minority tax certificate

Yesterday’s big news across the broadcast press was that Gigi Sohn, who had for well over a year been the nominee of the Biden administration to fill the open seat at the FCC, withdrew her name from consideration.  This may have been in reaction to circulated stories that there were several Democratic Senators who still were not committed to vote for her nomination without whose support she could not have been confirmed.  Until the Biden administration can make another nomination and have that nominee go through the confirmation process in the Senate, the FCC will continue to have two Democratic Commissioners and two Republican ones, potentially stalling action on some rulemaking matters where there is a partisan split on the pending issue.  We wrote in January in our look at the issues pending before the FCC about some of the issues that the FCC could face in 2023.  In light of the seeming extension of the partisan divide on the FCC, we thought that we would again highlight some of the issues likely to be affected by the current state of the Commission. 

But it is first worth noting that, merely because there is a partisan split among the Commissioners, this does not mean that nothing of significance will happen at the FCC.  As we wrote yesterday, the TEGNA merger was designated for hearing, potentially leading to its demise.  This was done not by an action of the Commissioners, but instead by its Media Bureau.  Interpretations of FCC authority in specific cases by the Media Bureau, the Enforcement Bureau or other lower-level bureaus and offices within the Commission can be just as impactful on any specific company as are the big policy decisions made by the Commissioners themselves.  Just as the TEGNA designation could have significant ramifications for broadcast dealmaking if its conclusions are taken to their logical ends, Bureau-level decisions can set day-to-day policy on many issues if the Commission itself cannot make broader decisions through their rulemaking process.Continue Reading Gigi Sohn Withdraws from Consideration for Open Seat as FCC Commissioner – What that Means for Broadcast Regulation

Here are some of the regulatory developments of significance to broadcasters from the past week, with links to where you can go to find more information as to how these actions may affect your operations.

With the Administration’s decision to renominate Jessica Rosenworcel for another term on the FCC and to select her as the permanent chair of the Commission, and the nomination of Gigi Sohn to fill the vacant seat on the FCC, and assuming both are confirmed by the Senate (though the Wall Street Journal noted that there

Here are some of the regulatory developments of significance to broadcasters from the last week, with links to where you can go to find more information as to how these actions may affect your operations.

  • Two Federal Register notices set dates for changes to the FCC’s EAS rules. We wrote about these issues here and

The minority tax certificate is back in the news with revised bills being introduced in both the House of Representatives and the Senate.  We wrote about a version of this bill introduced in the last session of Congress here.  The tax certificate offers perhaps the most meaningful route to increasing diversity in broadcast ownership.  While the certificate was abolished by Congress over 25 years ago, these new bills signaling the potential for its revival merits another examination of what this policy did and why it was effective, and what is now being proposed.

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 of broadcast stations that incentivized them to sell to a minority-owned business even if there were multiple bidders for their properties.  If the seller sold its station 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.  In the closing decades of the last century, this policy spurred many sales to minority-controlled 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 Bills Introduced to Bring Back Tax Certificate to Foster Diversity in Broadcast Ownership – Exploring the Proposals

Here are some of the regulatory developments of significance to broadcasters from 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 and FEMA conducted their annual Nationwide Test of the EAS system on Wednesday, August 11. All broadcasters should

Here are some of the FCC regulatory and legal actions of the last week of significance to broadcasters — with a quick look at the week ahead— with links to where you can go to find more information as to how these actions may affect your operations.

