[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3678 Enrolled Bill (ENR)]

        H.R.3678

                       One Hundred Tenth Congress

                                 of the

                        United States of America


                          AT THE FIRST SESSION

          Begun and held at the City of Washington on Thursday,
            the fourth day of January, two thousand and seven


                                 An Act


 
   To amend the Internet Tax Freedom Act to extend the moratorium on 
   certain taxes relating to the Internet and to electronic commerce.

    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 Freedom Act Amendments 
Act of 2007''.

SEC. 2. MORATORIUM.

    The Internet Tax Freedom Act (47 U.S.C. 151 note) is amended--
        (1) in section 1101(a) by striking ``2007'' and inserting 
    ``2014'', and
        (2) in section 1104(a)(2)(A) by striking ``2007'' and inserting 
    ``2014''.

SEC. 3. GRANDFATHERING OF STATES THAT TAX INTERNET ACCESS.

    Section 1104 of the Internet Tax Freedom Act (47 U.S.C. 151 note) 
is amended by adding at the end the following:
    ``(c) Application of Definition.--
        ``(1) In general.--Effective as of November 1, 2003--
            ``(A) for purposes of subsection (a), the term `Internet 
        access' shall have the meaning given such term by section 
        1104(5) of this Act, as enacted on October 21, 1998; and
            ``(B) for purposes of subsection (b), the term `Internet 
        access' shall have the meaning given such term by section 
        1104(5) of this Act as enacted on October 21, 1998, and amended 
        by section 2(c) of the Internet Tax Nondiscrimination Act 
        (Public Law 108-435).
        ``(2) Exceptions.--Paragraph (1) shall not apply until June 30, 
    2008, to a tax on Internet access that is--
            ``(A) generally imposed and actually enforced on 
        telecommunications service purchased, used, or sold by a 
        provider of Internet access, but only if the appropriate 
        administrative agency of a State or political subdivision 
        thereof issued a public ruling prior to July 1, 2007, that 
        applied such tax to such service in a manner that is 
        inconsistent with paragraph (1); or
            ``(B) the subject of litigation instituted in a judicial 
        court of competent jurisdiction prior to July 1, 2007, in which 
        a State or political subdivision is seeking to enforce, in a 
        manner that is inconsistent with paragraph (1), such tax on 
        telecommunications service purchased, used, or sold by a 
        provider of Internet access.
        ``(3) No inference.--No inference of legislative construction 
    shall be drawn from this subsection or the amendments to section 
    1105(5) made by the Internet Tax Freedom Act Amendments Act of 2007 
    for any period prior to June 30, 2008, with respect to any tax 
    subject to the exceptions described in subparagraphs (A) and (B) of 
    paragraph (2).''.

SEC. 4. DEFINITIONS.

    Section 1105 of the Internet Tax Freedom Act (47 U.S.C. 151 note) 
is amended--
        (1) in paragraph (1) by striking ``services'',
        (2) by amending paragraph (5) to read as follows:
        ``(5) Internet access.--The term `Internet access'--
            ``(A) means a service that enables users to connect to the 
        Internet to access content, information, or other services 
        offered over the Internet;
            ``(B) includes the purchase, use or sale of 
        telecommunications by a provider of a service described in 
        subparagraph (A) to the extent such telecommunications are 
        purchased, used or sold--
                ``(i) to provide such service; or
                ``(ii) to otherwise enable users to access content, 
            information or other services offered over the Internet;
            ``(C) includes services that are incidental to the 
        provision of the service described in subparagraph (A) when 
        furnished to users as part of such service, such as a home 
        page, electronic mail and instant messaging (including voice- 
        and video-capable electronic mail and instant messaging), video 
        clips, and personal electronic storage capacity;
            ``(D) does not include voice, audio or video programming, 
        or other products and services (except services described in 
        subparagraph (A), (B), (C), or (E)) that utilize Internet 
        protocol or any successor protocol and for which there is a 
        charge, regardless of whether such charge is separately stated 
        or aggregated with the charge for services described in 
        subparagraph (A), (B), (C), or (E); and
            ``(E) includes a homepage, electronic mail and instant 
        messaging (including voice- and video-capable electronic mail 
        and instant messaging), video clips, and personal electronic 
        storage capacity, that are provided independently or not 
        packaged with Internet access.'';
        (3) by amending paragraph (9) to read as follows:
        ``(9) Telecommunications.--The term `telecommunications' means 
    `telecommunications' as such term is defined in section 3(43) of 
    the Communications Act of 1934 (47 U.S.C. 153(43)) and 
    `telecommunications service' as such term is defined in section 
    3(46) of such Act (47 U.S.C. 153(46)), and includes communications 
    services (as defined in section 4251 of the Internal Revenue Code 
    of 1986 (26 U.S.C. 4251)).'', and
        (4) in paragraph (10) by adding at the end the following:
            ``(C) Specific exception.--
                ``(i) Specified taxes.--Effective November 1, 2007, the 
            term `tax on Internet access' also does not include a State 
            tax expressly levied on commercial activity, modified gross 
            receipts, taxable margin, or gross income of the business, 
            by a State law specifically using one of the foregoing 
            terms, that--

