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Regulatory Rumblings

Filing Shows San Francisco Beverage Ordinance is Unconstitutional

Posted: Jul 30, 2015 9:00am ET

In response to a recently approved San Francisco ordinance that would ban most advertising of sugar-sweetened beverages – sodas, sports drinks, energy drinks, and iced teas – on government property, the American Beverage Association, the California Retailers Association, and the California State Outdoor Advertising Association have filed a motion asking the district court to stay this ordinance until constitutional issues are resolved.

The numerous constitutional violations triggered by this ordinance make it appear that the San Francisco supervisors were intent on stepping on virtually every available First Amendment landmine. The industry motion for a preliminary injunction filing does an excellent job of clearly laying out why this ordinance is unconstitutional.

Five flagrant constitutional violations are specifically noted by the plaintiffs:

    “First, the Ordinance discriminates on the basis of viewpoint by suppressing speech that the City disfavors while allowing conflicting speech the City favors.
    Second, the Ordinance’s prohibition against commercial advertisements for sugar-sweetened beverages on City property is not reasonably related to the purpose of the forums where these advertisements are placed. This speech ban does not, for example, make City buses, bus stops, or light rail more reliable or safe.
    Third, the Ordinance’s ban on sugar-sweetened beverage producers’ use of their own names when sponsoring products and events on City property impermissibly discriminates based on the identity of speakers because the City disagrees with their viewpoints.
    Fourth, the Ordinance’s ban on sugar-sweetened beverage producers’ use of their own names when sponsoring products and events on City property unreasonably restricts speech in the forums to which it applies.
    Fifth, prohibiting sugar-sweetened beverage producers from using their names effects an overbroad and impermissible prior restraint by suppressing substantial speech – even core non-commercial speech – promoting any non-charitable event or product on City property.”

ANA strongly agrees that this ordinance is clearly unconstitutional and should be quickly overturned. The United States Supreme Court has repeatedly affirmed that restrictions on advertising must “directly advance the governmental interest asserted” in a “material manner” and cannot be “more extensive than is necessary to serve that interest.” The Court further stated that advertising restrictions must be a “last – not first – resort.” Clearly, this ordinance totally fails these tests.

A second highly problematic ordinance impacting sugary beverage advertising also recently passed in San Francisco. This ordinance would require health labels on advertisements for certain beverages that contain more than 25 calories from sweeteners per 12 ounces. These labels, which must appear on billboards or other outdoor ads, must include a warning that “drinking beverages with added sugars contributes to obesity, diabetes, and tooth decay.” Nevertheless, the ordinance contains a sweeping number of exceptions to their restrictions creating so many holes in the ordinance as to create a veritable regulatory Swiss cheese. In its findings and purpose, the ordinance cites the myriad issues it claims result from consumption of “sugar sweetened beverages” and seeks to inform the public to “promote informed consumer choice.” In the filing mentioned above, the plaintiffs noted that they would seek a preliminary injunction against this ordinance as well. Both of these ordinances present very serious speech restrictions that would create dangerous potential precedents with impacts far beyond the category of sweetened beverages. ANA is considering how best to help overturn these ordinances, and we will alert members to any major developments in these cases.

ICANN Update: Aftermath of the Buenos Aires Meeting

Posted: Jul 14, 2015 2:00pm ET

By Clark W. Lackert, Reed Smith LLP

Before the ICANN Buenos Aires meeting even formally began, NTIA Assistant Secretary Larry Strickling dropped a bombshell in a packed meeting in the evening of Sunday, June 21 – the transition of the IANA (technical) function of ICANN would not take place in September 2015, but would be moved back about a year until the middle of 2016 to provide more time for the internal working groups within ICANN to hammer out the details of the move. Why is this important to brand owners and advertisers? The twin pillars of ICANN Accountability and Transition are vital to the domain name (and related trademark) stability.