  • As protests and civil unrest over George Floyd’s killing roiled cities across the country, FCC Chairman Ajit Pai commended local broadcasters for their coverage of the events and their willingness to put themselves at personal risk to share these stories with America (News Release). Commissioner Starks called for more diversity in media ownership (News Release). We explained the minority tax certificate on our blog here.  The tax certificate has historically been one of the most effective means of promoting diversity in broadcast ownership.
  • The FCC issued a Public Notice setting out proposed lump sum payments for reimbursement of the costs for the relocation of authorized C-Band satellite earth stations following the repurposing of some of that band for 5-G wireless uses. The notice is scheduled to be published in the Federal Register on Monday, setting a June 15 comment deadline on the proposed payments.
  • The Media Bureau reminded LPTV and TV translator stations operating on channels 38, 44, 45 and 46 that they must cease operations no later than 11:59 pm local time on July 13, 2020. The July 13, 2020 date for cessation of operations is a hard deadline, tied to the end of the post-Incentive Auction transition period.  (Public Notice)
  • The Media Bureau opened a settlement window running through July 31 for applicants for new or modified LPTV stations or TV translators, originally filed in 2009, that had filed for new channels or new technical facilities because use of their old channels was preempted by the incentive auction repack.  Where more than one applicant applied for the same new channel in the same area, those applicants can file to make engineering changes to their applications (including, if no other solutions are possible, changing channels yet again) or to reach other settlements (including channel sharing) to resolve their conflicts by the July 31 deadline.  (Public Notice)(see our summary of both LPTV items on the Broadcast Law Blog).
  • The FCC released a list of 515 open proceedings from across its bureaus that it plans to close due to dormancy. A proceeding makes the proposed closure list when it requires no more action, no more action is planned, or no filings in the docket have been made for several years.  Interested parties can review the list and submit comments urging the Commission to either keep open or close permanently items that appear on the list.  (Public Notice)
  • The Media Bureau issued a decision reviewing Section 312(g) of the Communications Act which automatically cancels a station’s license if it has been silent for 12 months, absent special circumstances. The decision is particularly useful in explaining the special circumstances that can justify the preservation of a license, and the way that the FCC assesses the period that a station was silent.  (Letter)
  • Two Notices of Apparent Liability that came out of the Commission this week serve as good reminders during this license renewal cycle that you do, in fact, have to file an application to renew your license.
    • In one case, a Virginia AM station was hit with a $7,000 fine for failing to file for license renewal and then operating the station after its FCC authorization had expired. In the end, the Commission levied the fine, but also found that the station’s license should be renewed for a “short-term” two-year license term instead of the typical eight-year term.  (Notice of Apparent Liability)
    • In a second case, a Florida low power FM failed file an application for license renewal on January 27, 2020 that was due on or before October 1, 2019, without providing an explanation for the late filing. The Commission levied a $1,500 fine against the station and will consider the license renewal application at a later time.  (Notice of Apparently Liability)

Continue Reading This Week at the FCC for Broadcasters: May 30, 2020 to June 5, 2020

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

In a Further Notice of Proposed Rulemaking, the FCC last week asked for public comment on a series of initiatives to promote the ownership of broadcast stations by minorities and other Socially Disadvantaged Businesses ("SDBs").  These proposals, which include the potential for the sale without requiring any divestitures of clusters of radio stations which exceed the multiple ownership rules now in effect, and the potential for investors to invest in stations controlled by SDBs, even if such investment would otherwise violate the existing multiple ownership rules.  The Further Notice was issued in response to a petition filed over a year ago by the Minority Media Telecommunications Council, which asked for a withdrawal of the FCC’s Notice of Proposed Rulemaking on the Multiple Ownership Rules (which we summarized here) because that Notice did not address the promotion of minority ownership of broadcast stations.  MMTC claimed that the Third Circuit’s remand of the 2003 Multiple Ownership decision mandated that consideration.  Comments on the Further Notice, which will be resolved as part of the current multiple ownership proceeding, are due on October 1, and replies on October 15

The Notice raises a number of suggestions for regulatory changes to foster the ownership of broadcast stations by minority owners and other SDBs.  In addition to allowing the transfer of grandfathered radio clusters that no longer comply with the multiple ownership rules, these include specific proposals that would accomplish the following:

  • Allowing investment by exiting broadcasters and others with attributable media interests into companies controlled by minorities without the investment being counted against the ownership holdings of the investing company
  • Allowing minority groups to purchase unbuilt construction permits, and get sufficient time to construct those stations, even if the construction permit is otherwise to expire as it has been outstanding and unbuilt for over three years
  • Granting some non-minority owned companies waivers to exceed the multiple ownership limits if they sell stations to SDBs (including a proposal to create tradable credits for creating minority-owned stations)
  • Allowing for the waiver of the alien ownership limits if the investment by foreign companies would assist a minority-owned company in getting into the broadcast business.
  • Revival of the policies permitting minority distress sales (where a broadcaster against whom there were issues pending which could lead to a revocation of a license could sell their station to a minority group and avoid the revocation proceeding) and minority tax credits  (where a broadcaster who sells to a minority group could defer gains on sale if the money was reinvested into any broadcast company in the future)

Continue Reading FCC Proposes Multiple Ownership Exceptions to Foster Minority Ownership