Citizens for Equity in Taxation has filed a petition to deny the sale of radio stations from Cox to SummitMedia and Connoisseur Media on grounds that ultimately its members, and indeed, all citizens of the US will have to pay more taxes to make up for taxes potentially avoided by the dealing parties.
The FCC first determined that CET lacks standing to file against the deal, but discussed the petition regardless and said it would have failed anyway.
To briefly recap the transactions, Cox proposes to sell 22 stations in Birmingham AL, Greenville-Spartanburg SC, Honolulu HI, Louisville KY and Richmond VA to SummitMedia for $66.25M; and three stations in three Connecticut markets to Connoisseur for $40M.
CET believes that Cox may structure the deal as a like-kind exchange and thus avoid paying taxes, and fears the rest of us will see our tax burden go up as a result.
To have standing, the petitioner must prove damage, link it to the action being challenged and demonstrate that granting the petition will cure the damage. The FCC said traditionally, the petitioner must be an in-market competitor suffering signal interference or economic harm, or a resident in a challenged station’s service area.
There is no provision for a group like CET that is acting as an advocate for citizens focusing on a non-broadcast matter, in this case taxation. The FCC noted that CET belatedly put forth members living within earshot of the stations, but that this action was late and therefore there was no standing and the matter was ripe for dismissal.
But the FCC explained how it would have ruled, and the result is still a dismissal.
The FCC said that the tax code is set up by Congress and administered by the IRS; and as a matter of precedent, at no time has the FCC ever objected to participants in a broadcast taxation take advantage of any instruments legally provided under the laws of the United States.
The lack of any broadcast-specific objections from CET is reason enough, said the FCC, to deny the petition.
Both deals have now been officially approved.
RBR-TVBR observation: There is a time lag in broadcast license transactions that does not exist in most other types of business deals. That is because the FCC is required to review all such transactions – and that takes time.
As readers of the RBR-TVBR Deal Tips and Contract Closeup essays from Garvey Schubert Barer attorneys Erwin Krasnow and John Pelkey and their collaborators know, the lag in striking and closing a deal leads to all sorts of headaches that subtle contract writers seek to provide for.
When a petition to deny is tossed into the mix, it can really slow things down, opening the door to all sorts of problems that can threaten the deal and disrupt the business plans of the parties engaged in the deal.
The FCC is to be commended for its swift and fair action to dispense with this bald-faced attempt to hijack the FCC transaction review process for the purpose of litigating a completely unrelated matter.