Small Business Advertising: Model Law

The text below should be taken as a “floor” that reflects the recommended components of a small business advertising tax credit bill, as identified by Rebuild Local News.

Certain provisions may need to be amended to reflect the particulars of your jurisdiction.  There are additional provisions that could be added as “nice-to-haves.”  Finally, many legislatures will include findings that reflect the intent of the legislature in enacting the law; we have included some possible findings below.

Section 1.  Short Title.

This Act may be cited as the “Small Business and Local News Support Act.”

Section 2.  Legislative Findings.

The [LEGISLATURE] makes the following findings:

(1) Small businesses are a central driver of [STATE]  competitiveness, job growth, and community sustainability and quality of life. 

(2) Small businesses in [STATE] have weathered numerous challenges including pandemic closures, supply chain disruptions and inflation. 

(3) Advertising by small businesses in local media provides revenue opportunities for both the small business, by reaching local audiences and new customers, and for local media, helping to sustain local media, provide an economic benefit broadly for the community, and promote an informed electorate.

(4) [STATE] benefits from robust local news organizations that provide trusted and essential information to the community that encourages citizen participation, informs communities and improves government accountability.

(5) Local news in [STATE] and throughout the country is struggling with newspaper advertising dropping 82 percent nationally since 2000, contributing to a 57 percent drop in the number of reporters at newspapers and thousands of newsroom closures.  [INCLUDE ANY STATE SPECIFIC DATA.]

Section 3.  Definitions.

(1) The term “Advertising” means providing consideration for the publication, dissemination, solicitation, or circulation of visual, aural, spoken, or written communication to directly or indirectly

i. induce any person or organization to purchase a good or service, or to contribute to a cause, or

ii. raise awareness of a brand, good, service, or issue.

(2) The term “eligible small business” means any person for any taxable year if the average number of full-time employees employed by such person during such taxable year was less than 50 [and are classified under sector (INSERT NAICS SECTORS) of the North American Industry Classification Codes System].

(3) The term “local news organization” means an entity that:

(A) engages professionals to create, edit, produce, and distribute original content concerning matters of public interest, through reporting activities, including conducting interviews, observing current events, or analyzing documents or other information;

(B) has at least one employee full-time for 30 hours a week or more dedicated to providing coverage of [STATE] and living within 50 miles of the coverage area, who gathers, prepares, collects, photographs, writes, edits, reports, or publishes original local or state community news for dissemination to the local or state community;

(C) in the case of print publications, has published at least one print publication per month over the previous 12 months, and either holds a valid United States Postal Service periodical permit or has at least 25 percent of its content dedicated to local news;

(D) in the case of digital-only entities, has published one piece about the community per week 50 of the previous 52 weeks, and has at least 33 percent of its digital audience in [STATE], averaged over a 12-month period;

(E) in the case of entities with both digital and print publications, has met the requirements under either subsections (3)(C) or (D) of this section;

(F) has disclosed in its print publication or on its website its beneficial ownership or, in the case of a not-for-profit entity, its board of directors;

(G) in the case of an entity that maintains tax status under § 501(c)(3) of the federal Internal Revenue Code, has declared the coverage of local or state news as the stated mission in their filings with the Internal Revenue Service; 

(H) has not received more than 50 percent of its gross receipts for the previous year from political action committees or other entities described in § 527 of the federal Internal Revenue Code, or from an organization that maintains § 501(c)(4), (c)(5), or (c)(6) status under the federal Internal Revenue Code; and

(I) has not had a service contract valued at more than $100,000 with an organization that has received more than 50 percent of its gross receipts for the previous year from political action committees or other entities described in § 527 of the federal Internal Revenue Code, or from an organization that maintains § 501(c)(4), (c)(5), or (c)(6) status under the federal Internal Revenue Code in the last five years

(4) The term “Qualified Local News Organization Advertising Expenses” means amounts paid or incurred in the ordinary course of a trade or business for

(A) Advertising with a product, service, or other offering that is fully owned and operated by a Local News Organization; or

(B) Advertising or underwriting on any broadcast radio or television station licensed by the Federal Communications Commission to serve a local community.

