Viacom Inc., which had deals in place to sell its five network affiliates for about $400 million, has called off the transactions.
One of the two deals involved the use of a tax certificate that would allow the seller of a broadcast property to defer capital gains for two years provided the buyer is minority-owned.
But the tax certificate policy is under fire on Capitol Hill as a result of another Viacom deal and may even be repealed, so Viacom wants to rethink its strategy.
The media giant was set to sell four of its stations – KMOV St. Louis, a CBS affil; and NBC affils WVIT Hartford, Conn., WHEC Rochester, N.Y., and WNYT Albany, N.Y. – to a group formed by Smith Broadcasting that included a minority partner. The fifth station, CBS affiliate KSLA Shreveport, La., was to be sold to group owner Ellis Communications.
The tax certificate policy is under scrutiny in Washington as a result of Viacom’s $2.2 billion deal to sell its cable systems to Intermedia Partners. Viacom was set to receive a tax break of $300 million to $400 million on the sale because Frank Washington, a black attorney who as a member of the Carter administration created the tax certificate program, is a partner of Intermedia.
Although Washington is investing more than $1 million in the deal, the transaction has raised eyebrows among House republicans who fear the policy is being abused. House Ways & Means Committee chairman Bill Archer (R-Texas) has set a hearing for Jan. 27 to review the policy.