October 1, 2008

Jeff Perlman, Executive Vice President – Government Affairs
Clark Rector Jr., Senior Vice President – State Government Affairs
Robert Kohlmeyer, Manager – Government Affairs

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• AAF Submits Product Placement Comments to FCC
• House Passes Phone Card Advertising Bill
• Mississippi Tax Commission Recommends Removing Advertising Exemption
• Sen. McCain Might Seek End to Advertising Tax Exemption

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AAF Submits Product Placement Comments to FCC

The AAF and 17 national media providers have submitted comments to the Federal Communications Commission in response to the Notice of Proposed Inquiry and Notice of Proposed Rulemaking in the matter of sponsorship identification rules and embedded advertising. The FCC is considering requiring simultaneous disclosure of all instances of televised product placement via an on-screen "crawl." Our comments argue that product placement is a necessary response to a changing media environment and proposed regulations would undermine advertiser-supported media. Additionally, we believe that there is no substantial consumer benefit to such a proposal, noting that currently, all promotional considerations are disclosed at the end of programs. The coalition is composed of advertising trade associations, television and radio broadcasters, cable networks and program producers. A copy of the comments is available here.
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House Passes Phone Card Advertising Bill

The House has passed a bill that would require prepaid phone card providers to clearly describe all of the fees and limitations associated with the use of the card and would give the Federal Trade Commission enforcement authority over phone card advertising. H.R. 3402, the Calling Card Consumer Protection Act, was introduced by Rep. Eliot Engel, D-N.Y. The AAF supports the FTC's efforts to combat deceptive advertising and believes the agency should have the enforcement tools needed to protect consumers from unscrupulous companies. We believe all fees should be clearly disclosed at the point of sale. However, we are concerned about the ability to provide full disclosure information in all advertisements as a matter of practicality. Additionally, we are concerned that the bill would place legitimate phone card providers under the dual jurisdiction of both the Federal Communications Commission and the FTC. The bill must now be considered by the Senate.
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Mississippi Tax Commission Recommends Removing Advertising Exemption

The Mississippi Tax Study Commission has recommended adding additional business services to the list of taxable services, including advertising. The report calls for removing the exemption for professional services related to advertising but still excludes media buying and other rebilled services from taxation. In its report, the commission stated that one of its objectives was to broaden the tax base. Under present Mississippi law, all services are exempt from taxation unless specifically included. In addition to advertising, the commission recommended removing exemptions for graphic design services and photographic services. The AAF is opposed to this proposal because of its potential impact on the advertising industry, economy and state revenues. We believe that eliminating or reducing the deductibility of advertising expenses artificially increases the cost of advertising.
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Sen. McCain Might Seek End to Advertising Tax Exemption

In 2000, Sen. John McCain, R-Ariz., said that if elected president, he wanted to close "special interest tax loopholes," and cited marketers deducting the cost of advertising as a business expense as a key example. He suggested that ad costs be amortized over an unspecified time period rather than be deducted in the year they occur. McCain does not mention tax deductibility in his current policy statements.
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Congress is set to adjourn for the year this week. AAF Government Report will not publish while Congress is out of session.

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