HB 0081

CS

CHAMBER ACTION

1	The Finance & Tax Committee 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 the tax on sales, use, and other
7	transactions; amending s. 212.052, F.S.; deleting an
8	exception to an exemption from the tax for research or
9	development costs; amending s. 212.08, F.S.; exempting
10	machinery and equipment used predominantly for research
11	and development activities; authorizing the Department of
12	Revenue to adopt rules implementing the exemption;
13	providing requirements and procedures for claiming the
14	exemption; requiring an affidavit to be given by a
15	taxpayer claiming entitlement to the exemption; providing
16	penalties for fraudulently claiming the exemption;
17	requiring the Legislature to review the exemption;
18	providing for a study of the exemption by the Office of
19	Program Policy Analysis and Government Accountability and
20	Enterprise Florida, Inc.; providing study requirements;
21	requiring a report to the Governor and Legislature;
22	revising criteria, requirements, and procedures for
23	exemptions for semiconductor, defense, or space technology
24	production; revising the definition of the term "research
25	and development"; defining the term "machinery and
26	equipment"; providing an effective date.
27
28	Be It Enacted by the Legislature of the State of Florida:
29
30	Section 1.  Subsection (2) of section 212.052, Florida
31	Statutes, is amended to read:
32	212.052  Research or development costs; exemption.--
33	(2)  Notwithstanding any provision of this chapter to the
34	contrary, any person, including an affiliated group as defined
35	in s. 1504 of the Internal Revenue Code of 1954, as amended, who
36	manufactures, produces, compounds, processes, or fabricates in
37	any manner tangible personal property for such taxpayer's own
38	use directly and solely in research or development shall not be
39	subject to the tax imposed by this chapter upon the cost of the
40	product so manufactured, produced, compounded, processed, or
41	fabricated. However, the tax imposed by this chapter shall be
42	due on the purchase, rental, or repair of real property or
43	tangible personal property employed in research or development
44	which is subject to the tax imposed by this chapter at the time
45	of purchase or rental.
46	Section 2.  Paragraph (j) of subsection (5) of section
47	212.08, Florida Statutes, is amended to read:
48	212.08  Sales, rental, use, consumption, distribution, and
49	storage tax; specified exemptions.--The sale at retail, the
50	rental, the use, the consumption, the distribution, and the
51	storage to be used or consumed in this state of the following
52	are hereby specifically exempt from the tax imposed by this
53	chapter.
54	(5)  EXEMPTIONS; ACCOUNT OF USE.--
55	(j)  Machinery and equipment used in research and
56	development and semiconductor, defense, or space technology
57	production and research and development.--
58	1.a.  Machinery and equipment used predominantly for
59	research and development are exempt from the tax imposed by this
60	chapter.
61	b.  The department may adopt rules that provide for
62	administering this exemption and for assumption of self-accrual
63	authority that is authorized by this subparagraph. Persons
64	claiming the exemption provided in this subparagraph shall
65	furnish the vendor of the machinery or equipment, including the
66	vendor of materials and labor used in self-fabrication of the
67	machinery or equipment, an affidavit stating that the item or
68	items for which an exemption is claimed are machinery and
69	equipment that will be used predominantly for research and
70	development as required by this subparagraph. The affidavit must
71	contain the purchaser's name, address, sales and use tax
72	registration number, and, if applicable, federal employer's
73	identification number. A purchaser who claims the exemption by
74	refund shall include the affidavit with the refund application.
75	Any person fraudulently furnishing an affidavit to the vendor
76	for the purpose of evading payment of any tax imposed under this
77	chapter shall be subject to the penalty set forth in s. 212.085
78	and as otherwise provided by law. Purchasers shall maintain all
79	documentation necessary to prove the exempt status of purchases
80	and fabrication activity and make such documentation available
81	for inspection pursuant to the requirements of s. 212.13(2). In
82	lieu of furnishing an affidavit, a purchaser claiming the
83	exemption provided in this subparagraph who has a direct pay
84	permit may furnish the vendor with a copy of the direct pay
85	permit and shall maintain all documentation necessary to prove
86	the exempt status of the purchases and fabrication activity and
87	make such documentation available for inspection pursuant to the
88	requirements of s. 212.13(2).
89	c.  The Office of Program Policy Analysis and Government
90	Accountability and Enterprise Florida, Inc., shall study the
91	exemption provided for in this subparagraph to determine the
92	impact of the exemption on the promotion of research and
93	development activities in this state. Enterprise Florida, Inc.,
94	may contract with an independent research organization to
95	perform the assessment. The study must include the estimated
96	annual cost of the exemption and an estimate of the economic
97	impact of increased research and development activities, if any.