Now, doubt has been cast on the timeline as the U.S. Congress has become more activist in ICANN’s activities due to public pressure (in fact, the letter from ANA to ICANN on the overreaching by the GAC in the geographical names (“Argentina”) proposal was the first footnote in a letter from House members to ICANN). Additionally, the new DOTCOM Act which is currently under consideration in the Senate (having passed the House) which would mandate Congressional supervision of the IANA “handover” is clearly a significant development and was extensively discussed in Buenos Aires. Brand owners and advertisers have another year to become involved in the process of transitioning the IANA functions to the so-called “PTI” (“Post-Transition IANA”) entity.

A parallel development in Buenos Aires of great interest to brand owners and advertisers are the activities of the Discussion Group (“DG”) on the opening of the next round of new Generic Top Level Domains (“gTLDs”), which by the timeline of the original Applicant Guidebook is already two years overdue. The DG reviewed a number of scenarios for its draft charter and the opening of a new Policy Development Process (“PDP”) for the new top level domains. Various sources provided different dates for the opening of the next round, but at the moment this date appears to be late 2017 to even early 2018. Although this may seem to be a far off date, discussions are happening now as to how the new round will be structured. To cite one example, the Governmental Advisory Committee (“GAC”) held a short update meeting in Buenos Aires on the so-called “Argentina Proposal” greatly expanding possible “geographical name” objections against brand based domain names, promoted by GAC Vice Chair Olga Cavalli. Although the previous versions of the proposal have been almost universally rejected by various members of the multi-stakeholder community as governmental meddling and censorship in the name of a vague “public interest” justification, the working group in GAC continues to attempt to find legal justification for it. This development should be closely monitored by the trademark community since virtually any brand may have some geographical, cultural, or ethnic significance which some country may find objectionable.

Since it is highly unlikely that the next round will be identical to the 2012 round, everything is currently in play, including broader powers of the GAC to veto domain name applications, reduced costs of the new gTLD applications from the existing $185,000.00 per application, strengthened rights protection mechanisms (“RPMs”), stronger control on the substance and monitoring of registry contracts, revised auction procedures, and enhanced independent review arbitration of ICANN Board decisions. Not surprisingly, timelines emanating out ICANN 53 continued to be pushed back, both for the transition (about one year – 2016) and the new gTLD round (about four years – 2017).

What is surprising, however, is how the enhanced scrutiny of ICANN’s activities and procedures continues to develop new problems for ICANN at a time when ICANN has an outgoing CEO and there is no general consensus on the way forward. As preparations are made for the upcoming meeting in Dublin in October 2015, a number of these critical issues will be open for public comment. Companies should closely monitor the ICANN Public Comments website for policy issues and draft texts which are currently being discussed, and make comments on the official record as needed. In addition, governmental representatives are also a good source of providing feedback to ICANN, as was seen by the recent series of letters from the U.S. Congress to ICANN management.

Reed Smith LLP is the ANA’s General Counsel.

Progress Being Made, but Still Many Big Issues for ICANN

Posted: Jul 10, 2015 9:00am ET

The House Energy & Commerce Subcommittee on Communications and Technology held a hearing Wednesday during which several members continued to raise questions about the transparency and accountability of ICANN. The aim of the hearing, Internet Governance Progress After ICANN 53, was to gain more understanding about the timeline for the IANA transition process and to give members a chance to hear firsthand from ICANN CEO Fadi Chehadé and NTIA Administrator Larry Strickling about progress being made by ICANN.

Mr. Strickling assured Congress that NTIA is confident in the transition and its potential to promote a stronger ICANN. Furthermore, the transition timetable, which has been a source of contention in recent months, was more clearly delineated. The current IANA contract with ICANN, which is due to expire September 30, 2015, will likely be extended at least through July of next year. The timetable provides several months for the U.S. Congress to review the transition process. According to Strickling, this oversight will be granted to Congress even if the DOTCOM Act, which recently passed the House, is not a law by that point. The DOTCOM Act would grant Congress oversight of the IANA transition before the transition is finalized.

