Resurrecting Minority Tax Certificate Not a Cure-All, Says ACDDE Event Panel

A restored minority tax certificate would be a useful tool for minority and female would-be broadcast station owners, but the main barrier is lack of access to capital, agreed panelists at the FCC Advisory Committee on Diversity and Digital Empowerment’s virtual symposium Friday. “We have to look at how you create more access to investment capital and other instruments that will allow owners to have the resources to participate in this industry,” said Sara Lomax-Reese, CEO of AM station WURD Philadelphia.

A minority tax certificate can make minority and female buyers more visible to sellers and persuade sellers who might otherwise be reluctant, but that’s the extent of it, the panelists said. Perry Broadcasting CEO Russell Perry, who bought his first station when the original tax certificate was in place, said it likely made the deal more attractive to the seller but didn’t bring the price down or otherwise affect the sale. “It’s helpful in getting to the table,” said Multicultural Media, Telecom and Internet Council President Maurita Coley. “Sellers are economic creatures. They want to get the most dollars they can,” said Emmis Communications CEO Jeff Smulyan.

The minority tax certificate -- which provided station sellers a tax break on capital gains when the buyer was a minority -- was eliminated in 1995, but a bill sponsored by Rep. G.K. Butterfield, D-N.C., to resurrect it has been progressing through the House (see 2009090068). The original version “quintupled” minority ownership, said MMTC Senior Adviser David Honig.

To short-circuit possible legal challenges, the proposed new certificate would apply to those selling to “socially disadvantaged individuals” -- people subjected to bias because of gender or race -- rather than specifically to racial minorities, Honig said. It would also require the FCC to set a period of two or three years for the buyers to hold the station, and be valid only for deals of $50 million or less, he said. Another bill, sponsored by Rep. Greg Walden, R-Ore., would bring back a broadcast incubator program struck down in the Prometheus IV 3rd U.S. Circuit Court of Appeals decision (see 2004170065), said House Communications Subcommittee Chief Counsel Kate O’Connor. An incubator program enacted through legislation would be more insulated against legal challenges, she said.

The lack of capital for station deals doesn’t affect only diverse owners, several lender panelists said. With the ongoing COVID-19 pandemic, it's impossible for broadcasters and banks to have a clear picture of a station’s future prospects or value, said ACDDE member Garret Komjathy, U.S. Bank senior vice president-media and communications. That makes financing unlikely, he said. Pandemic aside, the lack of capital in the broadcasting space in general is “appalling,” said Smulyan.

Small, independent broadcasters face other challenges as well, Smulyan said. Black-owned broadcaster Circle City had difficulty obtaining carriage (see 2008110060), and competition with much larger companies is “very challenging,” he said. The key for smaller, independent broadcasters is to find a niche and do it well, said Lomax-Reese: “It’s not easy at all, but it can be done, and you have to be really, really scrappy.”