House Members Oppose Curbing Tax Break For Advertising

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.

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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.”

2 comments about "House Members Oppose Curbing Tax Break For Advertising".
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  1. Paul Robinson from Viridian Development Corporation, June 11, 2015 at 12:55 a.m.

    Why only asvertising? What makes it a capital cost or investme billingĀ  $1 f games where the bill is issued for double, which means for an acrural-based company the double bill is counted as owed now, or the adnt requiring 10-year amoortization. Why not do this for employee salaries, or office supplies, or sales taxes? i cas see two ways this can go: huge cuts in advertising, or someone finds a tax loophole, like some company combining something else with advertising, and a combined bill of $101,000, where $1000 was for the ads, and $100,000 was for ten toilets used in a technical project. Or the ad company is Canadian and thus the IRS knows nothing about what it's doing. Or you can play accounting games, like billing rwice the amount due, which for an accrural-based taxpayer is counted as owed in the year it's billed, but the other half can be a "zero coupon" style bill that isn't due for ten years, and if the recipent is cash-based they don't count the income until received, which might be never or maybe 99 years, or whatwver the tax code lets you get away with.

  2. Alvin Silk from Harvard Business School, June 11, 2015 at 8:52 a.m.

    Whatever happended to the proposition (and empirical evidence) that advertising campaigns are "investiments" and have "long term" ("carry-over") effectss?

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