Print Friendly HOUSE BILL NO. 261 – Sales tax exmptn, certain property
HOUSE BILL NO. 261
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H0261...............................................by REVENUE AND TAXATION
SALES TAX EXEMPTION - Adds to and amends existing law to exempt from the
sales and use tax property which is used in research and development
activities; to define "research and development"; to revise the definition
of "clean room"; and to remove property used for research and development
as an exclusion from the production exemption.
02/23 House intro - 1st rdg - to printing
02/24 Rpt prt - to Rev/Tax
03/03 Rpt out - rec d/p - to 2nd rdg
03/04 2nd rdg - to 3rd rdg
03/08 3rd rdg - PASSED - 66-3-1
AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer,
Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Cannon, Chadderdon,
Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Eskridge,
Field(18), Field(23), Garrett, Hart, Harwood, Henbest, Henderson,
Jaquet, Jones, Kemp, Lake, Loertscher, Martinez, Mathews, McGeachin,
McKague, Miller, Moyle, Nielsen, Nonini, Pasley-Stuart, Pence,
Raybould, Ring, Roberts, Rusche, Rydalch, Sali, Sayler, Schaefer,
Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30), Smith(24),
Smylie, Snodgrass, Stevenson, Trail, Wills, Wood, Mr. Speaker
NAYS -- LeFavour, Mitchell, Ringo
Absent and excused -- Bradford
Floor Sponsor - Moyle
Title apvd - to Senate
03/09 Senate intro - 1st rdg - to Loc Gov
03/17 Rpt out - rec d/p - to 2nd rdg
03/18 2nd rdg - to 3rd rdg
03/22 3rd rdg - PASSED - 32-2-0, 1 vacancy
AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough, Langhorst,
Lodge, Malepeai, Marley, McGee, McKenzie, Pearce, Richardson,
Schroeder, Stennett, Sweet, Werk, Williams
NAYS -- Little, Stegner
Absent and excused -- (District 21 seat vacant)
Floor Sponsors - Bunderson & Sweet
Title apvd - to House
03/23 To enrol
03/24 Rpt enrol - Sp signed
03/25 Pres signed
03/28 To Governor
04/01 Governor signed
Session Law Chapter 242
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-eighth Legislature First Regular Session - 2005
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 261
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO SALES AND USE TAXATION AND TAXATION OF RESEARCH AND DEVELOPMENT
3 ACTIVITIES; AMENDING CHAPTER 36, TITLE 63, IDAHO CODE, BY THE ADDITION OF
4 A NEW SECTION 63-3622RR, IDAHO CODE, TO EXEMPT FROM THE SALES AND USE TAX
5 PROPERTY WHICH IS USED IN RESEARCH AND DEVELOPMENT ACTIVITIES AND TO
6 DEFINE A TERM; AMENDING SECTION 63-3622NN, IDAHO CODE, TO ADD TO THE DEFI-
7 NITION OF "CLEAN ROOMS" THOSE ROOMS IN WHICH RESEARCH AND DEVELOPMENT
8 ACTIVITIES OCCUR; AMENDING SECTION 63-3622D, IDAHO CODE, TO REMOVE PROP-
9 ERTY USED FOR RESEARCH AND DEVELOPMENT AS AN EXCLUSION FROM THE PRODUCTION
10 EXEMPTION; AND DECLARING AN EMERGENCY.
11 Be It Enacted by the Legislature of the State of Idaho:
12 SECTION 1. That Chapter 36, Title 63, Idaho Code, be, and the same is
13 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
14 ignated as Section 63-3622RR, Idaho Code, and to read as follows:
15 63-3622RR. RESEARCH AND DEVELOPMENT. (1) There is exempted from the taxes
16 imposed by this chapter, the lease, rental, purchase, sale at retail, storage,
17 use or other consumption in this state of tangible personal property which is
18 primarily used in research and development activities.
19 (2) "Research and development" means an activity which is:
20 (a) Designed to advance existing knowledge or capability in the field of
21 science or technology, the development of new products, materials,
22 technologies or processes, including new uses for or improvements to
23 existing products, materials, technologies or processes; and
24 (b) Related to the development, design, manufacture, processing, produc-
25 tion or fabrication of:
26 (i) A product or potential product which is tangible personal prop-
27 erty; or
28 (ii) Machinery, materials or components utilized or potentially uti-
29 lized in the development, design, manufacture, processing, production
30 or fabrication of a product or potential product which is tangible
31 personal property.
