INSIGHT: Comcast’s Gross Receipts From Broadcasting Included in Oregon Sales Factor

Oregon’s income-apportionment formula for interstate broadcasters has been based exclusively on the “sales factor.” The sales factor is the fraction representing a taxpayer’s total sales in Oregon divided by the taxpayer’s total sales everywhere. This factor is then applied to taxable income to arrive at the portion thereof that is properly allocable to Oregon.

In 1989, the Oregon legislature created a “special” sales factor for any business that qualifies as an interstate broadcaster. The plaintiff, here, none other than Comcast Corp., constitutes such an interstate broadcaster.

For an interstate broadcaster, the taxpayer’s “gross receipts from broadcasting” (GRFB) are included in the numerator of the sales factor in the ratio that the broadcaster’s audience or subscribers located in this state bears to its total audience and subscribers. For example, if 1/20 of the broadcaster’s audience (or subscribers) reside in Oregon, then 1/20 of the GRFB are included in the numerator of the sales-factor fraction. In other words, the product of (1) the audience ratio and; (2) the GRFB, constitutes the numerator of the sales-factor fraction.

All Receipts Count

The dispute focused narrowly on the all-important question of what is included in GRFB (to which the audience ratio is then applied). According to Comcast, only receipts from its activity that qualified as “broadcasting” should have been attributed to Oregon under the audience-ratio formula. The Oregon Department of Revenue countered that the term is specifically defined to mean “all gross receipts of an interstate broadcaster from transactions and activities in the regular course of its trade or business.” Thus, the department understood that definition of GRFB “to include a broader category of receipts than simply receipts from ’broadcasting activity.’“

The Oregon Tax Court agreed with the department that Comcast’s receipts from both broadcasting and other business activities fall within the definition of GRFB. The Oregon Supreme Court also endorsed the department’s stance.

The disputed statute, Oregon Revised Statutes Section 314.684, specifies that “[g]ross receipts from broadcasting means all gross receipts of an interstate broadcaster from transactions and activities in the regular course of its trade or business except receipts from sales of real or tangible personal property” (emphasis added).

The state high court noted that the text does not describe GRFB “as limited to receipts from activity consisting of broadcasting. Rather, the phrasing…broadly incorporates all gross receipts of an interstate broadcaster, subject to only two limits: (1) the receipts must be from transactions and activities in the regular course of its trade or business; and (2) the receipts must not be from the sale of real or tangible personal property.”

Comcast emphasized that GRFB was limited to those receipts “from transactions and activities in the regular course of (the interstate broadcaster’s) trade or business” and that an interstate broadcaster is a taxpayer that engages “in the business of broadcasting.” Thus, it follows that transactions and activities in the regular course should mean only transactions and activities that consist of the business of broadcasting. According to Comcast, “only those receipts from transmitting a one-way electronic signal are properly considered” GRFB.

The court was not persuaded by this syllogism. The court concluded that the legislature did not intend to limit GRFB “to receipts from transactions and activities that consist of transmitting.“ The legislature, the court observed, “defined gross receipts from broadcasting in a way that suggests the legislature understood the term to include more than just receipts from the activity of transmitting.” The definition of GRFB excludes receipts from sales of property. “Receipts from the activity of selling property, however, are not receipts from the activity of transmitting,” the court said.

If Comcast were correct that GRFB “included only receipts from the activity of transmitting a one-way electronic signal, then it would have been unnecessary for the legislature to expressly exclude receipts from the selling of property,” the court said. Comcast’s construction of the statute “would render redundant the provision that excludes property sales from the definition of” GRFB. It is axiomatic that a court should construe a statute in a way that gives effect to all of its provisions. Comcast’s construction did not abide by this standard.

Legislative History Unhelpful

Nothing in the legislative history disclosed “a legislative intent to apportion the receipts of an interstate broadcaster in a manner different from that suggested by the text and context“ of the statutes. Nothing in such history provided “a basis for concluding that the legislature intended the new audience-ratio formula for attributing a broadcaster’s receipts to Oregon would be used for only part of a broadcaster’s receipts. Rather, the legislative history indicates that the legislature, in specifying that the audience-ratio formula would apply to gross receipts from broadcasting, intended that phrase to broadly include all receipts essentially.” Thus, in the court’s view, the legislative history “provides no basis for concluding that the legislature intended ORS 314.684 to be construed differently than ”the construction to which our examination of text and context points.“

Finally, Comcast contended that the Tax Court’s broad construction of GRFB would “lead to what Comcast views as absurd results.” Once again, the court was unpersuaded. “When the legislative intent is clear from an inquiry into text and context, or from resort to legislative history, it would be inappropriate to apply the absurd-result maxim because we would be rewriting a clear statute based solely on our conjecture that the legislature could not have intended a particular result.”

Thus, “the Tax Court correctly concluded that in calculating the sales factor,” the court said, “all gross receipts of the interstate broadcaster from transactions and activities in the regular course of its trade or business—not solely receipts from broadcasting activities—are included in the numerator of the sales factor in the ratio” that the interstate broadcaster’s Oregon audience bore to its total audience. The only recognized exception thereto is the interstate broadcaster’s receipts from the sale of real property or tangible personal property, which are included in the numerator (of the sales factor) if attributable to Oregon, but are not governed by the audience ratio formula. The limited judgment of the Tax Court was affirmed. See Comcast Corp. v. Or. Dep’t of Revenue, 363 Or. 537 (2018).