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IHS Global Insight Study and Advertising Taxes

Dan Jaffe Op-Ed in The Hill

Dan Jaffe recently had an op-ed published on The Hill's "Congress Blog" that lays out our case against the amortization of advertising expenses as proposed in the drafts by both Senator Baucus and Representative Camp. You can view the op-ed on The Hill's website.

UPDATE: House Ways & Means Committee Chairman Releases Tax Plan that Includes Amortization Proposal

Chairman Dave Camp (R-MI) of the House Ways & Means Committee released a draft tax reform proposal on February 26th. As we had expected, Chairman Camp’s plan would require the amortization of certain advertising expenses beginning in 2015. This amortization plan marks a drastic departure from the historical treatment of advertising as an ordinary and necessary business expense, which has allowed it to be virtually one hundred percent deductible in the year in which the expense is made.

Under the plan, 50 percent of certain ad expenses would be deductible currently, and the other 50 percent would be amortized over a ten year period. This amortization would phase in over a period of years until 2018. The provision allows for the first $1 million of advertising expenditures to be deducted, with a reduction of the $1 million for companies whose advertising costs are greater than $1.5 million and a complete phase out of the $1 million for companies whose advertising costs exceed $2 million. A complete description of the ad amortization plan can be found on pages 56 and 57 of the Section-by-Section Summary and pages 362-69 of the draft legislation.

We need your help. Please contact members of the House Ways and Means Committee that your company has close relationships with and stress to them the importance of maintaining the full deductibility of advertising expenditures.  A list of Committee members can be found here, and a list of key staffers is available here. In order to help guide your outreach messaging, ANA has put together a list of talking points, which you will find in the column on the right. Our press release on today’s proposal can be found here.

While ANA supports tax reform and the lowering of corporate tax rates, we do not believe it would be appropriate to use advertising to fund this reform effort. If enacted, this proposal will cost advertisers billions of dollars. Chairman Camp stated last week that it was "time to take on the special interests." Advertising has never been treated as a special interest exemption before, and it must not be treated as one now. Tell Chairman Camp and members of the House Ways and Means Committee that advertising is part of the lifeblood of our economy, not a special interest exemption to raid for lost dollars elsewhere.

IHS Global Insight Study Demonstrates the Importance of Advertising to U.S. Economy

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ANA and The Advertising Coalition (TAC) have released a landmark new study conducted by IHS Global Insight, Inc. that demonstrates the importance of advertising as a driving force in the United States economy. 

Among the findings:

The study examined the economic impact of advertising expenditures across 16 industries and the government in all 50 states and Washington, D.C. It also examines the importance of advertising to all 435 Congressional districts. 

The economic model used by the study was developed by Dr. Lawrence R. Klein, the winner of the 1980 Nobel Memorial Prize in Economic Sciences.

To view a summary of the key findings of the report, click here

To view the full study, click here.

To view examples of the economic value advertising on a sample of states, visit the following links: New York, Michigan, Montana, or Oregon.

We Need Your Help!

In November, Senator Max Baucus (D-MT), chairman of the U.S. Senate Committee on Finance, released his discussion draft of tax reform legislation which includes a provision that would allow advertisers to deduct only 50 percent of all advertising expenses in the first year and amortize the remaining 50 percent over the next five years. Advertising expenses are currently treated as a fully tax deductible ordinary and necessary business expense in the year in which they occur.

Daniel Jaffe, group executive vice president of the ANA, discussed the fight against the new Senate advertising tax proposal. He spoke with Pimm Fox on Bloomberg Television's "Taking Stock."

Senator Baucus’s proposal followed a potential proposal by Representative Dave Camp (R-MI), chairman of the U.S. House of Representatives Committee on Ways and Means, that would allow advertisers to deduct 50 percent of all advertising expenses in the first year and amortize the remainder over 10 years, as opposed to five

We are asking ANA members to contact their members of Congress to weigh in on this proposal. You can find contact information for your Senator here and your Representative here. We have also prepared talking points you can use in your contacts. We ask that you please share with us any correspondence you send to Congressional offices.

If you have any questions, you can contact Dan in ANA's Washington office at 202.296.2359 or at djaffe@ana.net

25 Years of Initiatives to Tax Advertising

Since the last major overhaul of the Federal Tax Code in 1986, there have been numerous proposals to end the tax deduction for advertising expenses, either in fully or in part. ANA and The Advertising Coalition (TAC) have been successful in defeating every one of these proposals. For more details, click here

What Amortization Would Mean

Get more information on how amortizing advertising costs would affect U.S. economic output and job creation.

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Video Content

ANA video on the advertising tax proposals:

Ad Tax Talking Points

Talking points to assist you in discussing ad taxes with your Congressional contacts

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Lexecon Study

At the request of The Advertising Coalition, the economic consulting firm of Lexecon, Inc., and its affiliates, Nobel Laureates Dr. Kenneth Arrow of Stanford University and the late Dr. George Stigler of the University of Chicago examined the economic effect of a change in the tax treatment of advertising expenditures. 

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The Advertising Coalition

The Advertising Coalition (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. 

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