HB 0027

CS

CHAMBER ACTION

1	The Fiscal Council recommends the following:
2
3	Council/Committee Substitute
4	Remove the entire bill and insert:
5	A bill to be entitled
6	An act relating to exemptions from the tax on sales, use,
7	and other transactions; amending s. 212.08, F.S.; deleting
8	an annual limitation on an exemption from the sales tax
9	for certain machinery and equipment used to increase
10	productive output; deleting an exemption for machinery and
11	equipment used to expand certain printing manufacturing
12	facilities or plant units; deleting a limitation on
13	application of the exemption for machinery and equipment
14	purchased for use in phosphate or other solid minerals
15	severance, mining, or processing operations by way of a
16	prospective credit; deleting an annual limitation on an
17	exemption from the sales tax for certain machinery and
18	equipment purchased under a federal procurement contract;
19	repealing s. 212.0805, F.S., relating to qualifications
20	for the exemption and credit for machinery and equipment
21	purchased by an expanding business for use in phosphate or
22	other solid minerals severance, mining, or processing
23	operations; providing an appropriation; providing an
24	effective date.
25
26	Be It Enacted by the Legislature of the State of Florida:
27
28	Section 1.  Paragraphs (b) and (d) of subsection (5) of
29	section 212.08, Florida Statutes, are amended to read:
30	212.08  Sales, rental, use, consumption, distribution, and
31	storage tax; specified exemptions.--The sale at retail, the
32	rental, the use, the consumption, the distribution, and the
33	storage to be used or consumed in this state of the following
34	are hereby specifically exempt from the tax imposed by this
35	chapter.
36	(5)  EXEMPTIONS; ACCOUNT OF USE.--
37	(b)  Machinery and equipment used to increase productive
38	output.--
39	1.  Industrial machinery and equipment purchased for
40	exclusive use by a new business in spaceport activities as
41	defined by s. 212.02 or for use in new businesses which
42	manufacture, process, compound, or produce for sale items of
43	tangible personal property at fixed locations are exempt from
44	the tax imposed by this chapter upon an affirmative showing by
45	the taxpayer to the satisfaction of the department that such
46	items are used in a new business in this state. Such purchases
47	must be made prior to the date the business first begins its
48	productive operations, and delivery of the purchased item must
49	be made within 12 months of that date.
50	2.a.  Industrial machinery and equipment purchased for
51	exclusive use by an expanding facility which is engaged in
52	spaceport activities as defined by s. 212.02 or for use in
53	expanding manufacturing facilities or plant units which
54	manufacture, process, compound, or produce for sale items of
55	tangible personal property at fixed locations in this state are
56	exempt from any amount of tax imposed by this chapter in excess
57	of $50,000 per calendar year upon an affirmative showing by the
58	taxpayer to the satisfaction of the department that such items
59	are used to increase the productive output of such expanded
60	facility or business by not less than 10 percent.
61	b.  Notwithstanding any other provision of this section,
62	industrial machinery and equipment purchased for use in
63	expanding printing manufacturing facilities or plant units that
64	manufacture, process, compound, or produce for sale items of
65	tangible personal property at fixed locations in this state are
66	exempt from any amount of tax imposed by this chapter upon an
67	affirmative showing by the taxpayer to the satisfaction of the
68	department that such items are used to increase the productive
69	output of such an expanded business by not less than 10 percent.
70	3.a.  To receive an exemption provided by subparagraph 1.
71	or subparagraph 2., a qualifying business entity shall apply to
72	the department for a temporary tax exemption permit. The
73	application shall state that a new business exemption or
74	expanded business exemption is being sought. Upon a tentative
75	affirmative determination by the department pursuant to
76	subparagraph 1. or subparagraph 2., the department shall issue
77	such permit.
78	b.  The applicant shall be required to maintain all
79	necessary books and records to support the exemption. Upon
80	completion of purchases of qualified machinery and equipment
81	pursuant to subparagraph 1. or subparagraph 2., the temporary
82	tax permit shall be delivered to the department or returned to
83	the department by certified or registered mail.
