HB1261: HB1261 Revenue and taxation; level 1 freeport exemptions for certain goods in inventory for electric utilities; provide

26 LC 56 0550/AP House Bill 1261 (AS PASSED HOUSE AND SENATE) By: Representatives Huddleston of the 72 nd, Dickey of the 134 th, Williamson of the 112 th, Frye of the 122nd, Cannon of the 172nd, and others A BILL TO BE ENTITLED AN ACT To amend Part 1 of Article 2 of Chapter 5 of Title 48 of the Of ficial Code of Georgia1 Annotated, relating to tax exemptions, so as to provide for level 1 freeport exemptions for2 certain goods in inventory for electric utilities; to provide f or application for such3 exemptions; to provide for related matters; to repeal conflicting laws; and for other purposes.4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:5 SECTION 1.6 Part 1 of Article 2 of Chapter 5 of Title 48 of the Official Co de of Georgia Annotated,7 relating to tax exemptions, is amended by revising subsection (b) of Code Section 48-5-48.1,8 relating to level 1 freeport exemption, application, filing, and renewal, as follows:9 "(b) The application for the level 1 freeport exemption shall provide for:10 (1) A summary, as prescribed by the department, of the inventory of goods in the process11 of manufacture or production which shall include all partly fin ished goods and raw12 materials held for direct use or consumption in the ordinary co urse of the taxpayer's13 manufacturing or production business in the State of Georgia;14 (2) A summary, as prescribed by the department, of the invento ry of finished goods15 manufactured or produced within the State of Georgia in the ord inary course of the16 H. B. 1261 - 1 - 26 LC 56 0550/AP taxpayer's manufacturing or production business when held by the original manufacturer17 or producer of such finished goods;18 (3) A summary, as prescribed by the department, of the invento ry of finished goods19 which on January 1 are stored in a warehouse, dock, or wharf, whether public or private,20 and which are destined for shipment outside the State of Georgi a and the inventory of21 finished goods which are shipped into the State of Georgia from outside this state and22 which are stored for transshipment to a final destination outsi de this state. The23 information required by Code Section 48-5-48.2 to be contained in the official books and24 records of the warehouse, dock, or wharf where such property is being stored, which25 official books and records are required to be open to the inspection of taxing authorities26 of this state and political subdivisions thereof, shall not be required to be included as a27 part of or to accompany the application for such exemption; and28 (4) A summary, as prescribed by the department, of the stock i n trade of a fulfillment29 center which on January 1 is stored in the fulfillment center. The information required30 by Code Section 48-5-48.2 to be contained in the official books and records of the31 fulfillment center where such property is being stored, which official books and records32 are required to be open to the inspection of the taxing authorities of this state and political33 subdivisions thereof, shall not be required to be included as a part of or to accompany the34 application for such exemption.; and35 (5) A summary, as prescribed by the department, of the inventory of finished goods and36 parts held in the ordinary course of an electric utility taxpay er's operations which are37 destined for incorporation into any electric generation, distri bution, or transmission38 infrastructure located in this state through construction, impr ovement, repair, or39 maintenance."40 H. B. 1261 - 2 - 26 LC 56 0550/AP SECTION 2.41 Said part is further amended by revising subsection (c) of Code Section 48-5-48.2, relating42 to level 1 freeport exemption and referendum, as follows:43 "(c) The governing authority of any county or municipality may, subject to the approval44 of the electors of such political subdivision, exempt from ad valorem taxation, including45 all such taxes levied for educational purposes and for state purposes, all or any combination46 of the following types of tangible personal property:47 (1) Inventory of goods in the process of manufacture or production which shall include48 all partly finished goods and raw materials held by the taxpayer, the taxpayer's affiliate,49 or the taxpayer's designated agent for direct use or consumptio n in the ordinary course50 of the taxpayer's manufacturing or production business in this state. The exemption51 provided for in this paragraph shall apply only to tangible per sonal property which is52 substantially modified, altered, combined, or changed in the or dinary course of the53 taxpayer's manufacturing, processing, or production