N.D. Admin. Code § 81-03-09-38 — Special rules - Television and radio broadcasting

The following special rules are established in respect to the apportionment of income from television and radio broadcasting by a broadcaster that is taxable both in this state and in one or more other states. 1. In general. When a person 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 within and without this state, the amount of business income from sources within this state must be determined pursuant to North Dakota Century Code chapter 57-38.1 and article IV of North Dakota Century Code section 57 -59-01, and the regulations issued thereunder by this state, except as modified by this section. This section also applies to telecasting by cable television systems. 2. Business and nonbusiness income. For definitions and regulations for determining whether income must be classified as business or nonbusiness income, see sections 81 -03-09-03 through 81-03-09-05. 3. Definitions. The following definitions are applicable to the terms contained in this section, unless, the context clearly requires otherwise: a. "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 a videotape, disc, or any other type of format or medium. Each episode of a series of films produced for television constitutes a separate "film" notwithstanding that the series relates to the same principal subject and is produced during one or more tax periods. b. "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. c. "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 audiotape, disc, or any other format or medium. Each episode of a series of radio programming produced for radio broadcast constitutes a separate "radio programming" notwithstanding that the series relates to the same principal subject and is produced during one or more tax periods. d. "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 into 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. e. "Rent" includes license fees or other payments or consideration provided in exchange for the broadcast or other use of television or radio programming. 30 f. "Subscriber" to a television system is the individual residence or other outlet which is the ultimate recipient of the transmission. g. "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 radiowaves 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. 4. Apportionment of business income. The property factor must be determined in accordance with North Dakota Century Code sections 57 -38.1-10 through 57-38.1-12, subsections 10, 11, and 12 of article IV of North Dakota Century Code section 57-59-01, and sections 81-03-09-15 through 81-03-09-21. The payroll factor must be determined in accordance with North Dakota Century Code sections 57 -38.1-13, 57-38.1-14, subsections 13 and 14 of article IV of North Dakota Century Code section 57 -59-01, and sections 81 -03-09-22 through 81 -03-09-25. The sales factor must be determined in accordance with North Dakota Century Code sections 57-38.1-01, 57-38.1-15, 57-38.1-16, subsections 15 and 16 of article IV of North Dakota Century Code section 57 -59-01, and sections 81 -03-09-26 through 81 -03-09-30, except as modified by this section. 5. Property factor - In general. a. In the case of rented studios, the net annual rental rate includes only 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 and the like, except that additional equipment rented from other sources or from the studio not covered in the basic or flat rental charge and used for one week or longer, even though rented on a day -to-day basis, must be included. Lump-sum net rental payments for a period which encompasses more than a single income year must be assigned ratably over the rental period. b. No value or cost attributable to any outer-jurisdictional film or radio programming property may be included in the property factor at any time. 6. Property factor denominator. a. 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 must be included in the denominator of the property factor. b. 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 must be included in the property factor at their 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 said cassettes, discs, or other medium must include the license, royalty, or other fees received by the taxpayer capitalized at a rate of eight times the gross receipts derived therefrom during the income year. c. Outer-jurisdictional, film and radio programming property must be excluded from the denominator of the property factor. 7. Property factor numerator. a. 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 this state during the tax period must be included in the numerator of the property factor. 31 b. Outer-jurisdictional, film and radio programming property must be excluded from the numerator of the property factor. Example: XYZ Television Company has a total value of all of its property everywhere of five hundred million dollars, including a satellite valued at fifty million dollars that was used to telecast programming into this state and one hundred fifty million dollars in film property of which one million dollars' worth was located in this state the entire tax year. The total value of real and tangible personal property other than film programming property, located in this state for the entire income year was valued at two million dollars, and the moveable and mobile property described in subdivision a was determined to be of a value of four million dollars and such moveable and mobile property was used in this state for one hundred days. The total value of property to be attributed to this state would be determined as follows: Value of property permanently in state: $2,000,000 Mobile and moveable property: (100/365 x $4,000,000): $1,095,600 Total value of property to be included in the state's property factor numerator without apportionment of outer-jurisdictional and film property $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 percent ($3,095,600/$300,000,000): .0103 8. Payroll factor denominator. The denominator of the payroll factor must include all compensation, including residual and profit participation payments, paid to employees during the income year, including that paid to directors, actors, newscasters, and other talent in their status as employees. 9. Payroll factor numerator. Compensation for all employees must be attributed to the state or states as may be determined by the application of the provisions of North Dakota Century Code sections 57 -38.1-13, 57 -38.1-14, subsections 13 and 14 of article IV of North Dakota Century Code section 57-59-01, and sections 81-03-09-22 through 81-03-09-25. 10. Sales factor denominator. The denominator of the sales factor must include the total gross receipts derived by the taxpayer from transactions and activity in the regular course of its trade or business, except receipts excluded under subsection 2. 11. Sales factor numerator. The numerator of the sales factor must include all gross receipts of the taxpayer from sources within this state, including the following: a. Gross receipts, including advertising revenue, from live television, film or radio programming in release to or by television and radio stations located in this state. b. Gross receipts, including advertising revenue, from television film or radio programming in release to or by a television or radio station, independent or unaffiliated, or network of stations for broadcast must be attributed to this state in the ratio, hereafter "audience factor" that the audience for such station, or owned and affiliated stations in the case of 32 networks, located in this state bears to the total audience for such station, or owned and affiliated stations in the case of networks. c. The audience factor for television or radio programming must be determined by the ratio that the taxpayer's in -state viewing and listening audience bears to its total viewing and listening audience. Such audience factor must 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 for such purpose and fairly represents the taxpayer's activity in the state. d. Gross receipts from film programming in release to or by a cable television system must be attributed to this state in the ratio, hereafter "audience factor", that the subscribers for such cable television system located in this state 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 must 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 for that purpose. e. Receipts from the sale, rental, licensing, or other disposition of audio or video cassettes, discs, or similar medium intended for home viewing or listening must be included in the sales factor as provided in North Dakota Century Code section 57 -38.1-16, subsection 16 of article IV of North Dakota Century Code section 57 -59-01, and section