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TV broadcasters call NC customers to fight tax proposal

Grover Norquist, right, founder of Americans for Tax Reform, speaks to members of the media on Thursday, May 16, 2013 at the N.C. General Assembly. He addressed issues of tax reform with Republican Sens. Phil Berger, center, and Bob Rucho.
Grover Norquist, right, founder of Americans for Tax Reform, speaks to members of the media on Thursday, May 16, 2013 at the N.C. General Assembly. He addressed issues of tax reform with Republican Sens. Phil Berger, center, and Bob Rucho. clowenst@newsobserver.com

The Motion Picture Association of America is ramping up its fight against a proposed tax change that would result in the nation’s most prominent broadcasting companies paying many times more in North Carolina income taxes.

It’s calling consumers in the state urging them to contact their state legislators to oppose what an MPAA official called an “unfair, exorbitant tax on our members” that would trickle down to TV customers in the form of higher cable and satellite TV bills.

The association also is touting the support of Grover Norquist, of the anti-tax Americans for Tax Reform, who opposes the proposal to change the way broadcasters’ tax liabilities are determined in the state.

The MPAA has supported Americans for Tax Reform financially in the past, including a $100,000 grant earlier this decade as the MPAA tried to build its clout in conservative circles, The Wall Street Journal reported. It wasn’t immediately clear whether Americans for Tax Reform has received additional money from the MPAA.

Norquist has been a key cheerleader of Republican-led tax changes in North Carolina, but he disagrees with the proposal regarding broadcasters, according to a letter he sent to state legislators this week.

Norquist wrote that most states don’t use the method of determining broadcasters’ tax liability that Sen. Bob Rucho, a Mecklenburg County Republican, and others are pushing. The proposal, included in the Senate budget, would determine the share of a broadcaster’s income that is taxable in North Carolina by multiplying its total income by the ratio of its viewing audience in North Carolina to its total viewing audience nationwide.

Currently, MPAA members — including Paramount Pictures Corp., Universal City Studios, Walt Disney Studios Motion Pictures, Warner Bros. Entertainment and CBS Corp. — rely on a “private letter ruling” from the Department of Revenue in determining their N.C. income for tax purposes. Put simply, the late 2012 ruling found that if contracts for advertising or programming license fees are signed in North Carolina, those revenues can be taxed in the state. Senate Republicans have questioned the ruling — issued in the final days of former Gov. Beverly Perdue’s administration — as overly favorable to broadcasters because most contracts aren't signed in North Carolina.

Vans Stevenson, MPAA’s senior vice president of state government affairs, said Wednesday that its member companies are paying roughly $1 million a year combined in income taxes to North Carolina under the private letter ruling. The proposed change would cause those companies to pay about $30 million a year, he said. Stevenson questioned why Rucho was singling out the broadcasters amid tax cuts elsewhere, calling him a senator who “ran on a pledge to his constituents about lowering business and consumer taxes.”

“What's the motivation?” Stevenson asked. “I don't know.”

Rucho responded that a “good corporate citizen does not refuse to pay a fair tax rate.”

“For the first time, once this change occurs, they’re paying their fair rate,” Rucho said. “I get offended by that kind of attitude of corporate America in doing what they're doing, and I’m a very pro-business person. I’m offended by that kind of action and that kind of greed.”

Meanwhile, private letter rulings, such as the one under which MPAA members operate, have become a topic of discussion since the broadcasters’ tax circumstances arose this legislative session. The rulings are specific tax guidance provided to taxpayers upon request.

On Wednesday, the Senate Finance Committee signed off on legislation that would require the Department of Revenue to publish on its website all private letter rulings within 90 days after issuance. Rulings going back to 2010 also would have to be published. Posted rulings would have to be redacted so as not to identify the taxpayer.

According to a bill summary, North Carolina is one of a few states that don't make the rulings publicly available.

Patrick Gannon: 919-836-2801, @Pat_NCInsider

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