Legislators are pushing back against a proposed alteration to the tax code that would—for the first time—change the treatment of advertising expenses.
Currently, advertising is treated as a fully and immediately deductible business expense. But the proposed tax plan on the table before Congress would limit companies to deducting only half of their advertising costs immediately, with the remainder spread out over five years.
“Where it hits extraordinarily hard is the media, which is already struggling without any additional burdens,” Dan Jaffe, executive vice president for the Association of National Advertisers, told Bloomberg. “This could be a very heavy straw on the camel’s back.”
In addition to industry lobbying against the change, a group of 15 lawmakers authored a letter to the Senate majority and minority leaders, Sens. Mitch McConnell, R-Ky., and Chuck Schumer, D-N.Y., advocating for maintaining the status quo.
“For the life of the tax code, advertising has been treated the same as all other regularly occurring business expenses,” a bipartisan group of five Republican and ten Democratic senators wrote. “Any measure that would tax advertising—and therefore make it more expensive—cannot be justified.”
The legislators—including Sens. Edward J. Markey, D-Mass., and Rand Paul, R-Ky., noted that advertising not only supports 20 million U.S. jobs and $5.8 trillion in activity, but also “contributes to 19 percent of our nation’s GDP and is responsible for supporting the high-quality news and information we all rely on.”
“As the Senate continues to work towards tax reform, we ask that you continue to support local businesses and recognize the importance of advertising on jobs and the economy,” the lawmakers concluded.
To read the letter, click here.
Why it matters: Similar ideas have been floated before without success, and the future of the tax plan remains uncertain. Passage will require the full support of all Republicans, but five signed the letter in support of keeping advertising as a full and immediately deductible business expense, giving the industry hope.