Government Relations & Affairs

AAF-San Angelo protects and promotes advertising in the local, state, and national government. We monitor the policies that affects advertising practices and professionals through communication with other AAF chapters, including the chapter on the national level.

November 7, 2013

Credible sources within the House Ways and Means Committee have recently confirmed that not only does limiting the deduction for advertising costs remain on the table for tax reform, but that the proposal could be even worse than we feared. According to our information the plan under consideration would require 50% of all advertising costs to be amortized over 10 years, and 50% deducted in the first year of the amortization schedule.

It is very important that you as many members as possible of the AAF and advertising industry contact members of Congress and express strong opposition to any attempt to limit the full current year deduction for advertising expenses. If your Representative does not sit on Ways and Means, encourage him or her to weigh in with Committee members and House leadership and urge them to drop the advertising proposal.

Any tax on advertising would be devastating not just to the advertising industry, but to the national economy as well. It would cost the nation millions of jobs and hundreds of millions of dollars in lost economic activity. This is exactly the wrong thing to do as the economy struggles to recover. The stimulus generated by advertising brings jobs and sales to every state and to every congressional district. More detailed talking points are listed below.

Members of Congress can be contacted though the U.S. House of Representatives website. Just enter your zip code in the upper right hand corner to find your Representative and a link to his or her webpage.

Please report back to me any response you may receive and do not hesitate to let me know if you have any comments or questions. Thank you for your assistance with this vital matter.

Talking points for communications to Members of U.S. Congress

Preserve the current standard business deduction for the cost of advertising

• The House Ways and Means Committee has developed draft legislation that would impose a tax on advertising. Today businesses may deduct 100% of the cost of their advertising. The proposal would allow only 50% in the year the ad runs and require a business to spread the remaining amount over 10 years. IHS Global Insight estimates this could reduce sales in the U.S. by $446 billion and place 1.7 million U.S. jobs at risk.

• The Tax Code for 100 years has permitted businesses to deduct the full cost of their advertising, just as it permits the deduction of other ordinary business costs like salaries, rent, utilities and office supplies.

• Advertising expenditures generate sales activity in the U.S. economy amounting to $5.8 trillion. That is 20 percent of the total national economic output. It also helps support 20 million jobs or 15% of all jobs in the country.

• Nobel prize-winning economists who have looked at the advertising deduction have concluded that nothing in the economic literature justifies a change in tax policy.

• It makes no economic or common sense to make businesses pay more for advertising thereby causing a decline in ad spending and the sales advertising generates.

Clark Rector

July 12, 2013

Clark Rector Jr., Executive Vice President – Government Affairs

Chairmen Start With “Blank Slate” on Tax Reform

Senator Max Baucus, D-Mont. and Representative Dave Camp, R-Mich., chairs of the Senate and House tax writing committees have informed their members that they want to start with a blank slate when considering tax reform. Rather than looking at what expenditures and deductions should be eliminated from the tax code, they have asked other members of Congress to submit to them what expenditures and deductions should remain in the tax code. According to a letter sent by Senators Baucus and Orin Hatch, R-Utah (the ranking Republican on the Finance Committee) “we plan to operate from an assumption that all special provisions are out unless there is clear evidence that they” (1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.”

The deduction for the cost of advertising is not and never has been classified as a tax expenditure. In addition, the deduction for advertising costs certainly meets the first goal, makes market entry more fair for businesses of all sizes, and promotes efficiency in the economy. AAF and The Advertising Coalition will be communicating this important message to the members of both the Senate Finance and House Ways and Means Committees as well as Congressional leadership and other key lawmakers.

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Group Recommends Taxing Services

The Center on Budget and Policy Priorities, a Washington, D.C. based policy organization, has recommended states broaden their sales tax bases to include more services. In a new report, Four Steps to Moving State Sales Taxes Into the 21st Century, the service tax was the first of four recommendations made. The others included requiring online retailers to collect sales taxes, taxing Internet downloads and closing the online hotel tax loophole. No specific services are mentioned in the report, which seems to place a greater emphasis on personal services than business services.

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Subcommittee Maintains IWG Language

The House Appropriations Subcommittee on Financial Services has approved the FY 2014 Financial Services and General Government appropriations bill that includes language preventing the publication of the 2011 report by the Interagency Working Group (IWG) setting forth “voluntary” nutrition standards to regulate the advertising of food products to children. According to the language in the bill, the report may be released only after the FTC and the other agencies in the IWG (USDA, FDA, CDC) submit the proposed recommendations for review by the Office of Information and Regulatory Affairs pursuant to Executive Order 13563. The provision means the standards must undergo the same cost/benefit analysis as traditional government regulations.

