Sec. 73.3597  Procedures on transfer and assignment applications.

    (a) If, upon the examination of an application for FCC consent to an 
assignment of a broadcast construction permit or license or for a 
transfer of control of a corporate permittee or licensee, it appears 
that the station involved has been operated on-air by the current 
licensee or permittee for less than one year, the application will be 
designated for hearing on appropriate issues unless the FCC is able to 
find that:
    (1) The permit or license was not authorized either through the 
Minority Ownership Policy or after a comparative hearing or, in the case 
of low power TV and TV translator stations, the permit or license was 
not authorized after a lottery in which the permittee or licensee 
benefited from minority or diversity preferences;

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    (2) The application involves an FM translator station or FM booster 
station only;
    (3) The application involves a pro forma assignment or transfer of 
control; or
    (4) The assignor or transferor has made an affirmative factual 
showing, supported by affidavits of a person or persons with personal 
knowledge thereof, which establishes that, due to unavailability of 
capital, to death or disability of station principals, or to other 
changed circumstances affecting the licensee or permittee occurring 
subsequent to the acquisition of the license or permit, FCC consent to 
the proposed assignment or transfer of control will serve the public 
interest, convenience and necessity.
    (5) the assignee or transferee has made an affirmative factual 
showing, supported by affidavits of a person or persons with personal 
knowledge thereof, which established that the proposed transaction would 
involve an assignment or transfer to a minority-owned or minority 
controlled entity in furtherance of our Minority Ownership Policy.
    (b)(1) The commencement date of the one-year period set forth in 
paragraph (a) of this section shall be the date on which the station 
initiated program tests in accordance with Sec. 73.1620 or Sec. 74.14.
    (2) In determining whether the station has been operating on-air for 
one year, the FCC will calculate the period between the date of 
initiation of program tests (as specified in paragraph (b)(1) of this 
section) and the date the application for transfer or assignment is 
tendered for filing with the FCC.
    (c)(1) As used in paragraphs (c) and (d) of this section:
    (i) Unbuilt station refers to an AM, FM, or TV broadcast station or 
a low power TV or TV translator station for which a construction permit 
is outstanding, and, regardless of the stage of physical completion, as 
to which program tests have not commenced or, if required, been 
authorized.
    (ii) Seller includes the assignor(s) of a construction permit for an 
unbuilt station, the transferor(s) of control of the holder of such 
construction permit, and any principal or such assignor(s) or 
transferor(s) who retains an interest in the permittee or acquires or 
reacquires such interest within 1 year after commencing program tests.
    (2) The FCC will not consent to the assignment or transfer of 
control of the construction permit of an unbuilt station if the 
agreements or understandings between the parties provide for, or permit, 
payment to the seller of a sum in excess of the aggregate amount clearly 
shown to have been legitimately and prudently expended and to be 
expended by the seller, solely for preparing, filing, and advocating the 
grant of the construction permit for the station, and for other steps 
reasonably necessary toward placing the station in operation.
    (3)(i) Applications for consent to the assignment of a construction 
permit or transfer of control shall, in the case of unbuilt stations, be 
accompanied by declarations both by the assignor (or transferor) and by 
the assignee (or transferee) that, except as clearly disclosed in detail 
in the applications, there are no agreements or understandings for 
reimbursement of the seller's expenses or other payments to the seller, 
for the seller's retention of any interest in the station, for options 
or any other means by which the seller may acquire such an interest, or 
for any other actual or potential benefit to the seller in the form of 
loans, the subsequent repurchase of the seller's retained interest, or 
otherwise.
    (ii) When the seller is to receive reimbursement of his expenses, 
the applications of the parties shall include an itemized accounting of 
such expenses, together with such factual information as the parties 
rely upon for the requisite showing that those expenses represent 
legitimate and prudent outlays made solely for the purposes allowable 
under paragraph (c)(2) of this section.
    (d)(1) Whenever an agreement for the assignment of the construction 
permit of an unbuilt station or for the transfer of control of the 
permittee of an unbuilt station, or any arrangement or understanding 
incidental thereto, provides for the retention by the seller of any 
interest in the station, or for any other actual or potential benefit to 
the seller in the form of loans or otherwise, the question is raised as 
to whether the

