This information is provided for general educational purposes only and does not constitute tax, legal, or accounting advice. Broughton Partners and its affiliates are not tax advisors. Law firms should consult with a qualified CPA, tax professional, or attorney to evaluate the specific tax treatment of mass tort retainer purchases in their individual circumstances.
For law firms, advertising is not just a growth driver. It can also be a tax strategy that is especially powerful at year-end when firms are looking to reduce taxable income before closing the books. The IRS allows firms to deduct ordinary and necessary business expenses, and advertising is one of the clearest examples.
And, with the right funding structure, your firm can stretch its advertising dollars further, increase case volume, and reduce taxable income at the same time.
Advertising as Tax Deduction
When a law firm invests in advertising, the full expense is typically deductible.
- Example: A firm spends $300,000 on advertising.
- That full $300,000 can be deducted from taxable income.
- If the firm is in a 40% combined tax bracket, that deduction could reduce its tax bill by about $120,000.
This means advertising spend directly lowers taxable income, which in turns lowers taxes owed.
Year-End Tax Strategy: Why Timing Matters
Advertising can play a powerful role in year-end tax planning. Because the IRS generally allows firms to deduct advertising expenses in the year they’re incurred, timing can make a significant difference.
- Immediate deduction: Money spent on advertising in November or December typically counts toward the current tax year.
- Offsetting higher income: If your firm has had a strong year, increasing advertising spend before December 31 can help reduce taxable income, lowering the overall tax bill due in April.
- Planning ahead: Year-end campaigns don’t just reduce taxes for the current year. They also position the firm to start the new year with momentum, creating a stronger pipeline of potential clients.
In short, end-of-year advertising can deliver a dual benefit: immediate tax savings and a head start on next year’s case intake.
The Broughton Partners Funding Structure
Broughton Partners’ funding program, BP Finance, makes it possible for firms to amplify their advertising power with limited risk.
Here’s how it works, using a $100,000 contribution example:
- Firm contribution: $100,000 cash.
- BP Finance match: up to $200,000 as a non-recourse loan.
- Total advertising budget: $300,000.
- Invoice issued: $300,000 (the full amount is deductible).
From a tax perspective, the invoice is critical. The IRS recognizes the entire $300,000 advertising expense as deductible, even though the firm only put in $100,000 out of pocket.
BP Finance Loan Repayment Terms
The funding is structured as a non-recourse loan, meaning repayment comes only from case settlements:
- The funder is repaid 2x-3x the loaned amount dependent on settlement timing.
- In this case, on a $200,000 loan, the firm would pay back $400,000 -$600,000 from settlements depending on settlement time.
- If litigation fails, the firm loses only its initial $100,000 contribution.
This structure caps downside risk while multiplying advertising reach.
Why Attorneys Love BP Funding
Without funding:
- Firm spends $100,000 → deducts $100,000.
With BP Finance:
- Firm spends $100,000, but receives an invoice for $300,000 → deducts $300,000.
That additional $200,000 deduction could save the firm $80,000+ in taxes (depending on the tax bracket). On top of that, the firm gets up to 3x the advertising budget, significantly improving the odds of bringing in new cases.
A Simple Analogy
Think of BP Finance like a vending machine:
- You put in $1.
- A partner adds up to $2 more.
- You now have up to $3 to spend on snacks.
Even better, the IRS lets you write off the full $3 expense, even though you only spent $1 out of pocket. If the snacks don’t sell (litigation fails), you only lose your $1.
Explore Mass Tort Co-Counsel Opportunities
BP Finance amplifies both the advertising impact and the tax deduction, while limiting downside risk to your initial contribution. For law firms looking to grow case volume—especially at year-end when tax planning is top of mind—this model can be a powerful strategy.
Interested in learning more about BP Finance? You can get approval in as little as one day, with no confusing forms or documents required.
