With Tax Reform Coming, Business Deduction for Advertising Costs in Play
Last week, the House of Representatives and the Senate Budget Committee passed a budget resolution that sets the stage for tax reform legislation that could be adopted with a simple majority under what is called budget reconciliation. The Senate Budget Committee resolution specifically calls for tax cuts of $1.5 trillion over 10 years. The resounding challenge will be finding revenues to pay for tax cut proposals set forth by the Trump Administration and Republican leadership in Congress; details regarding offsets have not been specified to date. As the congressional tax committees begin to draft legislation, the Alliance is concerned that Congress will turn to a damaging proposal that was offered in the last Congress. Specifically, former tax committee chairmen, Dave Camp and Max Baucus (both now retired) circulated a proposal that would have required businesses to spread out over 5 years (Senate) or 10 years (House) 50 percent of advertising expenses incurred in a taxable year. Since its inception 100 years ago, the Tax Code has allowed businesses to immediately deduct 100 percent of advertising expenses. The proposal was included in the draft as a revenue source for offsetting a reduction in the corporate tax rate from 35 to 25 percent. While the Alliance supports congressional efforts to reform the corporate tax structure, we are adamantly opposed to changing the tax treatment for advertising costs as it will undermine the engine that drives the US economy. Advertising continues to be the most important revenue stream to support newspaper journalism in local communities. In the coming days, the Alliance will be reaching out to member publishers encouraging them to contact Members of Congress and ask that they support efforts to maintain the current tax treatment for advertising costs.
Related: Advertising Tax Talking Points
USPS Announces New Rates for 2018
The Postal Service on October 6 filed a notice of rate adjustments for all “market-dominant” products, including Marketing Mail Saturation, High Density Plus, and High Density rates (used for newspapers’ Total Market Coverage Products) and Periodicals. Overall, HD/Saturation rates will increase by 1.086 percent, less than the class-wide average of 1.908 percent. Within County Periodicals, rates will rise by an average of 1.835 percent. The destination delivery unit (local post office) pound charge will increase by 1.3 percent, and Carrier-Route Nonautomation rates will rise 1.54% at the Basic level. Click here to view a chart of the new rates for mail products commonly used by newspapers. The new rates will take effect on January 21, 2018.
Media Ownership Repeal Pulled from Legislation
Yesterday, the House Communications and Technology Subcommittee passed an FCC reauthorization bill, a step towards reauthorizing the agency, which has not happened since 1990. The bill was originally drafted to include a provision that would effectively repeal the ban on newspaper and broadcast cross-ownership. Despite initial efforts of Chairman Marsha Blackburn (R-TN), the cross-ownership provision was stripped over objections raised by Committee Democrats. The Alliance released a statement expressing our disappointment. News Media Alliance President & CEO David Chavern stated, “At a time when we need to attract more capital to support high-quality journalism, this outdated rule cuts off an important potential source of investment. The rule handcuffs news outlets that seek to be more competitive in an industry increasingly dominated by online platforms.” The Alliance calls on the FCC, as the expert agency, to swiftly grant the pending Petition for Reconsideration and repeal this outdated rule once and for all.
Google Ends First-Click-Free
On October 2, Google announced changes to its first-click-free policy, to be replaced with “flexible sampling.” First-click-free required news publishers to provide three free articles per day, or be deprioritized in search results. News publishers will now decide how much of an article, or how many articles, it will provide users for free without being penalized by the algorithm. Google also announced the development of a suite of products and services that would support news publishers’ efforts to reach and monetize new audiences. Google’s stated intention is to help publishers mitigate lower barriers against digital subscriptions for users. The Alliance applauded these efforts as a good steps forward by Google, and a great improvement over current policies. The success of the other efforts Google announced, such as the optimization and transaction tools, will be assessed as they are implemented over time. The Alliance will continue to fight for news publishers and their access to subscribers, data and advertising revenue, and will advocate to ensure that news publishers get a better return for their investments in high-quality journalism.
LawView Monthly Updates Return in January, Access LawView Interactive Map
LawView is a tool that tracks state legislation critical to the news media industry so that our members can affect policy decisions at a local level. This members-only tool is shaped by member input that determines what issues, bills and legislatures are covered. The LawView Monthly Legislative Update will not be published during the fall since most state legislatures are adjourned – see state legislative session dates. In the meantime, to receive real-time updates please visit our LawView interactive map to view state legislative initiatives, developments, bill text, sponsors and voting history and more. We will resume regular monthly updates when state legislatures are back in session in January.
Danielle Coffey is Senior Vice President of Strategic Initiatives at News Media Alliance