HF 2419 (LSB 5885HH (3) 85)

HOUSE FILE 2419

BY  COWNIE

(COMPANION TO LSB 5885SS BY DOTZLER)

A BILL FOR

An Act relating to the apportionment of certain gross receipts of a broadcaster for purposes of Iowa income tax, and including effective date and applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.33, subsection 2, paragraph b, Code 2014, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (05)  (a)  Notwithstanding subparagraph (3), where income is derived by a broadcaster from broadcasting, the part attributable to business within the state shall be in the proportion that the gross receipts from broadcasting derived from customers whose commercial domicile is in this state bears to the total gross receipts from broadcasting.
   (b)  For purposes of this subparagraph:
   (i)  “Broadcaster” means a taxpayer who is engaged in the business of broadcasting. “Broadcaster” includes but is not limited to a television or radio network, a cable program network, a television or radio station, and a television or radio distribution company. “Broadcaster” does not include a cable system operator or a direct broadcast satellite system operator.
   (ii)  “Broadcasting” means the transmission of film or radio programming by an electronic or other signal conducted by radio waves, microwaves, wires, lines, coaxial cables, wave guides, fiber optics, satellite transmissions, or through any other means of communication directly or indirectly to viewers and listeners.
   (iii)  “Customer” means a person who has a direct contractual relationship with a broadcaster from whom the broadcaster derives gross receipts. “Customer” includes but is not limited to an advertiser or licensee.
   (iv)  “Gross receipts from broadcasting” means gross receipts of a broadcaster from transactions and activities in the regular course of its business, including but not limited to advertising, licensing, and distribution, but excluding gross receipts from the sale of real property or tangible personal property.
    Sec. 2.  Section 422.33, subsection 2, paragraph b, subparagraph (5), Code 2014, is amended to read as follows:
   (5)  Where income consists of more than one class of income as provided in subparagraphs (1) to (4) through (05) of this paragraph, it shall be reasonably apportioned by the business activity ratio provided in rules adopted by the director.
    Sec. 3.  EFFECTIVE DATE.  This Act takes effect January 1, 2015.
    Sec. 4.  APPLICABILITY.  This Act applies to tax years beginning on or after January 1, 2015.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill relates to the apportionment of income of a broadcaster for purposes of Iowa corporate income tax.
   A corporation doing business both within and without Iowa is required to apportion its business income among Iowa and the other states in which it does business. The amount of business income apportioned to Iowa is generally in the same percentage as the business’s gross sales made within Iowa if the business involves the manufacture or sale of goods and products, or in the same percentage as the business’s gross receipts earned within Iowa if the business involves something other than the manufacture or sale of goods and products.
   Under current law pursuant to Iowa Administrative Code 701-57.7(5), a radio or television company doing business within and without Iowa is required to apportion its business income to Iowa in the same proportion that the Iowa population served by its broadcasting bears to the total population served by its broadcasting. The calculation is made using all residents of the applicable broadcasting area, regardless of whether or not the residents individually elect to receive the broadcasts.
   The bill specifies that when income is derived by a broadcaster from broadcasting, the business income apportioned to Iowa shall be in the same proportion that the broadcaster’s gross receipts from broadcasting derived from customers whose commercial domicile is in Iowa bears to the broadcaster’s total gross receipts from broadcasting.
   “Broadcaster” is defined in the bill as a taxpayer who is engaged in the business of broadcasting. A broadcaster includes but is not limited to a television or radio network, a cable program network, a television or radio station, and a television or radio distribution company. A broadcaster does not include a cable system operator or a direct broadcast satellite system operator.
   “Broadcasting” is defined in the bill as the transmission of film or radio programming by an electronic or other signal conducted by radio waves, microwaves, wires, lines, coaxial cables, wave guides, fiber optics, satellite transmissions, or through any other means of communication directly or indirectly to viewers and listeners.
   “Customer” is defined in the bill as a person who has a direct contractual relationship with a broadcaster from whom the broadcaster derives gross receipts.
   By operation of law, the method of apportioning gross receipts from broadcasting provided in the bill will also apply for purposes of the individual income tax to a resident individual who is an owner of a broadcaster organized for federal tax purposes as an S corporation, and for a nonresident individual who is an owner of a broadcaster organized for federal tax purposes as an S corporation or a partnership.
   The bill takes effect January 1, 2015, and applies to tax years beginning on or after that date.