HB 0415

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.; deleting
10	provisions providing an exemption on account of use for
11	machinery and equipment used for research and development;
12	exempting machinery and equipment used predominantly for
13	research and development activities; providing
14	definitions; authorizing the Department of Revenue to
15	adopt rules administering and implementing the exemption;
16	providing requirements and procedures for claiming the
17	exemption; requiring an affidavit to be given by a
18	taxpayer claiming entitlement to the exemption; providing
19	penalties for fraudulently claiming the exemption;
20	providing recordkeeping requirements; providing an
21	effective date.
22
23	Be It Enacted by the Legislature of the State of Florida:
24
25	Section 1.  Subsection (2) of section 212.052, Florida
26	Statutes, is amended to read:
27	212.052  Research or development costs; exemption.--
28	(2)  Notwithstanding any provision of this chapter to the
29	contrary, any person, including an affiliated group as defined
30	in s. 1504 of the Internal Revenue Code of 1954, as amended, who
31	manufactures, produces, compounds, processes, or fabricates in
32	any manner tangible personal property for such taxpayer's own
33	use directly and solely in research or development shall not be
34	subject to the tax imposed by this chapter upon the cost of the
35	product so manufactured, produced, compounded, processed, or
36	fabricated. However, the tax imposed by this chapter shall be
37	due on the purchase, rental, or repair of real property or
38	tangible personal property employed in research or development
39	which is subject to the tax imposed by this chapter at the time
40	of purchase or rental.
41	Section 2.  Paragraph (j) of subsection (5) of section
42	212.08, Florida Statutes, is amended, and subsection (18) is
43	added to that section, to read:
44	212.08  Sales, rental, use, consumption, distribution, and
45	storage tax; specified exemptions.--The sale at retail, the
46	rental, the use, the consumption, the distribution, and the
47	storage to be used or consumed in this state of the following
48	are hereby specifically exempt from the tax imposed by this
49	chapter.
50	(5)  EXEMPTIONS; ACCOUNT OF USE.--
51	(j)  Machinery and equipment used in semiconductor,
52	defense, or space technology production and research and
53	development.--
54	1.a.  Industrial machinery and equipment used in
55	semiconductor technology facilities certified under subparagraph
56	5. 6. to manufacture, process, compound, or produce
57	semiconductor technology products for sale or for use by these
58	facilities are exempt from the tax imposed by this chapter. For
59	purposes of this paragraph, industrial machinery and equipment
60	includes molds, dies, machine tooling, other appurtenances or
61	accessories to machinery and equipment, testing equipment, test
62	beds, computers, and software, whether purchased or self-
63	fabricated, and, if self-fabricated, includes materials and
64	labor for design, fabrication, and assembly.
65	b.  Industrial machinery and equipment used in defense or
66	space technology facilities certified under subparagraph 5. 6.
67	to design, manufacture, assemble, process, compound, or produce
68	defense technology products or space technology products for
69	sale or for use by these facilities are exempt from 25 percent
70	of the tax imposed by this chapter.
71	2.a.  Machinery and equipment are exempt from the tax
72	imposed by this chapter if used predominately in semiconductor
73	wafer research and development activities in a semiconductor
74	technology research and development facility certified under
75	subparagraph 6. For purposes of this paragraph, machinery and
76	equipment includes molds, dies, machine tooling, other
77	appurtenances or accessories to machinery and equipment, testing
78	equipment, test beds, computers, and software, whether purchased
79	or self-fabricated, and, if self-fabricated, includes materials
80	and labor for design, fabrication, and assembly.
81	b.  Machinery and equipment are exempt from 25 percent of
82	the tax imposed by this chapter if used predominately in defense
83	or space research and development activities in a defense or
84	space technology research and development facility certified
85	under subparagraph 6.
86	2.3.  Building materials purchased for use in manufacturing
87	or expanding clean rooms in semiconductor-manufacturing
88	facilities are exempt from the tax imposed by this chapter.
