HB 0069

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 exemptions from the tax on sales, use,
7	and other transactions; providing a short title; providing
8	legislative findings and purpose; amending s. 212.08,
9	F.S.; deleting an annual limitation on an exemption from
10	the sales tax for certain machinery and equipment used to
11	increase productive output; deleting an exemption for
12	machinery and equipment used to expand certain printing
13	manufacturing facilities or plant units; deleting a
14	limitation on application of the exemption for machinery
15	and equipment purchased for use in phosphate or other
16	solid minerals severance, mining, or processing operations
17	by way of a prospective credit; deleting an annual
18	limitation on an exemption from the sales tax for certain
19	machinery and equipment purchased under a federal
20	procurement contract; repealing s. 212.0805, F.S.,
21	relating to qualifications for the exemption and credit
22	for machinery and equipment purchased by an expanding
23	business for use in phosphate or other solid minerals
24	severance, mining, or processing operations; providing an
25	appropriation; providing an effective date.
26
27	Be It Enacted by the Legislature of the State of Florida:
28
29	Section 1.  Short title.--This act may be cited as the
30	"Florida Manufacturing Global Competitiveness Act."
31	Section 2.  Legislative findings and purpose.--The
32	Legislature finds that a competitive manufacturing business
33	climate is important given that the manufacturing sector
34	contributes significantly to the economy of this state, helping
35	the state to weather natural and manmade disasters; that the
36	development of free trade agreements with the Americas will
37	allow the state to be the gateway to increased international
38	trade that will expand the opportunities for manufacturing
39	exports, potentially add thousands of well-paying jobs in the
40	state, and secure this state's place in emerging markets in the
41	world marketplace; and that with the potential for increasing
42	exports, an investment in manufacturing today will mean
43	significant long-term positive economic benefits to the state
44	tomorrow.
45	Section 3.  Paragraphs (b) and (d) of subsection (5) of
46	section 212.08, Florida Statutes, are amended to read:
47	212.08  Sales, rental, use, consumption, distribution, and
48	storage tax; specified exemptions.--The sale at retail, the
49	rental, the use, the consumption, the distribution, and the
50	storage to be used or consumed in this state of the following
51	are hereby specifically exempt from the tax imposed by this
52	chapter.
53	(5)  EXEMPTIONS; ACCOUNT OF USE.--
54	(b)  Machinery and equipment used to increase productive
55	output.--
56	1.  Industrial machinery and equipment purchased for
57	exclusive use by a new business in spaceport activities as
58	defined by s. 212.02 or for use in new businesses which
59	manufacture, process, compound, or produce for sale items of
60	tangible personal property at fixed locations are exempt from
61	the tax imposed by this chapter upon an affirmative showing by
62	the taxpayer to the satisfaction of the department that such
63	items are used in a new business in this state. Such purchases
64	must be made prior to the date the business first begins its
65	productive operations, and delivery of the purchased item must
66	be made within 12 months of that date.
67	2.a.  Industrial machinery and equipment purchased for
68	exclusive use by an expanding facility which is engaged in
69	spaceport activities as defined by s. 212.02 or for use in
70	expanding manufacturing facilities or plant units which
71	manufacture, process, compound, or produce for sale items of
72	tangible personal property at fixed locations in this state are
73	exempt from any amount of tax imposed by this chapter in excess
74	of $50,000 per calendar year upon an affirmative showing by the
75	taxpayer to the satisfaction of the department that such items
76	are used to increase the productive output of such expanded
77	facility or business by not less than 10 percent.
78	b.  Notwithstanding any other provision of this section,
79	industrial machinery and equipment purchased for use in
80	expanding printing manufacturing facilities or plant units that
81	manufacture, process, compound, or produce for sale items of
82	tangible personal property at fixed locations in this state are
83	exempt from any amount of tax imposed by this chapter upon an
84	affirmative showing by the taxpayer to the satisfaction of the
85	department that such items are used to increase the productive
86	output of such an expanded business by not less than 10 percent.
87	3.a.  To receive an exemption provided by subparagraph 1.
88	or subparagraph 2., a qualifying business entity shall apply to
89	the department for a temporary tax exemption permit. The
90	application shall state that a new business exemption or
91	expanded business exemption is being sought. Upon a tentative
92	affirmative determination by the department pursuant to
93	subparagraph 1. or subparagraph 2., the department shall issue
94	such permit.
