Sen. John McCain (R-Ariz.) is trying to help minorities and small businesses to
get into the media business.
Last week, the Commerce Committee's ranking Republican introduced legislation
that would give owners of telecommunications properties incentive to sell to new
and small business owners by allowing deferral of taxes on capital gains.
His bill comes as many policymakers are increasingly worried about the wave
of media consolidation and its impact on media diversity. The likelihood of the
relaxation of media-ownership limits by the Federal Communications Commission is
also fueling concern about a new round of consolidation.
The tax break is needed, McCain said, because small business generally must
pay cash, while big media owners prefer tax free stock swaps that only large
companies can arrange. Introduced in the waning days of the current session,
McCain's bill is little more than a model for legislation that will be
reintroduced in the next Congress.
McCain's plan calls for deferral of up to $250 million in capital gains over
three years from any one transaction and $84 million in any one year.
Eligible purchasers must be new industry entrants, small businesses and other
socially and economically disadvantaged businesses, as defined by the Treasury
The tax benefits can be recaptured by the government with a 20 percent
penalty if the business is resold within three years, unless the second buyer
also qualifies as an eligible buyer.
A similar tax-break law in place until 1995 covered only broadcast and cable
properties, but McCain's bill also grants breaks for sales of telephone and
Internet businesses. Congress killed the previous program, created in 1975,
after allegations of abuse. The tax-recapture provision is intended to stem
opportunities for small owners to "flip" the businesses to larger buyers without
actually running them.
Despite the problems, the previous program helped minorities to buy 288 radio
stations, 43 TV stations and 31 cable companies.
"The previous tax credit accounted for two-thirds of minority-owned stations. We miss it," said David Honig, executive director of the Minority
Media Telecommunications Council.
FCC chairman Michael Powell, who repeatedly has advocated reviving the tax
credit, also praised McCain's legislation. The National Association of
Broadcasters and the National Cable & Telecommunications Association endorsed the bill, as well.