AICPA Calls Advertising Amortization Tax Proposal Competitively Disadvantageous and Overly Complex

January 14, 2015

The American Institute of Certified Public Accountants (AICPA) recently wrote to House Ways & Means Committee Chairman Paul Ryan (R-WI) on the Tax Reform Act of 2014, the comprehensive tax reform bill introduced at the end of last Congress. AICPA’s detailed, section by section statement specifically singles out the provision in the bill that would require the amortization of advertising expenses, and states that it “will add new unnecessary complexities.” The letter further states:  

“Advertising is a key expenditure for a business in order to promote its product, mission, values, and business. The requirement to amortize current year advertising expenditures effectively increases the cost of advertising, which can result in a competitive disadvantage in the local, national, and international marketplaces.”

This strong statement against the amortization proposal follows statements by Curtis Dubay of the Heritage Foundation at a Ways & Means Committee hearing last July, which noted that the amortization proposal would increase the cost of capital and ultimately harm the economy. The Advertising Coalition, of which ANA is a founding member, submitted a statement urging the committee to preserve the full deduction of advertising costs and cited the important research done by several Nobel laureates in economics which has shown that advertising should be treated as an ordinary and necessary business expense and that theories advocating otherwise are invalid.

With the ongoing controversy over tax inversions by U.S. companies and the general concern over the competitiveness of the U.S. tax code in comparison to other countries, tax reform legislation is a distinct possibility this Congress. President Obama, Speaker Boehner, Senate Majority Leader McConnell, and Senate Finance Chairman Hatch have all stated they are willing to move forward to pass bipartisan tax legislation. ANA strongly supports tax reform. However, we believe it is essential for job creation and to create a positive environment for economic activity that the current tax treatment for advertising expenses that allows for the immediate full deductibility of advertising expenses, which has been in place for over 100 years, be maintained.

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