Bill Text: IN HB1296 | 2013 | Regular Session | Engrossed
Bill Title: Apportionment of broadcaster income.
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2013-04-09 - Second reading: ordered engrossed [HB1296 Detail]
Download: Indiana-2013-HB1296-Engrossed.html
Citations Affected: IC 6-3; noncode.
Synopsis: Apportionment of broadcaster income. Provides that, for
purposes of the statute specifying the amount of income attributable to
Indiana for income tax purposes, sales of a broadcaster that arise from
or relate to the broadcast or other distribution of film or radio
programming by any means are in Indiana if the commercial domicile
of the broadcaster's customer is in Indiana. Also provides that a part of
a broadcaster's sales to a customer that has a commercial domicile
outside this state are in this state if that customer's state of domicile
does not impose an income tax on the broadcaster based on those sales.
Specifies that the part of the sales to such a customer that are in this
state is determined by apportionment using an audience factor.
Effective: January 1, 2014.
(SENATE SPONSORS _ MISHLER, HERSHMAN)
January 14, 2013, read first time and referred to Committee on Ways and Means.
February 18, 2013, reported _ Do Pass.
February 20, 2013, read second time, ordered engrossed. Engrossed.
February 21, 2013, read third time, passed. Yeas 90, nays 3.
February 27, 2013, read first time and referred to Committee on Tax and Fiscal Policy.
April 4, 2013, amended, reported favorably _ Do Pass.
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
(1) income from real or tangible personal property located in this state;
(2) income from doing business in this state;
(3) income from a trade or profession conducted in this state;
(4) compensation for labor or services rendered within this state; and
(5) income from stocks, bonds, notes, bank deposits, patents, copyrights, secret processes and formulas, good will, trademarks, trade brands, franchises, and other intangible personal property to the extent that the income is apportioned to Indiana under this section or if the income is allocated to Indiana or considered to be derived from sources within Indiana under this section.
Income from a pass through entity shall be characterized in a manner consistent with the income's characterization for federal income tax purposes and shall be considered Indiana source income as if the person, corporation, or pass through entity that received the income had directly engaged in the income producing activity. Income that is derived from one (1) pass through entity and is considered to pass through to another pass through entity does not change these characteristics or attribution provisions. In the case of nonbusiness income described in subsection (g), only so much of such income as is allocated to this state under the provisions of subsections (h) through (k) shall be deemed to be derived from sources within Indiana. In the case of business income, only so much of such income as is apportioned to this state under the provision of subsection (b) shall be deemed to be derived from sources within the state of Indiana. In the case of compensation of a team member (as defined in section 2.7 of this chapter), only the portion of income determined to be Indiana income under section 2.7 of this chapter is considered derived from sources within Indiana. In the case of a corporation that is a life insurance company (as defined in Section 816(a) of the Internal Revenue Code) or an insurance company that is subject to tax under Section 831 of the Internal Revenue Code, only so much of the income as is apportioned to Indiana under subsection (r) is considered derived from sources within Indiana.
(b) Except as provided in subsection (l), if business income of a corporation or a nonresident person is derived from sources within the state of Indiana and from sources without the state of Indiana, the business income derived from sources within this state shall be determined by multiplying the business income derived from sources both within and without the state of Indiana by the following:
(1) For all taxable years that begin after December 31, 2006, and before January 1, 2008, a fraction. The:
(A) numerator of the fraction is the sum of the property factor plus the payroll factor plus the product of the sales factor multiplied by three (3); and
(B) denominator of the fraction is five (5).
(2) For all taxable years that begin after December 31, 2007, and before January 1, 2009, a fraction. The:
(A) numerator of the fraction is the property factor plus the payroll factor plus the product of the sales factor multiplied by four and sixty-seven hundredths (4.67); and
(B) denominator of the fraction is six and sixty-seven hundredths (6.67).
(3) For all taxable years beginning after December 31, 2008, and before January 1, 2010, a fraction. The:
(A) numerator of the fraction is the property factor plus the payroll factor plus the product of the sales factor multiplied by eight (8); and
(B) denominator of the fraction is ten (10).
(4) For all taxable years beginning after December 31, 2009, and before January 1, 2011, a fraction. The:
(A) numerator of the fraction is the property factor plus the payroll factor plus the product of the sales factor multiplied by eighteen (18); and
(B) denominator of the fraction is twenty (20).
(5) For all taxable years beginning after December 31, 2010, the sales factor.
(c) The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in this state during the taxable year and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the taxable year. However, with respect to a foreign corporation, the denominator does not include the average value of real or tangible personal property owned or rented and used in a place that is outside the United States. Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at eight (8) times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals. The average of property shall be determined by averaging the values at the beginning and ending of the taxable year, but the department may require the averaging of monthly values during the taxable year if reasonably required to reflect properly the average value of the taxpayer's property.