98	By January 1, 2015, the office and Enterprise Florida, Inc.,
99	shall submit to the Governor, the President of the Senate, and
100	the Speaker of the House of Representatives reports that provide
101	the findings and recommendations as to whether the exemption
102	should be retained by the Legislature. The Legislature shall
103	review the exemption no later than July 1, 2015.
104	2.1.a.  Industrial machinery and equipment used in
105	semiconductor technology facilities certified under subparagraph
106	5.6. to manufacture, process, compound, or produce semiconductor
107	technology products for sale or for use by these facilities are
108	exempt from the tax imposed by this chapter. For purposes of
109	this paragraph, industrial machinery and equipment includes
110	molds, dies, machine tooling, other appurtenances or accessories
111	to machinery and equipment, testing equipment, test beds,
112	computers, and software, whether purchased or self-fabricated,
113	and, if self-fabricated, includes materials and labor for
114	design, fabrication, and assembly.
115	b.  Industrial machinery and equipment used in defense or
116	space technology facilities certified under subparagraph 5.6. to
117	manufacture, process, compound, or produce defense technology
118	products or space technology products for sale or for use by
119	these facilities are exempt from 25 percent of the tax imposed
120	by this chapter.
121	2.a.  Machinery and equipment are exempt from the tax
122	imposed by this chapter if used predominately in semiconductor
123	wafer research and development activities in a semiconductor
124	technology research and development facility certified under
125	subparagraph 6. For purposes of this paragraph, machinery and
126	equipment includes molds, dies, machine tooling, other
127	appurtenances or accessories to machinery and equipment, testing
128	equipment, test beds, computers, and software, whether purchased
129	or self-fabricated, and, if self-fabricated, includes materials
130	and labor for design, fabrication, and assembly.
131	b.  Machinery and equipment are exempt from 25 percent of
132	the tax imposed by this chapter if used predominately in defense
133	or space research and development activities in a defense or
134	space technology research and development facility certified
135	under subparagraph 6.
136	c.3.  Building materials purchased for use in manufacturing
137	or expanding clean rooms in semiconductor-manufacturing
138	facilities are exempt from the tax imposed by this chapter.
139	3.4.  In addition to meeting the criteria mandated by
140	subparagraph 1., subparagraph 2., or subparagraph 3., a business
141	must be certified by the Office of Tourism, Trade, and Economic
142	Development as authorized in this paragraph in order to qualify
143	for exemption under subparagraph 2 this paragraph.
144	4.5.  For items purchased tax exempt pursuant to
145	subparagraph 2. this paragraph, possession of a written
146	certification from the purchaser, certifying the purchaser's
147	entitlement to exemption pursuant to subparagraph 2. this
148	paragraph, relieves the seller of the responsibility of
149	collecting the tax on the sale of such items, and the department
150	shall look solely to the purchaser for recovery of tax if it
151	determines that the purchaser was not entitled to the exemption.
152	5.6.a.  To be eligible to receive the exemption provided by
153	subparagraph 1., subparagraph 2., or subparagraph 3., a
154	qualifying business entity shall apply to Enterprise Florida,
155	Inc. The application shall be developed by the Office of
156	Tourism, Trade, and Economic Development in consultation with
157	Enterprise Florida, Inc.
158	b.  Enterprise Florida, Inc., shall review each submitted
159	application and information and determine whether or not the
160	application is complete within 5 working days. Once an
161	application is complete, Enterprise Florida, Inc., shall, within
162	10 working days, evaluate the application and recommend approval
163	or disapproval of the application to the Office of Tourism,
164	Trade, and Economic Development.
165	c.  Upon receipt of the application and recommendation from
166	Enterprise Florida, Inc., the Office of Tourism, Trade, and
167	Economic Development shall certify within 5 working days those
168	applicants who are found to meet the requirements of this
169	section and notify the applicant, Enterprise Florida, Inc., and
170	the department of the certification. If the Office of Tourism,
171	Trade, and Economic Development finds that the applicant does
172	not meet the requirements of this section, it shall notify the
173	applicant and Enterprise Florida, Inc., within 10 working days
174	that the application for certification has been denied and the
175	reasons for denial. The Office of Tourism, Trade, and Economic
176	Development has final approval authority for certification under
177	this section.
178	6.7.a.  A business may apply once each year for the
179	exemption provided by subparagraph 2.
