Congressional Record, Volume 144 Issue 140 (Thursday, October 8, 1998)

[Congressional Record Volume 144, Number 140 (Thursday, October 8, 1998)]
[Senate]
[Pages S11847-S11865]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

INTERNET TAX FREEDOM ACT

Mr. McCAIN. Mr. President, what is the pending business?
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:.

A bill (S. 442) to establish national policy against State
and local government interference with interstate commerce on
the Internet or interactive computer services, and to
exercise Congressional jurisdiction over interstate commerce
by establishing a moratorium on the imposition of exactions
that would interfere with the free flow of commerce via the
Internet, and for other purposes.

Pending:

McCain/Wyden amendment No. 3719, to make changes in the
moratorium provision.

The Senate resumed consideration of the bill.

Amendment No. 3719

Mr. McCAIN. Mr. President, it is my understanding there is no further
debate regarding the consideration of the amendment at the desk. I ask
that it be adopted.
The PRESIDING OFFICER. Is there further debate?
If not, without objection, the amendment is agreed to.
The amendment (No. 3719) was agreed to.

Amendment No. 3711, As Modified

(Purpose: To define what is meant by the term ``discriminatory tax'' as
used in the bill)

Mr. McCAIN. Mr. President, I call up amendment No. 3711, as modified.
The PRESIDING OFFICER. The clerk will report.
Mr. GRAHAM addressed the Chair.
The PRESIDING OFFICER. The Senator from Florida.
Mr. GRAHAM. Mr. President, I raise a point of order that this
amendment is not germane.
The PRESIDING OFFICER. Would the Senator from Florida suspend for
just a moment?
The clerk first will report the amendment.
The assistant legislative clerk read as follows:

The Senator from Arizona [Mr. McCain], for himself and Mr.
Wyden, proposes an amendment numbered 3711, as modified.

The PRESIDING OFFICER. Is there objection to the amendment being
modified?
Mr. GRAHAM. Mr. President, I object to the modification of the
amendment and raise a point of order that the amendment is not germane.

[[Page S11848]]

Amendment No. 3711

(Purpose: To define what is meant by the term ``discriminatory tax'' as
used in the bill.)

Mr. McCAIN. Mr. President, I call up amendment No. 3711.
The PRESIDING OFFICER. Does the Senator from Arizona withdraw his
previous amendment?
Mr. McCAIN. I withdraw it and call up amendment No. 3711.
The amendment (No. 3711), as modified, was withdrawn.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:

The Senator from Arizona [Mr. McCain], for himself and Mr.
Wyden, proposes an amendment numbered 3711.

Mr. GRAHAM addressed the Chair.
The PRESIDING OFFICER. The Senator from Florida.
Mr. GRAHAM. Am I correct that there is not a request to modify this
amendment?
The PRESIDING OFFICER. There is a properly filed request to modify
the----
Mr. GRAHAM. I object to that request to modify and I raise again the
point of order that the amendment is not germane.
The PRESIDING OFFICER. There is no request to modify the pending
amendment. There is a duly filed motion to suspend the rules with
respect to that amendment. The motion to suspend is debatable.
Is there further debate?
Mr. GRAHAM. Mr. President, point of parliamentary inquiry. Will there
be a ruling on the motion of the point of order as to germanity?
The PRESIDING OFFICER. The motion to suspend the rules needs to be
resolved.
Mr. GRAHAM. Further point of inquiry.
The PRESIDING OFFICER. The Senator from Florida.
Mr. GRAHAM. What is the position relative to debate on the motion to
suspend the rules for the purpose of considering this amendment?
The PRESIDING OFFICER. The Senate is operating under cloture, and the
motion will be debatable as under the limitation of the cloture rule.
Mr. McCAIN. Mr. President, has the Chair ruled?
The PRESIDING OFFICER. The Senator from Arizona.

