[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 150 Enrolled Bill (ENR)]

        S.150

                       One Hundred Eighth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

          Begun and held at the City of Washington on Tuesday,
           the twentieth day of January, two thousand and four


                                 An Act


 
    To make permanent the moratorium on taxes on Internet access and 
multiple and discriminatory taxes on electronic commerce imposed by the 
                        Internet Tax Freedom Act.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Internet Tax Nondiscrimination 
Act''.
SEC. 2. FOUR-YEAR EXTENSION OF INTERNET TAX MORATORIUM.
    (a) In General.--Subsection (a) of section 1101 of the Internet Tax 
Freedom Act (47 U.S.C. 151 note) is amended to read as follows:
    ``(a) Moratorium.--No State or political subdivision thereof may 
impose any of the following taxes during the period beginning November 
1, 2003, and ending November 1, 2007:
        ``(1) Taxes on Internet access.
        ``(2) Multiple or discriminatory taxes on electronic 
    commerce.''.
    (b) Conforming Amendments.--(1) Section 1101 of the Internet Tax 
Freedom Act (47 U.S.C. 151 note) is amended by striking subsection (d) 
and redesignating subsections (e) and (f) as subsections (d) and (e), 
respectively.
    (2) Section 1104(10) of the Internet Tax Freedom Act (47 U.S.C. 151 
note) is amended to read as follows:
        ``(10) Tax on internet access.--
            ``(A) In general.--The term `tax on Internet access' means 
        a tax on Internet access, regardless of whether such tax is 
        imposed on a provider of Internet access or a buyer of Internet 
        access and regardless of the terminology used to describe the 
        tax.
            ``(B) General exception.--The term `tax on Internet access' 
        does not include a tax levied upon or measured by net income, 
        capital stock, net worth, or property value.''.
    (3) Section 1104(2)(B)(i) of the Internet Tax Freedom Act (47 
U.S.C. 151 note) is amended by striking ``except with respect to a tax 
(on Internet access) that was generally imposed and actually enforced 
prior to October 1, 1998,''.
    (c) Internet Access Service; Internet Access.--
        (1) Internet access service.--Paragraph (3)(D) of section 
    1101(d) (as redesignated by subsection (b)(1) of this section) of 
    the Internet Tax Freedom Act (47 U.S.C. 151 note) is amended by 
    striking the second sentence and inserting ``The term `Internet 
    access service' does not include telecommunications services, 
    except to the extent such services are purchased, used, or sold by 
    a provider of Internet access to provide Internet access.''.
        (2) Internet access.--Section 1104(5) of that Act is amended by 
    striking the second sentence and inserting ``The term `Internet 
    access' does not include telecommunications services, except to the 
    extent such services are purchased, used, or sold by a provider of 
    Internet access to provide Internet access.''.
SEC. 3. GRANDFATHERING OF STATES THAT TAX INTERNET ACCESS.
    The Internet Tax Freedom Act (47 U.S.C. 151 note) is amended--
        (1) by redesignating section 1104 as section 1105; and
        (2) by inserting after section 1103 the following:

``SEC. 1104. GRANDFATHERING OF STATES THAT TAX INTERNET ACCESS.

    ``(a) Pre-October 1998 Taxes.--
        ``(1) In general.--Section 1101(a) does not apply to a tax on 
    Internet access that was generally imposed and actually enforced 
    prior to October 1, 1998, if, before that date--
            ``(A) the tax was authorized by statute; and
            ``(B) either--
              ``(i) a provider of Internet access services had a 
            reasonable opportunity to know, by virtue of a rule or 
            other public proclamation made by the appropriate 
            administrative agency of the State or political subdivision 
            thereof, that such agency has interpreted and applied such 
            tax to Internet access services; or
              ``(ii) a State or political subdivision thereof generally 
            collected such tax on charges for Internet access.
        ``(2) Termination.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        this subsection shall not apply after November 1, 2007.
            ``(B) State telecommunications service tax.--
                ``(i) Date for termination.--This subsection shall not 
            apply after November 1, 2006, with respect to a State 
            telecommunications service tax described in clause (ii).
                ``(ii) Description of tax.--A State telecommunications 
            service tax referred to in subclause (i) is a State tax--

                    ``(I) enacted by State law on or after October 1, 
                1991, and imposing a tax on telecommunications service; 
                and
                    ``(II) applied to Internet access through 
                administrative code or regulation issued on or after 
                December 1, 2002.''.

    ``(b) Pre-November 2003 Taxes.--
        ``(1) In general.--Section 1101(a) does not apply to a tax on 
    Internet access that was generally imposed and actually enforced as 
    of November 1, 2003, if, as of that date, the tax was authorized by 
    statute and--
            ``(A) a provider of Internet access services had a 
        reasonable opportunity to know by virtue of a public rule or 
        other public proclamation made by the appropriate 
        administrative agency of the State or political subdivision 
        thereof, that such agency has interpreted and applied such tax 
        to Internet access services; and
            ``(B) a State or political subdivision thereof generally 
        collected such tax on charges for Internet access.
        ``(2) Termination.--This subsection shall not apply after 
    November 1, 2005.''.