32 SECTION 2. That Section 63-3622NN, Idaho Code, be, and the same is hereby
33 amended to read as follows:
34 63-3622NN. CLEAN ROOMS. (1) There is exempted from the taxes imposed by
35 this chapter the sale at retail, storage, use or other consumption in this
36 state of tangible personal property which is exclusively used in or to main-
37 tain the environment of, or is or becomes a component part of, a clean room,
38 without regard to whether the property is actually contained within the clean
39 room or whether such tangible personal property ultimately becomes affixed to
40 or incorporated into real property.
41 (2) The following definitions apply to this section:
1 (a) "Clean room" means an environment in a defined space, within a larger
2 building, where humidity, temperature, particulate matter and contamina-
3 tion are precisely and regularly controlled; and
4 (i) Which is a "Class 10,000" clean room or better, and
5 (ii) In which the primary activities are:
6 1. A activities which qualify for the production exemption in
7 section 63-3622D, Idaho Code, resulting in the manufacture of
8 products which are either semiconductors, products manufactured
9 using semiconductor manufacturing processes, or equipment used
10 to manufacture semiconductors;
11 2. Activities which qualify for the research and development
12 exemption in section 63-3622RR, Idaho Code; or
13 3. A combination of the activities described in subparagraphs
14 1. and 2. above.
15 (b) "Class 10,000 clean room" means a specified area in which the concen-
16 tration of airborne particulates of five-tenths (0.5) micrometers or
17 larger is regularly maintained at a level of cleanliness no greater than
18 ten thousand (10,000) particles per cubic foot of air.
19 (c) "Semiconductor" means a small piece of semiconductor material includ-
20 ing silicon:
21 (i) On which an integrated circuit is embedded, or
22 (ii) Which is altered in the manufacturing process by primarily
23 using semiconductor processes.
24 (d) "Integrated circuit" means a complex of multiple active electronic
25 components and their interconnections built upon a semiconductor sub-
27 (e) "Semiconductor manufacturing processes" means chemical vapor deposi-
28 tion, plasma vapor deposition, wet and dry etch, chemical mechanical
29 planarization or polishing and such other manufacturing processes gener-
30 ally recognized by the semiconductor industry as being standard processes
31 in the industry.
32 (f) Property is "exclusively used" for a purpose when its use for any
33 other purpose is insignificant or inconsequential.
34 SECTION 3. That Section 63-3622D, Idaho Code, be, and the same is hereby
35 amended to read as follows:
36 63-3622D. PRODUCTION EXEMPTION. There are exempted from the taxes imposed
37 by this chapter:
38 (a) The sale at retail, storage, use or other consumption in this state
40 (1) Tangible personal property which will enter into and become an ingre-
41 dient or component part of tangible personal property manufactured, proc-
42 essed, mined, produced or fabricated for sale.
43 (2) Tangible personal property primarily and directly used or consumed in
44 or during a manufacturing, processing, mining, farming, or fabricating
45 operation, including, but not limited to, repair parts, lubricants,
46 hydraulic oil, and coolants, which become a component part of such tangi-
47 ble personal property; provided that the use or consumption of such tangi-
48 ble personal property is necessary or essential to the performance of such
50 (3) Chemicals, catalysts, and other materials which are used for the pur-
51 pose of producing or inducing a chemical or physical change in the product
52 or for removing impurities from the product or otherwise placing the prod-
53 uct in a more marketable condition as part of an operation described in
1 subsection (a)(2) of this section, and chemicals and equipment used in
2 clean-in-place systems in the food processing and food manufacturing
4 (4) Safety equipment and supplies required to meet a safety standard of a
5 state or federal agency when such safety equipment and supplies are used
6 as part of an operation described in subsection (a)(2) of this section.
7 (5) Plants to be used as part of a farming operation.
8 (b) Other than as provided in subsection (c) of this section, the exemp-
9 tions allowed in subsections (a)(1), (2), (3) and (4) of this section are
10 available only to a business or separately operated segment of a business
11 which is primarily devoted to producing tangible personal property which that
12 business will sell and which is intended for ultimate sale at retail within or
13 without this state. A contractor providing services to a business entitled to
14 an exemption under this section is not exempt as to any property owned,
15 leased, rented or used by it unless, as a result of the terms of the contract,
16 the use of the property is exempt under section 63-3615(b), Idaho Code.
