Connecticut Seal

House Bill No. 5479

Public Act No. 04-72

AN ACT CLARIFYING PROVISIONS RELATED TO THE PROPERTY TAX EXEMPTION FOR MANUFACTURING MACHINERY AND EQUIPMENT.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Subparagraph (A) of subdivision (72) of section 12-81 of the general statutes, as amended by section 53 of public act 03-6 of the June 30 special session, is repealed and the following is substituted in lieu thereof (Effective from passage):

(A) Effective for assessment years commencing on or after October 1, 2002, new machinery and equipment, as defined in this subdivision, acquired after October 1, 1990, and newly-acquired machinery and equipment, as defined in this subdivision, acquired on or after July 1, 1992, by the person claiming exemption under this subdivision, provided this exemption shall only be applicable in the five full assessment years following the assessment year in which such machinery or equipment is acquired, subject to the provisions of subparagraph (B) of this subdivision. Machinery and equipment acquired on or after July 1, 1996, and used in connection with biotechnology shall qualify for the exemption under this subsection. For the purposes of this subdivision: (i) "Machinery" and "equipment" [mean] means tangible personal property which is installed in a manufacturing facility [,] and claimed on the owner's federal income tax return as either five-year property or seven-year property, as those terms are defined in Section 168(e) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, and the predominant use of which is for manufacturing, processing or fabricating; for research and development, including experimental or laboratory research and development, design or engineering directly related to manufacturing; for the significant servicing, overhauling or rebuilding of machinery and equipment for industrial use or the significant overhauling or rebuilding of other products on a factory basis; for measuring or testing or for metal finishing; or used in the production of motion pictures, video and sound recordings. "Machinery" means the basic machine itself, including all of its component parts and contrivances such as belts, pulleys, shafts, moving parts, operating structures and all equipment or devices used or required to control, regulate or operate the machinery, including, without limitation, computers and data processing equipment, together with all replacement and repair parts therefor, whether purchased separately or in conjunction with a complete machine, and regardless of whether the machine or component parts thereof are assembled by the taxpayer or another party. "Equipment" means any device separate from machinery but essential to a manufacturing, processing or fabricating process. (ii) "Manufacturing facility" means that portion of a plant, building or other real property improvement used for manufacturing, processing or fabricating, for research and development, including experimental or laboratory research and development, design or engineering directly related to manufacturing, for the significant servicing, overhauling or rebuilding of machinery and equipment for industrial use or the significant overhauling or rebuilding of other products on a factory basis, for measuring or testing or for metal finishing. (iii) "Manufacturing" means the activity of converting or conditioning tangible personal property by changing the form, composition, quality or character of the property for ultimate sale at retail or use in the manufacturing of a product to be ultimately sold at retail. Changing the quality of property shall include any substantial overhaul of the property that results in a significantly greater service life than such property would have had in the absence of such overhaul or with significantly greater functionality within the original service life of the property, beyond merely restoring the original functionality for the balance of the original service life. (iv) "Fabricating" means to make, build, create, produce or assemble components or tangible personal property work in a new or different manner, but does not include the presorting, sorting, coding, folding, stuffing or delivery of direct or indirect mail distribution services. (v) "Processing" means the physical application of the materials and labor in a manufacturing process necessary to modify or change the characteristics of tangible personal property. (vi) "Measuring or testing" includes both nondestructive and destructive measuring or testing, and the alignment and calibration of machinery, equipment and tools, in the furtherance of the manufacturing, processing or fabricating of tangible personal property. (vii) "Biotechnology" means the application of technologies, including recombinant DNA techniques, biochemistry, molecular and cellular biology, genetics and genetic engineering, biological cell fusion techniques, and new bioprocesses, using living organisms, or parts of organisms, to produce or modify products, to improve plants or animals, to develop microorganisms for specific uses, to identify targets for small molecule pharmaceutical development, or to transform biological systems into useful processes and products.

Sec. 2. Subparagraph (B) of subdivision (72) of section 12-81 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(B) Any person who on October first in any year holds title to machinery and equipment for which such person desires to claim the exemption provided in this subdivision shall file with the assessor or board of assessors in the municipality in which the machinery or equipment is located, on or before the first day of November in such year, a list of such machinery or equipment together with written application claiming such exemption on a form prescribed by the Secretary of the Office of Policy and Management. Such application shall include the taxpayer identification number assigned to the claimant by the Commissioner of Revenue Services and the federal employer identification number assigned to the claimant by the Secretary of the Treasury. If title to such equipment is held by a person other than the person claiming the exemption, the claimant shall include on such person's application information as to the portion of the total acquisition cost incurred by such person, and on or before the first day of November in such year, the person holding title to such machinery and equipment shall file a list of such machinery with the assessor of the municipality in which the manufacturing facility of the claimant is located. Such person shall include on the list information as to the portion of the total acquisition cost incurred by such person. Commercial or financial information in any application or list filed under this section shall not be open for public inspection, provided such information is given in confidence and is not available to the public from any other source. The provisions of this subdivision regarding the filing of lists and information shall not supersede the requirements to file tax lists under sections [12-42, 12-43, 12-57a and 12-59] 12-41, 12-42 and 12-57a. In substantiation of such claim, the claimant and the person holding title to machinery and equipment for which exemption is claimed shall present to the assessor or board of assessors such supporting documentation as said secretary may require, including, but not limited to, invoices, bills of sale, contracts for lease and bills of lading and shall, upon request, present to the secretary or the secretary's designee a copy of each applicable federal income tax return and accompanying schedules. In lieu of submitting each applicable federal income tax return and accompanying schedules, a claimant and person holding title to machinery and equipment for which an exemption is claimed may, upon approval of said secretary, submit copies of applicable schedules accompanied by a sworn affidavit stating that such schedules were filed as part of such claimant's or person's federal income tax return. Failure to file such application in this manner and form within the time limit prescribed shall constitute a waiver of the right to such exemption for such assessment year, unless an extension of time is allowed pursuant to section 12-81k. If title to exempt machinery is conveyed subsequent to October first in any assessment year, entitlement to such exemption shall terminate for the next assessment year and there shall be no pro rata application of the exemption unless such machinery or equipment continues to be leased by the manufacturer who claimed and was approved for the exemption in the previous assessment year. Machinery or equipment shall not be eligible for exemption upon transfer from a seller to a related business or from a lessor to a lessee except to the extent it would have been eligible for exemption by the seller or the lessor, as the case may be. For the purposes of this subdivision, "related business" means: (i) A corporation, limited liability company, partnership, association or trust controlled by the taxpayer; (ii) an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer; (iii) a corporation, limited liability company, partnership, association or trust controlled by an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer; or (iv) a member of the same controlled group as the taxpayer. For purposes of this subdivision, "control", with respect to a corporation, means ownership, directly or indirectly, of stock possessing fifty per cent or more of the total combined voting power of all classes of the stock of such corporation entitled to vote. "Control", with respect to a trust, means ownership, directly or indirectly, of fifty per cent or more of the beneficial interest in the principal or income of such trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in Section 267(c) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, other than paragraph (3) of said Section 267(c).

Approved May 10, 2004