SEC. 4. ACCOUNTING RULE.

    The Internet Tax Freedom Act (47 U.S.C. 151 note) is amended by 
adding at the end the following:

``SEC. 1106. ACCOUNTING RULE.

    ``(a) In General.--If charges for Internet access are aggregated 
with and not separately stated from charges for telecommunications 
services or other charges that are subject to taxation, then the 
charges for Internet access may be subject to taxation unless the 
Internet access provider can reasonably identify the charges for 
Internet access from its books and records kept in the regular course 
of business.
    ``(b) Definitions.--In this section:
        ``(1) Charges for internet access.--The term `charges for 
    Internet access' means all charges for Internet access as defined 
    in section 1105(5).
        ``(2) Charges for telecommunications services.--The term 
    `charges for telecommunications services' means all charges for 
    telecommunications services, except to the extent such services are 
    purchased, used, or sold by a provider of Internet access to 
    provide Internet access.''.

SEC. 5. EFFECT ON OTHER LAWS.

    The Internet Tax Freedom Act (47 U.S.C. 151 note), as amended by 
section 4, is amended by adding at the end the following:

``SEC. 1107. EFFECT ON OTHER LAWS.

    ``(a) Universal Service.--Nothing in this Act shall prevent the 
imposition or collection of any fees or charges used to preserve and 
advance Federal universal service or similar State programs--
        ``(1) authorized by section 254 of the Communications Act of 
    1934 (47 U.S.C. 254); or
        ``(2) in effect on February 8, 1996.
    ``(b) 911 and E-911 Services.--Nothing in this Act shall prevent 
the imposition or collection, on a service used for access to 911 or E-
911 services, of any fee or charge specifically designated or presented 
as dedicated by a State or political subdivision thereof for the 
support of 911 or E-911 services if no portion of the revenue derived 
from such fee or charge is obligated or expended for any purpose other 
than support of 911 or E-911 services.
    ``(c) Non-Tax Regulatory Proceedings.--Nothing in this Act shall be 
construed to affect any Federal or State regulatory proceeding that is 
not related to taxation.''.
SEC. 6. EXCEPTION FOR VOICE AND OTHER SERVICES OVER THE INTERNET.
    The Internet Tax Freedom Act (47 U.S.C. 151 note), as amended by 
section 5, is amended by adding at the end the following:

``SEC. 1108. EXCEPTION FOR VOICE SERVICES OVER THE INTERNET.

    ``Nothing in this Act shall be construed to affect the imposition 
of tax on a charge for voice or similar service utilizing Internet 
Protocol or any successor protocol. This section shall not apply to any 
services that are incidental to Internet access, such as voice-capable 
e-mail or instant messaging.''.

SEC. 6A. EXCEPTION FOR TEXAS MUNICIPAL ACCESS LINE FEE.

    The Internet Tax Freedom Act (47 U.S.C. 151 note), as amended by 
section 6, is amended by adding at the end the following:

``SEC. 1109. EXCEPTION FOR TEXAS MUNICIPAL ACCESS LINE FEE.

    ``Nothing in this Act shall prohibit Texas or a political 
subdivision thereof from imposing or collecting the Texas municipal 
access line fee pursuant to Texas Local Govt. Code Ann. ch. 283 (Vernon 
2005) and the definition of access line as determined by the Public 
Utility Commission of Texas in its `Order Adopting Amendments to 
Section 26.465 As Approved At The February 13, 2003 Public Hearing', 
issued March 5, 2003, in Project No. 26412.''.
SEC. 7. GAO STUDY OF EFFECTS OF INTERNET TAX MORATORIUM ON STATE AND 
LOCAL GOVERNMENTS AND ON BROADBAND DEPLOYMENT.
    The Comptroller General shall conduct a study of the impact of the 
Internet tax moratorium, including its effects on the revenues of State 
and local governments and on the deployment and adoption of broadband 
technologies for Internet access throughout the United States, 
including the impact of the Internet Tax Freedom Act (47 U.S.C. 151 
note) on build-out of broadband technology resources in rural 
underserved areas of the country. The study shall compare deployment 
and adoption rates in States that tax broadband Internet access service 
with States that do not tax such service, and take into account other 
factors to determine whether the Internet Tax Freedom Act has had an 
impact on the deployment or adoption of broadband Internet access 
services. The Comptroller General shall report the findings, 
conclusions, and any recommendations from the study to the Senate 
Committee on Commerce, Science, and Transportation and the House of 
Representatives Committee on Energy and Commerce no later than November 
1, 2005.

SEC. 8. EFFECTIVE DATE.

    The amendments made by this Act take effect on November 1, 2003.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.