Senate File 2345 - Introduced SENATE FILE 2345 BY DOTZLER A BILL FOR An Act concerning 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 6192SS (5) 85 mm/sc

S.F. 2345 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) Notwithstanding subparagraph division (a) or 10 subparagraph (3), where income is derived by a broadcaster 11 from national or local political advertising that is directed 12 exclusively at one or more markets in this state, all gross 13 receipts from such advertising shall be attributable to 14 business within the state. 15 (c) For purposes of this subparagraph: 16 (i) “Broadcaster” means a taxpayer who is engaged in the 17 business of broadcasting. “Broadcaster” includes but is not 18 limited to a television or radio network, a cable program 19 network, an Iowa television or radio station, and a television 20 or radio distribution company. “Broadcaster” does not include 21 a cable system operator or a direct broadcast satellite system 22 operator. 23 (ii) “Broadcasting” means the transmission of film or radio 24 programming by an electronic or other signal conducted by radio 25 waves, microwaves, wires, lines, coaxial cables, wave guides, 26 fiber optics, satellite transmissions, or through any other 27 means of communication directly or indirectly to viewers and 28 listeners. 29 (iii) “Customer” means a person who has a direct contractual 30 relationship with a broadcaster from whom the broadcaster 31 derives gross receipts. “Customer” includes but is not limited 32 to an advertiser or licensee. 33 (iv) “Gross receipts from broadcasting” means gross receipts 34 of a broadcaster from transactions and activities in the 35 -1- LSB 6192SS (5) 85 mm/sc 1/ 4

S.F. 2345 regular course of its business, including but not limited to 1 advertising, licensing, and distribution, but excluding gross 2 receipts from the sale of real property or tangible personal 3 property. 4 Sec. 2. Section 422.33, subsection 2, paragraph b, 5 subparagraph (5), Code 2014, is amended to read as follows: 6 (5) Where income consists of more than one class of income 7 as provided in subparagraphs (1) to (4) through (05) of this 8 paragraph, it shall be reasonably apportioned by the business 9 activity ratio provided in rules adopted by the director. 10 Sec. 3. EFFECTIVE DATE. This Act takes effect January 1, 11 2015. 12 Sec. 4. APPLICABILITY. This Act applies to tax years 13 beginning on or after January 1, 2015. 14 EXPLANATION 15 The inclusion of this explanation does not constitute agreement with 16 the explanation’s substance by the members of the general assembly. 17 This bill relates to the apportionment of income of a 18 broadcaster for purposes of Iowa corporate income tax. 19 A corporation doing business both within and without Iowa is 20 required to apportion its business income among Iowa and the 21 other states in which it does business. The amount of business 22 income apportioned to Iowa is generally in the same percentage 23 as the business’s gross sales made within Iowa if the business 24 involves the manufacture or sale of goods and products, or in 25 the same percentage as the business’s gross receipts earned 26 within Iowa if the business involves something other than the 27 manufacture or sale of goods and products. 28 Under current law pursuant to Iowa Administrative Code 29 701-57.7(5), a radio or television company doing business 30 within and without Iowa is required to apportion its business 31 income to Iowa in the same proportion that the Iowa population 32 served by its broadcasting bears to the total population 33 served by its broadcasting. The calculation is made using all 34 residents of the applicable broadcasting area, regardless of 35 -2- LSB 6192SS (5) 85 mm/sc 2/ 4

S.F. 2345 whether or not the residents individually elect to receive the 1 broadcasts. 2 The bill specifies that when income is derived by a 3 broadcaster from broadcasting, the business income apportioned 4 to Iowa shall be in the same proportion that the broadcaster’s 5 gross receipts from broadcasting derived from customers whose 6 commercial domicile is in Iowa bears to the broadcaster’s 7 total gross receipts from broadcasting. However, where the 8 income derived by the broadcaster is from national or political 9 advertising directed exclusively at one or more markets in 10 the state, all gross receipts from such advertising shall be 11 apportioned to Iowa. 12 “Broadcaster” is defined in the bill as a taxpayer who 13 is engaged in the business of broadcasting. A broadcaster 14 includes but is not limited to a television or radio network, 15 a cable program network, an Iowa television or radio station, 16 and a television or radio distribution company. A broadcaster 17 does not include a cable system operator or a direct broadcast 18 satellite system operator. 19 “Broadcasting” is defined in the bill as the transmission 20 of film or radio programming by an electronic or other signal 21 conducted by radio waves, microwaves, wires, lines, coaxial 22 cables, wave guides, fiber optics, satellite transmissions, or 23 through any other means of communication directly or indirectly 24 to viewers and listeners. 25 “Customer” is defined in the bill as a person who has a 26 direct contractual relationship with a broadcaster from whom 27 the broadcaster derives gross receipts. 28 By operation of law, the method of apportioning gross 29 receipts from broadcasting provided in the bill will also 30 apply for purposes of the individual income tax to a resident 31 individual who is an owner of a broadcaster organized for 32 federal tax purposes as an S corporation, and for a nonresident 33 individual who is an owner of a broadcaster organized for 34 federal tax purposes as an S corporation or a partnership. 35 -3- LSB 6192SS (5) 85 mm/sc 3/ 4

S.F. 2345 The bill takes effect January 1, 2015, and applies to tax 1 years beginning on or after that date. 2 -4- LSB 6192SS (5) 85 mm/sc 4/ 4