Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-718 - MODIFICATION OF APPORTIONMENT AND ALLOCATION › Rule 2.26-51-718(d) - Television and Radio Broadcasting

Current through Register Vol. 49, No. 6, June, 2024
The following special rules are established with respect to
					 the apportionment of income from television and radio broadcasting by a
					 broadcaster that is subject to income tax in both Arkansas and in one or more
					 other states.
When a taxpayer in the business of broadcasting film or
					 radio programming, whether through the public airwaves, by cable, direct or
					 indirect satellite transmission or any other means of communication, either
					 through a network (including owned and affiliated stations) or through an
					 affiliated, unaffiliated or independent television or radio broadcasting
					 station, has income from sources both inside and outside of Arkansas the amount
					 of business income from sources within Arkansas shall be determined pursuant to
					 ACA
					 26-51-702
					 to
					 26-51-718
					 and the regulations issued thereunder, except as modified by this
					 regulation.
Definitions. The following definitions apply to the terms
					 contained in this regulation.
(i)
				  "Film" or "film programming" means any and all performances, events or
				  productions telecast on television, including but not limited to news, sporting
				  events, plays, stories or other literary, commercial, educational or artistic
				  works, through the use of video tape, disc or any other type of format or
				  medium.
Each episode of a series of films produced for television
					 shall constitute a separate "film" notwithstanding that the series relates to
					 the same principal subject and is produced during one or more tax
					 periods.
(ii)
				  "Outer-jurisdictional property" means certain types of tangible personal
				  property, such as orbiting satellites, undersea transmission cables and the
				  like, that are owned or rented by the taxpayer and used in the business of
				  telecasting or broadcasting, but which are not physically located in any
				  particular state.
(iii) "Radio" or
				  "radio programming" means any and all performances, events or productions
				  broadcast on radio, including but not limited to news, sporting events, plays,
				  stories or other literary, commercial, educational or artistic works, through
				  the use of an audio tape, disc or any other format or medium.
Each episode of a series of radio programming produced for
					 radio broadcast shall constitute a separate "radio programming" notwithstanding
					 that the series relates to the same principal subject and is produced during
					 one or more tax periods.
(iv) "Release" or "in release" means the
				  placing of film or radio programming into service. A film or radio program is
				  placed into service when it is first broadcast to the primary audience for
				  which the program was created. Thus, for example, a film is placed in service
				  when it is first publicly telecast for entertainment, educational, commercial,
				  artistic or other purpose. Each episode of a television or radio series is
				  placed in service when it is first broadcast. A program is not placed in
				  service merely because it is completed and therefore in a condition or state of
				  readiness and availability for broadcast or merely because it is previewed to
				  prospective sponsors or purchasers.
(v) "Rent" shall include license fees or
				  other payments or consideration provided in exchange for the broadcast or other
				  use of television or radio programming.
(vi) A 'subscriber" to a cable television
				  system is the individual residence or other outlet which is the ultimate
				  recipient of the transmission.
(vii) "Telecast" or "broadcast" (sometimes
				  used interchangeably with respect to television) means the transmission of
				  television or radio programming, respectively, by an electronic or other signal
				  conducted by radio waves or microwaves or by wires, lines, coaxial cables, wave
				  guides, fiber optics, satellite transmissions directly or indirectly to viewers
				  and listeners or by any other means of communications.
Apportionment of Business Income
The property factor shall be determined in accordance with
					 ACA
					 26-51-710
					 to
					 26-51-712,
					 the payroll factor in accordance with ACA
					 26-51-713
					 and
					 26-51-714,
					 and the sales factor in accordance with ACA
					 26-51-715
					 to
					 26-51-717,
					 except as modified by this regulation.
The Property Factor
In the case of rented studios, the net annual rental rate
					 shall include the amount of the basic or flat rental charge by the studio for
					 the use of a stage or other permanent equipment (such as sound recording
					 equipment). The net annual rental rate shall also include the rental charges
					 for any additional equipment rented from other sources or from the studio which
					 is not covered in the basic or flat rental charge and which is used for one (1)
					 week or longer (even though rented on a day- to-day basis). Lump-sum net rental
					 payments for a period which encompasses more than a single tax year shall be
					 assigned ratably over the rental period.
No value or cost attributable to any outer-jurisdictional
					 film or radio programming property shall be included in the property factor at
					 any time.
Property Factor Denominator
All real property and tangible personal property (other
					 than outer-jurisdictional and film or radio programming property), whether
					 owned or rented, which is used in the business shall be included in the
					 denominator of the property factor.
