Senate Bill sb1206

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    Florida Senate - 2006                                  SB 1206

    By Senator Atwater





    25-671A-06

  1                      A bill to be entitled

  2         An act relating to commerce; providing

  3         legislative findings and purpose relating to

  4         the contribution of the manufacturing sector to

  5         the economy of this state and relating to free

  6         trade agreements with the Americas; amending s.

  7         212.08, F.S.; deleting a limitation on the

  8         annual amount of an exemption from the sales

  9         tax for certain machinery and equipment used to

10         increase productive output; deleting an

11         exemption from the sales tax for machinery and

12         equipment used to expand certain printing

13         manufacturing facilities or plant units;

14         deleting a provision stating that the sales tax

15         exemption for machinery and equipment purchased

16         for use in phosphate or other solid mineral

17         severance, mining, or processing operations may

18         be taken only by way of a prospective credit

19         against certain taxes; deleting a limitation on

20         the annual amount of a sales tax exemption for

21         certain machinery and equipment purchased under

22         a federal procurement contract; repealing s.

23         212.0805, F.S., relating to qualifications for

24         the exemption and credit for machinery and

25         equipment purchased by an expanding business

26         for use in phosphate or other solid minerals

27         severance, mining, or processing operations;

28         providing an appropriation and authorizing

29         positions; providing an effective date.

30  

31  Be It Enacted by the Legislature of the State of Florida:

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    Florida Senate - 2006                                  SB 1206
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 1         Section 1.  This act may be cited as the "Florida

 2  Manufacturing Global Competitiveness Act."

 3         Section 2.  Legislative findings and purpose.--The

 4  Legislature finds that a competitive manufacturing business

 5  climate is important given that the manufacturing sector

 6  contributes significantly to the economy of this state,

 7  helping it to weather natural and manmade disasters; that the

 8  development of free-trade agreements with the Americas will

 9  allow the state to be the gateway to increased international

10  trade that will expand the opportunities for manufacturing

11  exports, add thousands of well-paying jobs in the state, and

12  secure Florida's place in emerging markets in the world

13  marketplace; and that with the potential for increasing

14  exports, an investment in manufacturing today will mean

15  significant long-term positive revenue streams for the state

16  tomorrow.

17         Section 3.  Paragraphs (b) and (d) of subsection (5) of

18  section 212.08, Florida Statutes, are amended to read:

19         212.08  Sales, rental, use, consumption, distribution,

20  and storage tax; specified exemptions.--The sale at retail,

21  the rental, the use, the consumption, the distribution, and

22  the storage to be used or consumed in this state of the

23  following are hereby specifically exempt from the tax imposed

24  by this chapter.

25         (5)  EXEMPTIONS; ACCOUNT OF USE.--

26         (b)  Machinery and equipment used to increase

27  productive output.--

28         1.  Industrial machinery and equipment purchased for

29  exclusive use by a new business in spaceport activities as

30  defined by s. 212.02 or for use in new businesses which

31  manufacture, process, compound, or produce for sale items of

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    Florida Senate - 2006                                  SB 1206
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 1  tangible personal property at fixed locations are exempt from

 2  the tax imposed by this chapter upon an affirmative showing by

 3  the taxpayer to the satisfaction of the department that such

 4  items are used in a new business in this state. Such purchases

 5  must be made prior to the date the business first begins its

 6  productive operations, and delivery of the purchased item must

 7  be made within 12 months of that date.

 8         2.a.  Industrial machinery and equipment purchased for

 9  exclusive use by an expanding facility which is engaged in

10  spaceport activities as defined by s. 212.02 or for use in

11  expanding manufacturing facilities or plant units which

12  manufacture, process, compound, or produce for sale items of

13  tangible personal property at fixed locations in this state

14  are exempt from any amount of tax imposed by this chapter in

15  excess of $50,000 per calendar year upon an affirmative

16  showing by the taxpayer to the satisfaction of the department

17  that such items are used to increase the productive output of

18  such expanded facility or business by not less than 10

19  percent.

20         b.  Notwithstanding any other provision of this

21  section, industrial machinery and equipment purchased for use

22  in expanding printing manufacturing facilities or plant units

23  that manufacture, process, compound, or produce for sale items

24  of tangible personal property at fixed locations in this state

25  are exempt from any amount of tax imposed by this chapter upon

26  an affirmative showing by the taxpayer to the satisfaction of

27  the department that such items are used to increase the

28  productive output of such an expanded business by not less

29  than 10 percent.

30         3.a.  To receive an exemption provided by subparagraph

31  1. or subparagraph 2., a qualifying business entity shall

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 1  apply to the department for a temporary tax exemption permit.

 2  The application shall state that a new business exemption or

 3  expanded business exemption is being sought. Upon a tentative

 4  affirmative determination by the department pursuant to

 5  subparagraph 1. or subparagraph 2., the department shall issue

 6  such permit.

 7         b.  The applicant shall be required to maintain all

 8  necessary books and records to support the exemption. Upon

 9  completion of purchases of qualified machinery and equipment

10  pursuant to subparagraph 1. or subparagraph 2., the temporary

11  tax permit shall be delivered to the department or returned to

12  the department by certified or registered mail.

