73.865
Part 73, Subpart G, Section 73.865 is a regulation for the Low Power FM (LPFM) radio service concerning the assignment and transfer of LPFM construction permits and licenses.
Assignments
When an Assignment application is filed
An assignment of license or construction permit is done when an organization wishes to transfer the station to a different qualifying nonprofit educational organization. The incoming organization, also referred to as the "proposed assignee" must meet all of the qualifications to be a noncommercial educational licensee and must submit an educational statement that describes the organization, its educational objectives and how the radio station will advance those educational objectives.
An assignment of license is also necessary if the licensee internally changes their corporate structure from one entity to another. For example, if the licensee's organization is currently a Delaware corporation and now they need to change to a Florida corporation, even though the organization name and board members remain the same.
The assignment of unbuilt original construction permits
Following the grant of the original construction permit for the LPFM station following the outcome of the filing window, that unbuilt construction permit is not valid for assignment until 18 months has passed from the application grant. This rule permits LPFM grantees in the filing window a period of time to build the station and if after 18 months, they are unable to do so, then they can assign the construction permit to a different organization who will have the remainder of the three year construction period to complete the construction. The assignment of an unbuilt construction permit is not a valid justification for tolling the construction permit past its original expiration date. The facility is still expected to be built and on the air within 3 years of the original grant.
LPFM stations originally awarded through the point system
When more than one application filed during the LPFM filing window is conflicting (or "mutually exclusive", or "MX"), the FCC will provide an opportunity for conflicting applicants to reach a settlement agreement or to unilaterally make a technical change to break the application out of the conflict. If no changes are made during this settlement period, then the conflicting applications will go to a point system which then decides which applicant(s) will be granted the construction permit.
If an LPFM station's original construction permit was granted using the point system, then there is a holding period of 4 years from the date that the license (post-construction) application was granted to the first day when an assignment application can be filed. However, if the LPFM station was granted in the point system and 4 years has not passed, the LPFM licensee can assign the station to another organization if it could be shown that if the proposed assignee did file an LPFM application during the filing window that they would have achieved the same number of points as the assignor's LPFM station. If there was a tie during the filing window and multiple construction permits were granted as part of a time share agreement, then the proposed assignee must have been consistently locally established in the community since a date that is earlier than the local establishment date of the member of the MX group that has the latest of such dates (e.g. the youngest of the organizations).
If the original LPFM construction permit had no conflicts from the start, made a technical change to break out of the MX group or reached a settlement agreement after the filing window with the other conflicting applications (where points were not used to dismiss another application), then there is no holding period.
Sale price of station
The assignor can receive remuneration (compensation) in connection with the assignment of the station. However, that compensation is limited to legitimate and prudent expenses that were reasonably incurred by the assignor and for which the the proposed assignee will be able to enjoy. This can include equipment purchases for the transmission equipment (antenna, transmitter, EAS decoder, etc.), studio equipment (mixing console, microphones, computers, tape/record players, etc.) as well as construction costs associated with those items. The costs can be up to the price actually paid by the station for the equipment or services. Therefore, if an item, such as a transmitter was received as a donation to the station, the cost of that transmitter cannot be considered.
Compensation cannot be accepted for costs incurred in the operating of the station such as rent, salaries, utilities and music licensing fees. In addition, there is a grey area of the rule in respect to exchanging real estate (land and structures) where the land or structures would be used for reasons other than broadcasting the LPFM station.
Any additional compensation for non-broadcast related tangible goods as well as "in kind donations" or any other amount above the reasonable and prudent one time expenses by the assignor cannot be claimed nor can the assignee receive compensation.
The bare LPFM license itself has zero value.
When compensation is involved, the assignor should draft an Asset Purchase Agreement that sets out the terms of the sale. Such a document should be prepared by a qualified attorney that specializes in FCC regulatory issues.
Public Notice requirement
When an assignment application is filed, the current licensee (also referred to as the "assignor") must carry public notice messages over the air for a period of 30 days to advise the general public about the proposed assignment. In that 30 day period, members of the public can comment through a Petition to Deny or Informal Objection as to why the proposed assignee should be the licensee of the station. Because of this, applicants should expect at least a 30 day delay on assignment applications. In fact, the average assignment takes about 45 to 60 days to be granted.
Consummation Notice
Once an assignment application is granted, then the transaction of transferring the station to the assignee can take place. Once the transaction takes place, then the assignor will file a Consummation Notice with the FCC, which will formally transfer the station to the assignee. If the time from the grant of the assignment to the actual completion of the transaction is expected to take more than 30 days, then the assignor can request to extend the consummation. If the agreement between the assignor and assignee is dissolved and the assignor keeps the station, then a Notice of Non-Consummation needs to be filed with the FCC. Once the consummation is completed, the assignee has full control over the station and the assignor is absolved from any further responsibility from the station.
