As I am sure you are aware, Congress may soon be taking up the first major reform of the U.S. Tax Code in nearly 30 years. We have learned that Congressional leaders who are drafting the proposal have heard suggestions that the deduction businesses take for the ordinary and necessary expense of advertising costs should be reduced significantly as a way to generate more revenues to help pay for tax reform. To lower corporate tax rates, “some suggest looking [for new revenues] at the deduction for advertising [costs], a commonly used business write-off.” (Wall Street Journal, August 2, 2013). This would constitute a tax on advertising and increase the cost of advertising for all businesses, as well as the tax liability for major advertisers.
AAF and the advertising industry need your help. It is very important that you, and other members of the industry, write, email or call your two Senators and Representative and urge them to oppose any tax on advertising in the form of a limit on the deduction for advertising costs. Ask them to communicate their opposition to taxing advertising to their colleagues on the tax-writing committees. Here is a draft letter.
Advertising – local, regional and national – generates $5.6 trillion in total economic activity for our country and helps support 22.1 million jobs in the U.S. economy. The stimulus generated by advertising brings jobs and sales to every state and to every congressional district. Even a modest reduction that limits the amount a business may deduct of its total advertising spending could cost the nation 1.6 million jobs and $419 billion in economic sales activity.
The critical message to convey to Members of Congress is that the deduction for advertising costs is not a special preference or deduction. Every business in America is entitled to this deduction, which is classified as an ordinary and necessary business expense. Other ordinary and necessary costs that may be deducted include the salaries of employees, rent for office space, utilities and other costs that a business must pay to keep the doors open and to generate sales. This deduction is for core business expenses and has been permitted since the adoption of the Tax Code in 1913. You should emphasize that you are not seeking a special treatment or exemption – you are asking Congress to maintain the business expense deduction allowed for advertising for the past 100 years.
You can find your member of Congress and a link to his or her website here. Senators can be found here.
Please distribute this alert to other members of your ad club and/or company. Do not hesitate to contact me if you have any questions or comments.