Update: Ad Expense Deductibility Proposal Reportedly Advances

LEGISLATIVE ALERT!!!  Last month we reported on indications that, according to AdWeek, some in Congress are thinking about revising the tax code to eliminate, or at least seriously reduce, the deductibility of advertising expenses. We have a follow up.

AdWeek is now reporting that the Chairman of the House Ways and Means Committee (that would be Rep. David Camp (R-Mich)) is indeed pushing a tax reform proposal that targets, among other things, ad expense deductibility.

The proposal appears not to envision the complete elimination of the deduction. But not by much. As described by AdWeek, Camp’s proposal calls for only 50% of ad expenses to be deductible during the first year, with the remainder of the expense to be amortized over the ensuing decade. (Exactly how this makes any economic sense is not at all clear.) Such a move would obviously have a harsh effect on advertisers and a trickle-down effect on others, including broadcasters, who might suffer if a change in tax policy discourages advertising.

It’s hard to say at this point how serious the threat is, but we suspect it ranks right up there.  And it is apparently stirring considerable concern among advertiser and media lobbyists, one of whom was quoted as referring to the situation as “DefCon 1”. Anytime anybody conjures “DefCon 1”, it’s worth passing along to our readers.

The smart money says that Camp is looking to insert his proposal into a more general tax reform package that would clear the Ways and Means Committee in the next couple of months. We will be following this.  Check back here for updates.

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