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AAF Sounds Alarm About Advertising's Tax Deductibility

Members Urged to Call Ways and Means Committee

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The tax man comes in April for most people but some worry he may be returning this fall for the advertising industry.

Clark Rector, exec VP for the American Advertising Federation, is among industry lobbyists who worry the expensing of advertising costs will be targeted in a tax code overhaul underway in Congress -- even if that Congress hasn't proven itself capable of passing much legislation.

In a blast email this week, he urged advertising executives to contact the 39 Republicans and Democrats on the House Ways and Means Committee and tell them to keep their hands off the ability of companies to write off advertising as a business expense.

Rector urged federation members to let Congress know advertising generates trillions of dollars in economic activity and creates millions of jobs. He also asked members to stress that advertising costs are a normal business expense, like rent and salaries, "not a special preference."

"You should emphasize that you are not seeking a special treatment or exemption -- you are asking Congress to maintain the business expense deduction allowed for advertising for the past 100 years," Mr. Rector said.

He told his members several proposals are under consideration. One would limit deductions of advertising cost to 80% of expenses or less. Another would require the amortization of expenses over several years.

Committee Chairman Dave Camp, R-Mich., said he is going to "step up the pace" of a tax overhaul this fall and hopes to have a final proposal by the end of the year. Republican members of the panel met Tuesday for the first of several meetings to delve into each cranny of the tax code.

Mr. Rector's alert to members was effective. Ways and Means Committee members began to hear from advertisers.

But a committee staffer said Mr. Rector is premature with his warning.

"There's no proposal on paper," the source said. "Nothing is in and nothing is out."

If that's not exactly reassuring, ad executives can take solace in the unlikelihood of a Congress locked in a partisan quagmire passing any sort of tax-reform bill—especially with elections coming up next year.

House Majority Leader Eric Cantor, R-Va., did not include tax reform in a recent memo laying out priorities for September and October. Next year is an election year, which will make it even more difficult to pass a tax bill.

Mr. Rector conceded he did not know for certain if a final tax bill would change the expensing of advertising "but we understand it's one of the things being discussed."

He also said "it's still something of a long shot" tax reform will be enacted anytime soon.

But he wants to be proactive and believes any proposal discussed now may eventually become law.

"It could be a starting point when the political climate is more conductive," Mr. Rector said.

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