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Is Killing Ad Tax Deductions Good or Not?

FHH says broadcasters, advertisers, markets should monitor the issue

Some lawmakers are reportedly considering eliminating the historic tax deductions for advertising expenditures.

The effects on all businesses, including radio, could be “seriously bad news,” writes Fletcher Heald and Hildreth’s Frank Montero, with the assistance of Rob Schill, in a recent CommLawBlog.

“Historically, of course, advertising has been treated by the IRS as a deductible business expense. So every dollar spent on advertising could be effectively ignored for tax purposes. The more money spent on advertising, the less would be subject to taxes,” according to Montero and Schill.

However, the American Advertising Federation says there are proposals under consideration in both houses of Congress that if passed, would affect the ability to expense advertising fees, including a proposal to amortize advertising costs. The AAF urges its members to lobby their lawmakers to vote against any measure that would limit a business’s ability to deduct the full cost of advertising in the year it is incurred.

The ongoing appropriations and debt ceiling woes being debated in Congress have apparently provided the impetus for the changes, according to the ANA.

Some broadcasters are aware of the issue. New Jersey Broadcasters Association President/CEO Paul Rotella sent a letter to lawmakers about the issue, stating: “In contrast to many tax expenditures, advertising is essential to the growth of our economy. For instance, just in the State of New Jersey, advertising accounts for $187 billion of its $966 billion total economic output and drives sales of products and services that help support 554,407 jobs in the state.” 

Montero and Schill advise the advertising, media and marketing industries to monitor Congress’ activities in this area.