17 (c) The exemptions allowed in subsections (a)(1), (a)(2), (a)(3) and
18 (a)(4) of this section shall also be available to a business, or separately
19 operated segment of a business, engaged in farming or mining, whether as a
20 subcontractor, contractor, contractee or subcontractee, when such business or
21 segment of a business is primarily devoted to producing tangible personal
22 property which is intended for ultimate sale at retail within or without this
23 state, without regard to the ownership of the product being produced.
24 (d) As used in this section, the term "directly used or consumed in or
25 during" a farming operation means the performance of a function reasonably
26 necessary to the operation of the total farming business, including, the
27 planting, growing, harvesting and initial storage of crops and other agricul-
28 tural products and movement of crops and produce from the place of harvest to
29 the place of initial storage. It includes disinfectants used in the dairy
30 industry to clean cow udders or to clean pipes, vats or other milking equip-
32 (e) The exemptions allowed in this section do not include machinery,
33 equipment, materials and supplies used in a manner that is incidental to the
34 manufacturing, processing, mining, farming or fabricating operations such as
35 maintenance and janitorial equipment and supplies.
36 (f) Without regard to the use of such property, this section does not
38 (1) Hand tools with a unit purchase price not in excess of one hundred
39 dollars ($100). A hand tool is an instrument used or worked by hand.
40 (2) Tangible personal property used in any activities other than the
41 actual manufacturing, processing, mining, farming or fabricating opera-
42 tions such as office equipment and supplies, and equipment and supplies
43 used in selling or distributing activities.
44 (3) Property used in research or development.
45 (4) Property used in transportation activities.
46 ( 54) Machinery, equipment, tools or other property used to make repairs.
47 This subsection does not include repair parts that become a component part
48 of tangible property exempt from tax under this section or lubricants,
49 hydraulic oil, or coolants used in the operation of tangible personal
50 property exempt under this section.
51 ( 65) Machinery, equipment, tools or other property used to manufacture,
52 fabricate, assemble or install tangible personal property which is:
53 (i) Not held for resale in the regular course of business; and
54 (ii) Owned by the manufacturer, processor, miner, farmer or fabrica-
1 provided, however, this subsection does not prevent exemption of machin-
2 ery, equipment, tools or other property exempted from tax under subsection
3 (a)(2) or (a)(3) of this section.
4 ( 76) Any improvement to real property or fixture thereto or any tangible
5 personal property which becomes or is intended to become a component of
6 any real property or any improvement or fixture thereto.
7 ( 87) Motor vehicles and aircraft.
8 ( 98) Tangible personal property used or consumed in processing, producing
9 or fabricating tangible personal property exempted from tax under this
10 chapter in sections 63-3622F, 63-3622G and 63-3622I, Idaho Code.
11 ( 109) Tangible personal property described in section 63-3622HH, Idaho
13 (g) Any tangible personal property exempt under this section which ceases
14 to qualify for this exemption, and does not qualify for any other exemption or
15 exclusion of the taxes imposed by this chapter, shall be subject to use tax
16 based upon its value at the time it ceases to qualify for exemption. Any tan-
17 gible personal property taxed under this chapter which later qualifies for
18 this exemption shall not entitle the owner of it to any claim for refund.
19 SECTION 4. An emergency existing therefor, which emergency is hereby
20 declared to exist, this act shall be in full force and effect on and after its
21 passage and approval.
Reprint Reprint Reprint Reprint Reprint Reprint
STATEMENT OF PURPOSE
This bill provides a new exemption from sales and use taxes
for property that is used in research and development activities.
It also amends the sales and use tax exemption for clean rooms to
include those clean rooms used for research and development.
Lastly, it amends the production exemption to remove property
used for research and development as an exclusion from the
Exempting research and development property from the sales
and use tax is intended to serve as an incentive for new jobs and
investment from existing Idaho businesses, along with attracting
new research and development investment from businesses looking
to locate such activities in the state.
The act shall be in full force and effect on and after its
passage and approval.
This bill reduces sales and use taxes by $6.8 to 7 million
based on past use and projected new investment in research and
Name: Bruce Newcomb
Name: Mike Moyle
Name: Mike Reynoldson, Micron
STATEMENT OF PURPOSE/FISCAL NOTE H 261