At the start of 2017, the new administration and Congress set tax reform as one of their highest priorities. As work on that began in earnest, it became clear that the reduction in the full deductibility of advertising was once again in play.
The 4A’s, in concert with other advertising groups, launched a massive effort of congressional contact, both in Washington and at the grassroots level across states and congressional districts, to blunt this attempt to limit full deductibility.
Yesterday, the House Ways & Means Committee released the first draft of its proposal for tax reform. The 4A’s is pleased to report to its membership that the treatment of advertising as a fully deductible expense remained unchanged. Industry efforts have succeeded, so far.
It is important to note there will be many further steps before this proposed tax reform legislation is signed into law. At any one of those steps, the full deductibility of advertising could come back into question.
The 4A’s will continue its advocacy work as tax reform moves forward.
Since the creation of the federal tax code in 1913, advertising has been fully and immediately deductible for advertisers as a necessary business expense.
Over the years, attempts have been made in Congress to either limit or eliminate that full deduction in the interests of raising new revenue for the government. The most recent of those attempts occurred in the last Congress when it was proposed that only 50% of advertising be deductible in the year of spending and the remaining 50% be amortized over the next five years. The Congressional Budget Office estimated that this one change would raise $169 billion in new revenue for the government over ten years. Put differently, this would result in a $169 billion price increase for advertising over that period. With such a massive price increase, advertising demand would certainly fall and jobs in the industry would be lost. The 4A’s and its industry partners will continue to fight to keep advertising expenses fully deductible.