THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, March 11, 1995 TAG: 9503100012
SECTION: FRONT PAGE: A10 EDITION: FINAL
TYPE: Opinion
SOURCE: By FLOYD G. BROWN
LENGTH: Medium: 75 lines
Citizens United has filed papers with the Federal Communications Commission urging the commission to reject a key part of Viacom International's proposed sale of its cable television systems. We oppose Viacom's application for a special tax certificate that would provide the multimedia conglomerate some $500 million in tax breaks because the sale is purportedly being made to a ``minority-owned'' business.
Such preferences should be declared unconstitutional under the equal-protection component of the Fifth Amendment. Imagine the outcry from the liberal establishment if the policy were reversed, providing similar racially exclusive benefits to white males. Hollywood's liberal elite, of which Viacom is a part, would be among the policy's most vocal opponents. But because the preferences purportedly benefit a racial minority, while further enriching Hollywood's wealthy fat-cats, there is not a peep of criticism from this sector. On the contrary, recent news reports suggest that Viacom is pulling out all the stops to save the policy, launching an intensive lobbying campaign to persuade the U.S. Senate to block efforts to retroactively kill the FCC's policy.
The sale, if approved by the FCC, will afford the Supreme Court the opportunity to once again revisit the issue of taxpayer-subsidized racial preferences. The last time this policy was before the high court, it survived on a 5-4 vote. But four of the five justices who voted to uphold have since retired. I am confident, given the current make-up of the court, that the policy will be struck down as unconstitutional.
But even if these preferences were not unconstitutional, the Viacom deal should be rejected. It is clear that the minority owner is not the real purchaser of the cable-television systems. Rather, the transaction is designed to further enrich Hollywood's wealthy (and white-dominated) media elites. The transaction does little to advance real minority participation in the broadcast industry.
For decades, the IRS has stressed substance over form in evaluating the tax consequences of asset transfers. If the FCC were to apply this standard to the Viacom deal, it would be clear that the company's application for a special-tax certificate should be rejected.
There is nothing to suggest that it will foster greater racial diversity in the broadcast or cable television industry. Instead, there is but a lone African American who stands to benefit from this deal. That person is Frank Washington, whose company will serve as the venture's general partner.
Mr. Washington, who is already quite wealthy, is putting up just $1 million out of the $2.3 billion price tag on the transaction. All told, his investment amounts to just .04 percent of the sale price. Also, he is being guaranteed a minimum $2 million profit on his investment by the nonminority limited partners in the venture. They have agreed to purchase his company's interest for a minimum of $3 million after just three years.
From a tax-benefit perspective, the whole deal looks like a sham transaction. When one gets down to its substance, it is clear that the minority owner is but a figurehead and a front for the white-dominated limited partners who will be the real owners of the cable-TV systems. As for the $500 million in tax benefits, they will go to the white-dominated Viacom stockholders. Thus, save Mr. Washington, who personally stands to make $2 million, there are no direct benefits to the black community or any other minority group.
The Viacom cable-TV deal vividly illustrates what is wrong with taxpayer-subsidized racial preferences. Not only are such programs unconstitutional, they do little or nothing to advance the interests of the minority groups that they were designed to help. MEMO: Mr. Brown is chairman of Citizens United, a 180,000-member conservative
grass-roots citizens organization. Mr. Brown is chairman of Citizens
United, a 180,000-member conservative grass-roots citizens organization.
by CNB