Motion to Suspend the Rules

Mr. McCAIN. In full accordance with the rules and procedures of the
Senate and pursuant to the notice filed yesterday, I move to suspend
rule XXII as it applies to the consideration of amendment No. 3711.
And, Mr. President, for the information of my colleagues, I want to
explain what will occur here and the significance of this vote.
By the way, as far as the modification is concerned to amendment No.
3711, since it is agreed on both sides, once we dispense with this
parliamentary tactic, then obviously we will be able, by unanimous
consent, to modify to satisfy a concern that was not included in the
amendment.
At some point this morning we will vote to suspend the rules
regarding germaneness with respect to the pending amendment. Senator
Wyden and I would have offered this amendment earlier, long before
cloture was invoked, but we didn't because we were still negotiating
language with other Senators--specifically, the Senator from North
Dakota and other Senators--who were involved in this very important
piece of legislation. We could have offered it and I am sure we could
have passed the amendment, but in the environment of trying to reach
overall agreement on language of this legislation we did not do it at
that time. We did not propose this amendment in order to accommodate
other Senators. As we all know, sometimes there are package agreements
involving different parts of the legislation.
The Democratic manager of the bill, Senator Dorgan, Senator Wyden and
myself came to agreement on the language of the amendment. It was at
that time, and only at that time, we were notified that a point of
order would be raised against the language, even though we have been
negotiating with the Senator from Florida and his staff since last
August on this package. Doing so obviously is the Senator's right. I
don't begrudge any Senator their right to use the rules to his or her
advantage. But I do want to make it clear we tried to be fair and
accommodate everyone who has left us in this position.
Simply, if we don't succeed in suspending the rules and adopting this
amendment, Senator Wyden and myself will no longer pursue this
legislation. It won't pass. Internet tax freedom, at least for this
year, will be dead. Because, Mr. President, failure to adopt this
amendment will render this bill impotent.
I suspect that may have been the desire of some Members all along, to
kill this bill. Let there be no mistake, failure of this bill will hurt
the future of electronic commerce and will subject our constituents to
new taxes. Yes, a vote against suspending the rules is a vote to kill
the bill. Without the language of this amendment being added, the bill
is meaningless; it will accomplish nothing. Therefore, we will not
pursue the legislation.
But this vote means more than killing the Internet Tax Freedom Act.
Adopted to this bill was Senator Bryan's Children's Online Privacy Act.
That is a very important bill that will protect children who use the
Internet. It is bipartisan legislation that was passed out of the
Commerce Committee by a unanimous vote. If this bill dies today,
Senator Bryan's Children Online Privacy Bill dies today.
Adopted to this bill was Senator Coats' Decency Act. That measure was
adopted by a vote of 98-1 yesterday. The Coats amendment is exceedingly
important to protect our children from pornography that is
proliferating on the world wide web. If this bill dies today, Senator
Coats' Decency Act dies today.
Adopted to this bill was Senator Dodd's amendment regarding
filtering. The Dodd amendment would require Internet service providers
making filtering software available to families so that they can screen
unwanted and harmful material from appearing on their computer. The
Dodd amendment has twice been adopted by the Senate. It is important.
Adopted to this bill was Senator Abraham's Digital Signature bill.
This bill was reported by the Commerce Committee with no opposition.
Mr. President, if we cannot suspend the rules and adopt this
amendment that is supported by both managers, the Internet tax bill is
dead and so is the vital legislation sponsored by our colleagues.

[[Page S11849]]

