FAQ: Can a LPFM (or full-service NCE) station be licensed to a "Social Purpose Corporation"

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A few states including California, Florida and Washington now recognize "Social Purpose Corporations".

A Social Purpose Corporation is a "hybrid" of a for-profit corporation that has also has a social purpose which would be attractive to social investors and foundations. Since a Social Purpose Corporation does have that "for-profit" element and can engage in activities that are in direct competition with for-profits, the corporation would not be eligible for tax exemption under §501(c)(3) of the IRS code. Social Purpose Corporations can issue stock and distribute profits to shareholders.

47 USC §397(6) of the Communications Act states that a noncommercial educational broadcast station is owned and operated by a public agency or nonprofit private foundation, corporation or association.

47 USC §397(8) further defines "nonprofit" as a foundation, corporation or association, no part of the net earnings of which inures, or may lawfully inure to the benefit of any private shareholder or individual.

Because a Social Purpose Corporation is capable of earning a profit and has the ability to distribute profits to a shareholder, officer or other individual, it would not meet the definition of "nonprofit" under paragraph 8 of section 397 above.

Therefore, it is REC's conclusion that a Social Purpose Corporation would not be eligible as a licensee of a noncommercial educational broadcast station including LPFM stations.

This advice of course should be checked with an attorney(s) who specializes in FCC law as well as corporation law for the state that the entity is proposed to be incorporated in.

Even if a Social Purpose Corporation is allowed to be a licensee, that would not mean that they could use an LPFM station to broadcast commercial programming.

REC Note: This answer has not been vetted through a qualified attorney and is based on analysis of various regulations, statutes and other factual information about the subject matter. This information should not be construed as legal advice. Only a qualified attorney can provide legal advice. If you use the advice that REC provides, you do so at your own risk.

LPFM eligibility and ownership questions
Answer Date: 
Wednesday, July 25, 2018