(a) 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 Hawaii, the amount of business income from sources within Hawaii
shall be determined pursuant to sections
235-21 to
235-39, HRS, or
the Multistate Tax Compact (section
255-1, HRS),
except as modified by this section.
(b) For definitions, rules, and examples for
determining whether income shall be classified as business or nonbusiness
income, see sections
18-235-21-01 to
18-235-21-04.
(c) In this section, unless the context
clearly requires otherwise:
"Film" or "film programming" means any and all performances,
events, or productions telecast on television, including 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.
"Outer-jurisdictional property" means 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 that are not physically located in any
particular state.
"Radio" or "radio programming" means any and all
performances, events, or productions that are broadcast on radio, including
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.
"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 purposes. 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 is in a condition or state of readiness
and availability for broadcast, or merely because it is previewed to
prospective sponsors or purchasers.
"Rent" includes license fees or other payments or
consideration provided in exchange for the broadcast or other use of film or
radio programming.
"State" includes the District of Columbia, the Commonwealth
of Puerto Rico, or any possession or territory of the United States.
A "subscriber" to a cable television system is the
individual residence or other outlet which is the ultimate recipient of the
transmission.
"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, microwaves, wires, lines, coaxial cables, wave guides, fiber optics,
satellite transmissions, or by any other means, directly or indirectly to
viewers or listeners.
(d)
The property factor shall be determined in accordance with sections
235-30
to
235-32,
HRS, and the rules thereunder; the payroll factor in accordance with sections
235-33
to
235-34,
HRS, and the rules thereunder; and the sales factor in accordance with sections
235-35
to
235-37,
HRS, and the rules thereunder; except as modified by this section.
(e) The following rules relate to the
property factor.
(1) The following rules apply
with respect to the property factor in general.
(A) In the case of rented studios, the net
annual rental rate shall include 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) shall be included. Lump-sum net rental payments for a period
which encompasses more than a single income year shall be assigned ratably over
the rental period.
(B) No value or
cost attributable to any outer-jurisdictional and film or radio programming
property shall be included in the property factor.
(2) The following rules apply with respect to
the 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, that is used in
the business shall be included in the denominator of the property
factor.
(B) Audio or video
cassettes, discs, or similar media 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 their original cost. To the extent that
the taxpayer licenses or otherwise permits others to manufacture or distribute
cassettes, discs, or other media containing film or radio programming for home
viewing or listening, the value of the cassettes, discs, or other media shall
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 and film or radio programming property shall be excluded
from the denominator of the property factor.
(3) The following rules apply with respect to
the property factor numerator.
(A) With the
exception of outer-jurisdictional and film or radio programming property, all
real and tangible personal property owned or rented by the taxpayer and used in
Hawaii during the tax period shall be included in the numerator of the property
factor as set forth in section
18-235-30-04.
(B) Outer-jurisdictional and film or 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 Hawaii and
$150,000,000 in film property of which $1,000,000 worth was located in Hawaii
the entire year. The total value of real and tangible personal property, other
than film programming property, located in Hawaii for the entire income year
was valued at $2,000,000. The movable and mobile property described in
subparagraph (e)(3)(A) has a value of $4,000,000. That property was used in
Hawaii for 100 days. The property factor is determined as follows:
| Value of property permanently in
Hawaii: |
$2,000,000 |
| Value of mobile and movable property (100/365 x
$4,000,000): |
1,095,600
|
| Total value of property to be included in Hawaii's
property factor numerator without apportionment of outer-jurisdictional and
film property: |
$3,095,600
|
| Total value of property
everywhere: |
$500,000,000 |
| Less value of satellite: |
(50,000,000) |
| Less value of film
property: |
(150,000,000) |
| Total value of property to be used in
denominator: |
$300,000,000 |
| Property factor
($3,095,600/$300,000,000): |
.0103 |
(f) The
following rules relate to the payroll factor.
(1) The denominator of the payroll factor
shall include all compensation, including residual and profitparticipation
payments, paid to employees during the income year, including that paid to
directors, actors, newscasters, and other talent in their status as
employees.
(2) With respect to the
payroll factor numerator, compensation for all employees shall be attributed to
the state or states as may be determined under sections
18-235-33-01 to
18-235-34-01.
(g) The
following rules relate to the sales factor.
(1) 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 its trade or business, except receipts
excluded under section
18-235-38-03.
(2) The numerator of the sales factor shall
include all gross receipts of the taxpayer from sources within Hawaii,
including the following.
(A) 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 Hawaii in the ratio (hereafter
"audience factor") that the audience for the station (or owned and affiliated
stations in the case of networks) located in Hawaii bears to the total audience
for the 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 in-state viewing (listening) audience bears to its
total viewing (listening) audience. The 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 for this purpose and fairly reflects the
taxpayer's activity in Hawaii.
(B)
Gross receipts from film programming in release to or by a cable television
system shall be attributed to Hawaii in the ratio (hereafter "audience factor")
that the subscribers for such cable television system located in Hawaii 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, the 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 for that purpose.
(C) Receipts
from the sale, rental, licensing, or other disposition of audio or video
cassettes, discs, or similar media intended for home viewing or listening shall
be included in the sales factor as provided in sections
235-36
and
235-37,
HRS, and the rules thereunder.
