Broadcasters tackle Free Flow of Information, new state franchise tax in Austin
At the opening of each session of the Texas Legislature, the Texas Association of Broadcasters hosts a luncheon for their members and state legislators. This year's Texas Association

of Broadcasters of Broadcasters Legislative Day was more mission intensive than in the past.

Two issues that are influenced by legislative input are of paramount concern to broadcasters and by extension to the people of Texas. A Free Flow of Information Act and a tweaking of the new state franchise tax on business to allow deduction of advertising and marketing expenses for businesses topped the agenda.

With the recent spate of journalists going to jail to protect sources of information, Texas broadcasters are asking the legislature to pass a bill that would protect the free flow of information to news reporters. The legislature should enact a law that features the same guidelines utilized by the U.S. Department of Justice for more than 30 years. Existing case law protects journalists and newsrooms from the flood of subpoenas that are being used by litigants and law enforcement officials to gather information for prosecution.

It is clear that whistleblowers have over the years sought anonymity when they have brought information to news organizations exposing wanton spending and law breaking by companies, governmental officials and agencies. They did so with the understanding that their identity would be protected by the reporter to shield them from physical and professional harm. Watergate, Iran-Contra, Enron and Worldcom are all examples over the years where misconduct was exposed by people that could not use the normal avenues available to them and instead turned to the press. Unfortunately, the First Amendment of the Constitution does not protect against the practice of subpoenaing of reporter's notes or video outtakes and a recent Supreme Court ruling suggests that states should enact such protections.

Without the safeguard of the proposed Free Flow of Information Act, the ability of the press to act as a conduit of information will result in overactive litigating attorneys or law enforcement officials.

To date, 32 states and the District of Columbia have enacted such laws, Texas should be number 33.

Passed in the special session of 2006, the Legislature enacted an extensive tax reform bill that included revamping taxation on businesses. One of the unintended consequences of the bill was the exclusion of expenses for marketing and advertising as a deduction to income in the computation of how much state tax a business will pay.

Unlike federal income tax, advertising expenses cannot be deducted under the new state tax plan. Consequently, spending on advertising, which generates more retail sales and income for cities and the state, will be an unrecoverable expense for businesses. Florida enacted a tax on advertising in the last few years with disastrous consequences. During its six months of life, convention cancellations cost the state some $50 million, according to Magazine Publishers of America. In addition, ad revenues from national spot ads dropped an average of 12.8 percent in six Florida broadcast markets. Retail sales dropped because advertisers were not able to inform the public of their sales without adding cost to their bottom line. This in turn led to layoffs among advertisers, broadcasters and ad agencies.

How businesses will be affected in Texas is unknown at this time because of the newness of the tax. However, with Florida's experience as a benchmark, one can only hope that Texas will not repeat their error by allowing the backdoor ad tax to stand.

Consequently, broadcasters are calling on the Texas Legislature in this session to enact a law that would allow the deduction of advertising expenses to determine the amount of tax a business will pay under the new plan.