§  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;

   (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 § 73.1620 or § 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.

   (iii) The provisions of paragraphs (c) and (d) of this section apply
   only to mutually exclusive noncommercial educational applications filed
   on or after the release of the Report and Order in MM Docket 98-43,
   where the construction permit is issued pursuant to settlement
   agreement.

   (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 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 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;  63 FR 70050 , Dec. 18, 1998]