New Tax Reform Legislation Includes Limit on Ad Tax Deductions

Feb. 27, 2014 – As expected, tax reform legislation introduced yesterday by Senate Ways and Means Committee Chairman Dave Camp (R-Mich.) includes a provision limiting the advertising cost deductions to 50 percent over the first year with an amortization of the remaining deductions over 10 years, with a loophole for the first million dollars of ad expenditures (statutory_text_tax_reform_act_of_2014_discussion_draft__022614).

In an article about this provision in Advertising Age, Dick O’Brien, Executive Vice President, Government Relations, American Association of Advertising Agencies, said it was “a dreadful idea” that endangers the financial health of the advertising industry.

“Dick O’Brien of the 4As nails it — the Camp proposal is indeed a dreadful idea,” said Coalition for Healthcare Communication Executive Director John Kamp. “It picks up from the defeated proposals in the Affordable Care Act to kill the deduction for drug marketing and applies it to virtually all marketing costs,” he said.

And, although Camp claims that tax reform is needed to boost the U.S. economy, others argue that the ad tax deduction limits actually hurt the economy and Kamp agrees, stating that the provision “will dampen employment in an era of high unemployment and impede the ability of medical marketers to inform doctors and patients of life- and cost-saving uses of new and innovative medicines.”

Although it is unlikely that the “Tax Reform Act of 2014” will be taken up by Congress this year, it is important for the advertising industry to make its case to lawmakers before this or other tax reform legislation moves forward with a crippled advertising tax expense deduction, Kamp suggested. “It’s time for Washington to sack this idea for once and for all,” he asserted.