HB 0415

CS

CHAMBER ACTION

1	The State Infrastructure 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 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.; deleting
10	provisions providing an exemption on account of use for
11	machinery and equipment used for research and development;
12	revising provisions for application for the exemption;
13	specifying the term of validity of an exemption
14	certification; providing for biennial renewal of
15	certifications; providing criteria; deleting a limitation
16	on number of exemption applications by a business in a
17	year; exempting machinery and equipment used predominantly
18	for research and development activities; providing
19	definitions; authorizing the Department of Revenue to
20	adopt rules administering and implementing the exemption;
21	providing requirements and procedures for claiming the
22	exemption; requiring an affidavit to be given by a
23	taxpayer claiming entitlement to the exemption; providing
24	penalties for fraudulently claiming the exemption;
25	providing recordkeeping requirements; providing an
26	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, and subsection (18) is
48	added to that section, to read:
49	212.08  Sales, rental, use, consumption, distribution, and
50	storage tax; specified exemptions.--The sale at retail, the
51	rental, the use, the consumption, the distribution, and the
52	storage to be used or consumed in this state of the following
53	are hereby specifically exempt from the tax imposed by this
54	chapter.
55	(5)  EXEMPTIONS; ACCOUNT OF USE.--
56	(j)  Machinery and equipment used in semiconductor,
57	defense, or space technology production and research and
58	development.--
59	1.a.  Industrial machinery and equipment used in
60	semiconductor technology facilities certified under subparagraph
61	5. 6. to manufacture, process, compound, or produce
62	semiconductor technology products for sale or for use by these
63	facilities are exempt from the tax imposed by this chapter. For
64	purposes of this paragraph, industrial machinery and equipment
65	includes molds, dies, machine tooling, other appurtenances or
66	accessories to machinery and equipment, testing equipment, test
67	beds, computers, and software, whether purchased or self-
68	fabricated, and, if self-fabricated, includes materials and
69	labor for design, fabrication, and assembly.
70	b.  Industrial machinery and equipment used in defense or
71	space technology facilities certified under subparagraph 5. 6.
72	to design, manufacture, assemble, process, compound, or produce
73	defense technology products or space technology products for
74	sale or for use by these facilities are exempt from 25 percent
75	of the tax imposed by this chapter.
76	2.a.  Machinery and equipment are exempt from the tax
77	imposed by this chapter if used predominately in semiconductor
78	wafer research and development activities in a semiconductor
79	technology research and development facility certified under
80	subparagraph 6. For purposes of this paragraph, machinery and
81	equipment includes molds, dies, machine tooling, other
82	appurtenances or accessories to machinery and equipment, testing
83	equipment, test beds, computers, and software, whether purchased
84	or self-fabricated, and, if self-fabricated, includes materials
85	and labor for design, fabrication, and assembly.
86	b.  Machinery and equipment are exempt from 25 percent of
87	the tax imposed by this chapter if used predominately in defense
88	or space research and development activities in a defense or
89	space technology research and development facility certified
90	under subparagraph 6.
91	2.3.  Building materials purchased for use in manufacturing
92	or expanding clean rooms in semiconductor-manufacturing
93	facilities are exempt from the tax imposed by this chapter.
94	3.4.  In addition to meeting the criteria mandated by
95	subparagraph 1. or, subparagraph 2., or subparagraph 3., a
96	business must be certified by the Office of Tourism, Trade, and
97	Economic Development as authorized in this paragraph in order to
98	qualify for exemption under this paragraph.
99	4.5.  For items purchased tax exempt pursuant to this
100	paragraph, possession of a written certification from the
101	purchaser, certifying the purchaser's entitlement to exemption
102	pursuant to this paragraph, relieves the seller of the
103	responsibility of collecting the tax on the sale of such items,
104	and the department shall look solely to the purchaser for
105	recovery of tax if it determines that the purchaser was not
106	entitled to the exemption.
