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Comcast Corporation and Subsidiaries v. Department of Revenue

Supreme Court of Oregon, En Banc

August 16, 2018

COMCAST CORPORATION AND SUBSIDIARIES, Plaintiff-Appellant,
v.
DEPARTMENT OF REVENUE, Defendant-Respondent.

          Argued and submitted January 18, 2018

          On appeal from the Oregon Tax Court.[*] Henry C. Breithaupt, Judge. (TC 5265).

          Timothy A. Gustafson, Eversheds Sutherland (US) LLP, Sacramento, California, argued the cause for appellant. Gregory A. Chaimov and Mark P. Trinchero, Davis Wright Tremaine LLP, Portland, fled the briefs for the appellant. Also on the briefs were Timothy A. Gustafson, Eversheds Sutherland (US) LLP, Sacramento, California, and Jeffrey A. Friedman, Eversheds Sutherland (US) LLP, Washington, District of Columbia.

          Marilyn J. Harbur, Assistant Attorney General, Salem, argued the cause and fled the brief for respondent. Also on the brief were Ellen F. Rosenblum, Attorney General, and Benjamin Gutman, Solicitor General.

          [363 Or. 538] Case Summary: Taxpayer challenged the Tax Court's construction of the statutory formula by which Oregon calculates the share of an interstate broadcaster's income that is taxable by Oregon. Specifcally, ORS 314.684 provides that the ratio of the broadcaster's Oregon audience to the broadcaster's total audience determines the portion of the taxpayer's "gross receipts from broadcasting" that is attributable to Oregon for income tax purposes. The Tax Court held that "gross receipts from broadcasting" was not limited to those gross receipts derived from one-way electronic transmissions and granted partial summary judgment to the Department of Revenue on that part of taxpayer's appeal. Taxpayer appealed that decision to the Supreme Court. Held: "Gross receipts from broadcasting," as defned in ORS 314.680(2), are not limited to those gross receipts derived from one-way electronic transmissions.

         [363 Or. 539] FLYNN, J.

         In this appeal from a decision of the Oregon Tax Court, taxpayer challenges the Tax Court's construction of the statutory formula by which Oregon calculates the portion of an interstate broadcaster's income that is taxable by Oregon. See ORS 314.680 to 314.690.[1] Based in part on those statutes, the Oregon Department of Revenue calculated that taxpayer had underpaid Oregon taxes for the tax years 2007-2009 and sent notices of deficiency, which taxpayer appealed to the Tax Court. The Tax Court agreed with the department's construction of the income-apportionment statutes and granted the department partial summary judgment on that part of taxpayer's appeal. Comcast Corp. v. Dept. of Rev. (TC 5265), 22 OTR 295 (2016). The Tax Court also entered a limited judgment to permit this appeal. We conclude that the Tax Court correctly construed the statutes that govern income-apportionment for interstate broadcasters, and we affirm the limited judgment.

         I. LEGAL OVERVIEW

         Before discussing the parties' arguments in more detail, we briefly describe the pertinent legal framework. Oregon, like most states that tax a portion of the income of multistate businesses, has adopted a formula for doing so that is derived from a uniform law-the Uniform Division of Income for Tax Purposes Act (UDITPA).[2] Health Net, Inc. v. Dept. of Rev., 362 Or. 700, 704-06, 415 P.3d 1034 (2018).[3] [363 Or. 540] Since 2005, Oregon's income-apportionment formula for interstate businesses has been based exclusively on what is referred to as the business's "sales factor." Id. at 707 (citing Or Laws 2005, ch 832, § 49). In general, the Oregon "sales factor" for a multistate-business taxpayer is the fraction representing the taxpayer's "total sales"[4] in Oregon during the tax period-the numerator-divided by "the total sales of the taxpayer everywhere during the tax period"-the denominator. ORS 314.665(1). For example, if a taxpayer has $10 million in total sales in a tax year, and $1 million of those are in Oregon, then the taxpayer's sales factor is $1 million in local sales divided by the $10 million in total sales, or 1/10. That would be the fraction of the taxpayer's total income that would be taxed by Oregon.