180	b.  The application must indicate, for program evaluation
181	purposes only, the average number of full-time equivalent
182	employees at the facility over the preceding calendar year, the
183	average wage and benefits paid to those employees over the
184	preceding calendar year, the total investment made in real and
185	tangible personal property over the preceding calendar year, and
186	the total value of tax-exempt purchases and taxes exempted
187	during the previous year. The department shall assist the Office
188	of Tourism, Trade, and Economic Development in evaluating and
189	verifying information provided in the application for exemption.
190	c.  The Office of Tourism, Trade, and Economic Development
191	may use the information reported on the application for
192	evaluation purposes only and shall prepare an annual report on
193	the exemption program and its cost and impact. The annual report
194	for the preceding fiscal year shall be submitted to the
195	Governor, the President of the Senate, and the Speaker of the
196	House of Representatives by September 30 of each fiscal year.
197	7.8.  A business receiving the certified to receive this
198	exemption provided by subparagraph 1. or subparagraph 2. may
199	elect to designate one or more state universities or community
200	colleges as recipients to receive from the business an amount of
201	up to 100 percent of the amount of the exemption for which the
202	business qualifies they may qualify. To receive these funds, the
203	institution must agree to match the funds so earned with
204	equivalent cash, programs, services, or other in-kind support on
205	a one-to-one basis in the pursuit of research and development
206	projects as requested by the certified business. The rights to
207	any patents, royalties, or real or intellectual property must be
208	vested in the business unless otherwise agreed to by the
209	business and the university or community college.
210	8.9.  As used in this paragraph, the term:
211	a.  "Predominately" means at least 50 percent of the time
212	in qualifying research and development.
213	b.  "Research and development" means research that has one
214	of the following as its ultimate goal:
215	(I)  Basic research in a scientific field of endeavor;
216	(II)  Advancing knowledge or technology in a scientific or
217	technical field of endeavor;
218	(III)  The development of a new product, whether or not the
219	new product is offered for sale;
220	(IV)  The improvement of an existing product, whether or
221	not the improved product is offered for sale;
222	(V)  The development of new uses of an existing product,
223	whether or not a new use is offered as a rationale to purchase
224	the product; or
225	(VI)  The design and development of prototypes, whether or
226	not a resulting product is offered for sale.
227
228	The term "research and development" does not include ordinary
229	testing or inspection of materials or products used for quality
230	control, market research, efficiency surveys, consumer surveys,
231	advertising and promotions, management studies, or research in
232	connection with literary, historical, social science,
233	psychological, or other similar nontechnical activities basic
234	and applied research in the science or engineering, as well as
235	the design, development, and testing of prototypes or processes
236	of new or improved products. Research and development does not
237	include market research, routine consumer product testing, sales
238	research, research in the social sciences or psychology,
239	nontechnological activities, or technical services.
240	c.  "Semiconductor technology products" means raw
241	semiconductor wafers or semiconductor thin films that are
242	transformed into semiconductor memory or logic wafers, including
243	wafers containing mixed memory and logic circuits; related
244	assembly and test operations; active-matrix flat panel displays;
245	semiconductor chips; semiconductor lasers; optoelectronic
246	elements; and related semiconductor technology products as
247	determined by the Office of Tourism, Trade, and Economic
248	Development.
249	d.  "Clean rooms" means manufacturing facilities enclosed
250	in a manner that meets the clean manufacturing requirements
251	necessary for high-technology semiconductor-manufacturing
252	environments.
253	e.  "Defense technology products" means products that have
254	a military application, including, but not limited to, weapons,
255	weapons systems, guidance systems, surveillance systems,
256	communications or information systems, munitions, aircraft,
257	vessels, or boats, or components thereof, which are intended for
258	military use and manufactured in performance of a contract with
259	the United States Department of Defense or the military branch
260	of a recognized foreign government or a subcontract thereunder
261	which relates to matters of national defense.
262	f.  "Space technology products" means products that are
263	specifically designed or manufactured for application in space
264	activities, including, but not limited to, space launch
265	vehicles, missiles, satellites or research payloads, avionics,
266	and associated control systems and processing systems. The term
267	does not include products that are designed or manufactured for
268	general commercial aviation or other uses even though those
269	products may also serve an incidental use in space applications.
270	g.  "Machinery and equipment" includes, but is not limited
271	to, molds, dies, machine tooling, other appurtenances or
272	accessories to machinery and equipment, testing and measuring
273	equipment, test beds, computers, and software, whether purchased
274	or self-fabricated, and, if self-fabricated, includes materials
275	and labor for design, fabrication, and assembly.
276	Section 3.  This act shall take effect July 1, 2005.

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