Sec. 3110. Amortization of certain advertising expenses
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Part VI of subchapter B of chapter 1 is amended by inserting after section 176 the following new section: In the case of a taxpayer’s amortizable advertising expenses for any taxable year— except as provided in paragraph (2), no deduction shall be allowed for such expenses, and the taxpayer shall— charge such expenses to capital account, and be allowed an amortization deduction of such expenses ratably over the 10-year period beginning with the midpoint of the taxable year in which such expenses are paid or incurred.
So much of the taxpayer’s otherwise deductible advertising expenses for any taxable year as do not exceed $1,000,000 shall not be taken into account in determining such taxpayer’s amortizable advertising expenses for such taxable year. In the case of a taxpayer whose otherwise deductible advertising expenses for any taxable year exceed $1,500,000, the dollar amount in effect under paragraph
(1)with respect to such taxpayer for such taxable year shall be reduced (but not below zero) by twice such excess. For purposes of this subsection, rules similar to the rules of paragraphs
(2)and (3)(B) of section 448(b) shall apply. For purposes of this section, the term amortizable advertising expenses means, with respect to any taxpayer for any taxable year, the applicable percentage of the taxpayer’s otherwise deductible advertising expenses for such taxable year. For purposes of this subsection, the term applicable percentage means (with respect to the taxpayer’s otherwise deductible advertising expenses for any taxable year) the percentage determined in accordance with the following table: For taxable years beginning in: The applicable percentage is: 2015 20 percent 2016 30 percent 2017 40 percent 2018 or thereafter 50 percent. The taxpayer may elect, at such time and in such form and manner as the Secretary shall prescribe, to treat the applicable percentage as being equal to 50 percent for all taxable years beginning before 2018. Such election, once made, shall be irrevocable. For purposes of this section— The term otherwise deductible advertising expenses means, with respect to any taxpayer for any taxable year, the deductions which would (but for this section) be allowable to the taxpayer for such taxable year with respect to specified advertising expenses. The term specified advertising expenses means any amount paid or incurred for the development, production, or placement (including any form of transmission, broadcast, publication, display, or distribution) of any communication to the general public (or portions thereof) which is intended to promote the taxpayer or a trade or business of the taxpayer (or any service, facility, or product provided pursuant to such trade or business). The term specified advertising expenses shall not include— Wages paid or incurred to any employee unless the services rendered by such employee are primarily related to— an activity described in paragraph
(2)(other than the direct sale of goods or services to customers of the taxpayer), or the direct supervision of employees rendering services primarily related to such an activity. In the case of any tangible property, any amount for which a deduction is allowed for depreciation under section 167. Any amount for which a deduction is allowed for amortization under section 197. Any discount, coupon, rebate, slotting allowance, sample, prize, loyalty reward point, or any item determined by the Secretary to be similar to any of the foregoing (other than any amount paid or incurred to promote any of the foregoing). Any amount paid or incurred with respect to any communication appearing on tangible property of the taxpayer which— is of a character subject to the allowance for depreciation, or is properly treated as inventory for purposes of section 471. Any amount paid or incurred for the creation of any logo, trademark, or trade name. Any amount to which section 263A(i) applies. Any amount paid or incurred for marketing research. Any amount paid or incurred for meals. Any amount paid or incurred as a qualified sponsorship payment (as defined in section 513(i)(2)) with respect to an organization subject to the tax imposed by section 511. If any property with respect to which specified advertising expenses are paid or incurred is disposed, retired, or abandoned during the period during which such expenses are allowed as an amortization deduction under this section, no deduction shall be allowed with respect such expenses on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenses. In the case of any taxable year beginning after 2015, each of the dollar amounts in subsection
(b)shall be increased by an amount equal to— such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 2014 for calendar year 2012 in clause
(ii)thereof. The amount of any increase under paragraph
(1)shall be rounded to the nearest multiple of $10,000. . Section 263A is amended by redesignating subsection
(i)as subsection
(j)and by inserting after subsection
(h)the following new subsection: For purposes of this section, in the case of any amount paid or incurred for package design, such amounts shall be treated as an indirect cost described in subsection (a)(2)(B) with respect to packages which utilize such design. . The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 176 the following new item: Sec. 177. Amortization of certain advertising expenses. . The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2014.