Transfer of Control
In LPFM, a pro forma Transfer of Control is filed whenever there is more than a 50 percent change in the board members of the organization. This can be a sudden change or it can be a gradual change. In the case of gradual changes, an example would be is there is a board of directors with 5 members and two members leave the board and are replaced, this will not trigger a transfer of control, but if a year later, an additional member, who was not one of the two recently added leaves the board and is replaced, then a transfer of control is triggered. As a point of reference, the gradual change would be based on the board members disclosed in the original construction permit application, an assignment application or a previously-filed transfer of control application, whichever occurred last.
In the Transfer of Control application, it needs to be noted, which board members have left, which are added and who is staying on. The application will require the entry of the percentage of votes each board member has. In most cases, each board member would have an equal vote (in our previous example where there are 5 board members, each board member has 20% of the vote). In cases where some board members have a weighted vote, then those percentages must be disclosed. The 50% trigger is based on the voting percentage.
A Transfer of Control is a change within the same nonprofit organizational entity. As such, there is no need to submit a new educational statement or make public notice messages over the air. The new organizational structure must follow the appropriate state law for the minimum number of board members.
The actual board member change can take place prior to the filing of the Transfer of Control application, but the Transfer of Control must be submitted to the FCC within 30 days of the change. A Consummation Notice is not necessary in the case of granted pro forma Transfer of Control applications.
Organization name changes
If an organization is simply changing their name where they are not a separate corporate entity in the eyes of the state and there is no change in the ownership or control of the station, then an application for an Administrative Update needs to be filed in LMS. This type of change does not fall under an assignment or transfer of control.
Regulatory history
Prior to 2007, LPFM stations were not permitted to assign or transfer their licenses as reflected in the original 2000 LPFM Report and Order. In 2007 as a part of the Third Report and Order, LPFM stations were permitted to assign or transfer their licenses and receive compensation for the depreciated fair market value of any physical equipment or facilities and there was a three year holding period from when the original license (post construction) was granted until the station could be assigned. In the 2020 LPFM/NCE Administrative Order, the rules were amended to allow LPFM stations to receive compensation for the fair and prudent expenses incurred (as opposed to depreciated fair market value). Assignments of "failing" construction permits after 18 months of validity was permitted. The three year holding period was replaced by a four year holding period and only in cases where the grant of the original construction permit was based on the point system.
Federal Register citation
85 FR 7889, Feb. 12, 2020
Text of regulation 47 CFR §73.865
§ 73.865 Assignment and transfer of LPFM permits and licenses.
(a) Assignment/transfer. No party may assign or transfer an LPFM permit or license if:
(1) Consideration promised or received exceeds the legitimate and prudent expenses of the assignor or transferor. For purposes of this section, legitimate and prudent expenses are those expenses reasonably incurred by the assignor or transferor in obtaining and constructing the station (e.g., expenses in preparing an application, in obtaining and installing broadcast equipment to be assigned or transferred, etc.). Costs incurred in operating the station are not recoverable (e.g., rent, salaries, utilities, music licensing fees, etc.);
(2) The assignee or transferee is incapable of satisfying all eligibility criteria that apply to a LPFM licensee; or
(3) For a period of time commencing with the grant of any construction permit awarded based on the comparative point system, § 73.872, and continuing until the station has achieved at least four years of on-air operations:
(i)
(A) The assignee or transferee cannot meet or exceed the points awarded to the initial applicant; or
(B) Where the original LPFM construction permit was issued based on a point system tie-breaker, the assignee or transferee does not have a “locally established date,” as defined in § 73.853(b), that is the same as, or earlier than, the date of the most recently established local applicant in the tied mutually exclusive (MX) group.
(ii) Any successive applicants proposing to assign or transfer the construction permit or license prior to the end of the aforementioned period will be required to make the same demonstrations. This restriction does not apply to construction permits that are awarded to non-mutually exclusive applicants or through settlement.
(b) Name change. A change in the name of an LPFM permittee or licensee where no change in ownership or control is involved may be accomplished by written notification by the permittee or licensee to the Commission.
(c) Holding period. A construction permit cannot be assigned or transferred for 18 months from the date of issue.
(d) Board changes. Notwithstanding the other provisions in this section, transfers of control involving a sudden or gradual change of more than 50 percent of an LPFM's governing board are not prohibited, provided that the mission of the entity remains the same and the requirements of paragraph (a) of this section are satisfied. Sudden majority board changes shall be submitted as a pro forma ownership change within 30 days of the change or final event that caused the LPFM permittee or licensee to exceed the 50 percent threshold.