Obligations of the Broadcaster Which May Affect the Program Producer

Sponsor Identification and Underwriting
Fairness Doctrine
Personal Attack and Political Editorial Rules
Political Broadcast Requirements
Indecency and Obscenity
Identification of Recorded Material
Fraud
Lotteries
Broadcast Hoaxes

The FCC imposes a number of requirements on broadcast licensees. While these are obligations of the broadcaster and not the program supplier, the broadcaster, in seeking to comply with them, may want to assure that the program supplier is providing programming which does not adversely affect the broadcaster's compliance with those requirements.

Sponsor Identification and Underwriting

The Communications Act (47 U.S.C. section 317) and FCC regulations (47 C.F.R. section 73.1212) require that all licensees identify the names of sponsors that have either promised or provided money, goods, services, or other valuable consideration to the station for transmission of a program. The station must announce that the transmission is sponsored, paid for, or furnished, either in whole or in part, and by whom or on whose behalf such consideration has been provided. The station will therefore want to know who has contributed to the program supplier's programming. In addition, stations may give underwriting credit to those who have made contributions to the station.

While the requirements for underwriting credits are detailed, in general announcements which identify but which do not compare or promote are permissible. The FCC distinguishes between announcements made on behalf of profit-making entities and those on behalf of not-for-profit entities. (See generally a series of Memorandum Opinions and Orders, in FCC Docket No. 21136.)

The Taxpayer Relief Act of 1997 contained a provision affecting the tax treatment of corporate sponsorship revenue received by tax-exempt organizations. The statute generally adopts the distinction between "acknowledgement" and "advertisement" that is embodied in the Communications Act and FCC regulation of underwriting announcements. However, there is no explicit safe harbor for public broadcasters. In addition, the language of the new provision differs from that of the Communications Act. For instance, the new tax provision does not differentiate between for-profit and not-for-profit sponsors.

On April 25, 2002, the Treasury Department issued the final regulations, implementing the Taxpayer Relief Act of 1997. The regulations apply to all payments received by an exempt organization on or after December 31, 1997.

Under the final regulations, payments received in exchange for non-promotional uses or acknowledgments of a funder's name, logo, or product lines constitute "qualified sponsorship" payments exempt from federal taxation. If, however, a use or acknowledgment of a sponsor were to cross the line into advertising by promoting the sponsor or its products or services, the use or acknowledgment would constitute a "substantial return benefit." Unless there were other aspects to the arrangement or other, non-promotional underwriting credits broadcast in exchange for the payment, the entire amount of the payment would be subject to UBIT.

Unlike the Communications Act and the FCC's underwriting rules and policies, the final tax regulations do not differentiate between for-profit sponsors and not-for-profit or other sponsors. Accordingly, the broadcasting of promotional underwriting announcements, regardless of the legal nature of the funder, may constitute "advertising" for tax purposes, and the revenue associated with such announcements may be taxable unrelated business income.

Under the final regulations, an exempt organization must account for benefits provided to a given sponsor when the value of benefits exceeds two (2%) percent of the amount of the donation. This means, for instance, if a particular sponsor contributes $10,000 and the station or producer acknowledges the contribution through non-promotional acknowledgments and provides certain premiums that have a collective value of $200, the entire amount would be exempt. If the collective value of the premiums were $300, however, that amount would constitute a "substantial return benefit," and only the amount of the payment in excess of that amount would constitute a "qualified sponsorship payment."

With respect to other issues, the Treasury Department clarified to some extent the treatment of Internet hyperlinks, indicating that a non-promotional link from an exempt organization's website constitutes a mere acknowledgment, while a link to a sponsor's site where an endorsement by the charity of the sponsor's product appears constitutes an advertisement. The Treasury Department is expected to elaborate further on the tax implications of Internet activities in another pending injury concerning that precise matter.