operations in this state. For purposes54 of this paragraph, the following activities shall constitute substantial modification in the55 ordinary course of manufacturing, processing, or production operations:56 (A) The cleaning, drying, pest control treatment, or segregati on by grade of grain,57 peanuts or other oil seeds, or cotton;58 (B) The remanufacture of aircraft engines or aircraft engine p arts or components,59 meaning the substantial overhauling or rebuilding of aircraft engines or aircraft engine60 parts or components;61 (C) The blending of fertilizer bulk materials into a custom mixture, whether performed62 at a commercial fertilizer blending plant, retail outlet, or any application site;63 (D) The substantial assembly of finished parts; and64 (E) The remanufacture, which includes repair or modification of goods manufactured,65 processed, or produced by the taxpayer;66 H. B. 1261 - 3 - 26 LC 56 0550/AP (2) Inventory of finished goods manufactured or produced withi n this state in the67 ordinary course of the taxpayer's manufacturing or production business when held by the68 original manufacturer or producer of such finished goods. The exemption provided for69 in this paragraph shall be for a period not exceeding 12 months from the date such70 property is produced or manufactured;71 (3) Inventory of finished goods which, on January 1, are stored in a warehouse, dock, or72 w h a r f , w h e t h e r p u b l i c o r p r i v a t e , a n d w h i c h a r e d e s t i n e d f o r s hipment to a final73 destination outside this state and inventory of finished goods which are shipped into this74 state from outside this state and stored for transshipment to a final destination outside this75 state, including foreign merchandise in transit. The exemption provided for in this76 paragraph shall be for a period not exceeding 12 months from the date such property is77 stored in this state. Such period shall be determined based on application of a first-in,78 first-out method of accounting for the inventory. The official books and records of the79 warehouse, dock, or wharf where such property is being stored shall contain a full, true,80 and accurate inventory of all such property, including the date of the receipt of the81 property, the date of the withdrawal of the property, the point of origin of the property,82 and the point of final destination of the same, if known. The official books and records83 of any such warehouse, dock, or wharf, whether public or private, pertaining to any such84 property for which a freeport exemption has been claimed shall be at all times open to the85 inspection of all taxing authorities of this state and of any p olitical subdivision of this86 state; or87 (4) Stock in trade of a fulfillment center which, on January 1, is stored in a fulfillment88 center and which is made available to remote purchasers who may make such purchases89 by electronic, internet, telephonic, or other remote means, and where such stock in trade90 of a fulfillment center will be shipped from the fulfillment ce nter and delivered to the91 purchaser at a location other than the location of the fulfillment center. The exemption92 provided for in this paragraph shall be for a period not exceeding 12 months from the date93 H. B. 1261 - 4 - 26 LC 56 0550/AP such property is stored in this state. Such period shall be determined based on application94 of a first-in, first-out method of accounting for the inventory . The official books and95 records of the fulfillment center where such property is being stored shall contain a full,96 true, and accurate inventory of all such property, including the date of the receipt of the97 property and the date of the withdrawal of the property. The official books and records98 of any such fulfillment center pertaining to any such property for which a freeport99 exemption has been claimed shall be at all times open to the in spection of all taxing100 authorities of this state and of any political subdivision of this state.; or101 (5) Inventory of electric utility equipment, including, but not limited to, motors, turbines,102 boilers, regulators, steel, concrete, masonry, conductor, cable , poles, transformers,103 capacitors, circuit breakers, fuses, insulators, switchgear, and any other capital equipment104 and supplies that are held in inventory by an electric utility for use in the normal course105 of business within this state. Electric utility equipment that has been incorporated into106 operating electric generation, distribution, or transmission facilities shall not, however,107 be exempt from ad valorem taxation pursuant to this Code section."108 SECTION 3.109 All laws and parts of laws in conflict with this Act are repealed.110 H. B. 1261 - 5 -