         In 1989, however, the legislature created a special sales factor for any business that qualifies as an "interstate broadcaster," meaning "a taxpayer that engages in the for-profit business of broadcasting to subscribers or to an audience located both within and without this state." ORS 314.680(3) (definition of "interstate broadcaster"); ORS 314.684 (specifying sales factor for an "interstate broadcaster"); Or Laws 1989, ch 792. For an interstate broadcaster, determining the numerator of the sales-factor fraction-the Oregon portion- requires a different calculation: the taxpayer's "gross receipts from broadcasting" are "included in the numerator of the sales factor in the ratio that the interstate broadcaster's audience or subscribers located in this state bears to its total audience and subscribers located both within and without this state." ORS 314.684(4). In other words, for an interstate business that engages in "broadcasting" to an audience that is in part located in Oregon, the ratio of the broadcaster's Oregon audience to the broadcaster's total audience determines the portion of the taxpayer's "gross receipts from broadcasting" that is attributable to Oregon for income tax purposes. For example, if 1/20th of the broadcaster's total audience (or subscribers) live in Oregon, then 1/20th of the broadcaster's total "gross receipts from broadcasting" are [363 Or. 541] counted as gross receipts attributed to Oregon and included in the numerator of the sales-factor fraction.

         II. PROCEDURAL BACKGROUND

         The dispute between the parties in this court narrowly focuses on the question of what is included in the "gross receipts from broadcasting" to which the Oregon audience ratio is applied. Taxpayer does not dispute that it engages in "broadcasting" or that its income is apportioned to Oregon-at least in part-using the special "sales factor" formula specified in ORS 314.684 for "interstate broadcasters."[5] However, taxpayer contends that most of its receipts for the disputed tax years arose from activity that does not qualify as "broadcasting," a term defined to mean "the activity of transmitting any one-way electronic signal." ORS 314.680(1). According to taxpayer, only receipts from its activity that qualifies as "broadcasting" should have been attributed to Oregon under the audience-ratio formula of ORS 314.684.

         The department counters, however, that the audience-ratio formula of ORS 314.684 is used to determine the Oregon portion of taxpayer's "gross receipts from broadcasting" and 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," with a few unrelated exceptions, ORS 314.680(2). The department understands that definition of "gross receipts from broadcasting" to include a broader category of receipts than simply receipts from "broadcasting" activity and, thus, maintains that it correctly counted taxpayer's receipts from both "broadcasting" and other business activities in the category of "gross receipts from broadcasting" that are attributable to Oregon under the audience-ratio formula specified in ORS 314.684.

         That issue of statutory construction was a focus of motions for partial summary judgment that both parties filed in the Tax Court. Taxpayer asked the court to determine [363 Or. 542] that only its receipts from "broadcasting" activity should be apportioned under ORS 314.684, and that its revenue from other business activities must be apportioned according to the general apportionment formula of ORS 314.665. The Tax Court rejected that hybrid approach to apportionment. Comcast Corp., 22 OTR at 298. The court agreed with the department that, as a statutory matter, taxpayer's receipts from both "broadcasting" and other business activity fall within the definition of "gross receipts from broadcasting" and are attributed to Oregon under the formula described in ORS 314.684. 22 OTR at 299. The Tax Court, accordingly, denied taxpayer's motion for partial summary judgment, granted the department's motion, and entered a limited judgment. Taxpayer has appealed from that limited judgment.

         III. DISCUSSION

         In general, summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See TCR 47 C (standard for granting summary judgment in Tax Court); Tektronix, Inc. v. Dept. of Rev., 354 Or. 531, 533, 316 P.3d 276 (2013) (applying that standard on appeal from Tax Court decision). On appeal, taxpayer does not assert that there is any genuine issue of material fact, but taxpayer renews its statutory argument that only its receipts from one-way electronic transmissions qualify as "gross receipts from broadcasting" for purposes of determining its sales factor under ORS 314.684. In determining the meaning of that statute, as with all statutes, we "pursue the intention of the legislature if possible." ORS l74.O2O(1)(a). Because it is "the intent of the legislature as formally enacted into law" that we seek to determine, we give "primary weight in the analysis" to text and context, but we also consider legislative history "where that legislative history appears useful to the court's analysis." State v. Gaines, 346 Or. 160, 171-72, 206 P.3d 1042 (2009).

         A. "Gross Receipts from Broadcasting"-Text and Context

The disputed statute specifies in its entirety: "(1) The sales factor for an interstate broadcaster shall be determined as ...

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