|
Part II: Speed
Congress to Propose Tax on Advertising By Mike Zaneis on November 14, 2013 1:33 PM Mike Zaneis is SVP & General Counsel at the IAB.
The economic consulting firm IHS Global Insight estimates this could place 1.7 million U.S. jobs at risk. Today, advertising sales help support 20 million jobs, or 15% of all jobs in the country.
[Time 2]
IAB members have no doubt been exposed to the congressional turmoil of late over budget policy in Washington. From one debt ceiling crisis to the next, to sequestration, and a complete shutdown of the government, U.S. budget deficits are driving policy down the same road as a kicked can.
It is widely understood that a reform of our taxation system is the first step forward to finding a long term solution for deficit reduction and economic growth. Early last year, House Ways and Means Chairman Dave Camp (R-MI) and Senate Finance Chairman Max Baucus (D-MT) established a process to begin review of the U.S. tax code, last overhauled in 1986.
IAB has learned Chairman Camp is prepared to formally release the Committee’s draft tax reform bill in the coming days; and, Chairman Baucus will begin briefing Committee members next week to prepare introduction shortly thereafter.
Why does this matter to you?
Many U.S. companies have, for decades, declared advertising as an, “ordinary and necessary cost of doing business.” Similar to employee payroll, office rent and other business expenditures, advertising is considered a standard deduction under applicable U.S. Internal Revenue Service (IRS) tax rules. It is the unified goal of Chairmen Camp and Baucus, and many U.S. industries, to see a lowered corporate tax rate (from 35% to as low as 28%). However, in order to accomplish a lowered overall rate, many deductions find themselves on the chopping block as “pay for’s” to offset the reduced revenue.
Specifically, the House Ways and Means Committee has developed draft tax reform legislation that would be funded by imposing a tax on advertising.
Today, businesses may deduct 100% of the cost of their advertising. The proposal in the Committee’s draft tax reform legislation would allow a business to deduct only 50% of its advertising costs in the year the ad runs but to delay the deduction for the remaining 50% over 10 years - thus deducting an additional 5% each of those years. The Senate Finance Committee draft is widely rumored to mirror this “Cost Recovery” bill language.
While Leadership in both the House and Senate is not prepared to hold a vote on tax reform this year; once introduced, the draft bills will become THE base line for all future debates.
[390 words]
[Time 3]
What are the consequences?
The very real consequence of having advertising re-classified (in whole or in part) as a taxable business activity is that client advertisers will do less of it. Any tax percentage assessed will incline companies to reduce advertising and media spending in order to mitigate or off-set any tax. This impacts ad agencies directly -and can adversely affect entire local economies and job bases where agencies and advertising-related businesses play such an important role.
The proposal also does not consider that companies buy new advertising each year and would feel the brunt of this tax annually. Not only would they have less money to spend on advertising year after year, but media companies would also be impacted as advertisers would be forced to reduce their ad buys.
Consider the impact this proposal would have on the economy:
Employment in the ad-supported internet ecosystem doubled over the past four years to 5.1 million, making it one of the most dynamic sectors in the recessionary American economy, according to a study by researchers at the Harvard University Business School, commissioned by the Interactive Advertising Bureau (IAB).
The ecosystem contributed $741 billion to the U.S. economy in 2011, close to double 2007 figures, and accounted for 5.1 percent of the U.S. gross domestic product (GDP), an uptick from 3.5 percent four years ago.
What can I do?
Begin thinking about what this change in tax code would mean to your company’s bottom line and ability to keep hiring. Stay plugged into IAB Public Policy news and alerts; and, be prepared for a call to action.
[267 words]
Source: IAB
http://www.iab.net/iablog/2013/11/-congress-to-propose-tax-on-advertising.html
Background
[Time 4]
Since the last major overhaul of the Federal Tax Code in 1986, there have been numerous proposals to end the tax deduction for advertising expenses, either in fully or in part. In the past, industry has been successful at defeating these attempts.
