The advertising community has been on high alert over proposals in the House to limit or eliminate the advertising tax deduction. Now, all eyes are on the Senate, where Max Baucus (D-Mont.) said Tuesday he plans to release "discussion drafts aimed at closing loopholes" in the tax code by the end of the week.
As of late Tuesday, advertising and media lobbyists were frantically trying to figure out what Baucus was planning, but no one is taking any chances in case limiting the ad tax deduction becomes one of the provisions in a tax reform bill.
"We were on highest alert before and if there is something above that, we'll go to it," said Dan Jaffe, evp for the Association of National Advertisers.
In anticipation of a potential proposal in the Senate, all 50 state broadcaster associations fired off a letter to Sen. Baucus and ranking member Orrin Hatch (R-Utah), urging the lawmakers to keep advertising as a fully deductible business expense.
The broadcasters sent the same message last week to Rep. Dave Camp (R-Mich.), chairman of the House ways and means committee, and ranking member Sander Levin (D-Mich.). Camp has been looking at a proposal for his tax reform bill that would cut the ad tax deduction by 50 percent in the first year and force companies to amortize the remaining 50 percent over 10 years. One industry source said that Camp has removed the provision from his draft, but now Baucus may be taking it up.
Any reduction in the deductibility of advertising would be a severe blow to local radio and TV stations, many of which are dependent on advertising for more than 90 percent of their revenue.
"Advertising is the primary source of revenue for most broadcasters, and for some it is the only source of revenue…. Creating a disincentive to advertise has real consequences on the ability of of stations to serve their communities with local programming," the associations wrote. "Nationwide, broadcast stations generate more than $986 billion in economic activity and support 1.38 million jobs in all sectors, including auto dealers, banks, retail stores, and real estate brokers, among many others."
Both Camp and Baucus are working together on tax reform. Because Camp is term-limited as chairman of House ways and means and Baucus is retiring, they are both committed and determined to make something happen.