Credit for donation of license and other assets of commercial radio broadcasting stations to nonprofit corporations

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to general business credits) is amended by adding at the end the following new section:

45J.

Credit for donation of license and other assets of commercial radio broadcasting station to certain nonprofit corporations

(a)

Radio broadcasting station donation credit

For purposes of section 38, the radio broadcasting station donation credit is an amount equal to the sum of— (1)125 percent of the fair market value of a radio broadcasting commercial license which is donated to a qualified recipient, (2)100 percent of the fair market value of any radio broadcasting station assets, including equipment and other real property owned by the station, which are donated to the same qualified recipient, and (3)the total amount deposited into an operations escrow fund established by the donor of the license and assets during the taxable year. (b)

Qualified recipient

For purposes of this section, a qualified recipient is an entity which— (1)is a corporation described in section 501(c)(3) which is exempt from taxation under section 501(a), (2)agrees to operate the radio broadcasting station being donated to it as a for-profit venture, with profits dedicated to the support of non-profit fine arts and performing arts organizations in its service area, (3)has at least 3 arts organizations from its service area on its board of trustees, or on a board of trustees of a subsidiary established to oversee operation of the radio broadcasting station, (4)agrees that, in the event that it ceases operation of the radio broadcasting station— (A)it will not sell the station to a for-profit broadcaster under any circumstances, and (B)it will either— (i)transfer the license to another corporation described in section 501(c)(3) which is exempt from taxation under section 501(a) and which agrees to continue operation of the station for the support of nonprofit fine arts and performing arts organizations in its service area, or (ii)surrender the license to the Federal Communications Commission. (c)

Operations escrow fund

(1)

In general

For purposes of this section, an operations escrow fund is a fund established by a taxpayer who has donated a radio broadcasting commercial license or radio broadcasting station assets to a qualified recipient for the purpose of covering operating expenses during the recipient’s first year of operation of the radio broadcasting station if the station’s revenues are not adequate to cover such expenses. An operations escrow fund may be established only if the qualified recipient is not able to meet the financial responsibility requirement of the Federal Communications Commission. (2)

Recapture of credit for amounts remaining in escrow fund

In any case in which there is an amount remaining in an operations escrow fund after the first year of operation of the radio broadcasting station for which the fund was established, such amount (not including any interest that accrued on the amount in the fund) shall be added to the tax imposed by this chapter on the taxpayer for the taxpayer’s taxable year which includes the end of such first year of operation. (d)

Special rules in case of surrender of license to FCC

If a qualified recipient surrenders its donated radio broadcasting license to the Federal Communications Commission, the Commission shall notify the donor of the license that the donor may, within 6 months after such notification, post a bond equal to the amount of the tax credit under subsection (a) that it received for donating the station, plus interest. After such a bond is posted, the donor may apply for the license. If the Commission approves the donor’s application for the license, the bond shall be used in lieu of an auction fee. If the donor does not exercise its option within such six months, or waives its option earlier, the license shall be auctioned in the same manner as a new license. (e)

Denial of double benefit

A donation or deposit for which a credit is allowed under subsection (a) shall not be treated as a charitable contribution under section 170. (f)

Election

This section shall apply to any taxpayer for any taxable year only if such taxpayer elects (at such time and in such manner as the Secretary may by regulations prescribe) to have this section apply for such taxable year.

(b)

Conforming amendments

(1)Subsection (b) of section 38 of such Code is amended by striking plus at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting , plus, and by adding at the end the following new paragraph:

(20)the radio broadcasting station donation credit determined under section 45J(a).

(2)The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 45J. Credit for donation of license and other assets of commercial radio broadcasting stations to certain nonprofit corporations

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2005.