REC Advisory Letter #5: Changes to the Assignment and Transfer of LPFM stations
Revision 5 - November 6, 2022
In the context of smaller noncommercial educational (NCE) broadcast stations, including Low Power FM (LPFM), an “assignment” is a transaction where the license is changed (assigned) to another nonprofit entity. A “transfer” is a transaction where the license remains where the license remains with the same entity, but there is a significant change in the persons that control the licensee organization.
The FCC, in MB Docket 19-3, made some significant changes to the rules regarding assignments of licenses and transfers of control (ALTC) where it comes to the LPFM service. The adoption of the new rules in this docket resulted in changes to the FCC forms used for such applications. These form changes, as well as other information collection processes were approved by the Office of Management and Budget. As a result, the revised rules were codified into the Code of Federal Regulations on October 30, 2020. This Advisory Letter is intended to communicate those changes. Some of these changes, such as the forms affect all radio broadcast services including NCE full-service, LPFM, commercial broadcasting, FM translator and FM booster.
Value of LPFM assignment transactions
Under the previous rules, the amount of consideration promised or received in an assignment transaction was limited to the depreciated fair market value of the equipment that will be sold to the assignee (the entity receiving the license). Under the new rules, this amount is now limited to the legitimate and prudent expenses reasonable incurred by the assignor or transferor (the entity that currently holds the license) in obtaining and constructing the station such as the expenses involved in preparing an application, in obtaining and installing the broadcast equipment to be assigned or transferred. Operations costs, such as electricity, rents, leases, music licensing, salaries, etc. cannot be recovered.
This would mean that the assignor can now ask for an amount up to the costs involved in what they actually paid for equipment. Our analysis of this rule is that if the assignor has received a particular piece of equipment (such as a transmitter) as a donation, then it can’t be considered. It is REC’s recommendation that an assignment of a higher dollar amount (such as more than $10,000) should include documentation, such as receipts to qualify the fact that the assignor did indeed pay for the equipment.
A legal gray area under this rule would be is if the equipment is being removed from a location to be moved to a different location where it will be installed at the assignee’s expense, whether the capital costs of the installation of the equipment can be compensated in the transaction. For this, we would suggest getting assistance from a qualified attorney. It is REC’s position that the assignor should not be able to be compensated for any construction costs incurred when the assignee would not be able to take advantage of the work product of such costs.
"Zero dollar" transactions and "bare licenses"
A considerable number of LPFM assignment applications are merely donations from one organization to another and usually do not involve an Asset Purchase Agreement or similarly worded contract. These transactions usually involve the donation of not just the license, but also the equipment such as the transmitter, antenna, etc. The FCC does have a "bare license" policy which prohibits assignments of just the license and nothing else. To prevent any issues with the FCC on an assignment application, there should be some equipment changing hands in the transaction.
On applications for assignment that are zero dollar and does involve the donation of the transmitter or other equipment, an exhibit should be included that reads something like:
This is a "zero dollar" transaction. There is no written agreement. No consideration will be received nor is promised in connection with the assignment of this station, including tangible equipment which will be used in connection with the operation of this station by the proposed assignee.
REC Networks will no longer accept any requests for an assignment of license unless it is accompanied by a written agreement or asset purchase agreement detailing the transfer of tangible equipment from the assingor to the proposed assignee, even if there is no consideration involved in the transaction.
Waiting period prior to an assignment of an LPFM license
Under the previous rule, there was a hard, three-year period before a license could be assigned to a different organization. The three-year clock starts on the date that the original license to cover application was granted. The three-year date could be extended out if the station was silent for any portion of that three-year period. In addition, during the original construction permit period, construction permits could not be assigned. This rule was put into place to prevent trafficking of construction permits and licenses.
Under the new rule, most licenses can be assigned once the license application has been granted. For about 90 LPFM stations which, in the 2013 window were subject to a comparative review of points, then there is a four year holding period in which during those first four years, exclusive of silent periods, in order to assign the license within the first four years of licensed operations, the assignee must be able to qualify for the same number of points awarded to the station and in cases where a tie-breaker was done and there was involuntary time sharing imposed, the assignee’s organization must have a local presence date that is older than the “youngest” organization that was in the time share group at the time the involuntary time share was awarded.
For the sake of the next LPFM filing window, construction permits for original facilities cannot be assigned or transferred for the first 18 months from the day that the original construction permit was granted. After 18 months, the permit can be assigned to another organization. For LPFM stations that were granted based on comparative review of points, the “4 year rule” policy mentioned in the previous paragraph would also apply to assigning construction permits.
LPFM stations in MX groups where points were aggregated but still resulted in an applicant being dismissed for a lack of points would be considered at their pre-aggregation score. MX groups where all members aggregated their points and no one was dismissed is considered a universal settlement and therefore, there would be no waiting period.
On assignment applications, applicants will need to answer questions on the form certifying that the application complies with §73.865 of the rules through one of the following methods:
- The license originally a singleton application and was never in a MX group. (no wait)
- The license was originally from the 2000/2001 “first generation” filing window series. (no wait)
- The license was originally part of an MX group but was made singleton by settlement or dismissal prior to the FCC point review. (no wait)
- The license was originally part of an MX group but was made singleton through an amendment made during the MX settlement process. (no wait)
- The license was originally part of an MX group but all parties in the MX group settled through moves, dismissals or a voluntary time share schedule and no other applicants were dismissed as non-tentative selectees. (no wait)
- The license was originally part of an MX group that went through a comparative review and from the date that the original license to cover application was granted, exclusive of silent periods, at least 4 years has passed. (no wait)
- The license was originally part of an MX group that went through a comparative review (which resulted in other applications being dismissed as non-tentative selectees) and 4 years from the grant of the original license to cover, exclusive of silent periods has not passed. In this case, the 4-year rule would apply and the statement will need to include a review of the points the assignee organization qualifies for versus the points assigned to the original licensee. If the group had more than one grant as a tie breaker, then the assignee’s local presence date must be longer than the station that was in the group (at the time when the points were awarded) that had the “youngest” local presence date. In this case, an attachment should also be included to demonstrate the assignee's qualifications for points under the point system.
