Advertising lobbying groups are mobilizing like mad men against a key piece of the tax-code reform package that House Ways and Means Committee Chairman Dave Camp could unveil as early as Wednesday.
"WE NEED YOUR HELP," warns an alert sent out by the Association of National Advertisers to its 574 member companies last week. The group is bracing for battle against what it expects to be a call to change the standard tax deduction that businesses use for advertising expenses.
"[Camp] said it is time to take on special interests. But advertising is not a special interest, and has never been considered a special interest" in the tax code, said Dan Jaffe, the Washington-based executive vice president of the ANA.
Other national advertising groups — such as the Advertising Coalition and the American Association of Advertising Agencies — are also pushing against such a plan.
Advertising is now treated as an ordinary, fully deductible business expense in the year it is incurred. The trade groups and their members fear that Camp is about to propose that businesses may deduct only 50 percent of their advertising expenses in a tax year — and require that the balance be amortized over some number of years.
The latest word, they say, is that he may seek to amortize the deduction over a five-year period. That is shorter than a previously-floated 10-year frame but similar to what former Senate Finance Committee Chairman Max Baucus proposed in a discussion draft in November.
Opponents say any such change would severely damage agencies and other businesses that rely on advertising spending.
Exactly what Camp will propose could still be under revision, and a committee spokeswoman declined to provide final details on Monday — including whether he would call for lowering the corporate tax rate from 35 percent to 25 percent. Democrats on the committee said he was suggesting that change to them last summer, along with lowering the rate for top individual earners from 39.6 percent to 25 percent. The talk now is that the chairman may be reconsidering that original plan, and that his top rate may not go below 30 percent.
But Democrats argue that without new revenues, any such reduction wouldn't be paid for, and so would add to the nation's debt.
Camp, who faces a term limit at the end of 2014 as Ways and Means chairman, will have an uphill battle in getting House GOP leaders to back action on his proposals during what remains of this midterm election year. But advertisers say they don't want to allow any momentum to build for some future effort in the House and Senate that is aimed at the deductibility of advertising expenses.
As part of its efforts, the ANA has already released a study with the Advertising Coalition that says limiting the ability of businesses to deduct the cost of advertising in this way could threaten 1.7 million jobs and $456 billion in sales over the next five years.
And to put a personal touch on that case for lawmakers, the IHS Global Insight study breaks down what would be the impact of the tax proposal in each of the nation's 435 congressional districts.
In its alert to member businesses, the ANA has asked them to "please contact members of the House Ways and Means Committee that your company has close relationships with and stress to them the importance of maintaining the full deductibility of advertising expenditures." The ANA has also put together a list of talking points and noted a website that deals with "the ad tax threat."