The Fight against Amortizing Advertising

August 5, 2014

The House Ways & Means Committee’s Subcommittee on Select Revenue Measures held an important hearing last week to discuss the proposed tax reform plan from Committee Chairman Dave Camp (MI-4).  The hearing was directed to investigating “The Dynamic Analysis of the Tax Reform Act of 2014,” and what impacts the proposal will have on tax revenue, job generation, and economic activity.

Chairman Camp’s plan has many laudable goals, including decreasing the corporate tax rate from 35 to 25 percent to make the United States more competitive with foreign tax regimes.  The plan, however, also includes a proposal to amortize 50 percent of advertising expenses over a period of 10 years, radically breaking from the way businesses have historically been able to deduct the full cost of advertising on an annual basis.  This proposal has been estimated to impose on the ad community an additional $169 billion in taxes over 10 years.

During last week’s hearing, we were very pleased that the amortization of advertising expenses was not swept under the rug during discussion of the macroeconomic impact of Camp’s tax plan.  Curtis Dubay, a research fellow at the Heritage Foundation, testified during the hearing that the amortization proposal would increase the cost of capital and ultimately be a drag on the economy.  In his written testimony, he stated, “This would deny businesses the ability to deduct these routine business expenses and thus overstate their taxable income.”  

In addition to Mr. Dubay’s testimony, The Advertising Coalition (TAC), which includes beyond the ANA the American Advertising Federation (AAF), the American Association of Advertising Agencies (4A’s), the Grocery Manufacturers Association (GMA), and the National Association of Broadcasters (NAB), has submitted a statement to be made part of the record of the hearing.  In TAC’s statement, the Coalition points out that the amortization proposal would have severe adverse impacts on job generation and economic activity in the United States.  The letter also cites the IHS Global Insight study which estimates that advertising expenditures account for $5.8 trillion in economic output in the United States.  This is equal to 17.2 percent of the $33.8 trillion in total U.S. economic output in 2013.  Furthermore, advertising helps support 21.7 million jobs, or 16 percent of the jobs in our country annually.  The Coalition urges the Committee to remove the proposed limits on the tax deductibility of advertising as it moves forward on the tax reform package.

Together with TAC, ANA will continue to work toward removing the advertising amortization proposal from any upcoming tax reform legislation.  It is vitally important that everyone involved in advertising work together as a united front to secure the protections our industry was granted over 100 years ago when the federal tax code was first established.  Legislators should know that their unprecedented actions would have a severe negative impact on our country’s economy moving forward.

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