Let me briefly explain why this amendment is needed. The amendment
does two things. First, it clarifies what is a discriminatory tax. This
is necessary because without this definition the moratorium is rendered
meaningless. States and localities do not pass new laws every time a
new product appears. They simply interpret existing laws to apply to
the products. What we are seeking to do here is clarify that the
Internet cannot be singled out for the application of a tax in a
discriminatory manner. For example, if an entity has a wicket tax, or a
cellular phone tax, or a microwave oven tax, it would not be able to
apply such tax in a discriminatory manner solely to the Internet and
thereby claim the moratorium does not apply.
Mr. President, if this definition is not included in the bill, then
the moratorium is gutted.
The second part of the amendment clarifies that the location of a
server or of web pages does not constitute nexus. This is exceedingly
important. If an individual in Iowa, sitting at his or her desk is
surfing the web and buys a product for his mother in Tennessee from a
company in Maine, using a server located in Florida, the fact that the
server is located in Florida should not constitute nexus for the
purposes of taxation. Neither the purchaser nor the company from which
merchandise was purchased, nor the recipient, under this example, lived
in Florida.
So, again, this language simply clarifies this matter. We do not
state that the appearance of a catalog in someone's mailbox constitutes
nexus. This provision simply updates that fact in the age of the
Internet.
As technology bypasses us all and the use of the web becomes more and
more ubiquitous and seamless, we will need to protect the technology
that is fueling our economy. The issues of Quill and of who should and
should not have to pay taxes will and should be settled by the Congress
and the States. But regardless of that outcome, this technology should
not be harmed by onerous, discriminatory, unfair--and in many cases--
outdated laws.
To close, adoption of this amendment is vital to the passage of this
legislation. This vote is key to its passage. If we fail to muster the
66 votes necessary, this bill will be dead. And as I have noted, some
have wanted to kill it all along. We were forced to file cloture on the
motion to proceed. We were forced to file cloture on the bill. We did
all we could to accommodate all Senators with interests in this bill.
We protected the rights of Senators to offer and debate amendments.
We did not have to allow the senior Senator from Arkansas an
opportunity to offer non-germane amendments prior to cloture we did. We
could have filled the tree or sat in quorum calls awaiting the cloture
vote or final vote. But the Senate functions in a spirit of comity. So
the Senator from Arkansas had his opportunity and his votes.
The bill has been changed and amended. We have accepted language
offered by Senator Hutchinson from Arkansas. We accepted language
offered by my good friend Senator Enzi. I did not care for those
amendments, but I accepted the will of this body and I recognized that
we must move forward on this important legislation. Especially on
legislation like this, accommodations and concessions have to be made.