13         c.  If, in a subsequent audit conducted by the

14  department, it is determined that the machinery and equipment

15  purchased as exempt under subparagraph 1. or subparagraph 2.

16  did not meet the criteria mandated by this paragraph or if

17  commencement of production did not occur, the amount of taxes

18  exempted at the time of purchase shall immediately be due and

19  payable to the department by the business entity, together

20  with the appropriate interest and penalty, computed from the

21  date of purchase, in the manner prescribed by this chapter.

22         d.  In the event a qualifying business entity fails to

23  apply for a temporary exemption permit or if the tentative

24  determination by the department required to obtain a temporary

25  exemption permit is negative, a qualifying business entity

26  shall receive the exemption provided in subparagraph 1. or

27  subparagraph 2. through a refund of previously paid taxes. No

28  refund may be made for such taxes unless the criteria mandated

29  by subparagraph 1. or subparagraph 2. have been met and

30  commencement of production has occurred.

31  

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 1         4.  The department shall adopt rules governing

 2  applications for, issuance of, and the form of temporary tax

 3  exemption permits; provisions for recapture of taxes; and the

 4  manner and form of refund applications and may establish

 5  guidelines as to the requisites for an affirmative showing of

 6  increased productive output, commencement of production, and

 7  qualification for exemption.

 8         5.  The exemptions provided in subparagraphs 1. and 2.

 9  do not apply to machinery or equipment purchased or used by

10  electric utility companies, communications companies, oil or

11  gas exploration or production operations, publishing firms

12  that do not export at least 50 percent of their finished

13  product out of the state, any firm subject to regulation by

14  the Division of Hotels and Restaurants of the Department of

15  Business and Professional Regulation, or any firm which does

16  not manufacture, process, compound, or produce for sale items

17  of tangible personal property or which does not use such

18  machinery and equipment in spaceport activities as required by

19  this paragraph. The exemptions provided in subparagraphs 1.

20  and 2. shall apply to machinery and equipment purchased for

21  use in phosphate or other solid minerals severance, mining, or

22  processing operations only by way of a prospective credit

23  against taxes due under chapter 211 for taxes paid under this

24  chapter on such machinery and equipment.

25         6.  For the purposes of the exemptions provided in

26  subparagraphs 1. and 2., these terms have the following

27  meanings:

28         a.  "Industrial machinery and equipment" means tangible

29  personal property or other property that has a depreciable

30  life of 3 years or more and that is used as an integral part

31  in the manufacturing, processing, compounding, or production

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    Florida Senate - 2006                                  SB 1206
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 1  of tangible personal property for sale or is exclusively used

 2  in spaceport activities. A building and its structural

 3  components are not industrial machinery and equipment unless

 4  the building or structural component is so closely related to

 5  the industrial machinery and equipment that it houses or

 6  supports that the building or structural component can be

 7  expected to be replaced when the machinery and equipment are

 8  replaced. Heating and air-conditioning systems are not

 9  industrial machinery and equipment unless the sole

10  justification for their installation is to meet the

11  requirements of the production process, even though the system

12  may provide incidental comfort to employees or serve, to an

13  insubstantial degree, nonproduction activities. The term

14  includes parts and accessories only to the extent that the

15  exemption thereof is consistent with the provisions of this

16  paragraph.

17         b.  "Productive output" means the number of units

18  actually produced by a single plant or operation in a single

19  continuous 12-month period, irrespective of sales. Increases

20  in productive output shall be measured by the output for 12

21  continuous months immediately following the completion of

22  installation of such machinery or equipment over the output

23  for the 12 continuous months immediately preceding such

24  installation. However, if a different 12-month continuous

25  period of time would more accurately reflect the increase in

26  productive output of machinery and equipment purchased to

27  facilitate an expansion, the increase in productive output may

28  be measured during that 12-month continuous period of time if

29  such time period is mutually agreed upon by the Department of

30  Revenue and the expanding business prior to the commencement

31  of production; provided, however, in no case may such time

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    Florida Senate - 2006                                  SB 1206
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 1  period begin later than 2 years following the completion of

 2  installation of the new machinery and equipment. The units

 3  used to measure productive output shall be physically

 4  comparable between the two periods, irrespective of sales.

 5         (d)  Machinery and equipment used under federal

 6  procurement contract.--

 7         1.  Industrial machinery and equipment purchased by an

 8  expanding business that which manufactures tangible personal

 9  property pursuant to federal procurement regulations at fixed

10  locations in this state are partially exempt from the tax

11  imposed in this chapter on that portion of the tax which is in

12  excess of $100,000 per calendar year upon an affirmative

13  showing by the taxpayer to the satisfaction of the department

14  that such items are used to increase the implicit productive

15  output of the expanded business by not less than 10 percent.

16  The percentage of increase is measured as deflated implicit

17  productive output for the calendar year during which the

18  installation of the machinery or equipment is completed or

19  during which commencement of production utilizing such items

20  is begun divided by the implicit productive output for the

21  preceding calendar year.  In no case may the commencement of

22  production begin later than 2 years following completion of

23  installation of the machinery or equipment.