Section 4.  Credit for Advertising in Local Media.

a.) In the case of any eligible small business, the local news organization advertising credit determined under this section for any taxable year is an amount equal to the applicable percentage of the qualified local news organization advertising expenses paid or incurred by the taxpayer during such taxable year.

b.) The local news organization advertising credit for any taxable year shall not exceed:

i. in the case of the first taxable year to which this section applies, $5,000; and

ii. in the case of any subsequent taxable year, $2,500.

c.) For the purposes of this section, the term “applicable percentage” means:

i. in the case of the first taxable year to which this section applies, 50 percent; and

ii. in the case of any subsequent taxable year, 25 percent.

d.) If the amount of a credit under this section exceeds a taxpayer’s actual tax liability for an income tax year, the amount of the credit not used as an offset against income taxes in the income tax year may be carried forward as a credit against subsequent years’ income tax liability for a period not to exceed ten years and shall be applied first to the earliest income tax years possible.  Any amount that is not used after such period shall not be refunded to the taxpayer.

e.) To qualify for the local news organization advertising credit, the taxpayer shall submit a certification provided by each local news organization or broadcast radio or television station that the taxpayer purchased advertising from with the taxpayer’s income tax return form.  A local news organization or broadcast radio or television station that provides a certification form must certify on the form that it qualifies as such under this section, and that the taxpayer has met the qualifications for the local news organization advertising credit under this section.  

f.) An entity that knowingly issues a false certification under subsection (e) shall be subject to a civil penalty of not less than $5,000 and not more than $10,000 for each false certification issued.


Advocating for the Tax Credit: First Steps

It’s crucial to try to build a broad coalition that includes not only local news media companies but a wide range of businesses that would benefit. Without enthusiasm from at least some of the business groups for the policy, it’s unlikely the bill will pass, especially in purple or red states.

In Wisconsin, the bill was pushed by the Wisconsin newspaper and broadcast associations (both commercial and public radio) but was also endorsed by:

  • Wisconsin Bankers Association
  • Wisconsin Chiropractic Association
  • Wisconsin Dental Association
  • Wisconsin Grocers Association
  • Wisconsin Independent Businesses
  • Wisconsin Petroleum Marketers and Convenience Store Association
  • Wisconsin Restaurant Association
  • Tavern League of Wisconsin

In Maryland, the Maryland Retailers Association testified in favor of a state-wide small business advertising tax credit. 

The first step is to reach out to business groups to see which might support the idea, and, more importantly, are willing to advocate for it in an upcoming legislative session. The best time to start creating these relationships is three to six months before the legislative session. That’s typically when associations are identifying their legislative priorities. Even if a group supports the idea on the merits, they may not have the capacity to help get a bill across the finish line. 

Additionally, local groups interested in pushing the bill should have at least a basic understanding of advertising patterns to either inform or contest the score of the bill. They should also assemble local evidence of the efficacy of local advertising. Lawmakers often will need to see what local news outlets know implicitly: Advertising in local news outlets helps small businesses reach the audiences they most need to reach to grow their businesses – those making purchase decisions in their own community 


Talking points on advertising and local media

Several studies have been done on the efficacy and results of advertising. Some of these talking points are general and therefore should be supplemented with local evidence. The two areas of evidence local advocates should focus on are: 

  1. Local media is an effective place to advertise. What’s more, local businesses want to advertise in local media. 
  2. Advertising in local media can drive local consumer behavior, potentially creating additional tax revenues for jurisdictions, while also supporting the sustainability of the local economy and the local press. 
  3. Every dollar of ad spending supported, on average, about $21 of economic output (sales), according to a national survey completed by The Advertising Coalition.
  4. In a University of North Carolina study, 27% of North Carolina ad buyers surveyed plan to allocate more of their advertising budgets to local media companies even without an incentive, showing that local media remains an attractive destination for advertisers, particularly local advertisers. Local media is not only an effective place to put advertisements, but small businesses want to advertise in local media
  5. It’s been a rough four years for many small businesses. The pandemic caused many small enterprises to shrink; record inflation shrunk already small margins; supply chain disruptions disrupted operations. This program would help them deepen their connections with their customers, as well as create new customer relationships.

NEXT: The Grant Approach