Commissioner Geoffrey Starks

It has been a busy week for regulatory actions affecting broadcasters.  Here are some of the significant developments of the last week, with links to where you can go to find more information as to how these actions may affect your operations.

  • The FCC held a virtual Open Meeting on Tuesday, voting to approve an

An intense national conversation on racial justice and equity has been thrust upon the country by the events of the last week.  While our focus here on this blog is narrow, it is certainly worth looking at some of the issues that are within our broadcast world that are relevant to this conversation.  In recent days, for instance, FCC Commissioner Geoffrey Starks promoted more diversity in broadcast ownership, and an article in Radio Ink by the President of the National Association of Black Owned Broadcasters called for a revival of the minority tax certificate – a program ended decades ago over concerns about its cost to the government.  The tax certificate offers perhaps the most meaningful route to the goals sought by the Commissioner and is worth examination as, since its abolition so many years ago, its revival has been discussed so many times that it has become almost a cliché, with many not really understanding what it did and why it was effective.

The minority tax certificate was a program designed to provide broadcasters with an economic incentive to sell their stations to minority owners.  Rather than directly subsidizing the potential owners, the certificate instead gave a tax break to sellers that incentivized them to sell to the minority-owned business even if there were multiple bidders for their properties.  If the seller sold to a minority-owned business, the seller could take the proceeds from the sale and roll those proceeds over into a new media property without recognizing the taxable gain from the sale.  Unlike the typical like-kind exchange where the roll-over into a new property has to proceed within a few months of the sale, the tax certificate treated the sale as an involuntary sale (like the sale of a property because of a government’s exercise of eminent domain) under Section 1033 of the tax code, giving the seller several years to roll the proceeds over into a new purchase.  At that point, the new property would have the same tax basis as the old – meaning that no gain would be recognized until the sale of the new property.  This spurred many sales to minority companies by broadcasters looking not to get out of the business, but instead looking to realign their holdings or to move up into larger markets.  Several hundred radio and TV stations were purchased under this program in the last 20 years of the program’s existence.  Why was this seemingly successful program abandoned?
Continue Reading Understanding the Minority Tax Certificate and its Potential for Promoting Diversity in Broadcast Ownership