HB 77

1	A bill to be entitled
2	An act relating to the tax on sales, use, and other
3	transactions; amending s. 212.052, F.S.; deleting an
4	exception to an exemption from the tax for research or
5	development costs; amending s. 212.08, F.S.; exempting
6	machinery and equipment used predominantly for research
7	and development activities; authorizing the Department of
8	Revenue to adopt rules implementing the exemption;
9	providing requirements and procedures for claiming the
10	exemption; requiring an affidavit to be given by a
11	taxpayer claiming entitlement to the exemption; providing
12	penalties for fraudulently claiming the exemption;
13	requiring the Legislature to review the exemption;
14	providing for a study of the exemption by the Office of
15	Program Policy Analysis and Government Accountability and
16	Enterprise Florida, Inc.; providing study requirements;
17	requiring a report to the Governor and Legislature;
18	revising criteria, requirements, and procedures for
19	exemptions for semiconductor, defense, or space technology
20	production; clarifying authorization for qualified
21	businesses to donate the amount of the exemption to state
22	universities and community colleges; revising the
23	definition of the term "research and development";
24	defining the term "machinery and equipment"; reenacting s.
25	213.053(7)(k), F.S., relating to confidentiality and
26	information sharing, and s. 1011.94(1), F.S., relating to
27	the Trust Fund for University Major Gifts, for purposes of
28	incorporating the amendment to s. 212.08, F.S., in
29	references thereto; providing an effective date.
30
31	Be It Enacted by the Legislature of the State of Florida:
32
33	Section 1.  Subsection (2) of section 212.052, Florida
34	Statutes, is amended to read:
35	212.052  Research or development costs; exemption.--
36	(2)  Notwithstanding any provision of this chapter to the
37	contrary, any person, including an affiliated group as defined
38	in s. 1504 of the Internal Revenue Code of 1954, as amended, who
39	manufactures, produces, compounds, processes, or fabricates in
40	any manner tangible personal property for such taxpayer's own
41	use directly and solely in research or development shall not be
42	subject to the tax imposed by this chapter upon the cost of the
43	product so manufactured, produced, compounded, processed, or
44	fabricated. However, the tax imposed by this chapter shall be
45	due on the purchase, rental, or repair of real property or
46	tangible personal property employed in research or development
47	which is subject to the tax imposed by this chapter at the time
48	of purchase or rental.
49	Section 2.  Paragraph (j) of subsection (5) of section
50	212.08, Florida Statutes, is amended to read:
51	212.08  Sales, rental, use, consumption, distribution, and
52	storage tax; specified exemptions.--The sale at retail, the
53	rental, the use, the consumption, the distribution, and the
54	storage to be used or consumed in this state of the following
55	are hereby specifically exempt from the tax imposed by this
56	chapter.
57	(5)  EXEMPTIONS; ACCOUNT OF USE.--
58	(j)  Machinery and equipment used in research and
59	development and semiconductor, defense, or space technology
60	production and research and development.--
61	1.a.  Machinery and equipment used predominantly for
62	research and development are exempt from the tax imposed by this
63	chapter.
64	b.  The department may adopt rules that provide for
65	administering this exemption and for assumption of self-accrual
66	authority that is authorized by this subparagraph. Persons
67	claiming the exemption provided in this subparagraph shall
68	furnish the vendor of the machinery or equipment, including the
69	vendor of materials and labor used in self-fabrication of the
70	machinery or equipment, an affidavit stating that the item or
71	items for which an exemption is claimed are machinery and
72	equipment that will be used predominantly for research and
73	development as required by this subparagraph. The affidavit must
74	contain the purchaser's name, address, sales and use tax
75	registration number, and, if applicable, federal employer's
76	identification number. A purchaser who claims the exemption by
77	refund shall include the affidavit with the refund application.
78	Any person fraudulently furnishing an affidavit to the vendor
79	for the purpose of evading payment of any tax imposed under this
80	chapter shall be subject to the penalty set forth in s. 212.085
81	and as otherwise provided by law. Purchasers shall maintain all
82	documentation necessary to prove the exempt status of purchases
83	and fabrication activity and make such documentation available
84	for inspection pursuant to the requirements of s. 212.13(2). In
85	lieu of furnishing an affidavit, a purchaser claiming the
86	exemption provided in this subparagraph who has a direct pay
87	permit may furnish the vendor with a copy of the direct pay
88	permit and shall maintain all documentation necessary to prove
89	the exempt status of the purchases and fabrication activity and
90	make such documentation available for inspection pursuant to the
91	requirements of s. 212.13(2).
