House Panel Votes to Eliminate Media Tax Credit for Minorities : Congress: Move could torpedo deal to create nation’s largest minority- owned cable company.

In a decision that could undermine a deal to create the nation’s largest minority-owned cable TV company, the House Ways and Means Committee on Wednesday voted to eliminate a longstanding tax credit designed to increase minority ownership of media properties.

The committee’s vote comes only a few weeks after Intermedia Partners, a San Francisco-based minority-operated cable company, agreed to buy the cable franchises of Viacom Inc. for $2.3 billion. Since Viacom was selling the franchises to a minority-owned firm, it would have avoided between $280 million and $400 in capital gains taxes on the sale.

But that tax break is now in doubt, and Viacom has reportedly said it will scuttle the sale of cable franchises if the legislation wins approval.

The bill that would eliminate the tax break is the latest example of a Republican effort to cut government-mandated preferences to women and minorities. During often-heated debate, Rep. Charles B. Rangel (D-N.Y.), who opposed the bill, accused Ways and Means Chairman Bill Archer (R-Tex.) of “playing a race card.” Archer said he found the allegation “objectionable” and Rangel later apologized.

The tax credit is part of a 17-year-old law the Federal Communications Commission has used to boost minority ownership of television and radio stations, cable TV systems and other media outlets. The law permits a company to avoid paying capital gains taxes when it sells a broadcast station or cable TV system to another firm controlled by women or minorities.

The bill’s sponsors argued that the tax credit benefits only large media conglomerates. Eliminating the tax break would save the federal government an estimated $1.6 billion over five years, they said.

Ironically, Frank Washington, a principal of Intermedia and a former executive at Times Mirror Co., publisher of the Los Angeles Times, worked on the FCC tax rule while working as an aide and subsequently as bureau chief at the FCC. Washington is an African American.

The deal, which has been under negotiation for at least three months, would catapult Intermedia Partners--a privately held cable company with 750,000 cable TV subscribers and annual revenue of about $200 million--to the nation’s sixth-largest cable operator, with nearly 2 million subscribers.

Intermedia, whose cable holdings are now concentrated mostly in Santa Clara County, Calif., and Nashville, Tenn., would get 1.1 million Viacom subscribers in metropolitan Seattle; Dayton, Ohio; the San Francisco Bay area, and three other cities.