ICANN CEO Fadi Chehadé, stressing transparency and the importance of dialogue around the world, claimed that the multi-stakeholder model is working and is the right model for his organization. He stated, “We will not move forward with any loopholes on accountability.” Also, Chehadé answered questions from Members about the role of governments through the ICANN Governmental Advisory Committee (GAC). Several committee members had expressed concern about “governments taking over the Internet,” and both Strickling and Chehadé said they were confident proposals would not permit that to occur. ANA also has concerns about the potential for excessive influence of the GAC on ICANN decision-making, and we will continue to monitor proposals made by the GAC to increase its power within ICANN.

Furthermore, questions were raised about so-called “undesirable” domains, in particular by Rep. Marsha Blackburn (R-TN). Rep. Blackburn highlighted the fact that ICANN is required to enforce prohibitions on illegal activity by domain names. Mr. Chehadé said that the ICANN compliance department investigates the complaints they receive and tries to take steps to ensure that they work within their contracts’ provisions. While Mr. Chehadé indicated that ICANN is doing all it can to protect against abusive domain names, ANA is concerned about domain names such as “.sucks” that seem designed to place immense pressure on major trademark holders to defensively purchase secondary domains to assure that sites like “.sucks” cannot be used to hurt one’s trademark or category. We urge our members to join us in communicating to Congress, the Department of Commerce, and ICANN concerning the potential damages these offensive domain names can impose on businesses and the greater Internet ecosystem before the transition process is finalized.

Advertising still a Tax Target

Posted: Jul 9, 2015 9:00am ET

The U.S. Senate Finance Committee released the reports of its five bipartisan tax working groups yesterday. These working groups were tasked with coming up with new and creative avenues for tax reform by examining various aspects of the code. This is the latest in a recent push by the Finance Committee on the tax reform issue. In January, the formation of the working groups was announced to coincide with the kickoff of a series of tax reform hearings. Then in March, after five hearings, the Committee announced it would ask stakeholders and the public to submit ideas to the bipartisan working groups. ANA submitted comments to the Business Income Tax Working Group, and all submissions were released to the public in April.

Since advertising was first singled out for amortization in the tax reform proposals by the former Chairs of the Senate Finance and House Ways & Means Committees, Sen. Max Baucus and Rep. Dave Camp, in 2014, we have been especially vigilant in watching for any new suggestions that are put forth impacting advertising. In its report, the Business Income Tax Working Group did not explicitly single out advertising amortization or suggest that advertising amortization was a necessary component of the package. However, advertising did not escape notice entirely. Amortization of advertising was third on the list of the largest revenue raising options in the report (pg. 19), although the report also stated that there were potential tax timing and market disruption aspects for each of the categories on the list.  

As Congress looks to find new sources of revenue to support corporate tax reform, advertisers will continue to see amortization as an ever-present danger. It is vitally important that the advertising community work together to show lawmakers the importance of our industry and the extreme economic harm that would be caused by the imposition of amortization proposals. A report put together by the renowned economic research firm IHS demonstrates that advertising is a primary driver of jobs and economic activity in the U.S. Clearly, saddling the selling effort with increased tax burdens would depress these positive economic benefits. While we may never completely remove ourselves from Congressional scrutiny, we will rekindle our efforts to counteract proposals to hobble advertising with inappropriate tax disincentives.

The Ambiguous Future of Highway Funding

Posted: Jun 29, 2015 1:30pm ET

“Dead End, No Turn Around, Danger Ahead,” was the title of the United States’ Senate Finance Committee hearing emphasizing the severe state of transportation infrastructure around the country and the situation of a budget shortfall in the Highway Trust Fund on the horizon. Over the last 5 years the Trust Fund has faced 12 different budget shortfalls. In order to prevent another, the Committee must find new ways to generate revenue or continue down the path of least resistance and borrow money.
 
The advertising community has been on guard and rightfully so after former Chairman Camp (R-MI) of the House Way’s & Mean’s Committee released his ad-tax plan in his tax reform proposal in February 2014. The plan called for ending the right off of all advertising expenses immediately and instead would require amortizing 50% of those expenses over 10 years. The Joint Tax Committee estimated that this would generate $169 billion in additional taxes and creates a threat that every time a program needs funding advertising taxes would be one of the potential targets.
 
