For the first time in a decade, a bill has been introduced in Congress that would revive the tax certificate program, which would give tax breaks to companies that sell a radio or television station to a minority- or women-owned business. The proposed Expanding Broadcast Ownership Act would also authorize a pilot incubator program at the Federal Communications Commission.
“In today’s omnipresent media environment, the need to increase diverse voices that can contribute to the dialogue has never been more important,” Rep. G.K. Butterfield (D-NC) said. “My bill that bolsters the FCC’s reporting requirements, revives a tax certificate program, and empowers the FCC to assist historically disadvantaged groups is an important step forward in encouraging new entrants into the broadcast industry.”
The tax certificate program was created in 1978 and it remained in place until 1995 when abuses led Congress to abolish the effort. But it never lost support among broadcasters and media activists who frequently called for its resuscitation. The last time legislation was introduced was in 2007, and while it drew no opposition among lawmakers, there was also limited support with lingering fraud concerns that had sidelined the program earlier.
The latest proposal has a similar goal as its earlier incarnations that gave a seller a break on capital gains taxes; the new program, crafted by Butterfield, has embraced an idea first floated by the Multicultural Media, Telecom and Internet Council and has designed it as a tax deferral program. In order to qualify, the buyer must be a company where the controlling stake is held by a woman or a minority. The bill proposes a limit be placed on how large a sale could be in order to qualify for a tax break. And it also proposes that the buyer be required to own the station for an unspecified period of time. Both details would be filled in through a FCC rulemaking.
Allegations of abuse may’ve scuttled the tax certificate two decades ago and Butterfield believes an increased emphasis on reporting will help avoid that problem this time. He proposes the FCC be required to file a report to Congress each year detailing which sales qualified for a tax certificate. And using biennial Form 323 ownership reports, the agency would be required to submit data on how many stations are owned by women and minorities every two years. Then every five years the FCC would be required to assess to Congress how the program is affecting ownership levels. And if the program isn’t reauthorized by Congress, it would automatically come to an end 16 years after the bill is signed into law.
Butterfield has also proposed the FCC create an incubator program to help give broadcast diversity a shot in the arm. But he is leaving the specifics of how that incubator would operate to the FCC to determine as part of its rulemaking. Some proposals that have circulated in recent years would give a broadcaster special permission to exceed ownership caps in a market in exchange for helping a woman- or minority-owned company get off the ground with financial and technical support.
FCC commissioner Mignon Clyburn has championed a revival of the tax certificate program for years and she thinks Butterfield has “hit the nail on the head when it comes to proposing solutions for a more inclusive media landscape.” Giving tax breaks, along with the creation of a pilot incubator program, were two ideas she recently proposed as part of what she’s calling her Solutions 2020 Call to Action Plan. “Transforming the dismal reality of the present ownership landscape, into a future that offers abundant opportunities for women and minorities will not be an easy task,” Clyburn concedes. But she says the proposal is “an important step” toward greater broadcast ownership diversity.
The National Association of Broadcasters quickly threw its support behind Butterfield’s bill on Wednesday. “Broadcasters have long supported market-based solutions that expand the diversity of voices at radio and television stations, and NAB has worked with partners from across industries to help women and minorities achieve their dreams of station ownership,” NAB spokesman Dennis Wharton said. Beyond simply supporting the proposal Wharton said the NAB will also lobby members of Congress to quickly pass the legislation.
During the tax certificate’s previous 17-year existence, it helped minority radio ownership rise from just 40 radio and TV stations in 1978 to 288 radio and 43 TV stations by the time Congress pulled the plug in 1995, according to the FCC. That was accomplished through the issuing of 287 tax certificates to radio stations and 40 certificates to television stations.
But in the wake of consolidation, the number of minority owners has declined in recent years. The FCC says just 7% of FMs are owned by women with less than 3% of FM licenses held by minority broadcasters. Butterfield says women and minority ownership is as much as 20-times higher in other industries compared to radio and TV.