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transaction involves actual or potential gain to the seller over and 
above the legitimate and prudent out-of-pocket expenses allowable under 
paragraph (c)(2) of this section. In such cases the FCC will designate 
the assignment or transfer applications for evidentiary hearing. 
However, a hearing is not mandatory in cases coming within paragraph 
(d)(2) of this section.
    (2) It is not intended to forbid the seller to retain an equity 
interest in an unbuilt station which he is transferring or assigning if 
the seller obligates himself, for the period ending 1 year after 
commencing program tests, to provide that part of the total capital made 
available to the station, up to the end of that period, which is 
proportionate to the seller's equity share in the permittee, taking into 
account equity capital, loan capital, and guarantees of interest and 
amortization payments for loan capital provided by the seller before the 
transfer or assignment. This condition will be satisfied:
    (i) In the case of equity capital: By paid-in cash capital 
contributions proportionate to the seller's equity share;
    (ii) In cases where any person who has an equity interest in the 
permittee provides loan capital: By the seller's provision of that part 
of the total loan capital provided by equity holders which is 
proportionate to the seller's equity share; and
    (iii) In cases where any person cosigns or otherwise guarantees 
payments under notes given for loan capital provided by nonequity 
holders: By similar guarantees by the seller covering that part of such 
payments as is proportionate to the seller's equity share. However, this 
condition shall not be deemed to be met if the guarantees given by 
persons other than the seller cover, individually or collectively, a 
larger portion of such payments than the ratio of the combined equities 
of persons other than the seller to the total equity.
    (3) In cases which are subject to the requirements of paragraphs 
(d)(2) (i), (ii) and (iii) of this section:
    (i) The assignee's (or transferee's) application shall include a 
showing of the anticipated capital needs of the station through the 
first year of its operation and the seller's financial capacity to 
comply with the above requirements, in the light of such anticipated 
capital needs.
    (ii) The FCC will determine from its review of the applications 
whether a hearing is necessary to ensure compliance with the above 
requirements.
    (iii) Compliance with the above requirements will be subject to 
review by the FCC at any time, either when considering subsequently 
filed applications or whenever the FCC may otherwise find it desirable.
    (iv) Within 30 days after any time when a seller is required to 
provide equity or loan capital or execute guarantees, the permittee 
shall furnish the FCC a written report containing sufficient details as 
to the sources and amounts of equity capital paid in, loan capital made 
available, or guarantees obtained as to enable the FCC to ascertain 
compliance with the above requirements.
    (v) No steps shall be taken by the permittee to effectuate 
arrangements for the provision of equity or loan capital from sources 
not previously identified and disclosed to the FCC, until 30 days after 
the permittee has filed with the FCC a report of such arrangements and 
of provisions made for the seller's compliance with the above 
requirement.
    (vi) The provisions of paragraphs (d)(3) (iv) and (v) of this 
section shall cease to apply 1 year after commencing program tests.
    (4) Applications subject to this paragraph (d) of this section will, 
in any event, be designated for evidentiary hearing in any case where 
the agreements, arrangements or understandings with the seller provide 
for the seller's option to acquire equity in the station or to increase 
equity interests he retains at the time of the assignment or transfer of 
control. An evidentiary hearing will similarly be held in any case in 
which the assignee(s), transferee(s) or any of their principals, or any 
person in privity therewith, has an option to purchase all or part of 
the

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seller's retained or subsequently acquired equity interests in the 
station.

[ 44 FR 38509 , July 2, 1979, as amended at  47 FR 24580 , June 7, 1982;  47 FR 55930 , Dec. 14, 1982;  48 FR 9012 , Mar. 3, 1983;  48 FR 27207 , June 13, 
1983;  50 FR 6946 , Feb. 19, 1985;  53 FR 36787 , Sept. 22, 1988]