Audio or video cassettes, discs or similar medium
					 containing film or radio programming and intended for sale or rental by the
					 taxpayer for home viewing or listening shall be included in the property factor
					 at the mediums' original cost. To the extent that the taxpayer licenses or
					 otherwise permits others to manufacture or distribute such cassettes, discs or
					 other medium containing film or radio programming for home viewing or
					 listening, the value of such cassettes, discs or other medium shall include the
					 license, royalty or other fees received by the taxpayer capitalized at a rate
					 of eight times the gross receipts derived there from during the tax
					 year.
Outer-jurisdictional, film and radio programming property
					 shall be excluded from the denominator of the property factor.
Property Factor Numerator
With the exception of outer-jurisdictional, film and radio
					 programming property, all real and tangible personal property owned or rented
					 by the taxpayer and used in Arkansas during the tax year shall be included in
					 the numerator of the property factor as provided in ACA 2651-710 to
					 26-51-712.
Outer-jurisdictional, film and radio programming property
					 shall be excluded from the numerator of the property factor.
Example: XYZ Television Co. has a total value of all of its
					 property everywhere of $500,000,000, including a satellite valued at
					 $50,000,000 that was used to telecast programming into Arkansas and
					 $150,000,000 in film property of which $1,000,000's worth was located in
					 Arkansas the entire year. The total value of real and tangible personal
					 property, other than film programming property, located in Arkansas for the
					 entire tax year was valued at $2,000,000. Movable and mobile property was
					 determined to have a value of $4,000,000 and such movable and mobile property
					 was used in Arkansas for 100 days.
The total value of property to be attributed to Arkansas
					 would be determined as follows:
Value of property permanently located within
								Arkansas
Value of mobile and movable property (100/365 or
								.2739 x $4,000,000):
$2,000,000
$1,095,600
Total value of property to be included in
								Arkansas' property factor numerator (outer-jurisdictional and film property
								excluded):
$3,095,600
Total value of property to be used in the
								denominator ($500,000,000-$200,000,000):
$300,000,000
Total property factor
								($3,095,600/$300,000,000):
.01031867
The Payroll Factor
Payroll Factor Denominator
The denominator of the payroll factor shall include all
					 compensation, including residual and profit participation payments, paid to
					 employees during the tax year, including that paid to directors, actors,
					 newscasters and other talent in their status as employees.
Payroll Factor Numerator
Compensation for all employees shall be attributed to
					 Arkansas as determined by the provisions of ACA
					 26-51-713
					 and
					 26-51-714.
The Sales Factor
Sales Factor Denominator
The denominator of the sales factor shall include the total
					 gross receipts derived by the taxpayer from transactions and activity in the
					 regular course of the taxpayer's trade or business.
Sales Factor Numerator
The numerator of the sales factor shall include all gross
					 receipts of the taxpayer from sources within Arkansas, including, but not
					 limited to, the following:
1. Gross
				  receipts, including advertising revenue, from television film or radio
				  programming in release to or by television and radio stations located in
				  Arkansas;
2. Gross receipts,
				  including advertising revenue, from television film or radio programming in
				  release to or by a television station (independent or unaffiliated) or network
				  of stations for broadcast shall be attributed to Arkansas in the ratio
				  (hereafter "audience factor") that the audience for such station (or owned and
				  affiliated stations in the case of networks) located in Arkansas bears to the
				  total audience for such station (or owned and affiliated stations in the case
				  of networks).
The audience factor for television or radio programming
					 shall be determined by the ratio that the taxpayer's Arkansas viewing or
					 listening audience bears to its total viewing or listening audience. Such
					 audience factor shall be determined either by reference to the books and
					 records of the taxpayer or by reference to published rating statistics,
					 provided the method used by the taxpayer is consistently used from year to year
					 and from state to state for such purpose and fairly represents the taxpayer's
					 activity in Arkansas;
3.
				  Gross receipts from film programming in release to or by a cable television
				  system shall be attributed to Arkansas in the ratio (hereafter "audience
				  factor") that the subscribers for such cable television system located in
				  Arkansas bears to the total subscribers of such cable television system. If the
				  number of subscribers cannot be accurately determined from the books and
				  records maintained by the taxpayer, such audience factor ratio shall be
				  determined on the basis of the applicable year's subscription statistics
				  located in published surveys, provided that the source selected is consistently
				  used from year to year and from state to state for that purpose; or
4. Receipts from the sale, rental, licensing
				  or other disposition of audio or video cassettes, discs, or similar medium
				  intended for home viewing or listening shall be included in the sales factor as
				  provided in ACA
				  26-51-716
				  and
				  26-51-717.