in modules or sections which are transported to
the site. A builder will normally install the foundation and the modules
will be lifted in place and fixed to the foundation. Once the modules are
installed at the foundation, the builder will complete the completion of
the utilities and other finishes.
Modular homes vary in size and price. There are multi-million dollar
custom modular homes, and there are modular homes designed for more
How does the current Mississippi tax law treat modular homes?
According to the Mississippi Tax Commission (MTC), Section 27-65-17 levies
a tax at the rate of 7% on the sale of tangible personal property. This
Section also provides reduced rates of tax for certain items, including
mobile homes which are tax at the reduced rate of 3%.
The MTC taxes modular home sales at the regular retail rate of 7% since
the statutes do not provide a lower rate of tax.
If a homeowner used conventional site-built housing methods, a 7% tax
would be paid on the materials, but no sales tax would be paid on the
labor. However, under the current tax law for modular homes, a 7% tax is
owed on materials and labor.
How should Mississippi tax modular homes?
Modular homes should be taxed at the same 3% tax rate that currently
exists for manufactured housing. This would also more closely match the
taxability of a conventional site-built home.
What is the revenue impact to the state?
Since there is very little modular housing currently in Mississippi, there
will be a very minimal impact on state revenue. The Mississippi Tax
Commission reports that the State collected $5.5 million from the sale of
manufactured housing in FY 06, but it can not identify existing revenue
figures for modular homes. No one estimates the state has ever collected
as much as $1 million in a year in state sales taxes on modular homes.
However, by removing a financial barrier to modular housing and given the
large unmet demand for housing, there is no doubt that more modular houses
will be purchased and, therefore, more tax revenue will be generated than
in any previous year.
TO THE MEMBERS OF THE LEGISLATURE:
WHEREAS, by the provisions of Section 121 of the Constitution of the
State of Mississippi, the Governor is vested with the power to convene,
by public Proclamation, the Legislature in Extraordinary Session
whenever, in his judgment, the public interest requires it; and
WHEREAS, it is the Governor's judgment that the public interest requires
that the Legislature be convened in Extraordinary Session for the
consideration of the matter hereinafter stated:
NOW, THEREFORE, I, Haley Barbour, Governor of the State of Mississippi,
do hereby issue this Proclamation to convene the Legislature in
Extraordinary Session, and do designate Thursday, October 5, 2006, at
12:00 p.m., as the time, and the State Capitol in the City of Jackson,
Mississippi, as the place, in which said Session shall be convened; and
do designate as the subjects to be considered at said Extraordinary
Session, when so convened, the following matter so relating exclusively
to and for no other purpose:
AN ACT TO AMEND SECTION 27 65 17, MISSISSIPPI CODE OF 1972, TO REDUCE
THE SALES TAX ON RETAIL SALES OF CERTAIN FACTORY BUILT HOMES; AND FOR
RELATED PURPOSES; and
Such other matters as may be submitted by the Governor for consideration
during such Extraordinary Session.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the Great
Seal of the State of Mississippi to be affixed.
DONE at the Capitol, in the City of Jackson, this the 2nd day of
October, in the year of our Lord, two thousand six and of the
Independence of the United States of America, the two hundred and
BY THE GOVERNOR