95	b.  The applicant shall be required to maintain all
96	necessary books and records to support the exemption. Upon
97	completion of purchases of qualified machinery and equipment
98	pursuant to subparagraph 1. or subparagraph 2., the temporary
99	tax permit shall be delivered to the department or returned to
100	the department by certified or registered mail.
101	c.  If, in a subsequent audit conducted by the department,
102	it is determined that the machinery and equipment purchased as
103	exempt under subparagraph 1. or subparagraph 2. did not meet the
104	criteria mandated by this paragraph or if commencement of
105	production did not occur, the amount of taxes exempted at the
106	time of purchase shall immediately be due and payable to the
107	department by the business entity, together with the appropriate
108	interest and penalty, computed from the date of purchase, in the
109	manner prescribed by this chapter.
110	d.  In the event a qualifying business entity fails to
111	apply for a temporary exemption permit or if the tentative
112	determination by the department required to obtain a temporary
113	exemption permit is negative, a qualifying business entity shall
114	receive the exemption provided in subparagraph 1. or
115	subparagraph 2. through a refund of previously paid taxes. No
116	refund may be made for such taxes unless the criteria mandated
117	by subparagraph 1. or subparagraph 2. have been met and
118	commencement of production has occurred.
119	4.  The department shall adopt rules governing applications
120	for, issuance of, and the form of temporary tax exemption
121	permits; provisions for recapture of taxes; and the manner and
122	form of refund applications and may establish guidelines as to
123	the requisites for an affirmative showing of increased
124	productive output, commencement of production, and qualification
125	for exemption.
126	5.  The exemptions provided in subparagraphs 1. and 2. do
127	not apply to machinery or equipment purchased or used by
128	electric utility companies, communications companies, oil or gas
129	exploration or production operations, publishing firms that do
130	not export at least 50 percent of their finished product out of
131	the state, any firm subject to regulation by the Division of
132	Hotels and Restaurants of the Department of Business and
133	Professional Regulation, or any firm which does not manufacture,
134	process, compound, or produce for sale items of tangible
135	personal property or which does not use such machinery and
136	equipment in spaceport activities as required by this paragraph.
137	The exemptions provided in subparagraphs 1. and 2. shall apply
138	to machinery and equipment purchased for use in phosphate or
139	other solid minerals severance, mining, or processing operations
140	only by way of a prospective credit against taxes due under
141	chapter 211 for taxes paid under this chapter on such machinery
142	and equipment.
143	6.  For the purposes of the exemptions provided in
144	subparagraphs 1. and 2., these terms have the following
145	meanings:
146	a.  "Industrial machinery and equipment" means tangible
147	personal property or other property that has a depreciable life
148	of 3 years or more and that is used as an integral part in the
149	manufacturing, processing, compounding, or production of
150	tangible personal property for sale or is exclusively used in
151	spaceport activities. A building and its structural components
152	are not industrial machinery and equipment unless the building
153	or structural component is so closely related to the industrial
154	machinery and equipment that it houses or supports that the
155	building or structural component can be expected to be replaced
156	when the machinery and equipment are replaced. Heating and air-
157	conditioning systems are not industrial machinery and equipment
158	unless the sole justification for their installation is to meet
159	the requirements of the production process, even though the
160	system may provide incidental comfort to employees or serve, to
161	an insubstantial degree, nonproduction activities. The term
162	includes parts and accessories only to the extent that the
163	exemption thereof is consistent with the provisions of this
164	paragraph.
165	b.  "Productive output" means the number of units actually
166	produced by a single plant or operation in a single continuous
167	12-month period, irrespective of sales. Increases in productive
168	output shall be measured by the output for 12 continuous months
169	immediately following the completion of installation of such
170	machinery or equipment over the output for the 12 continuous
171	months immediately preceding such installation. However, if a
172	different 12-month continuous period of time would more
173	accurately reflect the increase in productive output of
174	machinery and equipment purchased to facilitate an expansion,
175	the increase in productive output may be measured during that
176	12-month continuous period of time if such time period is
177	mutually agreed upon by the Department of Revenue and the
178	expanding business prior to the commencement of production;
179	provided, however, in no case may such time period begin later
180	than 2 years following the completion of installation of the new
181	machinery and equipment. The units used to measure productive
182	output shall be physically comparable between the two periods,
183	irrespective of sales.