This bill does contain amendments which I wish were not in there, but
there are 100 Members here. I also agreed to go along with the will of
the majority, as did the Senator from North Dakota, as did the Senator
from Oregon, and many other Senators who had deep and abiding interests
in this legislation.
Again, this vote is exceedingly important if we are going to pass
this bill. If we waive the rules for the purpose of this amendment, we
can pass the bill and send it to the House. If we waive the rules, we
can protect the Internet from unfair and discriminatory taxation, and
more importantly, pass legislation that is vitally important to the
country.
It is my understanding, and I ask parliamentary clarification, this
motion is debatable; is that true?
The PRESIDING OFFICER. The Senator is correct.
Mr. McCAIN. But there is still a time limit that each individual
Senator is allowed under the postcloture proceedings?
The PRESIDING OFFICER. The Senator is correct.
Mr. McCAIN. Parliamentary inquiry; how much time is remaining to the
Senator from Florida?
The PRESIDING OFFICER. The Senator from Florida has 14 minutes
remaining.
Mr. McCAIN. I yield the floor.
Mr. WYDEN addressed the Chair.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. BUMPERS. Mr. President, will the Senator from Oregon yield for a
parliamentary inquiry?
Mr. WYDEN. If that is all I am yielding for.
Mr. BUMPERS. How much time do I have remaining on the bill?
The PRESIDING OFFICER. The Senator from Arkansas has 36 minutes
remaining.
Mr. BUMPERS. I thank the Chair, and I thank the Senator from Oregon.
Mr. WYDEN. Mr. President, I urge the Senate suspend the rules and
pass this important amendment.
First, let's be clear what happens if this amendment is passed. The
most important thing is that the grandfather on Internet tax provision
that was so central to the States is preserved and preserved
completely.
Second, there is a separate section to ensure that all other existing
taxes are preserved, and that there is another provision that would
ensure that all ongoing liabilities--the matter the Senator from
Florida says is important to the State of Connecticut--is also
preserved.
After we filed this amendment last night, we again reached out to all
sides to try to address concerns. I have done this now for a year and a
half. The original bill that came out of the Commerce Committee, by the
time it came to the floor, had more than 30 major changes. In our
efforts here now to be reasonable, we have made at least another 20
changes to try to accommodate the Senator from Florida and others. In
fact, the definition of a discriminatory tax--which is what this is all
about--is essentially that which was used in the House, and it was
agreeable to the Governors and the States when it was debated there in
the House. The reason that the Senator from Arizona and I have focused
on this issue is that this definition of discrimination is essential to
ensure technological neutrality.
What this definition does is straightforward. It ensures that the new
technology and the Internet is not discriminated against. It makes sure
that a web site is treated like a catalog; catalogs aren't taxed. We
don't want web sites to be singled out for selective and discriminatory
treatment. The provision also makes sure that Internet service
providers are, in effect, treated like the mail. The mail isn't taxed
when a product is shipped to your home from a catalog merchant.
Similarly, the Internet service provider should not be taxed merely for
being the carriers or transmitters of information. In effect, Senator
Coats recognized this in his amendment that was adopted yesterday.
So what we have done is, yesterday, we have worked with the Senator
from North Dakota, Senator Enzi, and others, to address this
discriminatory tax question in a way that we thought would be agreeable
to the States. Overnight, we tightened up the language to deal with the
grandfathering question. The minority leader, Senator Daschle, made
some important and, I thought, useful suggestions. We incorporated
those this morning to make sure that when we talk about the
grandfathering provision, as it relates to South Dakota and North
Dakota, the grandfather provision would tightly protect those two
States. We have done that.
This Senator finds now that if we do not prevail on this point and
the bill goes down, all of these efforts now for a year and a half are
going to leave us in a situation where I think we will see, with
respect to the Internet and the digital economy, the same problems
develop that cropped up with respect to mail order and catalogs. We
have had a number of people at the State and local level saying, you
know, with respect to the mail-order and catalog issue, we wish we had
done what you are bringing about with respect to the Internet.
We know that we have to have sensible policies so we can protect some
of

[[Page S11850]]

