Advertising Tax Deduction at Serious Risk

July 28, 2017

House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch and House Ways and Means Committee Chairman Kevin Brady, issued a Joint Statement on Tax Reform yesterday. While there were relatively few specific details, the statement indicated that the “Big Six” have decided to set aside the border adjustment tax which was included in the House Republican blueprint from last year. That leaves a hole of over a trillion dollars that policymakers will need to fill in order to make major tax rate reductions.  

In addition, Vice President Pence yesterday also reiterated that “The President has made clear that we are going to cut the business tax rate to 15%,” which would be the largest drop in the corporate tax rate in U.S. history. These developments together will create enormous pressure to find so-called “pay-fors” to keep any tax reform proposal as revenue neutral as possible

The current tax deduction for advertising costs therefore is at serious risk. The Trump Administration may revisit proposals put forward previously by the house Ways and Means and Senate Finance Committees that would have slashed the full deductibility of advertising costs in half and required the balance of those costs to be amortized over a period of five or ten years. These changes could cost the marketing community over $200 billion in new taxes over the next ten years. The ad tax proposals were suggested in 2014 when former Chairman of the House Ways & Means Committee Dave Camp (R-MI) and former Chairman of the Senate Finance Committee Max Baucus (D-MT) released draft tax reform schemes that would require the amortization of certain advertising expenses. ANA has been fighting these sorts of proposals at both the federal and state level for many years.

Yesterday’s Joint Statement indicated that the policymakers plan to accelerate substantially the tax reform process after Congress returns from their August recess. The recent derailment of the health reform proposals in the Congress will only create stronger pressure to focus on tax reform efforts.

ANA members and the advertising community as a whole need to actively work to protect this bottom-line issue for each and every business. ANA was a founding member of The Advertising Coalition (TAC) and we are working hard to protect the full deductibility of all advertising costs. TAC recently filed comments with the House Ways and Means Committee explaining why it is critical to preserve this tax treatment. ANA and TAC also commissioned a study to demonstrate the immense positive impact advertising has on the U.S. economy. If policymakers hope to see economic growth continue into the future, hampering advertising – a substantial driver of economic activity and jobs – is clearly the wrong approach for our country. 

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