184	(d)  Machinery and equipment used under federal procurement
185	contract.--
186	1.  Industrial machinery and equipment purchased by an
187	expanding business which manufactures tangible personal property
188	pursuant to federal procurement regulations at fixed locations
189	in this state are partially exempt from the tax imposed in this
190	chapter on that portion of the tax which is in excess of
191	$100,000 per calendar year upon an affirmative showing by the
192	taxpayer to the satisfaction of the department that such items
193	are used to increase the implicit productive output of the
194	expanded business by not less than 10 percent. The percentage of
195	increase is measured as deflated implicit productive output for
196	the calendar year during which the installation of the machinery
197	or equipment is completed or during which commencement of
198	production utilizing such items is begun divided by the implicit
199	productive output for the preceding calendar year. In no case
200	may the commencement of production begin later than 2 years
201	following completion of installation of the machinery or
202	equipment.
203	2.  The amount of the exemption allowed shall equal the
204	taxes otherwise imposed by this chapter in excess of $100,000
205	per calendar year on qualifying industrial machinery or
206	equipment reduced by the percentage of gross receipts from cost-
207	reimbursement type contracts attributable to the plant or
208	operation to total gross receipts so attributable, accrued for
209	the year of completion or commencement.
210	3.  The exemption provided by this paragraph shall inure to
211	the taxpayer only through refund of previously paid taxes. Such
212	refund shall be made within 30 days of formal approval by the
213	department of the taxpayer's application, which application may
214	be made on an annual basis following installation of the
215	machinery or equipment.
216	4.  For the purposes of this paragraph, the term:
217	a.  "Cost-reimbursement type contracts" has the same
218	meaning as in 32 C.F.R. s. 3-405.
219	b.  "Deflated implicit productive output" means the product
220	of implicit productive output times the quotient of the national
221	defense implicit price deflator for the preceding calendar year
222	divided by the deflator for the year of completion or
223	commencement.
224	c.  "Eligible costs" means the total direct and indirect
225	costs, as defined in 32 C.F.R. ss. 15-202 and 15-203, excluding
226	general and administrative costs, selling expenses, and profit,
227	defined by the uniform cost-accounting standards adopted by the
228	Cost-Accounting Standards Board created pursuant to 50 U.S.C. s.
229	2168.
230	d.  "Implicit productive output" means the annual eligible
231	costs attributable to all contracts or subcontracts subject to
232	federal procurement regulations of the single plant or operation
233	at which the machinery or equipment is used.
234	e.  "Industrial machinery and equipment" means tangible
235	personal property or other property that has a depreciable life
236	of 3 years or more, that qualifies as an eligible cost under
237	federal procurement regulations, and that is used as an integral
238	part of the process of production of tangible personal property.
239	A building and its structural components are not industrial
240	machinery and equipment unless the building or structural
241	component is so closely related to the industrial machinery and
242	equipment that it houses or supports that the building or
243	structural component can be expected to be replaced when the
244	machinery and equipment are replaced. Heating and air-
245	conditioning systems are not industrial machinery and equipment
246	unless the sole justification for their installation is to meet
247	the requirements of the production process, even though the
248	system may provide incidental comfort to employees or serve, to
249	an insubstantial degree, nonproduction activities. The term
250	includes parts and accessories only to the extent that the
251	exemption of such parts and accessories is consistent with the
252	provisions of this paragraph.
253	f.  "National defense implicit price deflator" means the
254	national defense implicit price deflator for the gross national
255	product as determined by the Bureau of Economic Analysis of the
256	United States Department of Commerce.
257	5.  The exclusions provided in subparagraph (b)5. apply to
258	this exemption. This exemption applies only to machinery or
259	equipment purchased pursuant to production contracts with the
260	United States Department of Defense and Armed Forces, the
261	National Aeronautics and Space Administration, and other federal
262	agencies for which the contracts are classified for national
263	security reasons. In no event shall the provisions of this
264	paragraph apply to any expanding business the increase in
265	productive output of which could be measured under the
266	provisions of sub-subparagraph (b)6.b. as physically comparable
267	between the two periods.
268	Section 4.  Section 212.0805, Florida Statutes, is
269	repealed.
270	Section 5.  For the 2006-2007 fiscal year, the sum of
271	$210,069 is appropriated from the General Revenue Fund and four
272	positions are authorized to the Department of Revenue for the
273	purpose of implementing the provisions of this act. Of the funds
274	provided, $191,825 are recurring and $18,244 are nonrecurring
275	funds.
276	Section 6.  This act shall take effect July 1, 2006.

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