                    ``(I) was enacted after June 20, 2005, and before 
                November 1, 2007 (or, in the case of a State business 
                and occupation tax, was enacted after January 1, 1932, 
                and before January 1, 1936);
                    ``(II) replaced, in whole or in part, a modified 
                value-added tax or a tax levied upon or measured by net 
                income, capital stock, or net worth (or, is a State 
                business and occupation tax that was enacted after 
                January 1, 1932 and before January 1, 1936);
                    ``(III) is imposed on a broad range of business 
                activity; and
                    ``(IV) is not discriminatory in its application to 
                providers of communication services, Internet access, 
                or telecommunications.

                ``(ii) Modifications.--Nothing in this subparagraph 
            shall be construed as a limitation on a State's ability to 
            make modifications to a tax covered by clause (i) of this 
            subparagraph after November 1, 2007, as long as the 
            modifications do not substantially narrow the range of 
            business activities on which the tax is imposed or 
            otherwise disqualify the tax under clause (i).
                ``(iii) No inference.--No inference of legislative 
            construction shall be drawn from this subparagraph 
            regarding the application of subparagraph (A) or (B) to any 
            tax described in clause (i) for periods prior to November 
            1, 2007.''.

SEC. 5. CONFORMING AMENDMENTS.

    (a) Accounting Rule.--Section 1106 of the Internet Tax Freedom Act 
(47 U.S.C. 151 note) is amended--
        (1) by striking ``telecommunications services'' each place it 
    appears and inserting ``telecommunications'', and
        (2) in subsection (b)(2)--
            (A) in the heading by striking ``services'',
            (B) by striking ``such services'' and inserting ``such 
        telecommunications'', and
            (C) by inserting before the period at the end the 
        following: ``or to otherwise enable users to access content, 
        information or other services offered over the Internet''.
    (b) Voice Services.--The Internet Tax Freedom Act (47 U.S.C. 151 
note) is amended by striking section 1108.

SEC. 6. SUNSET OF GRANDFATHER PROVISIONS.

    Section 1104(a) of the Internet Tax Freedom Act is amended by 
adding at the end thereof the following:
        ``(3) Exception.--Paragraphs (1) and (2) shall not apply to any 
    State that has, more than 24 months prior to the date of enactment 
    of this paragraph, enacted legislation to repeal the State's taxes 
    on Internet access or issued a rule or other proclamation made by 
    the appropriate agency of the State that such State agency has 
    decided to no longer apply such tax to Internet access.''.

SEC. 7. EFFECTIVE DATE.

    This Act, and the amendments made by this Act, shall take effect on 
November 1, 2007, and shall apply with respect to taxes in effect as of 
such date or thereafter enacted, except as provided in section 1104 of 
the Internet Tax Freedom Act (47 U.S.C. 151 note).

                               Speaker of the House of Representatives.

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