House File 2419 - Introduced HOUSE FILE 2419 BY COWNIE (COMPANION TO LSB 5885SS BY DOTZLER) A BILL FOR An Act relating to the apportionment of certain gross receipts 1 of a broadcaster for purposes of Iowa income tax, and 2 including effective date and applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5885HH (3) 85 mm/sc
H.F. 2419 Section 1. Section 422.33, subsection 2, paragraph b, Code 1 2014, is amended by adding the following new subparagraph: 2 NEW SUBPARAGRAPH . (05) (a) Notwithstanding subparagraph 3 (3), where income is derived by a broadcaster from 4 broadcasting, the part attributable to business within the 5 state shall be in the proportion that the gross receipts from 6 broadcasting derived from customers whose commercial domicile 7 is in this state bears to the total gross receipts from 8 broadcasting. 9 (b) For purposes of this subparagraph: 10 (i) “Broadcaster” means a taxpayer who is engaged in the 11 business of broadcasting. “Broadcaster” includes but is not 12 limited to a television or radio network, a cable program 13 network, a television or radio station, and a television or 14 radio distribution company. “Broadcaster” does not include a 15 cable system operator or a direct broadcast satellite system 16 operator. 17 (ii) “Broadcasting” means the transmission of film or radio 18 programming by an electronic or other signal conducted by radio 19 waves, microwaves, wires, lines, coaxial cables, wave guides, 20 fiber optics, satellite transmissions, or through any other 21 means of communication directly or indirectly to viewers and 22 listeners. 23 (iii) “Customer” means a person who has a direct contractual 24 relationship with a broadcaster from whom the broadcaster 25 derives gross receipts. “Customer” includes but is not limited 26 to an advertiser or licensee. 27 (iv) “Gross receipts from broadcasting” means gross receipts 28 of a broadcaster from transactions and activities in the 29 regular course of its business, including but not limited to 30 advertising, licensing, and distribution, but excluding gross 31 receipts from the sale of real property or tangible personal 32 property. 33 Sec. 2. Section 422.33, subsection 2, paragraph b, 34 subparagraph (5), Code 2014, is amended to read as follows: 35 -1- LSB 5885HH (3) 85 mm/sc 1/ 3
H.F. 2419 (5) Where income consists of more than one class of income 1 as provided in subparagraphs (1) to (4) through (05) of this 2 paragraph, it shall be reasonably apportioned by the business 3 activity ratio provided in rules adopted by the director. 4 Sec. 3. EFFECTIVE DATE. This Act takes effect January 1, 5 2015. 6 Sec. 4. APPLICABILITY. This Act applies to tax years 7 beginning on or after January 1, 2015. 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanation’s substance by the members of the general assembly. 11 This bill relates to the apportionment of income of a 12 broadcaster for purposes of Iowa corporate income tax. 13 A corporation doing business both within and without Iowa is 14 required to apportion its business income among Iowa and the 15 other states in which it does business. The amount of business 16 income apportioned to Iowa is generally in the same percentage 17 as the business’s gross sales made within Iowa if the business 18 involves the manufacture or sale of goods and products, or in 19 the same percentage as the business’s gross receipts earned 20 within Iowa if the business involves something other than the 21 manufacture or sale of goods and products. 22 Under current law pursuant to Iowa Administrative Code 23 701-57.7(5), a radio or television company doing business 24 within and without Iowa is required to apportion its business 25 income to Iowa in the same proportion that the Iowa population 26 served by its broadcasting bears to the total population 27 served by its broadcasting. The calculation is made using all 28 residents of the applicable broadcasting area, regardless of 29 whether or not the residents individually elect to receive the 30 broadcasts. 31 The bill specifies that when income is derived by a 32 broadcaster from broadcasting, the business income apportioned 33 to Iowa shall be in the same proportion that the broadcaster’s 34 gross receipts from broadcasting derived from customers whose 35 -2- LSB 5885HH (3) 85 mm/sc 2/ 3
H.F. 2419 commercial domicile is in Iowa bears to the broadcaster’s total 1 gross receipts from broadcasting. 2 “Broadcaster” is defined in the bill as a taxpayer who 3 is engaged in the business of broadcasting. A broadcaster 4 includes but is not limited to a television or radio network, 5 a cable program network, a television or radio station, and 6 a television or radio distribution company. A broadcaster 7 does not include a cable system operator or a direct broadcast 8 satellite system operator. 9 “Broadcasting” is defined in the bill as the transmission 10 of film or radio programming by an electronic or other signal 11 conducted by radio waves, microwaves, wires, lines, coaxial 12 cables, wave guides, fiber optics, satellite transmissions, or 13 through any other means of communication directly or indirectly 14 to viewers and listeners. 15 “Customer” is defined in the bill as a person who has a 16 direct contractual relationship with a broadcaster from whom 17 the broadcaster derives gross receipts. 18 By operation of law, the method of apportioning gross 19 receipts from broadcasting provided in the bill will also 20 apply for purposes of the individual income tax to a resident 21 individual who is an owner of a broadcaster organized for 22 federal tax purposes as an S corporation, and for a nonresident 23 individual who is an owner of a broadcaster organized for 24 federal tax purposes as an S corporation or a partnership. 25 The bill takes effect January 1, 2015, and applies to tax 26 years beginning on or after that date. 27 -3- LSB 5885HH (3) 85 mm/sc 3/ 3