|November 30, 2017
Clark Rector, Jr., Executive Vice President of Government Affairs
Ad Deduction Not in Tax Reform Bills
The U.S. Congress keeps moving ahead on comprehensive tax reform. The House has passed their version of reform and the Senate is currently debating their version with amendments being offered and voted on. Neither bill includes any limitations on the full current year deduction for advertising expenses as a normal and necessary business expense. This is very good news for consumers and the advertising industry. However, it is still possible that the advertising deduction issue could be raised before tax reform is finished.
Republicans currently hold a 52-48 majority in the Senate and Democrats have been united in opposition to tax reform. Normally, the minority party can block legislation in the Senate using the filibuster, which would require a 60 vote majority to overcome. This would give Democrats the leverage to either stop the reform or shape it more to their liking. However, under the budget rules used to bring the bill to the full Senate, Republicans can pass the bill with a simple majority (needing no Democratic support), but only if the reform does not increase the budget deficit by more than $1.5 trillion over ten years.
Republican leadership will still be challenged to find a 50 vote majority to pass the bill (if a vote is tied 50-50, Vice President Mike Pence would cast the tiebreaking vote). Some Republican Senators find different provisions of the Senate bill objectionable and are asking for changes. Eliminating or changing parts of the bill could move the cost of reform over the $1.5 trillion threshold. If the Republican leadership tries to placate these members by making changes they may need to find new sources of revenue in order to keep the price tag under $1.5 trillion. It is under this scenario that advertising could be at risk as a source of revenue.
AAF will continue to monitor the issue closely and strenuously object to any effort to limit the full current year deduction for advertising expenses. We know we have strong supporters in both the Senate and House. A bi-partisan letter defending the advertising deduction was sent to the Republican and Democratic leaders of the Senate and Finance Committee. The letter was authored by Senators John Boozman, R-Ark. and Tammy Baldwin, D-Wisc. and signed by thirteen of their colleagues. The letter is similar to the Engel-Yoder letter sent last spring to House and Ways and Means Committee leaders signed by 124 members of the House of Representatives.
As reported before, we know AAF’s grassroots efforts are working. Many members of the House and the Ways and Means Committee cited the strong response from the advertising industry in their home districts as part of the reason advertising maintained its full deduction in the House reform proposal.
One threat to advertising did arise during the Senate Finance Committee tax reform mark-up. Senator Clair McCaskill, D-Missouri, filed but never formally introduced an amendment that would have disallowed the deduction for direct-to-consumer advertising of prescription pharmaceuticals. The AAF supported Advertising Coalition sent a letter to members of the Finance Committee opposing the amendment.
Tobacco Company Advertising Returning to the Air
Anti-smoking advertising, paid for by cigarette manufacturers, has started airing in television markets across the country. The ads are part of the settlement of a 1999 Justice Department lawsuit against tobacco companies that led to a federal order for the companies to issue “corrective statements” to offset decades of product advertising. Numerous legal appeals pushed back the ads for many years.
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