On Thursday, Senator Max Baucus (D-MT), Chairman of the U.S. Senate Finance Committee, released his discussion draft of tax reform legislation.
The draft is particularly controversial and of concern to the mobile ad community.
According to a statement provided to MMW by the Association of National Advertisers, the proposed legislation includes a provision that will, if enacted, “severely impact the economy and lead to significant job loss.”
This provision 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.
Advertising currently is treated as a fully tax deductible ordinary and necessary business expense. How this legislation would impact mobile advertising isn’t clear, but critics say it could be catastrophic.
Bob Liodice, President and CEO of the Association of National Advertisers, is understandably concerned.
“Senator Baucus’ draft proposal seriously undermines the deduction for advertising expenses and would have a profound impact on the advertising industry and the economy more broadly,” Liodice says. “Changes to the way advertising deductions currently are treated would greatly affect sales and employment across all levels and sectors. This is essentially a major new tax liability which would increase the cost of advertising and cause a substantial disincentive for companies to spend additional advertising dollars.”