Chairman Hatch (R-UT) echoed House Way’s & Mean’s Chairman Ryan (R-Wis.) on the Highway Trust Fund’s status as "broken" and that the dilemma on financing it depends on either "raising taxes or cutting back on the highway program." Hatch proclaimed that the goal of the hearing was to find a long-term funding solution starting with discovering way’s to raise enough revenue to meet the needs of America’s deteriorating infrastructure.
 
Ranking Member Wyden (D-OR) explained that the state of America’s deteriorating infrastructure “hurts businesses and discourages investment.” Wyden also noted that China spends four times and Europe twice the amount that the United States does on transportation infrastructure. Finally, he quoted a report by the American Society of Civil Engineers which states that the Federal government needs to invest an enormous $3.7 Trillion in transportation infrastructure by 2020 or $1.7 Trillion just to reach “good condition.”
 
So where is all this money going to come from? Multiple Senators suggested a need for all sorts of tax reform but momentum is gathering behind international reform focusing on repatriation of U.S. corporate profits from overseas that have not been brought back to the U.S. due to the 35% statutory corporate tax rate. According to a recent article in the Wall Street Journal, Paul Ryan clarified that the U.S.’s highest corporate tax rate in the world is creating a “smaller tax base in the U.S. and less money available to fuel the nation’s economy.”  
 
The testimony from the 3-member panel was diverse. Former Secretary of Transportation, Ray LaHood repeatedly stated that the committee needs as many options on the table as possible because a variety of avenues will be needed to provide his calculation of $300-500 billion to pay for new transportation infrastructure which is needed in order to get America “back to number one” internationally. LaHood firmly advocated that the federal government start by raising the gas tax which hasn’t been done in 20 years, and this money would then be reinvested into state and local government projects furthering economic growth.
 
Dr. Joseph Kile, from the Microeconomic Studies Division of the Congressional Budget Office, proposed a vehicle mileage tax due to the increase in fuel efficient automobiles.
 
The Heritage Foundation’s Stephen Moore discussed a more “conservative” option. Moore explained that his basis for disagreement with LaHood and the majority opinion was that “we don’t need to spend more money on infrastructure, we need to spend more wisely on infrastructure” citing the tens of billions spent on Virginia’s Silver Line train as a waste of taxpayer money. In addition, there are multiple way’s for the federal government to raise money such as tapping into the “Shale Oil and Gas Revolution” by drilling on federal lands which could be worth $2-3 Trillion or go forward with the Keystone Pipeline. According to Moore, these options would not only create jobs but more importantly they “wouldn’t cost taxpayers a penny.”
 
We can expect this negotiation to go down to the wire as the July deadline for the Highway Trust Fund approaches. This past week, Senator Inhofe (R-Okla.) and Boxer (D-Calif.) unveiled their plan for a six-year $275 billion highway reauthorization bill called the DRIVE Act which many Democrats have criticized because it will not, in their view, be sufficient.

Senator Corker (R-Tenn.) has called to increase the federal gas tax by 12 cents over the next two years, and the Senate Commerce Committee Chairman John Thune (R-S.D.) hasn’t taken it off the table yet. However, the Republican majority in both houses have expressed their opposition to increasing fuel taxes. Several Democrats and Republicans have alluded that the likely solution is corporate tax reform that supplements a multi-year highway deal.

The Senate Finance Committee Tax Reform Working Groups were supposed to submit proposals Friday but were delayed. The International Tax Working Group claims to have made progress, Co-Chair Senator Portman (R-OH) briefly discussed the proposal highlighting their plan to include a “repatriation tax” on corporate profits overseas. In the midst of this Highway Trust Fund deadline, the advertising industry will need to keep a very careful eye on this process as it can impact tax reform proposals and ad-taxes.

San Francisco Beverage Ad Warning Labels: Unhelpful and Unconstitutional

Posted: Jun 25, 2015 11:30am ET

The San Francisco Board of Supervisors recently approved an ordinance that would require health labels on advertisements for certain beverages – sodas, sports drinks, energy drinks, and iced teas – that contain more than 25 calories from sweeteners per 12 ounces.  These labels, which must appear on billboards or other outdoor ads, must include a warning that “drinking beverages with added sugars contributes to obesity, diabetes, and tooth decay.”  In its findings and purpose, the ordinance cites the myriad issues it claims result from consumption of “sugar sweetened beverages” and seeks to inform the public to “promote informed consumer choice.”    

