ClearChannel fires Star, laughs all the way to the bank with a tax refund of $843 million

If you were angry yesterday when you learned what now-fired ClearChannel radio host Troi Torain has been saying on air you are really going to hit the roof when you realize who was, in effect, paying his salary: you.

(Before I get into that, can someone explain to me how it wasn't "news" when he said it or even when a City Council Member protested it, but only once ClearChannel did something about it? Headline: "Power 105 radio host Star gets fired". How about, headline: "ClearChannel = hate radio")

Now, about that money of yours going to ClearChannel… Through accounting magic, ClearChannel was able to claim an $891 million capital loss in the 4th quarter of 2005 from the spinoff of its live music division. As a result, they got a tax refund of $314.1 million.

Yes: the IRS is writing a check for $314,100,000 to ClearChannel Communications to pay for things like hate radio DJs. (Don't think it stops because Star is out; as I said, hate is a business model for Lowry Mays and co.)

Here's how ClearChannel describes it in their 10-K filing with the SEC (p35):

Discontinued Operations
We completed the spin-off of our live entertainment and sports representation businesses on December 21, 2005. In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we reported the results of operations for these businesses through December 21, 2005 in discontinued operations. The spin-off generated a capital loss for tax purposes of approximately $2.4 billion. We utilized approximately $890.7 million of this capital loss in the current year to offset taxable capital gains realized in 2005 and previous years, which resulted in a $314.1 million tax benefit which is included in income from discontinued operations in the fourth quarter of 2005. The remaining $1.5 billion of the $2.4 billion capital loss was recorded as a deferred tax asset with an offsetting valuation allowance on our balance sheet at December 31, 2005.

Now, I don't know anything about the "Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets," but I sure wish someone had shown me that field in TurboTax when I was filing a return. I completed the spin-off my first generation iPod last year; I'd love $150 million from the government. How about those workers at Ford or GM that completed the spin-off of their jobs in 2005?

ClearChannel has $1.5 billion left in capital losses from the spin-off that they can claim against earnings in the future. At the rate of their first refund, that's another $529 million ClearChannel claims to have coming to them from the federal government for a grand total of $843 million.

And they still have those licenses we gave them to use our airwaves.

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3 Comments

  1. DJ 88 said

    Doesn’t a tax refund mean they’re refunding taxes that were paid by Clear Channel? It’s not like taxes collected are being funneled to them. They’re just avoiding their tax obligation to the gov’t. Saying that the taxpayer is paying Star’s salary is a bit of a stretch.

  2. Actually, that’s exactly what it’s like. When you get a refund, they cut you a check from the general treasury. The IRS is taking money that was rightfully collected (mostly from us, but also from ClearChannel, though once it’s collected from ClearChannel, it’s our money, not theirs) and then funneling $843 million of it to ClearChannel so they can pay the six-figure salaries of the Star & BucWild crew and still have enough money left over to offer $500 bounties for information on little girls.

    Here’s where $843 million in taxes would otherwise go, according to the National Priorities Project (in millions):

    Of the $843 million you would have paid in taxes:
    $240 million would have gone to the military
    $158 million would have gone to pay the interest on the debt
    $170 million would have gone to health care
    $55 million would have gone to income security
    $35 million would have gone to education
    $31 million would have gone to benefits for veterans
    $23 million would have gone to nutrition spending
    $17 million would have gone to housing
    $12 million would have gone to environmental protection
    $2.5 million would have gone to job training
    $9.8 million would have gone to all other expenses

  3. […] The fear among community broadcasters is that so-called indecency fines of any size are only meaningful to locally-owned stations. As I explained in an earlier post, the government would have to fine Clear Channel about 100 times under the new limits just to recoup the money it sent to the company in the form of a tax refund. For a community station, $300k is the whole ball game. […]

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