Nov. 13, 2013 – The Advertising Coalition (TAC) is working to remove an advertising tax provision that reportedly is included in tax reform legislation being drafted by the House Ways and Means Committee. The provision would allow a business to deduct only 50 percent of advertising costs in the year the ad runs and would delay the deduction for the remaining 50 percent over 10 years (deducting an additional 5 percent for each of those years), according to sources. Currently, businesses may deduct 100 percent of the cost of advertising.
The TAC is seeking to convince House Ways and Means Committee Chairman Dave Camp (R-MI) to drop this provision from the committee’s comprehensive tax reform bill, which Camp looks to fund in part with the new tax on advertising.
“If the advertising tax deductibility goes away, there is no question that the costs of marketing services will increase, and, as a result, be trimmed significantly,” said Coalition for Healthcare Communication Executive Director John Kamp. “The consulting firm IHS Global Insight estimates this scenario could place 1.7 million jobs at risk, so preserving the current standard business deduction for the cost of advertising is critical,” he asserted.
Further, although some proponents of the tax argue that businesses would recoup their costs over 10 years, the reality, Kamp explained, is that companies would lose out on their ability to spend or invest that money and earn a return earlier than 10 years. Additionally, the proposal does not consider that companies buy new advertising each year and would feel the brunt of this tax annually.The CHC will be following this issue very closely in the weeks and months to come.