ANA believes that this ordinance is clearly unconstitutional. The U.S. Supreme Court has repeatedly affirmed, since its 1980 decision in the landmark Central Hudson case, that restrictions on advertising must “directly advance the governmental interest asserted” in a “material manner” and cannot be “more extensive than is necessary to serve that interest.” The Court further stated in the 2002 Western States case that advertising restrictions must be a “last – not first – resort.”  

The San Francisco ordinance would not meet any of these criteria.  It is extremely overbroad.  The labels must include warnings that added sugars “contribute” to obesity and diabetes – but that potentially could be true for all caloric foods and drinks if they are excessively consumed.  There are clearly numerous other factors that contribute to obesity and diabetes beyond consuming “sugar sweetened beverages.”  

It is highly unlikely these warnings would have an impact on health, while forcing advertisers to spend their money to vilify their products.  The Supreme Court held in its Pacific Gas & Electric v. Public Utilities Commission decision dealing with mandated disclosures, that it is unconstitutional for the government to conscript private companies to promulgate the government’s desired messages with which it disagrees.  The Court stated that companies can refuse to accept government messages with which they disapprove where deception or misleading speech is not involved.  The court noted that “the choice to speak includes within it the choice of what not to say.” Additionally, San Francisco plans on spending money to enforce an ordinance that compels speech without detailing any other efforts to combat obesity, diabetes or tooth decay first, which obviously fails the Western States mandate.

Setting aside the constitutional arguments, the ordinance creates a very dangerous precedent.  There are 19,492 municipal level governments in the United States.  What would happen if many of them – whether it be New York City, Atlanta, or Peoria – decide to impose disparate warnings not only for sugar sweetened beverages, but for high calorie snacks, salty products, and a myriad of other issues that some city council believes they would like to inform the public about?  Manufacturers would be confronted with a dizzying patchwork of regulations around the country – and consumers would be confronted with a confusing mélange of warnings on products someone, somewhere, thought the public needed to be warned about.  This serves no one’s interest.

This ordinance is likely to be knocked down by the courts, but unfortunately in the meantime, other jurisdictions may attempt to copy San Francisco’s approach, so advertisers need to be on alert.

ICANN 53 – What to Expect in Buenos Aires

Posted: Jun 18, 2015 9:30am ET

By Clark W. Lackert, Reed Smith LLP

The next global ICANN meeting starts this weekend in Buenos Aires, an event important to brand owners and advertisers. Since the last meeting in Singapore in February, several seismic shifts have happened which may change the domain name ecosystem forever. Here are a few.

Perhaps the major change was the unexpected resignation of the ICANN CEO, Fadi Chehadé. While Chehadé has been under constant attack from various sources over the last few months, few observers thought he would resign in the midst of so many major projects and challenges including Second Round planning, IANA Transition, the continued rise of the GAC, and Accountability review. Chehadé said that he would step down in March of 2016. Now that Chehadé is a lame duck, ICANN 53 will be actively discussing what’s next, who will replace him, and how will his agenda be affected.

Another major change is an increased level of scrutiny for ICANN by the U.S. Congress, whether in hearings or correspondence, particularly on the more aggressive posture of the GAC to insert governmental objections and vetoes into the ICANN process. On June 10, 2015, Rep. Blake Farenthold wrote a scathing letter to ICANN, and signed by other members of Congress, to voice concern over the GAC’s desire for more power, an issue which has been consistently been of importance to ANA and its members. In fact, the letter referenced the ANA detailed negative comments on the GAC geographical name proposal last Fall as its first footnote. This proposal was authored by Olga Cavalli, Vice Chair of the GAC, and would greatly expand geographical name objections by GAC at the expense of brands. Another version of it will be discussed starting this weekend. It will be interesting to see if this new level of U.S. government monitoring will affect the GAC posture in Buenos Aires.