89	3.4.  In addition to meeting the criteria mandated by
90	subparagraph 1. or, subparagraph 2., or subparagraph 3., a
91	business must be certified by the Office of Tourism, Trade, and
92	Economic Development as authorized in this paragraph in order to
93	qualify for exemption under this paragraph.
94	4.5.  For items purchased tax exempt pursuant to this
95	paragraph, possession of a written certification from the
96	purchaser, certifying the purchaser's entitlement to exemption
97	pursuant to this paragraph, relieves the seller of the
98	responsibility of collecting the tax on the sale of such items,
99	and the department shall look solely to the purchaser for
100	recovery of tax if it determines that the purchaser was not
101	entitled to the exemption.
102	5.6.a.  To be eligible to receive the exemption provided by
103	subparagraph 1. or, subparagraph 2., or subparagraph 3., a
104	qualifying business entity shall apply to Enterprise Florida,
105	Inc. The application shall be developed by the Office of
106	Tourism, Trade, and Economic Development in consultation with
107	Enterprise Florida, Inc.
108	b.  Enterprise Florida, Inc., shall review each submitted
109	application and information and determine whether or not the
110	application is complete within 5 working days. Once an
111	application is complete, Enterprise Florida, Inc., shall, within
112	10 working days, evaluate the application and recommend approval
113	or disapproval of the application to the Office of Tourism,
114	Trade, and Economic Development.
115	c.  Upon receipt of the application and recommendation from
116	Enterprise Florida, Inc., the Office of Tourism, Trade, and
117	Economic Development shall certify within 5 working days those
118	applicants who are found to meet the requirements of this
119	section and notify the applicant, Enterprise Florida, Inc., and
120	the department of the certification. If the Office of Tourism,
121	Trade, and Economic Development finds that the applicant does
122	not meet the requirements of this section, it shall notify the
123	applicant and Enterprise Florida, Inc., within 10 working days
124	that the application for certification has been denied and the
125	reasons for denial. The Office of Tourism, Trade, and Economic
126	Development has final approval authority for certification under
127	this section.
128	6.7.a.  A business may apply once each year for the
129	exemption.
130	b.  The application must indicate, for program evaluation
131	purposes only, the average number of full-time equivalent
132	employees at the facility over the preceding calendar year, the
133	average wage and benefits paid to those employees over the
134	preceding calendar year, the total investment made in real and
135	tangible personal property over the preceding calendar year, and
136	the total value of tax-exempt purchases and taxes exempted
137	during the previous year. The department shall assist the Office
138	of Tourism, Trade, and Economic Development in evaluating and
139	verifying information provided in the application for exemption.
140	c.  The Office of Tourism, Trade, and Economic Development
141	may use the information reported on the application for
142	evaluation purposes only and shall prepare an annual report on
143	the exemption program and its cost and impact. The annual report
144	for the preceding fiscal year shall be submitted to the
145	Governor, the President of the Senate, and the Speaker of the
146	House of Representatives by September 30 of each fiscal year.
147	7.8.  A business certified to receive this exemption may
148	elect to designate one or more state universities or community
149	colleges as recipients of up to 100 percent of the amount of the
150	exemption for which they may qualify. To receive these funds,
151	the institution must agree to match the funds so earned with
152	equivalent cash, programs, services, or other in-kind support on
153	a one-to-one basis in the pursuit of research and development
154	projects as requested by the certified business. The rights to
155	any patents, royalties, or real or intellectual property must be
156	vested in the business unless otherwise agreed to by the
157	business and the university or community college.
158	8.9.  As used in this paragraph, the term:
159	a.  "Predominately" means at least 50 percent of the time
160	in qualifying research and development.
161	b.  "Research and development" means basic and applied
162	research in the science or engineering, as well as the design,
163	development, and testing of prototypes or processes of new or
164	improved products. Research and development does not include
165	market research, routine consumer product testing, sales
166	research, research in the social sciences or psychology,
167	nontechnological activities, or technical services.