Fairness Doctrine

The Fairness Doctrine was eliminated by the FCC in 1987 on the basis that it is no longer in the public interest. The Commission's action was upheld in court challenges. (See Syracuse Peace Council v. FCC, 867 F.2d 654 (D.C. Cir. 1989), cert. denied, 493 U.S. 1019 (1990).)

Congress continues to consider enacting the Fairness Doctrine into law. Sound journalism, which seeks to present fairly all sides of an issue, will assist in meeting the requirements of the Fairness Doctrine if it is reinstated.

Personal Attack and Political Editorial Rules

The Personal Attack Rule had provided that when an attack was made on the honesty, character, integrity, or like personal qualities of an identified person or group during the presentation of a controversial issue of public importance, the licensee must notify that person or group of the attack within one week, supply a script or tape of the attack, and offer a reasonable opportunity for response. The Political Editorial Rule had a similar structure, affording political candidates notice of and an opportunity to respond to editorials opposing them or endorsing another candidate. On October 11, 2000, the U.S. Court of Appeals for the District of Columbia Circuit issued a writ of mandamus ordering the "Commission immediately to repeal the personal attack and political editorial rules." By order adopted and released on October 26, 2000, the Commission repealed its personal attack and political editorial rules for both broadcast stations (47 C.F.R. Sections 73.1920 & 73.1930) and cable systems (47 C.F.R. Section 76.209(b), (c) & (d)), thus concluding a proceeding first initiated in 1983.

Political Broadcast Requirements

Licensees are required under the Communications Act (47 U.S.C. section 315) and FCC regulations (47 C.F.R. section 73.1940) to afford equal access to legally qualified candidates for a particular public office, once one such candidate has made a "use" of the station. Under the FCC's current definition of "use," any positive appearance of voice (or picture) triggers the "equal opportunities" requirement. There are four statutory exemptions from this requirement: bona fide newscasts; bona fide news interviews; bona fide news documentaries; and on-the-spot coverage of bona fide news events (including conventions and debates). If the program supplier's program is likely to be a "use" of the station by a candidate, and does not fall within one of the exceptions, the program supplier will want to discuss with the station how the broadcaster wants to accommodate its equal opportunity obligations triggered by the program.

In 2000, Congress amended the Communications Act to exempt public broadcast stations from the obligations to provide "reasonable access" to candidates for federal office (47 U.S.C. Section 312(a)(7)). As a result, public broadcast stations, unlike their commercial counterparts, have no legal obligation to provide airtime to legally qualified candidates for federal elective office. Nonetheless, if particular programming constitutes a non-exempt "use" for purposes of the "equal opportunities" obligation, public broadcast stations carrying the program would be subject to the "equal opportunities" requirements.

Indecency and Obscenity

Obscene material is not protected speech under the First Amendment. Under federal statute (18 U.S.C. section 1464), the FCC does not permit it on the air. Obscenity has been defined by federal constitutional cases. (See Miller v. California, 413 U.S. 15 (1973).) A three-part test is used: (1) an average person, applying contemporary community standards, must find that the material, taken as a whole, appeals to the prurient interest; (2) the material must depict or describe, in a patently offensive way measured by contemporary community standards, sexual or excretory conduct; and (3) the material, taken as a whole, must lack serious literary, artistic, political, or scientific value. Id. at 24.

Indecent material is material which under the First Amendment the FCC must permit to be aired, because it is not obscene, but which the FCC can channel to certain times of the day to help assure that unsupervised children are not exposed to it. (See FCC v. Pacifica, 438 U.S. 726 (1978).) Until April, 1987, the FCC defined such material by reference to specific words. In a series of rulings in April, 1987, and since, the FCC has redefined "indecent" material more broadly to include "language or material that depicts or describes, in terms patently offensive as measured by contemporary community standards for the broadcast medium, sexual or excretory activities or organs." Indecent material broadcast outside the time period set by the FCC, which is currently 10:00 p.m. until 6:00 a.m. (also called a "safe harbor") is subject to sanction.