Further action from Congress comes in the form of the DOTCOM Act (HR 805), which would give Congress time to review the proposed IANA transition and require a Government Accountability Office audit of the transition before it is finalized. This bill expresses many lawmakers’ concerns that ICANN is not prepared for the IANA transition, highlighting questions about the transparency and accountability of the organization. Yesterday, the DOTCOM Act was voted out of the House Energy & Commerce Committee on a voice vote and is now headed for the House floor.

Although it may seem unrelated, the FIFA scandal has also affected public perceptions of ICANN, most importantly in the area of accountability, a hot topic at ICANN right now. Several commentators have noted that during transition and accountability discussions going on at ICANN now and soon in Buenos Aires, it is inevitable that the issue of lessons learned from FIFA will enter the debate at several levels.

Finally, following up on our posts on the “.sucks” controversy, now the Canadian government has also declined to intervene on the issue. Both the U.S. and Canadian governments have now sent the controversy back to ICANN to get its house in order. At the moment, about 100,000 names are on the “.sucks” Premium Sunrise (Market Premium) list, a development which continues to anger brand owners.

Whatever happens at the meeting, these complex challenges for ICANN are not going away soon. As always, ANA members should speak up now before Buenos Aires to make sure their views are heard.

Reed Smith LLP is the ANA’s General Counsel.

Dear Colleague Letter Shows Immense Support for Protecting Advertising

Posted: Jun 10, 2015 11:30am ET

Yesterday, Representatives Kevin Yoder (R-KS) and Eliot Engel (D-NY) sent a Dear Colleague letter to Speaker of the House John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) in support of protecting the current tax deductibility of advertising. This letter is extremely significant for the advertising community. Eighty-seven bipartisan members of Congress (48 Republicans and 39 Democrats) signed the letter.

This broad bipartisan support illustrates the growing opposition in Congress to amortizing advertising. Advertising’s immediate deductibility has been an important part of the tax code for over 100 years, and changing this key tax status would create serious harm for the economy. It has been proposed that 50% of each year’s advertising expenditures would have to be expensed over 10 years. This would impose at least a $169 billion in additional taxes on the ad community. Also, millions of jobs would be at risk if the effort to sell was saddled with heavy new tax burdens.

Representatives from 36 different states from all across the country signed the Dear Colleague letter. This fact is not surprising as advertising has a significant positive economic impact on every single state and congressional district in the U.S. A study carried out by the noted economic forecasting research organization IHS Economics and Country Risk demonstrated that advertising in 2014 supported 20 million jobs and drove $5.8 trillion in economic activity. These impressive numbers can only continue to be achieved in the future by supporting the current tax deductibility of advertising.

To view the letter sent by Reps. Engel and Yoder, click here. Click here to view our press release on this issue.

The “New ICANN”

Posted: Jun 4, 2015 2:30pm ET

By Clark W. Lackert, Reed Smith LLP

With the announced resignation of ICANN CEO Fadi Chehadé on May 21, 2015, effective next March, ICANN is truly entering a chaotic period. There are numerous key issues hanging fire including accountability requirements still undetermined, the announced delay for the technical functions transition, and the FTC's refusal to intervene in the ".sucks" controversy while blaming ICANN in part for the fiasco. It is too early to say at the moment what will emerge, although the picture should be clearer later this month at the ICANN global meeting in Buenos Aires. What is clear for advertisers and brand owners is that now, as never before, is the time to speak up about what is desired and needed in the "New ICANN".

In the Congress, Rep. Mike Kelley has introduced the Defending Internet Freedom Act of 2015 (H.R. 2251) on May 12, 2015 which would place certain restrictions on how the transition of technical functions of ICANN is handled. This issue has attained more relevance in view of the announcement by China that it will more carefully scrutinize and control the domain name sphere.

The continued rise of the Governmental Advisory Committee (“GAC”) within ICANN also could mean even more governmental intervention in complex intellectual property issues affecting domain names at ICANN. In addition, the Federal Trade Commission has just decided not to take immediate action against the “.sucks” registry outrage as set forth in its letter to ICANN of May 27, 2015, but has instead sent the controversy back to ICANN for their further review. The FTC did say, however, that ICANN ignored its previous policy recommendations and that it would monitor the activities of ICANN and the registries and take action as needed.

