The 4A’s has long been a strong advocate for the preservation of the full federal deductibility of advertising as a necessary business expense. This deductibility has been threatened as recently as 2017 when the Tax Cuts And Jobs Act was being debated. While the 4A’s and our allies were able to successfully preserve that deduction in 2017, that ongoing preservation will likely be an even bigger challenge in light of the deficit-spending Congress is having to engage in to fight COVID-19. The bill will have to come due at some point, and no industry will likely be safe in the years ahead from threats of tax increases and/or loss of deductibility.
And the threat is no longer just at the federal level. States have gotten increasingly aggressive in introducing new tax bills to garner more revenue. And in 2020 there’s been a particularly concerning new development. While states have long passed (and often then repealed) bills that create new taxes on advertising, Maryland became the first state to pass a tax specifically on digital advertising. With states facing enormous revenue losses in their 2021 fiscal years due to COVID-19, the advertising industry can expect to see a proliferation of new state taxation bills in 2021.