Top FCC officials asked federal lawmakers on Tuesday to resurrect an agency regulation that once gave broadcasters and cable TV system owners a huge financial incentive to sell media properties to minorities.
Under the so-called tax-certificate policy, which was on the agency books from 1978 until 1995, media property owners who qualified for the sales could duck capital gains tax on the transactions.
The policy was intended to help the agency meet its legal obligation to ensure diversity in media outlets. But the regulation was thrown out by a Republican-controlled Congress in 1995 for allegedly being abused.
“Congress could be helpful by reinstating a version of the tax certificate law,” said Robert McDowell, a Republican FCC commisioner, during an oversight hearing before the House Communications and Technology Subcommittee on Tuesday.
“It was flawed but it could be improved upon, and I have long advocated that,” said McDowell.
Jessica Rosenworcel, a Democratic FCC commisioner, said that she agreed with McDowell.
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“The minority tax certificate program . . . was one of the most effective ways of promoting diversity of ownership,” said Jessica Rosenworcel, a Democratic FCC commissioner.
Outside the hearing room, other interested parties also voiced support for a revival of the tax certificate policy.
“This is one federal program that worked exactly as it was intended to,” Dennis Wharton, a spokesman for the National Association of Broadcasters, told TheWrap.
But Andrew Schwartzman, a longtime public interest attorney, told TheWrap that the prospects for congressional action are slim.
“Unlikely soon,” Schwartzman told TheWrap. “Because Congress isn’t passing much of anything.”
Schwartzman also said the percentage of stations owned by minorities has been on a decline for years, as minorities have sold station properties and the pool of bargain-basement-priced properties fueled by tax certificate incentives has evaporated.
“It’s generally argued that the tax certificate policy had created a lot of minority owners and that channel was shut out,” Schwartzman said.
Minorities owned 40 cable and broadcast properties in 1978, while they controlled about 350 in 1995, according to a 1998 study.
The number of media properties currently owned by minorities was not immediately available, according to an FCC spokesman.
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The FCC is currently researching what impact changes in its media ownership regulations might have on minority ownership — because the Federal Appeals Court for the Third Circuit in Philadelphia ordered the agency to do so.
The court’s directive was included in its July 7, 2011, decision striking down an effort by the FCC to loosen a regulation to permit a single company to own both a daily newspaper and broadcast stations in the same market. The appeals court said the FCC had not followed proper procedures allowing the public to comment on the proposed change in its cross-ownership prohibition.
The Supreme Court on June 29 declined to review the appeals court decision, offering no comment on why it refused to accept the case.
Under the law, the FCC is required to review its ownership rules every four years. The agency’s latest review, which is expected to include the FCC’s findings on minority ownership, is due by the end of the year.