Many US companies have, for decades, declared advertising as an, "ordinary and necessary cost of doing business." Similar to employee payroll, office rent and other expenditures, advertising is considered a standard business deduction under applicable IRS tax rules. However, advertising deductibility often comes under legislative scrutiny as broader economic factors (and associated political pressures) compel legislators to re-examine the existing tax code.
A large-scale review of corporate exemptions and deductions last occurred with The Tax Reform Act of 1986 and was subsequently revisited during the Clinton administration. This may occur again as the White House and the Congress continues to negotiate fiscal policy in the months and years ahead.
The very real consequence of having advertising re-classified (in whole or in part) as a taxable business activity is that client advertisers will do less of it. Any tax percentage assessed will incline companies to reduce advertising and media expenditures in order to mitigate or off-set a tax. This impacts ad agencies directly –and can adversely affect entire local economies and job bases where agencies and advertising-related businesses play such important roles.
Current 4A's Advocacy
The 4A's, in coordination with our colleagues in the broadcast, media and publishing communities, is dedicated to the ongoing protection of advertising deductibility. As a founding member of The Advertising Coalition, a Washington-based trade cooperative, the 4A's conducts informed outreach to members of Congress who decide tax and finance matters. This includes facilitating dialogue between 4A's members and members of Congress in their local districts.
• To date, the Advertising Coalition has sent letters to over 34 members of Congress who serve on key committees such as House Ways and Means, House Budget, Senate Finance and others.
• "Grassroots meetings" have been held in the district offices of members of Congress in Florida, Georgia, Kansas, Kentucky, Louisiana, Minnesota, Missouri, Ohio, Pennsylvania, Tennessee and Texas
• 4A's members that have played active and valuable roles in these grassroots meetings include: G2 Interactive and Latitude 39 (Philadelphia); Bohan Advertising (Nashville); Richards Group and TM Advertising (Dallas); Eric Mower & Associates, Fitzgerald & Company and 22 Squared (Atlanta); Sides & Associates (Lafayette); and, Fahlgren Mortine, and Conrad Philips Vutech (Columbus).
These coalition efforts have proven effective in helping legislators better understand the local value of advertising and the threat that advertising taxation poses to district economies.
Please contact the 4A's Washington Office if you would like to participate in any of the district meetings that 4A's Washington facilitates. 4A's member participation is critical to preserving the deductibility of advertising.
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