In November 2013, Senator Max Baucus (D-MT), former chairman of the U.S. Senate Committee on Finance, released his discussion draft of tax reform legislation which includes a provision that would allow advertisers to deduct only 50 percent of all advertising expenses in the first year and amortize the remaining 50 percent over the next five years.
In late February, Chairman Dave Camp (R-MI) of the House Ways & Means Committee released his draft tax reform proposal. Chairman Camp’s plan would require the amortization of certain advertising expenses beginning in 2015. This amortization plan marks a drastic departure from the historical treatment of advertising as an ordinary and necessary business expense, which has allowed it to be virtually one hundred percent deductible in the year in which the expense is made.
[173 words]
Source: DMA
http://dmaaction.channeldemocracy.com/alert/view/1272
Senate Finance Committee Chairman Max Baucus, D-Mont. Credit: Bloomberg
What the Proposed Ad Tax Could Mean For You Proposal Not Likely to Affect Major Marketers, But Could Hurt Small Companies, Startups By Andrew Osterland. Published on January 06, 2014.
[Warm Up]
The recent proposals in Congress to limit the immediate deductibility of advertising costs as part of a broader tax-reform effort have raised the collective hackles of the advertising community.
"This would affect every product and service in the country," said Daniel Jaffe, head of government relations at the Association of National Advertisers.
Despite such dire warnings, how much the policy change would affect the economy and the demand for advertising is debatable. Here's what you need to know.
[78 words]
[Time 5]
The proposals
The proposal put forth by House Ways and Means Committee Chairman Dave Camp, R-Mich., in November would allow companies to deduct 50% of their advertising costs in the year they are incurred, with the remaining 50% amortized over the following 10 years. Senate Finance Committee Chairman Max Baucus, D-Mont., proposed a more palatable five-year amortization period.
Who gets hit
For large companies with big advertising budgets, the policy change would be a nuisance in the short-term but ultimately it would only delay -- not limit -- the deductibility of advertising expenses. Under the Baucus proposal, if an advertiser were to keep its ad budget flat for the next five years, it would be deducting the same amount at the end of that period as it currently does. The change would clearly increase the after-tax cost of advertising for the company in the short run, but it probably wouldn't prompt the company to slash its spending on ads.
The proposal would likely have a more significant effect on startups and small businesses for which cash management is crucial. "For dynamic companies that might be growing their advertising budgets by 10% per year or more, the change would significantly increase the cost of advertising," said Mel Schwarz, a partner in the national tax office of accounting firm Grant Thornton.
What's at stake
The tax treatment of advertising costs certainly qualifies as a potentially large source of revenue. Businesses spent roughly $140 billion on advertising in 2012 -- depending on what's included in the figure. If only half of that figure were deductible, the Treasury would have theoretically netted an additional $24.5 billion at the current 35% corporate tax rate. At a 25% tax rate, the extra haul would have been $17.5 billion. Procter & Gamble, which had $4.8 billion in ad spending in 2012, according to Advertising Age's DataCenter, would have been on the hook for another $840 million in taxes for that year.
The outlook
With Mr. Baucus poised to become the next U.S. ambassador to China and Mr. Camp likely rotating out of his position as Chairman of the Ways and Means Committee this year, it's a very long shot that the reform will come to pass.
[369 words]
Source：Advertising Age
http://adage.com/article/news/proposed-ad-tax/290918/
Rep. Camp | Photo: Getty Images
Limit to Ad Tax Deduction Is in Rep. Camp's Tax Reform Package Provision has small concession for small advertisers By Katy Bachman February 26, 2014, 2:29 PM EST
Rep. Dave Camp (R-Mich.), the outgoing chairman of the House Ways and Means Committee, unveiled his tax reform package Wednesday, and the bad news for the advertising and media industries is that it includes new limits on the advertising tax deduction. As feared, Camp's proposal would cut the deduction by half in the first year with the rest amortized over 10 years.
[Time 6]
To help out small businesses and local advertisers, Camp's draft would allow companies to expense the first million dollars of advertising, provided the total advertising budget does not exceed $2 million.