24         2.  The amount of the exemption allowed shall equal the

25  taxes otherwise imposed by this chapter in excess of $100,000

26  per calendar year on qualifying industrial machinery or

27  equipment reduced by the percentage of gross receipts from

28  cost-reimbursement type contracts attributable to the plant or

29  operation to total gross receipts so attributable, accrued for

30  the year of completion or commencement.

31  

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 1         3.  The exemption provided by this paragraph shall

 2  inure to the taxpayer only through refund of previously paid

 3  taxes. Such refund shall be made within 30 days after of

 4  formal approval by the department of the taxpayer's

 5  application, which application may be made on an annual basis

 6  following installation of the machinery or equipment.

 7         4.  For the purposes of this paragraph, the term:

 8         a.  "Cost-reimbursement type contracts" has the same

 9  meaning as in 32 C.F.R. s. 3-405.

10         b.  "Deflated implicit productive output" means the

11  product of implicit productive output times the quotient of

12  the national defense implicit price deflator for the preceding

13  calendar year divided by the deflator for the year of

14  completion or commencement.

15         c.  "Eligible costs" means the total direct and

16  indirect costs, as defined in 32 C.F.R. ss. 15-202 and 15-203,

17  excluding general and administrative costs, selling expenses,

18  and profit, defined by the uniform cost-accounting standards

19  adopted by the Cost-Accounting Standards Board created

20  pursuant to 50 U.S.C. s. 2168.

21         d.  "Implicit productive output" means the annual

22  eligible costs attributable to all contracts or subcontracts

23  subject to federal procurement regulations of the single plant

24  or operation at which the machinery or equipment is used.

25         e.  "Industrial machinery and equipment" means tangible

26  personal property or other property that has a depreciable

27  life of 3 years or more, that qualifies as an eligible cost

28  under federal procurement regulations, and that is used as an

29  integral part of the process of production of tangible

30  personal property. A building and its structural components

31  are not industrial machinery and equipment unless the building

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    Florida Senate - 2006                                  SB 1206
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 1  or structural component is so closely related to the

 2  industrial machinery and equipment that it houses or supports

 3  that the building or structural component can be expected to

 4  be replaced when the machinery and equipment are replaced.

 5  Heating and air-conditioning systems are not industrial

 6  machinery and equipment unless the sole justification for

 7  their installation is to meet the requirements of the

 8  production process, even though the system may provide

 9  incidental comfort to employees or serve, to an insubstantial

10  degree, nonproduction activities. The term includes parts and

11  accessories only to the extent that the exemption of such

12  parts and accessories is consistent with the provisions of

13  this paragraph.

14         f.  "National defense implicit price deflator" means

15  the national defense implicit price deflator for the gross

16  national product as determined by the Bureau of Economic

17  Analysis of the United States Department of Commerce.

18         5.  The exclusions provided in subparagraph (b)5. apply

19  to this exemption.  This exemption applies only to machinery

20  or equipment purchased pursuant to production contracts with

21  the United States Department of Defense and Armed Forces, the

22  National Aeronautics and Space Administration, and other

23  federal agencies for which the contracts are classified for

24  national security reasons.  In no event shall the provisions

25  of this paragraph apply to any expanding business the increase

26  in productive output of which could be measured under the

27  provisions of sub-subparagraph (b)6.b. as physically

28  comparable between the two periods.

29         Section 4.  Section 212.0805, Florida Statutes, is

30  repealed.

31  

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 1         Section 5.  For the 2006-2007 fiscal year, the sum of

 2  $210,000 is appropriated from the General Revenue Fund and

 3  four positions are authorized to the Department of Revenue for

 4  the purpose of implementing this act. Of the funds

 5  appropriated in this section, $192,000 are recurring funds and

 6  $18,000 are nonrecurring funds.

 7         Section 6.  This act shall take effect July 1, 2006.

 8  

 9            *****************************************

10                          SENATE SUMMARY

11    Provides legislative findings and purpose relating to the
      contribution of the manufacturing sector to the economy
12    of this state and relating to free trade agreements with
      the Americas. Deletes a limitation on the annual amount
13    of an exemption from the sales tax for certain machinery
      and equipment used to increase productive output. Deletes
14    an exemption from the sales tax for machinery and
      equipment used to expand certain printing manufacturing
15    facilities or plant units. Deletes a provision stating
      that the sales tax exemption for machinery and equipment
16    purchased for use in phosphate or other solid mineral
      severance, mining, or processing operations may be taken
17    only by way of a prospective credit against certain
      taxes. Deletes a limitation on the annual amount of a
18    sales tax exemption for certain machinery and equipment
      purchased under a federal procurement contract. Repeals
19    s. 212.0805, F.S., relating to qualifications for the
      exemption and credit for machinery and equipment
20    purchased by an expanding business for use in phosphate
      or other solid minerals severance, mining, or processing
21    operations. Provides an appropriation.

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