The IRS is proposing a change to its rules to determine who the taxpayer is under Section 199 of the Tax Code for the purpose of claiming a deduction for printing and other manufacturing costs. We have long-argued for the manufacturing deduction and successfully fought to have advertising revenue included as an integral part of the income that would qualify for the deduction, as it is “inextricably linked” to the newspaper product.
On November 25, we filed comments with the IRS urging the agency to recognize the newspaper as the “owner” of the product – and the beneficiary of the deduction – even if the printing of the newspaper or advertising inserts are done by a third-party contractor. Importantly, we also raised with the IRS the need for an extension of this deduction to the digital display and distribution of newspaper media. As the newspaper industry moves forward with digital and mobile products to provide news and information to consumers, the Tax Code should follow. Nearly all of the 1,331 daily newspapers offer digital subscriptions that generates revenue to fund journalism in local communities. We believe this revenue, as well as revenue from digital advertisements, should be treated as qualified production income under current law.
Read our filing here.