Senate Bill sb1200

CODING: Words stricken are deletions; words underlined are additions.
    Florida Senate - 2005                                  SB 1200

    By Senator Fasano





    11-906-05

  1                      A bill to be entitled

  2         An act relating to the tax on sales, use, and

  3         other transactions; amending s. 212.052, F.S.;

  4         deleting an exception to an exemption from the

  5         tax for research or development costs;

  6         providing an exemption for machinery and

  7         equipment used predominantly for research and

  8         development activities; defining the term

  9         "machinery and equipment"; authorizing a

10         business certified to receive the exemption to

11         designate one or more state universities or

12         community colleges as recipients of part or all

13         of the amount of the exemption under specified

14         conditions; providing that the business retains

15         the rights to patents, royalties, or real or

16         intellectual property unless an agreement

17         specifies otherwise; amending s. 212.08, F.S.;

18         deleting an annual limitation on an exemption

19         from the tax for certain machinery and

20         equipment; deleting an exemption for machinery

21         and equipment used to expand certain printing

22         manufacturing facilities or plant units;

23         revising special provisions for phosphate and

24         solid mineral severance or processing; deleting

25         an annual limitation on an exemption from the

26         tax for certain machinery and equipment

27         purchased under a federal procurement contract;

28         repealing s. 212.0805, F.S., relating to

29         conditions for the qualification of machinery

30         and equipment used in phosphate and solid

31         mineral severance or processing for the

                                  1

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1         exemption for new or expanding businesses;

 2         providing an effective date.

 3  

 4  Be It Enacted by the Legislature of the State of Florida:

 5  

 6         Section 1.  Subsection (2) of section 212.052, Florida

 7  Statutes, is amended, present subsections (3), (4), and (5) of

 8  that section are redesignated as subsections (4), (5), and

 9  (6), respectively, and a new subsection (3) is added to that

10  section, to read:

11         212.052  Research or development costs; exemption.--

12         (2)  Notwithstanding any provision of this chapter to

13  the contrary, any person, including an affiliated group as

14  defined in s. 1504 of the Internal Revenue Code of 1954, as

15  amended, who manufactures, produces, compounds, processes, or

16  fabricates in any manner tangible personal property for such

17  taxpayer's own use directly and solely in research or

18  development shall not be subject to the tax imposed by this

19  chapter upon the cost of the product so manufactured,

20  produced, compounded, processed, or fabricated. However, the

21  tax imposed by this chapter shall be due on the purchase,

22  rental, or repair of real property or tangible personal

23  property employed in research or development which is subject

24  to the tax imposed by this chapter at the time of purchase or

25  rental.

26         (3)(a)  Machinery and equipment are exempt from the tax

27  imposed by this chapter if used predominantly for research and

28  development activities. As used in this subsection, the term

29  "machinery and equipment" includes molds, dies, machine

30  tooling, other appurtenances or accessories to machinery and

31  equipment, testing equipment, test beds, computers, and

                                  2

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1  software, whether purchased or self-fabricated, and, if

 2  self-fabricated, includes materials and labor for design,

 3  fabrication, and assembly.

 4         (b)  A business certified to receive this exemption may

 5  designate one or more state universities or community colleges

 6  as recipients of up to 100 percent of the amount of the

 7  exemption for which the business qualifies. To receive these

 8  funds, the state university or community college must agree to

 9  match the funds so earned with equivalent cash, programs,

10  services, or other in-kind support on a one-to-one basis in

11  the pursuit of research and development projects as requested

12  by the certified business. The rights to any patents,

13  royalties, or real or intellectual property must be vested in

14  the business unless the business and the state university or

15  community college agree otherwise.

16         Section 2.  Paragraphs (b) and (d) of subsection (5) of

17  section 212.08, Florida Statutes, are amended to read:

18         212.08  Sales, rental, use, consumption, distribution,

19  and storage tax; specified exemptions.--The sale at retail,

20  the rental, the use, the consumption, the distribution, and

21  the storage to be used or consumed in this state of the

22  following are hereby specifically exempt from the tax imposed

23  by this chapter.