107	5.6.a.  To be eligible to receive the exemption provided by
108	subparagraph 1. or, subparagraph 2., or subparagraph 3., a
109	qualifying business entity shall apply initially to Enterprise
110	Florida, Inc. The original certification shall be valid for a
111	period of 2 years. In lieu of submitting a new application, the
112	original certification may be renewed biennially by submitting
113	to the Office of Tourism, Trade, and Economic Development a
114	statement, certified under oath, that there has been no material
115	change in the conditions or circumstances entitling the business
116	entity to the original certification. The initial application
117	and the certification renewal statement shall be developed by
118	the Office of Tourism, Trade, and Economic Development in
119	consultation with Enterprise Florida, Inc.
120	b.  Enterprise Florida, Inc., shall review each submitted
121	initial application and information and determine whether or not
122	the application is complete within 5 working days. Once an
123	application is complete, Enterprise Florida, Inc., shall, within
124	10 working days, evaluate the application and recommend approval
125	or disapproval of the application to the Office of Tourism,
126	Trade, and Economic Development.
127	c.  Upon receipt of the initial application and
128	recommendation from Enterprise Florida, Inc., or upon receipt of
129	a certification renewal statement, the Office of Tourism, Trade,
130	and Economic Development shall certify within 5 working days
131	those applicants who are found to meet the requirements of this
132	section and notify the applicant, Enterprise Florida, Inc., and
133	the department of the original certification or certification
134	renewal. If the Office of Tourism, Trade, and Economic
135	Development finds that the applicant does not meet the
136	requirements of this section, it shall notify the applicant and
137	Enterprise Florida, Inc., within 10 working days that the
138	application for certification has been denied and the reasons
139	for denial. The Office of Tourism, Trade, and Economic
140	Development has final approval authority for certification under
141	this section.
142	7.a.  A business may apply once each year for the
143	exemption.
144	d.b.  The initial application and certification renewal
145	statement must indicate, for program evaluation purposes only,
146	the average number of full-time equivalent employees at the
147	facility over the preceding calendar year, the average wage and
148	benefits paid to those employees over the preceding calendar
149	year, the total investment made in real and tangible personal
150	property over the preceding calendar year, and the total value
151	of tax-exempt purchases and taxes exempted during the previous
152	year. The department shall assist the Office of Tourism, Trade,
153	and Economic Development in evaluating and verifying information
154	provided in the application for exemption.
155	e.c.  The Office of Tourism, Trade, and Economic
156	Development may use the information reported on the initial
157	application and certification renewal statement for evaluation
158	purposes only and shall prepare an annual report on the
159	exemption program and its cost and impact. The annual report for
160	the preceding fiscal year shall be submitted to the Governor,
161	the President of the Senate, and the Speaker of the House of
162	Representatives by September 30 of each fiscal year.
163	6.8.  A business certified to receive this exemption may
164	elect to designate one or more state universities or community
165	colleges as recipients of up to 100 percent of the amount of the
166	exemption for which they may qualify. To receive these funds,
167	the institution must agree to match the funds so earned with
168	equivalent cash, programs, services, or other in-kind support on
169	a one-to-one basis in the pursuit of research and development
170	projects as requested by the certified business. The rights to
171	any patents, royalties, or real or intellectual property must be
172	vested in the business unless otherwise agreed to by the
173	business and the university or community college.
174	7.9.  As used in this paragraph, the term:
175	a.  "Predominately" means at least 50 percent of the time
176	in qualifying research and development.
177	b.  "Research and development" means basic and applied
178	research in the science or engineering, as well as the design,
179	development, and testing of prototypes or processes of new or
180	improved products. Research and development does not include
181	market research, routine consumer product testing, sales
182	research, research in the social sciences or psychology,
183	nontechnological activities, or technical services.
184	a.c.  "Semiconductor technology products" means raw
185	semiconductor wafers or semiconductor thin films that are
186	transformed into semiconductor memory or logic wafers, including
187	wafers containing mixed memory and logic circuits; related
188	assembly and test operations; active-matrix flat panel displays;
189	semiconductor chips; semiconductor lasers; optoelectronic
190	elements; and related semiconductor technology products as
191	determined by the Office of Tourism, Trade, and Economic
192	Development.
193	b.d.  "Clean rooms" means manufacturing facilities enclosed
194	in a manner that meets the clean manufacturing requirements
195	necessary for high-technology semiconductor-manufacturing
196	environments.