92	c.  The Office of Program Policy Analysis and Government
93	Accountability and Enterprise Florida, Inc., shall study the
94	exemption provided for in this subparagraph to determine the
95	impact of the exemption on the promotion of research and
96	development activities in this state. Enterprise Florida, Inc.,
97	may contract with an independent research organization to
98	perform the assessment. The study must include the estimated
99	annual cost of the exemption and an estimate of the economic
100	impact of increased research and development activities, if any.
101	By January 1, 2016, the office and Enterprise Florida, Inc.,
102	shall submit to the Governor, the President of the Senate, and
103	the Speaker of the House of Representatives reports that provide
104	the findings and recommendations as to whether the exemption
105	should be retained by the Legislature. The Legislature shall
106	review the exemption no later than July 1, 2016.
107	2.1.a.  Industrial machinery and equipment used in
108	semiconductor technology facilities certified under subparagraph
109	5.6. to manufacture, process, compound, or produce semiconductor
110	technology products for sale or for use by these facilities are
111	exempt from the tax imposed by this chapter. For purposes of
112	this paragraph, industrial machinery and equipment includes
113	molds, dies, machine tooling, other appurtenances or accessories
114	to machinery and equipment, testing equipment, test beds,
115	computers, and software, whether purchased or self-fabricated,
116	and, if self-fabricated, includes materials and labor for
117	design, fabrication, and assembly.
118	b.  Industrial machinery and equipment used in defense or
119	space technology facilities certified under subparagraph 5.6. to
120	manufacture, process, compound, or produce defense technology
121	products or space technology products for sale or for use by
122	these facilities are exempt from 25 percent of the tax imposed
123	by this chapter.
124	2.a.  Machinery and equipment are exempt from the tax
125	imposed by this chapter if used predominately in semiconductor
126	wafer research and development activities in a semiconductor
127	technology research and development facility certified under
128	subparagraph 6. For purposes of this paragraph, machinery and
129	equipment includes molds, dies, machine tooling, other
130	appurtenances or accessories to machinery and equipment, testing
131	equipment, test beds, computers, and software, whether purchased
132	or self-fabricated, and, if self-fabricated, includes materials
133	and labor for design, fabrication, and assembly.
134	b.  Machinery and equipment are exempt from 25 percent of
135	the tax imposed by this chapter if used predominately in defense
136	or space research and development activities in a defense or
137	space technology research and development facility certified
138	under subparagraph 6.
139	c.3.  Building materials purchased for use in manufacturing
140	or expanding clean rooms in semiconductor-manufacturing
141	facilities are exempt from the tax imposed by this chapter.
142	3.4.  In addition to meeting the criteria mandated by
143	subparagraph 1., subparagraph 2., or subparagraph 3., a business
144	must be certified by the Office of Tourism, Trade, and Economic
145	Development as authorized in this paragraph in order to qualify
146	for exemption under subparagraph 2 this paragraph.
147	4.5.  For items purchased tax exempt pursuant to
148	subparagraph 2. this paragraph, possession of a written
149	certification from the purchaser, certifying the purchaser's
150	entitlement to exemption pursuant to subparagraph 2. this
151	paragraph, relieves the seller of the responsibility of
152	collecting the tax on the sale of such items, and the department
153	shall look solely to the purchaser for recovery of tax if it
154	determines that the purchaser was not entitled to the exemption.
155	5.6.a.  To be eligible to receive the exemption provided by
156	subparagraph 1., subparagraph 2., or subparagraph 3., a
157	qualifying business entity shall apply to Enterprise Florida,
158	Inc. The application shall be developed by the Office of
159	Tourism, Trade, and Economic Development in consultation with
160	Enterprise Florida, Inc.
161	b.  Enterprise Florida, Inc., shall review each submitted
162	application and information and determine whether or not the
163	application is complete within 5 working days. Once an
164	application is complete, Enterprise Florida, Inc., shall, within
165	10 working days, evaluate the application and recommend approval
166	or disapproval of the application to the Office of Tourism,
167	Trade, and Economic Development.
168	c.  Upon receipt of the application and recommendation from
169	Enterprise Florida, Inc., the Office of Tourism, Trade, and
170	Economic Development shall certify within 5 working days those
171	applicants who are found to meet the applicable requirements of
172	this paragraph section and notify the applicant, Enterprise
173	Florida, Inc., and the department of the certification. If the
174	Office of Tourism, Trade, and Economic Development finds that
175	the applicant does not meet the applicable requirements of this
176	paragraph section, it shall notify the applicant and Enterprise
177	Florida, Inc., within 10 working days that the application for
178	certification has been denied and the reasons for denial. The
179	Office of Tourism, Trade, and Economic Development has final
180	approval authority for certification under this paragraph
181	section.