24         (5)  EXEMPTIONS; ACCOUNT OF USE.--

25         (b)  Machinery and equipment used to increase

26  productive output.--

27         1.  Industrial machinery and equipment purchased for

28  exclusive use by a new business in spaceport activities as

29  defined by s. 212.02 or for use in new businesses which

30  manufacture, process, compound, or produce for sale items of

31  tangible personal property at fixed locations are exempt from

                                  3

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1  the tax imposed by this chapter upon an affirmative showing by

 2  the taxpayer to the satisfaction of the department that such

 3  items are used in a new business in this state. Such purchases

 4  must be made prior to the date the business first begins its

 5  productive operations, and delivery of the purchased item must

 6  be made within 12 months of that date.

 7         2.a.  Industrial machinery and equipment purchased for

 8  exclusive use by an expanding facility which is engaged in

 9  spaceport activities as defined by s. 212.02 or for use in

10  expanding manufacturing facilities or plant units which

11  manufacture, process, compound, or produce for sale items of

12  tangible personal property at fixed locations in this state

13  are exempt from any amount of tax imposed by this chapter in

14  excess of $50,000 per calendar year upon an affirmative

15  showing by the taxpayer to the satisfaction of the department

16  that such items are used to increase the productive output of

17  such expanded facility or business by not less than 10

18  percent.

19         b.  Notwithstanding any other provision of this

20  section, industrial machinery and equipment purchased for use

21  in expanding printing manufacturing facilities or plant units

22  that manufacture, process, compound, or produce for sale items

23  of tangible personal property at fixed locations in this state

24  are exempt from any amount of tax imposed by this chapter upon

25  an affirmative showing by the taxpayer to the satisfaction of

26  the department that such items are used to increase the

27  productive output of such an expanded business by not less

28  than 10 percent.

29         3.a.  To receive an exemption provided by subparagraph

30  1. or subparagraph 2., a qualifying business entity shall

31  apply to the department for a temporary tax exemption permit.

                                  4

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1  The application shall state that a new business exemption or

 2  expanded business exemption is being sought. Upon a tentative

 3  affirmative determination by the department pursuant to

 4  subparagraph 1. or subparagraph 2., the department shall issue

 5  such permit.

 6         b.  The applicant shall be required to maintain all

 7  necessary books and records to support the exemption. Upon

 8  completion of purchases of qualified machinery and equipment

 9  pursuant to subparagraph 1. or subparagraph 2., the temporary

10  tax permit shall be delivered to the department or returned to

11  the department by certified or registered mail.

12         c.  If, in a subsequent audit conducted by the

13  department, it is determined that the machinery and equipment

14  purchased as exempt under subparagraph 1. or subparagraph 2.

15  did not meet the criteria mandated by this paragraph or if

16  commencement of production did not occur, the amount of taxes

17  exempted at the time of purchase shall immediately be due and

18  payable to the department by the business entity, together

19  with the appropriate interest and penalty, computed from the

20  date of purchase, in the manner prescribed by this chapter.

21         d.  In the event a qualifying business entity fails to

22  apply for a temporary exemption permit or if the tentative

23  determination by the department required to obtain a temporary

24  exemption permit is negative, a qualifying business entity

25  shall receive the exemption provided in subparagraph 1. or

26  subparagraph 2. through a refund of previously paid taxes. No

27  refund may be made for such taxes unless the criteria mandated

28  by subparagraph 1. or subparagraph 2. have been met and

29  commencement of production has occurred.

30         4.  The department shall adopt rules governing

31  applications for, issuance of, and the form of temporary tax

                                  5

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1  exemption permits; provisions for recapture of taxes; and the

 2  manner and form of refund applications and may establish

 3  guidelines as to the requisites for an affirmative showing of

 4  increased productive output, commencement of production, and

 5  qualification for exemption.

 6         5.  The exemptions provided in subparagraphs 1. and 2.

