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DC policy fights intensify over STELA, taxes and royalties

 - FCC puts hold on plan to monitor newsrooms

The Pay-TV industry is turning up the heat on Congressmen with jurisdiction over the telecommunications industry and asking for an early Christmas haul with a long list of demands they want addressed in a pending reauthorization of satellite TV legislation.

The Satellite Television Extension and Localism Act (STELA) is due for a five-year reauthorization at the end of this year.  The law addresses matters specific to satellite TV operators.

Local broadcasters have long expected the Pay-TV industry would abuse this renewal as an opportunity to gain unfair advantage over them in retransmission consent negotiations.  Indeed, the goodies Pay-TV wants Congress to wrap up for them would, in part:

  • Move local broadcast stations from the basic cable tier to a more expensive tier
  • Gut the retransmission consent system in part by eliminating the sweeps-week rule and prohibiting joint representation of stations under JSAs or SSAs in retransmission consent negotiations

“Broadcasters throughout the country have been weighing in on the negative impact these provisions would have on viewers and local communities,” said TAB President Oscar Rodriguez.

“These measures do nothing but line the pockets of Pay-TV monopolies by requiring their customers to pay still more for their local news, weather and emergency information, as well as their favorite TV programming, and by hurting local stations’ ability to be properly compensated for that programming.”

“This is a TV tax, pure and simple.”

Tax rewrite discussion unfolding
A long-rumored proposal to rewrite the nation’s tax laws came to fruition last week when the chairman of the House tax-writing committee unveiled a “discussion draft” of changes that would not generate much additional revenue but, he says, would promote greater economic activity.

Among the proposals is a drastic change to how businesses deduct advertising costs – a key business input that has been deductible since the income tax was first enacted.

Under the change, businesses would deduct 50 percent of their advertising costs immediately and then amortize the remaining 50 percent equally over the five ensuing years.  The first million dollars in advertising costs would be exempted from taxation.

The ad tax proposal reportedly stems from a working group of 25 large multinational corporations.

“While we understand this is a discussion draft, and not pending legislation, the proposal on advertising costs is extremely worrisome,” Rodriguez said.

“What may be helpful to large multinational corporations does nothing to help local businesses that need to deduct the cost of their mattress sale ad buys in the year they sold the mattress, not five years down the road.”

Broadcasters and other players in the advertising industry are educating lawmakers on the impact of the proposal while also assessing the overall impact of the proposed tax rewrite on their businesses and the economy as a whole.

Another push on music royalties
A pair of House members from Georgia and New York last week introduced legislation designed to increase the rates that songwriters are paid when their music is played on local radio stations and other platforms.

The bill is expected to contain two key provisions:

  • When setting public performance rates for songwriters, the measure allows rate court judges to consider the fees paid to artists. Under current law, the rate court is prohibited from considering artists fees – which are significantly higher than those paid to songwriters – in determining a fair market rate for songwriters.
  • The bill changes the rate standard used by the Copyright Royalty Board to set rates paid by the record labels to songwriters. The rate standard would be changed from the current 801(b)(1) standard to a “willing buyer, willing seller” standard that generally is perceived to favor the copyright holder.

Ongoing tension between songwriters and artists, as well as dissatisfaction by the RIAA with the measure absent larger reforms in music licensing, makes it unlikely the measure will advance on its own.

On the question of whether lawmakers should adopt a Performance Tax on radio stations, opposition to such a measure grew this past week with the addition of several co-sponsors to HConRes 16, co-authored by Texas Congressmen Mike Conaway, R-Midland, and Gene Green, D-Houston.

“We continue to line up supporters and march toward the majority of 218 House members needed to forestall a measure,” Rodriguez said.

To date, 201 members have signed on, with Texas leading the count among the 50 states.

FCC pulls back on newsroom monitoring
The subject of scorn from journalists and both sides of the aisles in Congress, the FCC has dropped its plan to place official monitors in broadcast newsrooms.

The so-called Critical Information Needs study was ostensibly planned to help identify for Congress barriers to entry into the communications marketplace.

TAB’s DC counsel, Scott Flick with Pillsbury Winthrop Shaw Pittman offers this insight into the debacle.

Questions?  Contact TAB's Oscar Rodriguez or call (512) 322-9944.

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