197	c.e.  "Defense technology products" means products that
198	have a military application, including, but not limited to,
199	weapons, weapons systems, guidance systems, surveillance
200	systems, communications or information systems, munitions,
201	aircraft, vessels, or boats, or components thereof, which are
202	intended for military use and manufactured in performance of a
203	contract with the United States Department of Defense or the
204	military branch of a recognized foreign government or a
205	subcontract thereunder which relates to matters of national
206	defense.
207	d.f.  "Space technology products" means products that are
208	specifically designed or manufactured for application in space
209	activities, including, but not limited to, space launch
210	vehicles, space flight vehicles, missiles, satellites or
211	research payloads, avionics, and associated control systems and
212	processing systems and components of any of the foregoing. The
213	term does not include products that are designed or manufactured
214	for general commercial aviation or other uses even though those
215	products may also serve an incidental use in space applications.
216	(18)  MACHINERY AND EQUIPMENT USED PREDOMINANTLY FOR
217	RESEARCH AND DEVELOPMENT.--
218	(a)  Machinery and equipment used predominantly for
219	research and development as defined in this subsection are
220	exempt from the tax imposed by this chapter.
221	(b)  For purposes of this subsection:
222	1.  "Machinery and equipment" includes, but is not limited
223	to, molds, dies, machine tooling, other appurtenances or
224	accessories to machinery and equipment, testing and measuring
225	equipment, test beds, computers, and software, whether purchased
226	or self-fabricated, and, if self-fabricated, includes materials
227	and labor for design, fabrication, and assembly.
228	2.  "Predominantly" means at least 50 percent of the time.
229	3.  "Research and development" means research that has one
230	of the following as its ultimate goal:
231	a.  Basic research in a scientific field of endeavor;
232	b.  Advancing knowledge or technology in a scientific or
233	technical field of endeavor;
234	c.  The development of a new product, whether or not the
235	new product is offered for sale;
236	d.  The improvement of an existing product, whether or not
237	the improved product is offered for sale;
238	e.  The development of new uses of an existing product,
239	whether or not a new use is offered as a rationale to purchase
240	the product; or
241	f.  The design and development of prototypes, whether or
242	not a resulting product is offered for sale.
243
244	The term "research and development" does not include ordinary
245	testing or inspection of materials or products used for quality
246	control, market research, efficiency surveys, consumer surveys,
247	advertising and promotions, management studies, or research in
248	connection with literary, historical, social science,
249	psychological, or other similar nontechnical activities.
250	(c)  The department may adopt rules pursuant to ss.
251	120.536(1) and 120.54 that provide for administering and
252	implementing this exemption.
253	(d)  A person who claims the exemption provided in this
254	subsection shall furnish the vendor of the machinery or
255	equipment, including the vendor of materials and labor used in
256	self-fabrication of the machinery or equipment, an affidavit
257	stating that the item or items for which an exemption is claimed
258	are machinery and equipment that will be used predominantly for
259	research and development as required by this subsection. A
260	purchaser who claims the exemption by refund shall include the
261	affidavit with the refund application. The affidavit must
262	contain the purchaser's name, address, sales and use tax
263	registration number, and, if applicable, federal employer's
264	identification number. Any person fraudulently furnishing an
265	affidavit to the vendor for the purpose of evading payment of
266	any tax imposed under this chapter shall be subject to the
267	penalty set forth in s. 212.085 and as otherwise provided by
268	law.
269	(e)  In lieu of furnishing an affidavit, a purchaser
270	claiming the exemption provided in this subsection who has a
271	direct-pay permit may furnish the vendor with a copy of the
272	direct-pay permit and shall maintain all documentation necessary
273	to prove the exempt status of the purchases and fabrication
274	activity.
275	(f)  Purchasers shall maintain all documentation necessary
276	to prove the exempt status of purchases and fabrication activity
277	and make such documentation available for inspection pursuant to
278	the requirements of s. 212.13(2).
279	Section 3.  This act shall take effect July 1, 2006.

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