 7  do not apply to machinery or equipment purchased or used by

 8  electric utility companies, communications companies, oil or

 9  gas exploration or production operations, publishing firms

10  that do not export at least 50 percent of their finished

11  product out of the state, any firm subject to regulation by

12  the Division of Hotels and Restaurants of the Department of

13  Business and Professional Regulation, or any firm which does

14  not manufacture, process, compound, or produce for sale items

15  of tangible personal property or which does not use such

16  machinery and equipment in spaceport activities as required by

17  this paragraph. The exemptions provided in subparagraphs 1.

18  and 2. shall apply to machinery and equipment purchased for

19  use in phosphate or other solid minerals severance, mining, or

20  processing operations only by way of a prospective credit

21  against taxes due under chapter 211 for taxes paid under this

22  chapter on such machinery and equipment.

23         6.  For the purposes of the exemptions provided in

24  subparagraphs 1. and 2., these terms have the following

25  meanings:

26         a.  "Industrial machinery and equipment" means tangible

27  personal property or other property that has a depreciable

28  life of 3 years or more and that is used as an integral part

29  in the manufacturing, processing, compounding, or production

30  of tangible personal property for sale or is exclusively used

31  in spaceport activities. A building and its structural

                                  6

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1  components are not industrial machinery and equipment unless

 2  the building or structural component is so closely related to

 3  the industrial machinery and equipment that it houses or

 4  supports that the building or structural component can be

 5  expected to be replaced when the machinery and equipment are

 6  replaced. Heating and air-conditioning systems are not

 7  industrial machinery and equipment unless the sole

 8  justification for their installation is to meet the

 9  requirements of the production process, even though the system

10  may provide incidental comfort to employees or serve, to an

11  insubstantial degree, nonproduction activities. The term

12  includes parts and accessories only to the extent that the

13  exemption thereof is consistent with the provisions of this

14  paragraph.

15         b.  "Productive output" means the number of units

16  actually produced by a single plant or operation in a single

17  continuous 12-month period, irrespective of sales. Increases

18  in productive output shall be measured by the output for 12

19  continuous months immediately following the completion of

20  installation of such machinery or equipment over the output

21  for the 12 continuous months immediately preceding such

22  installation. However, if a different 12-month continuous

23  period of time would more accurately reflect the increase in

24  productive output of machinery and equipment purchased to

25  facilitate an expansion, the increase in productive output may

26  be measured during that 12-month continuous period of time if

27  such time period is mutually agreed upon by the Department of

28  Revenue and the expanding business prior to the commencement

29  of production; provided, however, in no case may such time

30  period begin later than 2 years following the completion of

31  installation of the new machinery and equipment. The units

                                  7

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1  used to measure productive output shall be physically

 2  comparable between the two periods, irrespective of sales.

 3         (d)  Machinery and equipment used under federal

 4  procurement contract.--

 5         1.  Industrial machinery and equipment purchased by an

 6  expanding business which manufactures tangible personal

 7  property pursuant to federal procurement regulations at fixed

 8  locations in this state are partially exempt from the tax

 9  imposed in this chapter on that portion of the tax which is in

10  excess of $100,000 per calendar year upon an affirmative

11  showing by the taxpayer to the satisfaction of the department

12  that such items are used to increase the implicit productive

13  output of the expanded business by not less than 10 percent.

14  The percentage of increase is measured as deflated implicit

15  productive output for the calendar year during which the

16  installation of the machinery or equipment is completed or

17  during which commencement of production utilizing such items

18  is begun divided by the implicit productive output for the

19  preceding calendar year.  In no case may the commencement of

20  production begin later than 2 years following completion of

21  installation of the machinery or equipment.

22         2.  The amount of the exemption allowed shall equal the

23  taxes otherwise imposed by this chapter in excess of $100,000

24  per calendar year on qualifying industrial machinery or

25  equipment reduced by the percentage of gross receipts from

26  cost-reimbursement type contracts attributable to the plant or

27  operation to total gross receipts so attributable, accrued for

28  the year of completion or commencement.

29         3.  The exemption provided by this paragraph shall

30  inure to the taxpayer only through refund of previously paid

31  taxes.  Such refund shall be made within 30 days of formal

                                  8

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1  approval by the department of the taxpayer's application,

 2  which application may be made on an annual basis following

 3  installation of the machinery or equipment.