182	6.7.a.  A business may apply once each year for the
183	exemption provided by subparagraph 2.
184	b.  The application must indicate, for program evaluation
185	purposes only, the average number of full-time equivalent
186	employees at the facility over the preceding calendar year, the
187	average wage and benefits paid to those employees over the
188	preceding calendar year, the total investment made in real and
189	tangible personal property over the preceding calendar year, and
190	the total value of tax-exempt purchases and taxes exempted
191	during the previous year. The department shall assist the Office
192	of Tourism, Trade, and Economic Development in evaluating and
193	verifying information provided in the application for exemption.
194	c.  The Office of Tourism, Trade, and Economic Development
195	may use the information reported on the application for
196	evaluation purposes only and shall prepare an annual report on
197	the exemption program and its cost and impact. The annual report
198	for the preceding fiscal year shall be submitted to the
199	Governor, the President of the Senate, and the Speaker of the
200	House of Representatives by September 30 of each fiscal year.
201	7.8.  A business receiving the certified to receive this
202	exemption provided by subparagraph 1. or subparagraph 2. may
203	elect to designate one or more state universities or community
204	colleges as recipients to receive from the business an amount of
205	up to 100 percent of the amount of the exemption for which the
206	business qualifies they may qualify. To receive these funds, the
207	institution must agree to match the funds so earned with
208	equivalent cash, programs, services, or other in-kind support on
209	a one-to-one basis in the pursuit of research and development
210	projects as requested by the certified business. The rights to
211	any patents, royalties, or real or intellectual property must be
212	vested in the business unless otherwise agreed to by the
213	business and the university or community college.
214	8.9.  As used in this paragraph, the term:
215	a.  "Predominately" means at least 50 percent of the time
216	in qualifying research and development.
217	b.  "Research and development" means research that has one
218	of the following as its ultimate goal:
219	(I)  Basic research in a scientific field of endeavor;
220	(II)  Advancing knowledge or technology in a scientific or
221	technical field of endeavor;
222	(III)  The development of a new product, whether or not the
223	new product is offered for sale;
224	(IV)  The improvement of an existing product, whether or
225	not the improved product is offered for sale;
226	(V)  The development of new uses of an existing product,
227	whether or not a new use is offered as a rationale to purchase
228	the product; or
229	(VI)  The design and development of prototypes, whether or
230	not a resulting product is offered for sale.
231
232	The term "research and development" does not include ordinary
233	testing or inspection of materials or products used for quality
234	control, market research, efficiency surveys, consumer surveys,
235	advertising and promotions, management studies, or research in
236	connection with literary, historical, social science,
237	psychological, or other similar nontechnical activities basic
238	and applied research in the science or engineering, as well as
239	the design, development, and testing of prototypes or processes
240	of new or improved products. Research and development does not
241	include market research, routine consumer product testing, sales
242	research, research in the social sciences or psychology,
243	nontechnological activities, or technical services.
244	c.  "Semiconductor technology products" means raw
245	semiconductor wafers or semiconductor thin films that are
246	transformed into semiconductor memory or logic wafers, including
247	wafers containing mixed memory and logic circuits; related
248	assembly and test operations; active-matrix flat panel displays;
249	semiconductor chips; semiconductor lasers; optoelectronic
250	elements; and related semiconductor technology products as
251	determined by the Office of Tourism, Trade, and Economic
252	Development.
253	d.  "Clean rooms" means manufacturing facilities enclosed
254	in a manner that meets the clean manufacturing requirements
255	necessary for high-technology semiconductor-manufacturing
256	environments.
257	e.  "Defense technology products" means products that have
258	a military application, including, but not limited to, weapons,
259	weapons systems, guidance systems, surveillance systems,
260	communications or information systems, munitions, aircraft,
261	vessels, or boats, or components thereof, which are intended for
262	military use and manufactured in performance of a contract with
263	the United States Department of Defense or the military branch
264	of a recognized foreign government or a subcontract thereunder
265	which relates to matters of national defense.