REC has a list of the LPFM stations that were subject to comparative review and subject to the 4 year rule, plus the main studio and local programming pledges at https://recnet.com/pledges.
From the 2013 LPFM filing window, REC has two different sets of pages that show each station in an MX group, their points claimed (not necessarily their points awarded), their local presence date and a log of events from the MX process. In the 2013 filing window, there were three MX remediation windows for different parts of the country. These URLs may change prior to the next LPFM filing window.
- Window 1 – applications – history
- Window 2 – applications – history
- Window 3 – applications – history
Changes in the board members of an LPFM organization
The FCC has clarified the rule regarding transfer of control applications involving situations where the makeup of a station’s board of directors makes a sudden or gradual change of over 50 percent from the last time the licensee reported to the FCC. As long as the mission of the entity remains the same, the board member change can take place, but a pro forma transfer of control application must be filed within 30 days of the final event that caused the LPFM station’s board to exceed the 50 percent threshold.
ALTC applications filed on or after November 18, 2020
The FCC has converted ALTC forms 314, 315, 316 and 345 (the latter used for FM translators) from CDBS to LMS. To file an application using LMS, access your record using your FRN and password. On the “Facilities” tab, select your facility. On the “File an Application” pull down, there will be new choices. Those that will be used by LPFM stations include:
- Assignment of Authorization non-pro forma (when changing the licensee to a different organization).
- Transfer of Control pro-forma (when changing the board members).
(It is important that you select the correct option as there are pro forma and non-pro forma options for both assignments and transfers.)
From there, you can follow the flow. If the LPFM station has commonly-owned FM translators or FM boosters, you only need to file one application, but the form will have a place to enter those additional facilities in.
With the change from CDBS to LMS, the FRN for the assignee must now be obtained prior to filing as the new form now asks for the FRN up front. In this past, the FRN for the assignee was added on the Consummation Notice.
ALTC applications filed before November 18, 2020
For applications filed before November 18, 2020, he public will need to use the FCC’s CDBS Public Access to view the application. You can also retrieve the application in REC’s FCCdata.org website.
After November 18, 2020, these forms will not be accessible for filing (they will still be for viewing). The FCC has advised us, in our November 9, 2020 consultation, that if any amendments need to be made to any pending pre-November 18, 2020 assignment or transfer applications, those changes need to be e-mailed to Annette Smith at the FCC so the applications can be manually amended. Unlike how the FCC handled pending modification applications, the ALTC applications will not “flow” into LMS and therefore, the amendments must be done through this e-mail process and new ALTC applications must go into LMS.
Filing consummation notices
A consummation notice is filed after the ALTC application has been granted by the FCC and the actual transaction of the action takes place. This will let the FCC know that the transaction is completed and for assignment applications, it will officially move the license from the assignor’s organization to the assignee’s organization.
For ALTC applications originally filed in CDBS (prior to November 18, 2020), the FCC stated in our November 9, 2020 consultation that the Consummation Notice form will still be active in CDBS (it’s in the “non-form forms” menu).
For ALTC applications filed in LMS on or after November 18, 2020, the consummation notice will be filed in LMS.
ALTC checklist for LPFM applicants
Since LPFM has some very specific rules for ALTC, we need to point out some of the additional statements and certifications each application will need in both CDBS and in LMS:
Assignment applications involving a new organization with a different mission.
Pro forma transfer of control applications only changing board members.
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For more information
For legal questions, please contact your attorney. With other questions including information not construed as legal advice, please contact REC Networks. REC can handle transfer of control applications. We can also handle most assignment applications, however, we will not be able to draft Asset Purchase Agreements as those are binding contracts that must be drafted by attorneys.
- §73.865 – LPFM Assignment and Transfer rule
- §73.853 – LPFM localism rule
- §73.855 – LPFM multiple ownership rule
- §73.858 – LPFM attributable interest rule
- §73.860 – LPFM cross-ownership with other broadcast facilities rule
- §73.872 – LPFM point system/mutually exclusive application handling
- FCC Public Notice: ALTC Applications Available in LMS
- FCC Public Notice: Interim process for filing FCC Forms 314, 315 and 340
This Advisory Letter contains some interpretations and positions that have either not been reviewed by a qualified attorney nor tested in case law. This document does not replace the services of a qualified attorney and therefore does not construe legal advice. Only a qualified attorney can provide legal advice.
Originally written on November 10, 2020.
Last revised October 14, 2022.
Michelle Bradley, CBT at REC Networks.
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Revision 1 (11/19/2020): Assignee's FRN is now indicated on the assignment application instead of the Consummation Notice.
Revision 2 (02/04/2021): Consummation notices for LMS filed assignements/transfers are also filed in LMS.
Revision 3 (04/22/2021). Clarifies that "point system" questions appear on the Assignment form and in most cases, replace the need for a separate statement.
Revision 4 (10/14/2022). Additional guidance regarding "zero dollar" assignment applications with no written agreement and notice of the FCC's "bare license" policy.
Revision 5 (11/6/2022). Adds a new REC Networks policy regarding acceptance of assignments of license through the requirement of a written agreement or asset purchase agreement, regardless of whether or not there is consideration for the proposed tranaction.