February 6, 2018

  • Tax Bill Leaves Advertising Alone
  • DTC Advertising Deductibility May be Threatened
  • Ad Tax Introduced in Oklahoma
  • FDA Issues Advertising Guidance
  • FTC Releases Report on Native Advertising
  • DAA Summit Announced

Tax Bill Leaves Advertising Alone

In December, Congressional Republicans were ultimately successful in passing comprehensive tax legislation which was signed into law by President Trump. The law permanently lowers the top corporate tax rate from 35% to 21%. Individual tax rates are also lowered, although not as dramatically and on a temporary basis. Most individual tax cuts will expire on December 31, 2025.

The new law does not make any changes to the tax status of advertising, meaning that advertising will continue to be fully deductible as a normal and necessary business expense in the year in which it was incurred. We know that during the writing of the new law limiting the advertising deduction was considered as a way to offset some the revenue lost from lowering tax rates. AAF worked very hard to educate lawmakers about the economic importance of maintaining advertising as a fully deductible business expense.

DTC Advertising Deductibility May be Threatened

While overall advertising deductibility seems to be safe for the moment, deductibility for direct-to-consumer advertising of pharmaceuticals may still be vulnerable. A recent report by the National Academies of Sciences included a finding that DTC advertising costs should no longer be tax deductible. The Senate Health, Education, Labor and Pensions Committee conducted a December hearing on the report.

The deductibility recommendation was received sympathetically by some Senators who acknowledged that the First Amendment would not allow banning DTC advertising. Going unrecognized was the fact that the proposal would still discriminate on the basis of content and thus still violate the Amendment’s protection of commercial speech. Some Senators and witnesses made the erroneous assumption that reducing or eliminating advertising would lower the cost of medications. Also unacknowledged was the benefits that advertising brings though consumer education and the prompting of countless conversations between patients and their doctors.

In his State of the Union address, President Trump promised to bring down the cost of prescription medications. The administration has not released any specifics on how it will propose to reduce the cost of pharmaceuticals. AAF will closely scrutinize the proposal and subsequent debate for any effort to unfairly target DTC advertising.

Ad Tax Introduced in Oklahoma

Oklahoma State Senator Nathan Dahm, R-Broken Arrow, has introduced legislation that would impose a sales tax on many forms of advertising, including newspapers, billboards and sports programs.  It is unclear whether broadcast and other forms of advertising are intended to be targeted.  AAF has been in touch with local AAF members and the Oklahoma Press Association about the bill.  At this point in time it is appears unlikely that the bill will be brought to a hearing or vote, but we will continue to closely monitor the situation.

FDA Issues Advertising Guidance

The U.S. Food and Drug Administration has issued Guidance on the use of Product Name Placement, Size, and Prominence in Promotional Labeling and Advertisements.  The FDA’s recommendations concern product names in traditional print media advertising, like journal ads and brochures, as well as promotional videos, broadcast and online ads. 

FTC Releases Report on Native Advertising

In December, the Federal Trade Commission released a staff report entitled Blurred Lines: An Exploration of Consumers' Advertising Recognition in the Contexts of Search Engines and Native Advertising. The report summarizes research that FTC staff conducted from 2014 to 2015 related to consumer recognition of paid search advertising and native advertising on various online platforms. According to the report, the FTC commissioned the research to further its mission to police deceptive advertisements, including search and native advertisements that require clear disclosures that consumers understand.

DAA Summit Announced

The AAF supported Digital Advertising Alliance has announced that its 2018 Summit theme is “ADapt!” The Summit will be held June 12-13 in Sonoma, CA.  Registration is open for this unique event that brings together all stakeholders for effective self-regulation in relevant ad content and messaging based on responsible data collection. 

<< 2018 Reports  | View all Government Reports >>

The AAF protects and promotes advertising at all levels of government through grassroots activities. Our nation-wide network monitors advertising-related legislation on local, state and federal levels. We put our members face-to-face with influential lawmakers while encouraging self-regulation as a preemptor to government intervention, when appropriate of course. To learn more about our advocacy efforts, click here.