 4         4.  For the purposes of this paragraph, the term:

 5         a.  "Cost-reimbursement type contracts" has the same

 6  meaning as in 32 C.F.R. s. 3-405.

 7         b.  "Deflated implicit productive output" means the

 8  product of implicit productive output times the quotient of

 9  the national defense implicit price deflator for the preceding

10  calendar year divided by the deflator for the year of

11  completion or commencement.

12         c.  "Eligible costs" means the total direct and

13  indirect costs, as defined in 32 C.F.R. ss. 15-202 and 15-203,

14  excluding general and administrative costs, selling expenses,

15  and profit, defined by the uniform cost-accounting standards

16  adopted by the Cost-Accounting Standards Board created

17  pursuant to 50 U.S.C. s. 2168.

18         d.  "Implicit productive output" means the annual

19  eligible costs attributable to all contracts or subcontracts

20  subject to federal procurement regulations of the single plant

21  or operation at which the machinery or equipment is used.

22         e.  "Industrial machinery and equipment" means tangible

23  personal property or other property that has a depreciable

24  life of 3 years or more, that qualifies as an eligible cost

25  under federal procurement regulations, and that is used as an

26  integral part of the process of production of tangible

27  personal property. A building and its structural components

28  are not industrial machinery and equipment unless the building

29  or structural component is so closely related to the

30  industrial machinery and equipment that it houses or supports

31  that the building or structural component can be expected to

                                  9

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1  be replaced when the machinery and equipment are replaced.

 2  Heating and air-conditioning systems are not industrial

 3  machinery and equipment unless the sole justification for

 4  their installation is to meet the requirements of the

 5  production process, even though the system may provide

 6  incidental comfort to employees or serve, to an insubstantial

 7  degree, nonproduction activities. The term includes parts and

 8  accessories only to the extent that the exemption of such

 9  parts and accessories is consistent with the provisions of

10  this paragraph.

11         f.  "National defense implicit price deflator" means

12  the national defense implicit price deflator for the gross

13  national product as determined by the Bureau of Economic

14  Analysis of the United States Department of Commerce.

15         5.  The exclusions provided in subparagraph (b)5. apply

16  to this exemption.  This exemption applies only to machinery

17  or equipment purchased pursuant to production contracts with

18  the United States Department of Defense and Armed Forces, the

19  National Aeronautics and Space Administration, and other

20  federal agencies for which the contracts are classified for

21  national security reasons.  In no event shall the provisions

22  of this paragraph apply to any expanding business the increase

23  in productive output of which could be measured under the

24  provisions of sub-subparagraph (b)6.b. as physically

25  comparable between the two periods.

26         Section 3.  Section 212.0805, Florida Statutes, is

27  repealed.

28         Section 4.  This act shall take effect July 1, 2005.

29  

30  

31  

                                  10

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2005                                  SB 1200
    11-906-05




 1            *****************************************

 2                          SENATE SUMMARY

 3    Amends provisions relating to the tax on sales, use, and
      other transactions. Deletes an exception to an exemption
 4    for research or development costs. Provides an exemption
      for machinery and equipment used predominantly for
 5    research and development. Defines the term "machinery and
      equipment." Authorizes a business certified to receive
 6    the exemption to designate state universities or
      community colleges, under specified conditions, as
 7    recipients of the funds received from the exemption.
      Deletes an exemption for machinery and equipment used to
 8    expand certain printing manufacturing facilities or plant
      units. Amends provisions for phosphate and solid mineral
 9    severance. Deletes an annual limitation on an exemption
      for certain machinery and equipment purchased under a
10    federal procurement contract. Repeals s. 212.0805, F.S.,
      relating to qualifications for exemption and credit
11    provided in s. 212.08(5)(b)5., F.S.

12  

13  

14  

15  

16  

17  

18  

19  

20  

21  

22  

23  

24  

25  

26  

27  

28  

29  

30  

31  

                                  11

CODING: Words stricken are deletions; words underlined are additions.