84	c.  If, in a subsequent audit conducted by the department,
85	it is determined that the machinery and equipment purchased as
86	exempt under subparagraph 1. or subparagraph 2. did not meet the
87	criteria mandated by this paragraph or if commencement of
88	production did not occur, the amount of taxes exempted at the
89	time of purchase shall immediately be due and payable to the
90	department by the business entity, together with the appropriate
91	interest and penalty, computed from the date of purchase, in the
92	manner prescribed by this chapter.
93	d.  In the event a qualifying business entity fails to
94	apply for a temporary exemption permit or if the tentative
95	determination by the department required to obtain a temporary
96	exemption permit is negative, a qualifying business entity shall
97	receive the exemption provided in subparagraph 1. or
98	subparagraph 2. through a refund of previously paid taxes. No
99	refund may be made for such taxes unless the criteria mandated
100	by subparagraph 1. or subparagraph 2. have been met and
101	commencement of production has occurred.
102	4.  The department shall adopt rules governing applications
103	for, issuance of, and the form of temporary tax exemption
104	permits; provisions for recapture of taxes; and the manner and
105	form of refund applications and may establish guidelines as to
106	the requisites for an affirmative showing of increased
107	productive output, commencement of production, and qualification
108	for exemption.
109	5.  The exemptions provided in subparagraphs 1. and 2. do
110	not apply to machinery or equipment purchased or used by
111	electric utility companies, communications companies, oil or gas
112	exploration or production operations, publishing firms that do
113	not export at least 50 percent of their finished product out of
114	the state, any firm subject to regulation by the Division of
115	Hotels and Restaurants of the Department of Business and
116	Professional Regulation, or any firm which does not manufacture,
117	process, compound, or produce for sale items of tangible
118	personal property or which does not use such machinery and
119	equipment in spaceport activities as required by this paragraph.
120	The exemptions provided in subparagraphs 1. and 2. shall apply
121	to machinery and equipment purchased for use in phosphate or
122	other solid minerals severance, mining, or processing operations
123	only by way of a prospective credit against taxes due under
124	chapter 211 for taxes paid under this chapter on such machinery
125	and equipment.
126	6.  For the purposes of the exemptions provided in
127	subparagraphs 1. and 2., these terms have the following
128	meanings:
129	a.  "Industrial machinery and equipment" means tangible
130	personal property or other property that has a depreciable life
131	of 3 years or more and that is used as an integral part in the
132	manufacturing, processing, compounding, or production of
133	tangible personal property for sale or is exclusively used in
134	spaceport activities. A building and its structural components
135	are not industrial machinery and equipment unless the building
136	or structural component is so closely related to the industrial
137	machinery and equipment that it houses or supports that the
138	building or structural component can be expected to be replaced
139	when the machinery and equipment are replaced. Heating and air-
140	conditioning systems are not industrial machinery and equipment
141	unless the sole justification for their installation is to meet
142	the requirements of the production process, even though the
143	system may provide incidental comfort to employees or serve, to
144	an insubstantial degree, nonproduction activities. The term
145	includes parts and accessories only to the extent that the
146	exemption thereof is consistent with the provisions of this
147	paragraph.
148	b.  "Productive output" means the number of units actually
149	produced by a single plant or operation in a single continuous
150	12-month period, irrespective of sales. Increases in productive
151	output shall be measured by the output for 12 continuous months
152	immediately following the completion of installation of such
153	machinery or equipment over the output for the 12 continuous
154	months immediately preceding such installation. However, if a
155	different 12-month continuous period of time would more
156	accurately reflect the increase in productive output of
157	machinery and equipment purchased to facilitate an expansion,
158	the increase in productive output may be measured during that
159	12-month continuous period of time if such time period is
160	mutually agreed upon by the Department of Revenue and the
161	expanding business prior to the commencement of production;
162	provided, however, in no case may such time period begin later
163	than 2 years following the completion of installation of the new
164	machinery and equipment. The units used to measure productive
165	output shall be physically comparable between the two periods,
166	irrespective of sales.
