House File 623 - Introduced HOUSE FILE 623 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 213) (COMPANION TO SF479 BY COMMITTEE ON WAYS AND MEANS) 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 retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1952HV (2) 86 mm/sc

H.F. 623 Section 1. Section 422.33, subsection 2, paragraph a, 1 subparagraph (2), Code 2015, is amended by adding the following 2 new subparagraph division: 3 NEW SUBPARAGRAPH DIVISION . (0e) (i) Notwithstanding 4 subparagraph division (c), where income is derived by a 5 broadcaster from broadcasting, the part attributable to 6 business within the state shall be in the proportion that the 7 gross receipts from broadcasting derived from customers whose 8 commercial domicile is in this state bears to the total gross 9 receipts from broadcasting. 10 (ii) Notwithstanding subparagraph subdivision (i) or 11 subparagraph division (c), where income is derived by a 12 broadcaster from national or local political advertising that 13 is directed exclusively at one or more markets in this state, 14 all gross receipts from such advertising shall be attributable 15 to business within the state. 16 (iii) For purposes of this subparagraph division: 17 (A) “Broadcaster” means a taxpayer who is engaged in 18 the business of broadcasting. “Broadcaster” includes a 19 television network, a cable program network, and a television 20 distribution company. “Broadcaster” does not include a cable 21 system operator, a direct broadcast satellite system operator, 22 or a television or radio station licensed by the federal 23 communications commission. 24 (B) “Broadcasting” means the transmission of film 25 programming by an electronic or other signal conducted by 26 microwaves, wires, lines, coaxial cables, wave guides, fiber 27 optics, satellite transmissions, or through any other means of 28 communication directly or indirectly to viewers and listeners. 29 (C) “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 (D) “Gross receipts from broadcasting” means gross receipts 34 of a broadcaster from transactions and activities in the 35 -1- LSB 1952HV (2) 86 mm/sc 1/ 4

H.F. 623 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 a, 5 subparagraph (2), subparagraph division (e), Code 2015, is 6 amended to read as follows: 7 (e) Where income consists of more than one class of income 8 as provided in subparagraph divisions (a) through (d) (0e) 9 of this subparagraph, it shall be reasonably apportioned by 10 the business activity ratio provided in rules adopted by the 11 director. 12 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies 13 retroactively to January 1, 2015, for tax years beginning on 14 or after that date. 15 EXPLANATION 16 The inclusion of this explanation does not constitute agreement with 17 the explanation’s substance by the members of the general assembly. 18 This bill relates to the apportionment of income of a 19 broadcaster for purposes of Iowa corporate income tax. 20 A corporation doing business both within and without Iowa is 21 required to apportion its business income among Iowa and the 22 other states in which it does business. The amount of business 23 income apportioned to Iowa is generally in the same percentage 24 as the business’s gross sales made within Iowa if the business 25 involves the manufacture or sale of goods and products, or in 26 the same percentage as the business’s gross receipts earned 27 within Iowa if the business involves something other than the 28 manufacture or sale of goods and products. 29 Under current law pursuant to Iowa Administrative Code 30 701-54.7(5), a radio or television company doing business 31 within and without Iowa is required to apportion its business 32 income to Iowa in the same proportion that the Iowa population 33 served by its broadcasting bears to the total population 34 served by its broadcasting. The calculation is made using all 35 -2- LSB 1952HV (2) 86 mm/sc 2/ 4

H.F. 623 residents of the applicable broadcasting area, regardless of 1 whether or not the residents individually elect to receive the 2 broadcasts. 3 The bill specifies that when income is derived by a 4 broadcaster from broadcasting, the business income apportioned 5 to Iowa shall be in the same proportion that the broadcaster’s 6 gross receipts from broadcasting derived from customers whose 7 commercial domicile is in Iowa bears to the broadcaster’s 8 total gross receipts from broadcasting. However, where the 9 income derived by the broadcaster is from national or political 10 advertising directed exclusively at one or more markets in 11 the state, all gross receipts from such advertising shall be 12 apportioned to Iowa. 13 “Broadcaster” is defined in the bill as a taxpayer who 14 is engaged in the business of broadcasting. A broadcaster 15 includes a television network, a cable program network, and 16 a television distribution company. A broadcaster does not 17 include a cable system operator, a direct broadcast satellite 18 system operator, or a television or radio station licensed by 19 the federal communications commission. 20 “Broadcasting” is defined in the bill as the transmission of 21 film programming by an electronic or other signal conducted by 22 microwaves, wires, lines, coaxial cables, wave guides, fiber 23 optics, satellite transmissions, or through any other means of 24 communication directly or indirectly 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 1952HV (2) 86 mm/sc 3/ 4

H.F. 623 The bill applies retroactively to tax years beginning on or 1 after January 1, 2015. 2 -4- LSB 1952HV (2) 86 mm/sc 4/ 4