Camp's proposal, at nearly 1,000 pages, would lower the corporate tax rate from 35 to 25 percent and simplify and reduce tax rates for individuals into two brackets, 10 and 25 percent. To pay for those decreases, he had to find some "pay fors." The advertising tax deduction—for more than a century treated as an ordinary, fully deductible business expense—is now being treated as a loophole or special interest.
When asked in a press conference about the deduction, Camp argued that the reduction in rates to 25 percent would compensate for the change in deductibility. "For all businesses, the top rate is going to be 25 percent, so there is going to be a significant rate reduction," Camp said.
While there may be a "significant rate reduction," it would overstate business income, said Kyle Pomerleau, an economist with the Tax Foundation, a Washington, D.C.-based research think tank. Because businesses wouldn't be able to deduct the full value of advertising, they "would be taxed higher than they otherwise should have been taxed," Pomerleau said. "Camp unfortunately moves in the wrong direction with this change."
The advertising tax deduction has been the top policy issue for the advertising industry. For months, the advertising lobby has been trying to get the provision removed from an unreleased draft, to no avail.
"It's crazy that they kept this in there. What boggles my mind is that extending the amortization over 10 years is called a 'simplification.'," said Clark Rector, evp of government affairs for the American Advertising Federation. "Beyond that, it's a sledge hammer to business, a dis-incentive to advertise, and counterproductive to stimulating the economy."
Now, the ad lobby has a very real target.
"We'll be out in force," said Dan Jaffe, evp of the Association of National Advertisers. "We're not against tax reform, but this provision would make the effort to sell more expensive. If the provision wasn't harmful, why does the proposal include an exemption for small business?" Jaffe said.
ANA research conducted by Nobel Laureate in Economics Lawrence Klein warned that if chairman Camp's proposal were enacted, it would put at risk more than 1.7 million jobs and $456 billion in sales.
[396 words]
[Time 7]
Media also stand to lose if the ad tax proposal isn't cut. "NAB strongly opposes any job-killing proposal that would limit the ability of thousands of large and small businesses from fully deducting their annual advertising expenses," said Dennis Wharton, evp of the National Association of Broadcasters. "Advertising on local radio and television stations is a key driver of the American economy."
The good news is that Camp will be crunched for time in an election year when members begin running for re-election in May. Even in the GOP-controlled House, it will be an uphill climb, let alone getting it through the Senate.
Asked about tax reform, speaker John Boehner (R-Ohio) wasn't encouraging (he actually said, "Blah, blah, blah,") and laughed off any chance of it coming it up for a vote this year, according to a report in The Hill.
The near future of tax reform in the Senate is an even bigger question mark for a chamber that's already been derided as the most do-nothing Congress since Harry Truman was president. Both Majority leader Harry Reid (D-Nev.) and Minority leader Mitch McConnell (R-Ky.) have expressed skepticism that any tax reform could get done this year, and Sen. Ron Wyden (D-Ore.), the new chairman of the finance committee is focused for now on a series of expired tax breaks known as the tax extenders.
That doesn't mean advertisers should write it off because even though it may not happen this year, Camp's proposal starts the discussion rolling. And Camp, who spent three years preparing for this moment, is determined to see it through.
"I don't think we can afford to wait. I'm not going to settle," he said during a press conference when asked about Rep. Boehner's reaction to moving tax reform this year. "We need to have this debate."
"I don't see it getting through the House this year, but it's a clear and present danger," said Mike Zaneis, evp and general counsel of the Interactive Advertising Bureau.
[328 words]
Source: ADWEEK
http://www.adweek.com/news/advertising-branding/limit-ad-tax-deduction-rep-camps-tax-reform-package-155978
|
[复制链接]
京公网安备11010202008513号 京ICP证101109号 京ICP备12012021号
发表于 2014-4-11 20:41:23
收藏
收藏
楼主
第一次占得这么神速！！！
谢谢楼主了咩~~~~~~