168	a.c.  "Semiconductor technology products" means raw
169	semiconductor wafers or semiconductor thin films that are
170	transformed into semiconductor memory or logic wafers, including
171	wafers containing mixed memory and logic circuits; related
172	assembly and test operations; active-matrix flat panel displays;
173	semiconductor chips; semiconductor lasers; optoelectronic
174	elements; and related semiconductor technology products as
175	determined by the Office of Tourism, Trade, and Economic
176	Development.
177	b.d.  "Clean rooms" means manufacturing facilities enclosed
178	in a manner that meets the clean manufacturing requirements
179	necessary for high-technology semiconductor-manufacturing
180	environments.
181	c.e.  "Defense technology products" means products that
182	have a military application, including, but not limited to,
183	weapons, weapons systems, guidance systems, surveillance
184	systems, communications or information systems, munitions,
185	aircraft, vessels, or boats, or components thereof, which are
186	intended for military use and manufactured in performance of a
187	contract with the United States Department of Defense or the
188	military branch of a recognized foreign government or a
189	subcontract thereunder which relates to matters of national
190	defense.
191	d.f.  "Space technology products" means products that are
192	specifically designed or manufactured for application in space
193	activities, including, but not limited to, space launch
194	vehicles, space flight vehicles, missiles, satellites or
195	research payloads, avionics, and associated control systems and
196	processing systems and components of any of the foregoing. The
197	term does not include products that are designed or manufactured
198	for general commercial aviation or other uses even though those
199	products may also serve an incidental use in space applications.
200	(18)  MACHINERY AND EQUIPMENT USED PREDOMINANTLY FOR
201	RESEARCH AND DEVELOPMENT.--
202	(a)  Machinery and equipment used predominantly for
203	research and development as defined in this subsection are
204	exempt from the tax imposed by this chapter.
205	(b)  For purposes of this subsection:
206	1.  "Machinery and equipment" includes, but is not limited
207	to, molds, dies, machine tooling, other appurtenances or
208	accessories to machinery and equipment, testing and measuring
209	equipment, test beds, computers, and software, whether purchased
210	or self-fabricated, and, if self-fabricated, includes materials
211	and labor for design, fabrication, and assembly.
212	2.  "Predominantly" means at least 50 percent of the time.
213	3.  "Research and development" means research that has one
214	of the following as its ultimate goal:
215	a.  Basic research in a scientific field of endeavor;
216	b.  Advancing knowledge or technology in a scientific or
217	technical field of endeavor;
218	c.  The development of a new product, whether or not the
219	new product is offered for sale;
220	d.  The improvement of an existing product, whether or not
221	the improved product is offered for sale;
222	e.  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	f.  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.
234	(c)  The department may adopt rules pursuant to ss.
235	120.536(1) and 120.54 that provide for administering and
236	implementing this exemption.
237	(d)  A person who claims the exemption provided in this
238	subsection shall furnish the vendor of the machinery or
239	equipment, including the vendor of materials and labor used in
240	self-fabrication of the machinery or equipment, an affidavit
241	stating that the item or items for which an exemption is claimed
242	are machinery and equipment that will be used predominantly for
243	research and development as required by this subsection. A
244	purchaser who claims the exemption by refund shall include the
245	affidavit with the refund application. The affidavit must
246	contain the purchaser's name, address, sales and use tax
247	registration number, and, if applicable, federal employer's
248	identification number. Any person fraudulently furnishing an
249	affidavit to the vendor for the purpose of evading payment of
250	any tax imposed under this chapter shall be subject to the
251	penalty set forth in s. 212.085 and as otherwise provided by
252	law.
253	(e)  In lieu of furnishing an affidavit, a purchaser
254	claiming the exemption provided in this subsection who has a
255	direct-pay permit may furnish the vendor with a copy of the
256	direct-pay permit and shall maintain all documentation necessary
257	to prove the exempt status of the purchases and fabrication
258	activity.
259	(f)  Purchasers shall maintain all documentation necessary
260	to prove the exempt status of purchases and fabrication activity
261	and make such documentation available for inspection pursuant to
262	the requirements of s. 212.13(2).
263	Section 3.  This act shall take effect July 1, 2006.

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