(d) The payroll factor is a fraction, the numerator of which is the total amount paid in this state during the taxable year by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the taxable year. However, with respect to a foreign corporation, the denominator does not include compensation paid in a place that is outside the United States. Compensation is paid in this state if:
(1) the individual's service is performed entirely within the state;
(2) the individual's service is performed both within and without this state, but the service performed without this state is incidental to the individual's service within this state; or
(3) some of the service is performed in this state and:
(A) the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in this state; or
(B) the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual is a resident of this state.
(e) The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the taxable year, and the denominator of which is the total sales of the taxpayer everywhere during the taxable year. Sales include receipts from intangible property and receipts from the sale or exchange of intangible property. However, with respect to a foreign corporation, the denominator does not include sales made in a place that is outside the United States. Receipts from intangible personal property are derived from sources within Indiana if the receipts from the intangible personal property are attributable to Indiana under section 2.2 of this chapter. Regardless of the f.o.b. point or other conditions of the sale, sales of tangible personal property are in this state if:
(1) the property is delivered or shipped to a purchaser that is within Indiana, other than the United States government; or
(2) the property is shipped from an office, a store, a warehouse, a factory, or other place of storage in this state and:
(A) the purchaser is the United States government; or
(B) the taxpayer is not taxable in the state of the purchaser.
Gross receipts derived from commercial printing as described in IC 6-2.5-1-10 shall be treated as sales of tangible personal property for purposes of this chapter.
(f) Sales, other than receipts from intangible property covered by subsection (e),
(1) the income-producing activity is performed in this state; or
(2) the income-producing activity is performed both within and without this state and a greater proportion of the income-producing activity is performed in this state than in any other state, based on costs of performance.
(g) Rents and royalties from real or tangible personal property, capital gains, interest, dividends, or patent or copyright royalties, to the extent that they constitute nonbusiness income, shall be allocated as provided in subsections (h) through (k).
(h)(1) Net rents and royalties from real property located in this state
are allocable to this state.
(2) Net rents and royalties from tangible personal property are
allocated to this state:
(i) if and to the extent that the property is utilized in this state; or
(ii) in their entirety if the taxpayer's commercial domicile is in this
state and the taxpayer is not organized under the laws of or
taxable in the state in which the property is utilized.
(3) The extent of utilization of tangible personal property in a state
is determined by multiplying the rents and royalties by a fraction, the
numerator of which is the number of days of physical location of the
property in the state during the rental or royalty period in the taxable
year, and the denominator of which is the number of days of physical
location of the property everywhere during all rental or royalty periods
in the taxable year. If the physical location of the property during the
rental or royalty period is unknown or unascertainable by the taxpayer,
tangible personal property is utilized in the state in which the property
was located at the time the rental or royalty payer obtained possession.
(i)(1) Capital gains and losses from sales of real property located in
this state are allocable to this state.
(2) Capital gains and losses from sales of tangible personal property
are allocable to this state if:
(i) the property had a situs in this state at the time of the sale; or
(ii) the taxpayer's commercial domicile is in this state and the
taxpayer is not taxable in the state in which the property had a
situs.
(3) Capital gains and losses from sales of intangible personal
property are allocable to this state if the taxpayer's commercial
domicile is in this state.
(j) Interest and dividends are allocable to this state if the taxpayer's
commercial domicile is in this state.
(k)(1) Patent and copyright royalties are allocable to this state:
(i) if and to the extent that the patent or copyright is utilized by
the taxpayer in this state; or
(ii) if and to the extent that the patent or copyright is utilized by
the taxpayer in a state in which the taxpayer is not taxable and the
taxpayer's commercial domicile is in this state.
(2) A patent is utilized in a state to the extent that it is employed
in production, fabrication, manufacturing, or other processing in
the state or to the extent that a patented product is produced in the
state. If the basis of receipts from patent royalties does not permit
allocation to states or if the accounting procedures do not reflect
states of utilization, the patent is utilized in the state in which the
taxpayer's commercial domicile is located.
(3) A copyright is utilized in a state to the extent that printing or
other publication originates in the state. If the basis of receipts
from copyright royalties does not permit allocation to states or if
the accounting procedures do not reflect states of utilization, the
copyright is utilized in the state in which the taxpayer's
commercial domicile is located.
(l) If the allocation and apportionment provisions of this article do
not fairly represent the taxpayer's income derived from sources within
the state of Indiana, the taxpayer may petition for or the department
may require, in respect to all or any part of the taxpayer's business
activity, if reasonable:
(1) separate accounting;
(2) for a taxable year beginning before January 1, 2011, the
exclusion of any one (1) or more of the factors, except the sales
factor;
(3) the inclusion of one (1) or more additional factors which will
fairly represent the taxpayer's income derived from sources within
the state of Indiana; or
(4) the employment of any other method to effectuate an equitable
allocation and apportionment of the taxpayer's income.
