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. 9, September, 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:
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;