266	f.  "Space technology products" means products that are
267	specifically designed or manufactured for application in space
268	activities, including, but not limited to, space launch
269	vehicles, missiles, satellites or research payloads, avionics,
270	and associated control systems and processing systems. The term
271	does not include products that are designed or manufactured for
272	general commercial aviation or other uses even though those
273	products may also serve an incidental use in space applications.
274	g.  "Machinery and equipment" includes, but is not limited
275	to, molds, dies, machine tooling, other appurtenances or
276	accessories to machinery and equipment, testing and measuring
277	equipment, test beds, computers, and software, whether purchased
278	or self-fabricated, and, if self-fabricated, includes materials
279	and labor for design, fabrication, and assembly.
280	Section 3.  For the purpose of incorporating the amendment
281	made by this act to section 212.08, Florida Statutes, in
282	references thereto, paragraph (k) of subsection (7) of section
283	213.053, Florida Statutes, is reenacted to read:
284	213.053  Confidentiality and information sharing.--
285	(7)  Notwithstanding any other provision of this section,
286	the department may provide:
287	(k)1.  Payment information relative to chapters 199, 201,
288	212, 220, 221, and 624 to the Office of Tourism, Trade, and
289	Economic Development, or its employees or agents that are
290	identified in writing by the office to the department, in the
291	administration of the tax refund program for qualified defense
292	contractors authorized by s. 288.1045 and the tax refund program
293	for qualified target industry businesses authorized by s.
294	288.106.
295	2.  Information relative to tax credits taken by a business
296	under s. 220.191 and exemptions or tax refunds received by a
297	business under s. 212.08(5)(j) to the Office of Tourism, Trade,
298	and Economic Development, or its employees or agents that are
299	identified in writing by the office to the department, in the
300	administration and evaluation of the capital investment tax
301	credit program authorized in s. 220.191 and the semiconductor,
302	defense, and space tax exemption program authorized in s.
303	212.08(5)(j).
304
305	Disclosure of information under this subsection shall be
306	pursuant to a written agreement between the executive director
307	and the agency. Such agencies, governmental or nongovernmental,
308	shall be bound by the same requirements of confidentiality as
309	the Department of Revenue. Breach of confidentiality is a
310	misdemeanor of the first degree, punishable as provided by s.
311	775.082 or s. 775.083.
312	Section 4.  For the purpose of incorporating the amendment
313	made by this act to section 212.08, Florida Statutes, in
314	references thereto, subsection (1) of section 1011.94, Florida
315	Statutes, is reenacted to read:
316	1011.94  Trust Fund for University Major Gifts.--
317	(1)  There is established a Trust Fund for University Major
318	Gifts. The purpose of the trust fund is to enable each
319	university and New College to provide donors with an incentive
320	in the form of matching grants for donations for the
321	establishment of permanent endowments and sales tax exemption
322	matching funds received pursuant to s. 212.08(5)(j), which must
323	be invested, with the proceeds of the investment used to support
324	libraries and instruction and research programs, as defined by
325	the State Board of Education. All funds appropriated for the
326	challenge grants, new donors, major gifts, sales tax exemption
327	matching funds pursuant to s. 212.08(5)(j), or eminent scholars
328	program may be deposited into the trust fund and invested
329	pursuant to s. 17.61 until the State Board of Education
330	allocates the funds to universities to match private donations.
331	Notwithstanding s. 216.301 and pursuant to s. 216.351, any
332	undisbursed balance remaining in the trust fund and interest
333	income accruing to the portion of the trust fund which is not
334	matched and distributed to universities must remain in the trust
335	fund and be used to increase the total funds available for
336	challenge grants. Funds deposited in the trust fund for the
337	sales tax exemption matching program authorized in s.
338	212.08(5)(j), and interest earnings thereon, shall be maintained
339	in a separate account within the Trust Fund for University Major
340	Gifts, and may be used only to match qualified sales tax
341	exemptions that a certified business designates for use by state
342	universities and community colleges to support research and
343	development projects requested by the certified business. The
344	State Board of Education may authorize any university to
345	encumber the state matching portion of a challenge grant from
346	funds available under s. 1011.45.
347	Section 5.  This act shall take effect July 1, 2006.

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