Dozens of lawmakers said this week that they oppose revising the tax code in a way that could drive up the cost of advertising.
“Changes that will make advertising more expensive cannot be justified as a matter of tax or economic policy,” Reps Eliot Engel (D-N.Y.), Kevin Yoder (R-Kansas), and 85 other lawmakers write this week in a letter to House Speaker John Boehner (R-Ohio) and Minority Leader Nancy Pelosi (D-Calif.).
Currently, companies can deduct 100% of their ad expenses the same year they are incurred. The House is considering revising that long-standing deduction by allowing companies to deduct only 50% of ad expenses the year they are incurred. Companies would then have to amortize the remaining 50% of ad expenses over a period of 10 years.
The Association of National Advertisers opposes that change, arguing that it would “create serious harm for the economy.” The group contends that the changes would result in at least $169 billion in additional taxes on advertisers.
ANA Executive Vice President Dan Jaffe adds that proponents of the change haven't shown that there's any reason to amortize ad costs.
“They don't cite to any data to show that advertising has a life of 10 years,” Jaffe tells MediaPost. If anything, he says, advertising has a “shorter and shorter life” in a digital environment, where ads can change extremely quickly.
The lawmakers who oppose the revision warn that imposing new costs on advertising “would be severely detrimental to local advertisers, broadcasters, print media, online service providers, national media companies, news-gathering organizations, and other businesses that rely on advertising as their primary source of income.”
The House members add: “Imposing this cost on advertising would threaten the ability of these businesses to continue to support jobs and offer the high quality news, information, and entertainment on which our constituents rely.”