American Society of Magazine Editors

Action on Tax Reform Fast and Furious in 2013: Ad Deductibility in Play in 2014?

February 14, 2014
Advertising is big business and Congress wants in on the action.
Long a potential source of federal tax revenue, a pair of tax reform proposals in the House and Senate would change the current tax treatment of advertising expenses, which is currently treated as a fully deductible cost of doing business.  Limiting the tax deductibility of advertising makes advertising more expensive, likely leading to fewer or smaller advertising campaigns and placements.  The impact on the magazine media industry (and economy at large) could be significant.  
Late in 2013, House Ways and Means Committee Chairman Dave Camp (R-MI) strongly considered introducing legislation widely believed to modify the current tax treatment of advertising to allow businesses to deduct only 50 percent of the advertising costs in the first year, and amortize the remaining 50 percent over a ten-year period.  A primary focus of Chairman Camp’s effort, which he spent a good portion of 2013 working on, is a tax code that supports a 25 percent marginal corporate tax rate.  
In response, MPA and allies in the media and advertising community made an aggressive effort to share our staunch opposition with members of the Committee and House leadership.  This opposition was unquestionably a factor in the House leadership’s decision to direct Camp not to proceed in 2013.
At the same time, Senate Finance Committee Chairman Max Baucus (D-MT) circulated several “discussion drafts” on tax reform.  Included in the draft on “Cost Recovery” is a proposal similar to that in the House, with advertising expenses 50 percent deductible in year one, and the remaining 50 percent deductible over five years.  We quickly made our objections known, reaching out to our supporters, who include our standard bearer Chuck Schumer (D-NY).  At the request of the Committee, we jointly filed formal comments outlining our objections to the proposal.
In a recent development, Senator Baucus was nominated by President Obama to serve as Ambassador to China and is likely to be confirmed by the end of the month.   His successor – Ron Wyden (D-OR) – has indicated a willingness to undertake tax reform, and has even gone as far as introducing a bipartisan tax reform bill of his own.  Once he assumes the Chairmanship, he will begin to put his own stamp on tax reform efforts, setting the tone for the balance of 2014.
As of now, we are cautiously optimistic that tax reform will not advance in 2014.  In addition to opposing these bills should they advance, we will continue to actively oppose any modification to the current tax treatment of advertising deductibility should it arise in other budget matters around the Capitol.