2011 Virginia Legislators' Tax Guide: Advertising

As a member of the General Assembly, I may place ads in trade journals, ad books or magazines published by various organizations in my district. I may also sponsor television or radio shows or events open to the general public. Can I deduct costs associated with these activities?

The good news is yes. These types of expenses are considered advertising expenses and are usually deductible. Generally, amounts paid or incurred for advertising are considered normal trade or business expenses. Because placing ads in trade journal, ad books or magazines to promote your name and maintain or improve relations with your constituency is a normal and necessary part of your business as an elected official, you are entitled to deduct these costs on your tax return. Be aware, however, of the timing of these ads. Ads placed during a reelection campaign period would usually be considered campaign expenses and, therefore, nondeductible.

Expenses to promote goodwill in the community would also be considered advertising expenses and therefore deductible. For example, a legislator may sponsor a television or radio show or an event attended by constituents. The costs associated with these events would be fully deductible. As an added bonus, any food and beverages distributed to the general public during an event to promote goodwill will be fully deductible and not subject to the usual 50 percent limit on meals and entertainment.

It is important that you maintain your invoices and proof of payment for advertising expenses to substantiate your deduction. It is also good practice to keep a copy of the advertisements in your files. For detailed guidance, see discussion in the section on Recordkeeping.

Are my campaign expenses deductible for tax purposes?

Unfortunately, no. Even though holding public office is considered a trade or business under the Internal Revenue Code (IRC) § 7701(a)(26), another provision (IRC § 162(e)(1)(B)) provides that no deduction is allowed for any amount paid or incurred in connection with any political campaign on behalf of any candidate for public office.

The list of nondeductible campaign expenses is comprehensive and applies whether or not a candidate is elected. Included in the list are expenses for attending political conventions, contributions to the political party that sponsored a candidate's candidacy, campaign travel expenses, campaign advertising, expenses of defending a position in a contested election, filing fees, or the cost of legal fees paid in litigation over redistricting. In addition, campaign expenses may not be capitalized and amortized over the term of the office.

Furthermore, campaign expenses are still treated as nondeductible for those who could characterize them as expenses to promote an existing trade or business. For example, an attorney could not deduct campaign expenses on the theory that it promoted his professional legal practice.

Finally, even though a candidate may later institute a defamation suit for damage to his professional reputation for allegations made during a campaign, these litigation expenses are also considered nondeductible political campaign expenses.