Advertising still a target in House tax reform bill

Advertising still a target in House tax reform bill

By on November 12, 2013 in Latest News

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The business deduction for advertising expenses is currently at risk in the House of Representatives. Despite our collective efforts to dissuade Ways and Means Committee Chairman Dave Camp from modifying the current tax treatment of advertising, we have heard that he will release draft tax reform legislation that will propose a 10-year amortization of advertising costs. Specifically, his proposal is expected to allow businesses to deduct 50 percent of their advertising costs in the year the advertising expense is incurred and require a business to spread the remaining cost over 10 years.

We can find no economic or policy reason for this proposed change. NAA also believes this proposal would increase the cost of advertising and force advertisers to reduce overall ad spending. We understand that this proposal is one of many that are in play in an effort to reduce the corporate tax rate to 25 percent. While reducing the corporate tax rate is attractive, the economic damage from this proposal would outweigh the benefits of a reduced rate.

NAA is encouraging ALL newspapers to call or write their member of Congress in the House of Representatives today and urge them to oppose this proposal. To locate your representative, go to www.house.gov/representatives/find/ and enter your zip code. The representative’s name will come up with a link to his/her website, allowing constituents to send e-mails. Phone calls into offices are also effective.

Key talking points:

  • The House Committee on Ways and Means is expected to propose a tax on advertising by limiting the business deduction for advertising to 50 percent in the year the expense is incurred and spreading the remaining amount over 10 years.
  • Advertising supports 20 million jobs or 15 percent of all jobs in the country.
  • This proposal would make advertising more expensive, cause a decline in ad spending and cost jobs, since every $1 spent on advertising leads to $20 in economic activity.
  • The Tax Code for 100 years has permitted businesses to deduct the full cost of their advertising just as it permits the deduction of other ordinary business costs like salaries, rent, utilities and office supplies.
  • Some defenders of this proposal claim that advertisers would be “made whole” after 10 years, when the remaining amount of a company’s advertising costs would be made fully deductible. However, this does not take into account the lost value of that deduction over time.
  • The proposal does not consider that companies buy new advertising each year and would feel the brunt of this tax annually. Not only would they have less money to spend on advertising year after year, but newspapers and other media companies that rely on advertising would be harmed as advertisers reduce ad buys.
  • I ask that you do whatever you can to urge your colleagues on the Ways and Means Committee to reject this tax on advertising.

We appreciate your quick response on this important matter. If you have questions or feedback on this request, please contact me: Kathy Mason at (571) 366-1152 or kathy.mason@naa.org

 

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November 12, 2013

Advertising still a target in House tax reform bill

The business deduction for advertising expenses is currently at risk in the House of Representatives. Despite our collective efforts to dissuade Ways and Means Committee Chairman Dave Camp from modifying the current tax treatment of advertising, we have heard that he will release draft tax reform legislation that will propose a 10-year amortization of advertising costs. Specifically, his proposal is expected to allow businesses to deduct 50 percent of their advertising costs in the year the advertising expense is incurred and require a business to spread the remaining cost over 10 years.

We can find no economic or policy reason for this proposed change. NAA also believes this proposal would increase the cost of advertising and force advertisers to reduce overall ad spending. We understand that this proposal is one of many that are in play in an effort to reduce the corporate tax rate to 25 percent. While reducing the corporate tax rate is attractive, the economic damage from this proposal would outweigh the benefits of a reduced rate.

NAA is encouraging ALL newspapers to call or write their member of Congress in the House of Representatives today and urge them to oppose this proposal. To locate your representative, go to www.house.gov/representatives/find/ and enter your zip code. The representative’s name will come up with a link to his/her website, allowing constituents to send e-mails. Phone calls into offices are also effective.

Key talking points:

  • The House Committee on Ways and Means is expected to propose a tax on advertising by limiting the business deduction for advertising to 50 percent in the year the expense is incurred and spreading the remaining amount over 10 years.
  • Advertising supports 20 million jobs or 15 percent of all jobs in the country.
  • This proposal would make advertising more expensive, cause a decline in ad spending and cost jobs, since every $1 spent on advertising leads to $20 in economic activity.
  • The Tax Code for 100 years has permitted businesses to deduct the full cost of their advertising just as it permits the deduction of other ordinary business costs like salaries, rent, utilities and office supplies.
  • Some defenders of this proposal claim that advertisers would be “made whole” after 10 years, when the remaining amount of a company’s advertising costs would be made fully deductible. However, this does not take into account the lost value of that deduction over time.
  • The proposal does not consider that companies buy new advertising each year and would feel the brunt of this tax annually. Not only would they have less money to spend on advertising year after year, but newspapers and other media companies that rely on advertising would be harmed as advertisers reduce ad buys.
  • I ask that you do whatever you can to urge your colleagues on the Ways and Means Committee to reject this tax on advertising.

We appreciate your quick response on this important matter. If you have questions or feedback on this request, please contact me: Kathy Mason at (571) 366-1152 or kathy.mason@naa.org.