Enacts the Multichannel Video Programming Distributor Competition Act

Summary of provisions

Section one of the bill creates a new section 186-G of the tax law, entitled excise tax on direct broadcast satellite (DBS) services.

§ 1. subdivision 1 defines terms, including the commissioner of taxation and finance, direct broadcast satellite service and provider, and revenues included in gross receipts. "Person", "subscriber or customer", and "video programming" are also defined.

Subsection 2 imposes a 5% excise on the gross receipts defined in § 1, subdivision 1.

Subsection 3 allows DBS providers to recover the 5% excise on gross receipts.

Subsection 4 requires DBS providers subject to the excise, to register with the Commissioner.

Subsection 5 requires DBS providers to file annual returns with the Commissioner.

Subsection 6 defines the applicability of Article 9 of the tax law and the intersection of section 186G with other provisions of Article 9.

Subsection 7 makes DBS providers liable in case of failure to pay amounts required by the excise.

§ 2. carries an immediate effective date, and applicability for tax years beginning on and after January 1st immediately following the year of enactment.

Justification

The MVPD industry is robust and highly competitive, with the vast majority of NYS consumers having a choice of providers for video entertainment services. This was not the case in 1996, when Congress granted the then-fledgling DBS industry special protection and preempted all local taxes and fees (and certain zoning requirements) on DBS service. Congress did not intend to confer a tax advantage to DBS providers, but rather to save DBS. providers the administrative burden from filing tax returns in thousands of local jurisdictions. Accordingly, Congress specifically preserved the authority of States to levy taxes and fees on DBS service and/or providers to ensure parity with their competitors. Through Section 602 of the Telecommunications Act of 1996, Congress granted incentives to a young industry to help spur its growth and enhance MVPD competition to benefit consumers.

This congressional tax policy experiment still exists today, but has placed significant pressures on local government's tax and fee revenues. DBS companies have grown in just more than a decade to be the second and third largest providers of MVPD services in the nation. Moreover, while the MVPD market has evolved since 1996, NYS' tax regime has not kept pace. Indeed, local taxing jurisdictions have seen reductions in revenue streams from levies such as franchise fees and local sales taxes imposed on cable providers as consumers migrated from cable service to DBS service. Therefore, it is important to level the playing field and ensure that the State does not artificially pick winners and losers in this competition; that public policy goal can be met through tax parity in the MVPD industry.

NYS cable companies pay up to 5% of their video revenues to local governments under franchise agreements with municipalities, and also provide capital support to Public, Education and Government (PEG) channels and other items. DBS providers do not pay similarly, and applying a 5% excise levels the playing field between these two MVPD industry members by making sure there is payment parity in the NYS MVPD industry.

12 states have rightly sought to close this payment parity gap with MVPD tax parity laws, including Ohio, Kentucky, Connecticut, Delaware, Florida, Massachusetts (whose video tax parity regime forms the basis of this act), North Carolina, Rhode Island, Tennessee, Utah, Virginia, and Washington. All these laws, when challenged, have been 'upheld when the collection and control of these funds is maintained by the state, as in this bill. No federal or state court has found video tax parity provisions to violate either the Constitution of the United States or of the respective State constitutions.

Legislative history

This is a new bill.

Fiscal implications

None to the State. The excise is anticipated to generate S50 to 5100 million in revenue for NYS.

Effective date

Immediately, and to be applied to tax years beginning on and after January 1st immediately following enactment.