167	(d)  Machinery and equipment used under federal procurement
168	contract.--
169	1.  Industrial machinery and equipment purchased by an
170	expanding business which manufactures tangible personal property
171	pursuant to federal procurement regulations at fixed locations
172	in this state are partially exempt from the tax imposed in this
173	chapter on that portion of the tax which is in excess of
174	$100,000 per calendar year upon an affirmative showing by the
175	taxpayer to the satisfaction of the department that such items
176	are used to increase the implicit productive output of the
177	expanded business by not less than 10 percent. The percentage of
178	increase is measured as deflated implicit productive output for
179	the calendar year during which the installation of the machinery
180	or equipment is completed or during which commencement of
181	production utilizing such items is begun divided by the implicit
182	productive output for the preceding calendar year. In no case
183	may the commencement of production begin later than 2 years
184	following completion of installation of the machinery or
185	equipment.
186	2.  The amount of the exemption allowed shall equal the
187	taxes otherwise imposed by this chapter in excess of $100,000
188	per calendar year on qualifying industrial machinery or
189	equipment reduced by the percentage of gross receipts from cost-
190	reimbursement type contracts attributable to the plant or
191	operation to total gross receipts so attributable, accrued for
192	the year of completion or commencement.
193	3.  The exemption provided by this paragraph shall inure to
194	the taxpayer only through refund of previously paid taxes. Such
195	refund shall be made within 30 days of formal approval by the
196	department of the taxpayer's application, which application may
197	be made on an annual basis following installation of the
198	machinery or equipment.
199	4.  For the purposes of this paragraph, the term:
200	a.  "Cost-reimbursement type contracts" has the same
201	meaning as in 32 C.F.R. s. 3-405.
202	b.  "Deflated implicit productive output" means the product
203	of implicit productive output times the quotient of the national
204	defense implicit price deflator for the preceding calendar year
205	divided by the deflator for the year of completion or
206	commencement.
207	c.  "Eligible costs" means the total direct and indirect
208	costs, as defined in 32 C.F.R. ss. 15-202 and 15-203, excluding
209	general and administrative costs, selling expenses, and profit,
210	defined by the uniform cost-accounting standards adopted by the
211	Cost-Accounting Standards Board created pursuant to 50 U.S.C. s.
212	2168.
213	d.  "Implicit productive output" means the annual eligible
214	costs attributable to all contracts or subcontracts subject to
215	federal procurement regulations of the single plant or operation
216	at which the machinery or equipment is used.
217	e.  "Industrial machinery and equipment" means tangible
218	personal property or other property that has a depreciable life
219	of 3 years or more, that qualifies as an eligible cost under
220	federal procurement regulations, and that is used as an integral
221	part of the process of production of tangible personal property.
222	A building and its structural components are not industrial
223	machinery and equipment unless the building or structural
224	component is so closely related to the industrial machinery and
225	equipment that it houses or supports that the building or
226	structural component can be expected to be replaced when the
227	machinery and equipment are replaced. Heating and air-
228	conditioning systems are not industrial machinery and equipment
229	unless the sole justification for their installation is to meet
230	the requirements of the production process, even though the
231	system may provide incidental comfort to employees or serve, to
232	an insubstantial degree, nonproduction activities. The term
233	includes parts and accessories only to the extent that the
234	exemption of such parts and accessories is consistent with the
235	provisions of this paragraph.
236	f.  "National defense implicit price deflator" means the
237	national defense implicit price deflator for the gross national
238	product as determined by the Bureau of Economic Analysis of the
239	United States Department of Commerce.
240	5.  The exclusions provided in subparagraph (b)5. apply to
241	this exemption. This exemption applies only to machinery or
242	equipment purchased pursuant to production contracts with the
243	United States Department of Defense and Armed Forces, the
244	National Aeronautics and Space Administration, and other federal
245	agencies for which the contracts are classified for national
246	security reasons. In no event shall the provisions of this
247	paragraph apply to any expanding business the increase in
248	productive output of which could be measured under the
249	provisions of sub-subparagraph (b)6.b. as physically comparable
250	between the two periods.
251	Section 2.  Section 212.0805, Florida Statutes, is
252	repealed.
253	Section 3.  For the 2005-2006 fiscal year, the sum of
254	$210,069 is appropriated from the General Revenue Fund and four
255	positions are authorized to the Department of Revenue for the
256	purpose of implementing the provisions of this act. Of the funds
257	provided, $191,825 are recurring and $18,244 are nonrecurring
258	funds.
259	Section 4.  This act shall take effect July 1, 2005.

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