Advertising Deductibility: For the Sake of Speech

 The “Tax Cuts and Jobs Act,” introduced amid great fanfare on Nov. 2, has now been passed by the U.S. House of Representatives along an essentially party-line vote. The Senate’s version, introduced Nov. 9, is still undergoing intense scrutiny as groups from every quarter weigh the bill’s proposed cuts in tax rates versus the elimination of certain deductions, credits, and other tax breaks.

As ideas for reforming the tax code were tossed around in recent months and even years, one proposal – or some variation of it – would surface from time to time. This was the idea that the tax deduction for business advertising expenses should be eliminated.

This has always been an ill-considered idea (as we shall discuss below), and thus we were relieved that it did not find its way into the new tax bills of either the House or Senate. But since these bills are only the opening salvos in the difficult battle to revise the tax code, it would be worthwhile to examine why this ad-related provision should not be a part of the measure that finally reaches the president’s desk.

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FCC Denies Stay of Its Political File Rules

In a decision that landed a country mile from being a surprise, the FCC yesterday denied a stay requested by the NAB of its new political file rules, under which broadcasters are required to post online their spot-by-spot ad rates for candidates for federal office.

As readers of this blog will recall, a dozen broadcast station groups recently suggested an alternative approach in which the required information about political and issue ads would be posted online, but aggregated in a way that would not reveal the stations’ ad rates.  (The alternative proposal would also have provided information about political and issue ads in state and local races, something that the FCC’s new rule does not require.)

The stations were concerned that, because the political ad rates are based on the rate they charge their best commercial advertisers, the effect of posting their political ad rates online would be to encourage other commercial advertisers to demand the same low rates for their products and services.  (Broadcasters also chafed at the fact that cable and satellite companies would not have to provide this information.)

Yesterday’s denial of the NAB’s requested stay mentioned the alternative proposal only in passing, but in language that speaks volumes.  “Requiring the public to view aggregated data online and separately review complete political rate data in the paper file,” they said, “would not provide the efficiencies presented by online disclosure.”

What is missing here is what part of the “public,” other than broadcasters’ competitors and advertisers, would want to view the spot-by-spot ad rates.  The simple fact is that the proposed aggregated data would actually be more helpful to journalists and interested citizens than the disaggregated data that the FCC rule now requires.

But the best in the language of the FCC’s decision was yet to come.  In a sentence that is sure to have broadcasters rolling in the aisles with laughter, the FCC writes that “as an additional basis for rejecting the alternative proposal, the Commission finds that it would be significantly more burdensome on broadcasters because it would require both the maintenance of paper files with detailed spot-by-spot information and the creation and uploading of new aggregated files.”

In other words, the FCC denied the broadcasters own proposal because the Commission was concerned that it would be too burdensome on them – surely the first time in recent memory that the FCC has been moved to act out of concern for broadcasters’ welfare.


The opinions expressed above are those of the writer and not of The Media Institute, its Board, contributors, or advisory councils.