ICANN also has asked for community comments on the Review of the Generic Names Supporting Organization (“GNSO”), a 180 page comprehensive review issued on June 1, 2015 of the current state of play with the GNSO – comments are due by July 20, 2015. The GNSO is a key player in ICANN, since it supports various domain name legal and administrative functions, many of which affect trademarks. Additionally, the ICANN Cross Community Working Group (“CCWG”) on Enhancing ICANN Accountability also has been asking for public input. An opportunity to comment on accountability directly to ICANN may not come again in this form.

At the moment, ICANN can go in any number of directions, particularly with Fadi Chehadé leaving. It is important that interested advertisers and brand owners submit their comments directly to Congress, ICANN, and/or trade associations such as ANA to provide direction now rather than later before the path for ICANN is clearly set. If interested groups and companies believe there are issues with the New Generic Top Level Domain (“gTLD”) program and its rollout or needed safeguards for the internet as it transitions away from the United States, specific accountability mechanisms for the New ICANN, and the direction of the continuing issue of the GAC and geographical names, now is the time to provide feedback. Once the draft documents are finalized in Buenos Aires and later this year in Dublin, it may be too late to make further significant changes.

Reed Smith LLP is the ANA’s General Counsel.

As Congress Faces Deadline for Tax Reform, Advertisers Must Protect Ad Deduction

Posted: May 29, 2015 10:50am ET

Earlier this year, we took note of the narrow window for tax reform in 2015 as set by House Ways & Means Committee Chairman Paul Ryan (WI-1), who declared that either a tax rewrite can be completed by this summer or not at all. Now, with a marathon presidential campaign already under way and other pressing national issues taking center stage, experts agree that if a bill isn’t sketched out by Chairman Ryan’s deadline, any kind of comprehensive reform would have to wait for an entirely new Congress to commence in 2017.

At stake are the major changes necessary to overhaul our country’s current overly complex corporate-tax code. But we must also insist that these changes be improvements, and not further hindrances to economic growth.

ANA is supportive of a streamlined, revitalized corporate tax code that protects advertising as the ordinary and necessary business expense it has always been. We believe the corporate tax rate can be substantially lowered without penalizing or sacrificing the major benefits that the present treatment of advertising deductions provide the U.S. Proposals in Congress to alter this business expense deduction for advertisers by imposing a requirement that 50% of advertising be amortized over 5 or 10 years would have the exact opposite result tax reform intends – that is, it would without a doubt increase the cost of capital and impose a drag on job creation and the economy. According to a study by IHS, a highly regarded economic forecasting organization, advertising generates as many as 21.1 million jobs in the U.S. annually and multi-trillions of dollars in economic activity. Any change to the current tax deduction would severely adversely impact these numbers.  

We are building the kind of momentum necessary to ensure that advertising, both as an economic driver of sales and as a consumer resource, remains a valued component of corporate tax reform legislation. Through grassroots meetings with key senators and representatives in their home states and districts, ANA as a member of The Advertising Coalition (TAC) is working to show lawmakers that advertising needs to be protected in any new tax reform plan. TAC is comprised of media companies and national trade associations whose members are advertisers, advertising agencies, advertising clubs, broadcast networks, cable operators and program networks, and newspaper and magazine publishers. These companies and associations share a common objective—to protect advertising from initiatives by the federal government to tax or restrict the content of advertising. ANA strongly encourages our members to participate in these grassroots meetings when they take place. We can adequately protect the ad community only if our voices are heard loud and clear now.

As the deadline to reach consensus on tax reform rapidly approaches, advertisers must continue to actively work in favor of appropriate reform and achieve legislation that will ultimately lessen the regulatory burdens on business and encourage the kind of job growth the advertising industry has contributed to the U.S. economy.


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About This Blog

Penned by Dan Jaffe, the ANA's group executive vice president of government relations, this blog focuses on advocacy initiatives and key legal/regulatory issues that threaten national advertisers' freedom of commercial speech.