(m) In the case of two (2) or more organizations, trades, or
businesses owned or controlled directly or indirectly by the same
interests, the department shall distribute, apportion, or allocate the
income derived from sources within the state of Indiana between and
among those organizations, trades, or businesses in order to fairly
reflect and report the income derived from sources within the state of
Indiana by various taxpayers.
(n) For purposes of allocation and apportionment of income under
this article, a taxpayer is taxable in another state if:
(1) in that state the taxpayer is subject to a net income tax, a
franchise tax measured by net income, a franchise tax for the
privilege of doing business, or a corporate stock tax; or
(2) that state has jurisdiction to subject the taxpayer to a net
income tax regardless of whether, in fact, the state does or does
not.
(o) Notwithstanding subsections (l) and (m), the department may
not, under any circumstances, require that income, deductions, and
credits attributable to a taxpayer and another entity be reported in a
combined income tax return for any taxable year, if the other entity is:
(1) a foreign corporation; or
(2) a corporation that is classified as a foreign operating
corporation for the taxable year by section 2.4 of this chapter.
(p) Notwithstanding subsections (l) and (m), the department may not
require that income, deductions, and credits attributable to a taxpayer
and another entity not described in subsection (o)(1) or (o)(2) be
reported in a combined income tax return for any taxable year, unless
the department is unable to fairly reflect the taxpayer's adjusted gross
income for the taxable year through use of other powers granted to the
department by subsections (l) and (m).
(q) Notwithstanding subsections (o) and (p), one (1) or more
taxpayers may petition the department under subsection (l) for
permission to file a combined income tax return for a taxable year. The
petition to file a combined income tax return must be completed and
filed with the department not more than thirty (30) days after the end
of the taxpayer's taxable year. A taxpayer filing a combined income tax
return must petition the department within thirty (30) days after the end
of the taxpayer's taxable year to discontinue filing a combined income
tax return.
(r) This subsection applies to a corporation that is a life insurance
company (as defined in Section 816(a) of the Internal Revenue Code)
or an insurance company that is subject to tax under Section 831 of the
Internal Revenue Code. The corporation's adjusted gross income that
is derived from sources within Indiana is determined by multiplying the
corporation's adjusted gross income by a fraction:
(1) the numerator of which is the direct premiums and annuity
considerations received during the taxable year for insurance
upon property or risks in the state; and
(2) the denominator of which is the direct premiums and annuity
considerations received during the taxable year for insurance
upon property or risks everywhere.
The term "direct premiums and annuity considerations" means the
gross premiums received from direct business as reported in the
corporation's annual statement filed with the department of insurance.
(s) The following apply in the determination of whether sales of
a broadcaster that arise from or relate to the broadcast or other
distribution of film programming or radio programming by any
means are in this state:
(1) Sales of a broadcaster are in this state if the commercial
domicile of the broadcaster's customer is in this state.
(2) In addition to the sales covered by subdivision (1), part of
the other sales of a broadcaster are in this state if:
(A) the commercial domicile of the broadcaster's customer
is outside this state; and
(B) that state does not impose an income tax based on those
sales.
The part of the sales, if any, that are in this state is the
broadcaster's receipts from sales to that customer
apportioned on the basis of rules and methods that source
receipts according to the location of listeners, viewers,
subscribers, or purchasers of television or radio broadcasts.
Sales to which this subsection applies include income from
advertising and licensing income from distributing film
programming or radio programming.
(t) For purposes of subsection (s), the following definitions
apply:
(1) "Broadcaster" means a taxpayer that is a television or
radio station licensed by the Federal Communications
Commission, a television or radio broadcast network, a cable
program network, or a television distribution company. The
term "broadcaster" does not include a cable service provider
or a direct broadcast satellite system.
(2) "Commercial domicile" has the meaning set forth in
IC 6-3-1-22.
(3) "Customer" means a person, corporation, partnership,
limited liability company, or other entity, such as an
advertiser or licensee, that has a direct connection or
contractual relationship with the broadcaster under which
revenue is derived by the broadcaster.
(4) "Film programming" means one (1) or more
performances, events, or productions (or segments of
performances, events, or productions) intended to be
distributed for visual and auditory perception, including but
not limited to news, entertainment, sporting events, plays,
stories, or other literary, commercial, educational, or artistic
works.
(5) "Radio programming" means one (1) or more
performances, events, or productions (or segments of
performances, events, or productions) intended to be
distributed for auditory perception, including but not limited
to news, entertainment, sporting events, plays, stories, or
other literary, commercial, educational, or artistic works.
(b) This SECTION expires July 1, 2016.