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SEC Lifts Advertising Ban

The U.S. Securities and Exchange Commission has voted to allow hedge funds and other private firms to raise money by advertising to the public. The vote overturns a rule that had been in place since the 1930s and comes at the direction of Congress which directed the Commission to lift the ban as part of the bipartisan Jobs Act. Critics contend that advertising may take advantage of unsophisticated investors. However, only accredited investors with a certain net worth or income will be allowed to make a purchase. The Commission has also tentatively approved a proposal that would require firms that solicit the public to disclose more information about themselves and notify the SEC in advance of a solicitation.

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AAF Government Report is available to all members of the AAF. If you are interested in receiving an e-mailed copy, please e-mail government@aaf.org.

If you are interested in receiving AAF SmartBrief, an opt-in news service, please visit www.smartbrief.com/aaf. AAF SmartBrief condenses advertising industry news from dozens of media sources into a succinct, easy to read e-mail.

Go to the Government Affairs Main Page.

June 20, 2013

Clark Rector Jr., Executive Vice President – Government Affairs

Corporations Advocate for Tax Reform

Forty-two U.S. corporations (including several AAF members) have formed a new coalition called the Alliance for Competitive Taxation (ACT). The purpose of the Alliance is to advocate for comprehensive bipartisan tax reform.

One of the primary goals of the Alliance is have the U.S. corporate tax rate lowered from 35% to 25%. This would be done by “ending corporate tax breaks and preferences.” No further detail is provided about specific “tax breaks and preferences.” Reportedly a repeal of all “tax expenditures” that benefit corporations would lower the rate to 28%, but it would take extraordinary action to lower the rate further. One of the extraordinary measures that may be under consideration would be to terminate the ordinary and necessary business expense deduction for the cost of advertising and require all advertising costs to be capitalized and amortized and deducted over three years.

AAF will continue to strenuously oppose any effort to limit the full 100% current year federal tax deduction for advertising expenses.

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Privacy Expert to Head FTC’s Bureau of Consumer Protection

FTC Chairwoman Edith Ramirez announced that longtime FTC attorney Jessica Rich will be the new director of the agency’s Bureau of Consumer Protection. Rich has served as deputy director of the bureau and spent eleven years in the FTC’s division of privacy and identity protection. She drafted the first children’s online privacy regulations and was a key player in the development of the agency’s privacy program. The appointment may signal that the agency will be active in shaping privacy policy and bringing related enforcement actions.

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Bill Introduced to Limit TVs Watching TV Watchers

Representatives Michael Capuano, D-Mass. and Walter Jones, R-N.C. have introduced legislation to prohibit cable boxes and DVRs from watching consumers without the consumers’ prior consent. Some companies have developed technology that would use infrared cameras and microphones built into cable boxes and DVRs that could observe the activities and conversations of television watchers and then serve up targeted television ads based on that information. In addition to requiring consent, the legislation would require the words “We are watching you” to be prominently displayed in type "readable from a distance” for as long as the device is recording the viewing area.

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Groups Call for Advertising Restrictions

In recent days, multiple groups have called for limits on food advertising to children.

U.S. Senators Jay Rockefeller, D-W.Va., Richard Blumenthan, D-Conn, Tom Harkin, D-Iowa and Dick Durbin, D-Ill. have sent a letter to the Nickelodeon cable network urging it to “prohibit advertisements that market unhealthy food to children.”

The European office of the World Health Organization has urged its member countries to adopt tighter controls on the marketing to children of foods high in saturated and trans fats, free sugars and salt.

Reflecting a similar mindset, the American Medical Association has called for a ban on advertising energy drinks to youths under the age of 18.

Despite the lack of any evidence of a causal link between advertising and obesity, most food companies already participate in the Children’s Food and Beverage Advertising Initiative in which they voluntarily limit the amount and type of products advertised to children.

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AAF Government Report is available to all members of the AAF. If you are interested in receiving an e-mailed copy, please e-mail government@aaf.org.

Go to the Government Affairs Main Page.

Want to become involved on the Goverment Relations Committee, or have any questions? Contact Government Relations Chair Michael Anglin.