Nearly 60 lawmakers have signed on to a “dear colleague” letter to ensure that a broad tax reform package does not change the current tax deduction for advertising expenses.
The letter, which will be sent to Speaker John Boehner (R-Ohio) and Minority leader Nancy Pelosi (D-Calif.), is being circulated among House members by Reps. Eliot Engel (D-N.Y) and Kevin Yoder (R-Kans.) with a May 29 cut-off date.
Advertising has been treated as a deductible cost of doing business since 1913. Limiting the tax deductibility of advertising gathered some momentum in the last Congress as part of a broad tax reform package until a change in committee leadership halted its progress. The proposals in both chambers would have placed limits on the amount of advertising dollars that could be deducted in the year it was spent.
If similar proposals gather steam this year, it would be a radical change with serious consequences to the advertising and media business, the letter warns.
“Changes that make advertising more expensive cannot be justified as a matter of tax or economic policy. Such changes would be severely detrimental to local advertisers, broadcasters, print media, online service providers, national media companies, news-gathering organizations, and other firms that rely on advertising as their primary source of income. Imposing a new cost on advertising would threaten the ability of these businesses to continue to support jobs and offer the high quality news, information, and entertainment that our constituents rely upon.”
The exact timing of any tax reform bill and the chances of it including a proposal to limit the advertising tax deduction making into a tax reform package is unclear. But there continues to be discussions in Congress to make a real effort by the end of the summer to come up with a tax reform package. Rep. Paul Ryan (R-Wisc.), chairman of the ways and means committee is looking to get something done by the end of the summer. On the Senate side, finance committee chairman Orrin Hatch (R-Utah) has already started the process.
“The next month or two is critical,” said Dan Jaffe, executive vice president of the Association of National Advertisers. “More than $100 billion in taxes are on the line. I have to be on full alert.”