On April 6, 2001, the FCC released a Policy Statement providing industry guidance on the FCC's decisions and enforcement policies relating to broadcast indecency. The Policy Statement attempts to clarify the FCC's definition of indecency. In order for the FCC to find material indecent, the material (1) must describe or depict sexual or excretory organs or activities; and (2) must be patently offensive as measured by contemporary community standards for the broadcast medium. The "contemporary community standards" criterion is a national standard that considers the sensibilities of the "average broadcast viewer." In making an indecency assessment, the FCC looks at the full context in which the material appeared. For example, explicit language may not be considered patently offensive if it is included in the context of a bona fide newscast.

The Policy Statement also sites the three principal factors that the FCC considers when reviewing an indecency complaint: (1) the explicitness or graphic nature of the description or depiction of sexual or excretory organs or activities; (2) whether the material dwells on or repeats at length descriptions of sexual or excretory organs or activities; and (3) whether the material appears to pander or is used to titillate, or whether the material appears to have been presented for its shock value.

Identification of Recorded Material

FCC regulations at 47 C.F.R. section 73.1208 (1999) require a clear announcement at the beginning of a broadcast, identifying the broadcast as taped or recorded for any taped or recorded program material "in which time is of special significance" (e.g., fast-breaking news story), or by which an affirmative attempt is made to create the impression that it is occurring live. Recorded announcements of a public service, commercial, or promotional nature, however, need not be identified as recorded.

Fraud

It is a violation of the Federal Criminal Code (18 U.S.C. section 1343) to transmit any signals or sounds by wire, radio, or television for the purpose of executing any fraudulent scheme. The FCC is authorized to revoke a license for a violation of that Criminal Code section (47 U.S.C. section 312 (a)(6)).

Lotteries

Section 1304 of the Federal Criminal Code (18 U.S.C.) makes it a crime, punishable by fine and/or imprisonment, for any licensee of an AM, FM, or television broadcast station to broadcast any advertisement or information concerning any lottery, gift enterprise or similar scheme, or any list of prizes awarded from any such lottery, gift enterprise or scheme. The FCC has authority to revoke a license for violation of this provision (47 U.S.C. section 312 (a)(6)). However, in June 1999, the U.S. Supreme Court held that Section 1304 may not be applied to advertisements of private casino gambling broadcast by a station in a state where such gambling is legal. Furthermore, as of May 1990, broadcasters are allowed to provide information about or advertise lotteries conducted by nonprofit organizations, governmental organizations and some commercial organizations under limited circumstances (47 C.F.R. section 73.1211 (1999)). There are some state laws which are more stringent than this new FCC rule, and care should be taken that programs do not offend state law provisions. The FCC defines a "lottery" as a game, contest or promotion which has these elements: a prize, chance, and consideration. Stations may also broadcast information about certain state lotteries (including the District of Columbia and Puerto Rico), certain Indian gaming information, or information about certain fishing contests. (18 U.S.C. Sections 1305 and 1307; 47 C.F.R. section 73.1211 (1999).) Even if a particular promotion constitutes a contest rather than a lottery, there are specific requirements regarding the disclosure of material terms. (See 47 C.F.R. section 73.1216 (1999).) Because of the complexity of the FCC's rules, it is advisable to consult counsel regarding the specific parameters of a proposed lottery contest or other promotion.

Broadcast Hoaxes

In 1992, the FCC adopted a rule to expressly prohibit the broadcast of hoaxes that cause substantial public harm. The new rule prohibits a licensee from knowingly broadcasting false information concerning a crime or catastrophe if it is foreseeable that broadcast of the information does, in fact, directly cause such harm. The rule arose out of several broadcast hoaxes which involved stories concerning an alleged murder and nuclear attack and resulted in public alarm and a diversion of public safety or law enforcement personnel. The FCC has stated that it will apply a presumption that fictional material accompanied by a disclaimer will not be the basis of a violation.