the existing sources of revenue for the States. Some call it the ``old
economy''; I don't. I think they are extremely important to the States.
We have to respect those, while at the same time writing the ground
rules for the digital economy--the economy where the Internet is going
to be the infrastructure and when every few months takes us to exciting
new fields and increases dramatically in revenue.
So I hope our colleagues will not cause all of the other important
work that has been done here to go down. That is Senator Dodd's
legislation and the important work done by Senator Bryan. There is a
host of good measures that we agreed to accept as part of this
legislation in an effort to be bipartisan and to accommodate our
colleagues.
But, once again, the goalposts are moving. The definition of
discriminatory tax that came up in the House is essentially what we are
using. The Governors and the States found that acceptable. And then,
after taking that kind of approach, even last night, we moved again, at
the request of colleagues--and we thought they were reasonable
requests--to tighten up the grandfathering provision. Now is the time
to make sure that we do not gut this bill, the definition of a
moratorium, and particularly don't gut a concept that we think is
acceptable to our colleagues, and that is the concept of technological
neutrality.
When you vote for the McCain-Wyden amendment to suspend the rules and
pass this, you will be voting for a solid grandfather provision that
ensures that all existing taxes are preserved. You will be voting to
protect ongoing liabilities, which is what the Senator from Florida
said he is concerned about, along with the Senator from Connecticut,
and others. You will be voting to make sure, in a separate section,
that all other existing taxes other than Internet taxes are preserved,
and you will be voting for the principle of technological neutrality.
I think it would be a great mistake to gut this legislation now after
all this progress has been made. I represent a State with 100,000 small
businesses. These businesses are a big part of the economic future that
we all want for our constituents. They cannot afford a crazy quilt of
taxes that would be applied by a good chunk of the Nation's 30,000
taxing jurisdictions, based on what we have seen during this debate.
Let's do this job right. Let's do it in a thoughtful and uniform way.
I urge our colleagues to support this bipartisan amendment Senator
McCain and I have offered. I yield the floor.
Mr. GRAHAM addressed the Chair.
The PRESIDING OFFICER. The Senator from Florida is recognized.
Mr. GRAHAM. Mr. President, for those here on the floor and those who
may be watching this on C-SPAN, I apologize, because we are about to
enter some very arcane and not particularly exciting discussion. But it
is necessary in order to understand what this amendment does and what
it doesn't do. First, what it doesn't do.
Mr. President, this amendment starts by saying on page 26 of the bill
that is before us that we will strike lines 3 through line 5 on page
27. So for those of you who have access to the legislation, I ask if
you will turn to those pages. If you don't have access to the
amendment, I am going to make a statement.
Unfortunately, both of those who have spoken--well, Senator Wyden is
on the floor. I would like him to listen to this statement. If he feels
I am misstating--since it is not my intention to have to read all of
this language--would he please indicate where I am misstating. But as I
read the amendment, with the exception of changing the numeration--that
is, what was listed as an (a) in the Senate Finance committee language
is listed as a small paragraph letter (i) in the McCain amendment
number 3711. With the changes of those numerations, the words in the
amendment are almost verbatim to the words that are being stricken from
line 3 on page 26 through line 5 on page 27. Is that an accurate
statement?
Mr. WYDEN. We are anxious to be responsive to the Senator from
Florida, but we are having trouble locating this. Why don't we do this:
Continue, if you will, with your address and we will try to get the
page numbers right.
Mr. GRAHAM. If there is a difference, I will yield to indicate that.
In my reading of the amendment, I cannot find any substantial
difference between the language that was in the Finance Committee's
draft and the language that is in this amendment. We are striking out
on the one hand and reinserting on the other. The difference begins
with a new subparagraph added by the amendment, which is subparagraph
Roman numeral (iv), beginning on line 16 of page 2 of the amendment
through line 22. It is my understanding that paragraph will be deleted.
Mr. WYDEN. We agreed to take that paragraph out yesterday.
Mr. GRAHAM. So that is not an issue of controversy.
And Roman numeral (v), which is the new language under discriminatory
tax, is acceptable.
Two-thirds of the amendment that is offered is not in contest, either
because it is in existing law--so whether we adopt the amendment or
not, it is still going to be in the legislation--or it is acceptable.
All the controversy, therefore, focuses on page 3, lines 5 through
23, which is the language that has been referred to as the ``nexus''
language. This language essentially as presented in this amendment was
before the Senate Finance Committee. It was reviewed by the Senate
Finance Committee and, on the recommendation of both the majority and
minority legal counsel, was stricken from the bill.
What was the basis, Mr. President, that the Finance Committee made
such a recommendation to strike what is now the essence of lines 5
through 23 from this bill? These are the arguments that the Finance
Committee was persuaded by. It determined that the areas of nexus,
which relate to the subject of how much of a presence does an entity
such as a business have to have in a State to make it subject to that
State's tax authority. It determined that the areas of nexus were
sufficiently clear under today's law that it was inappropriate to
include such standards in Federal legislation.
The basis of nexus: As the Presiding Officer, who was a distinguished
member of the State Senate of the State of Wyoming, knows and from his
professional career as a CPA, nexus has traditionally been determined
by State law, not by Federal law. Each State determines what is the
necessary presence for taxation. There are, of course, limits as to
State law under constitutional provision for interstate commerce. But
within that standard, the States have been the determinative bodies.
According to the Finance Committee staff, there has only been one
other Federal law, and that was passed 40 years ago, in 1959, which
relates to the issue of federalization of what those standards of nexus
would be.
So the essential position of the Finance Committee was, first, that
this is a matter that was being properly dealt with at the State level,
and that was not a compelling reason why we should federalize the issue
of nexus.
Second, they found that no State is currently attempting to enforce a
tax collection obligation on the basis of the circumstances outlined in
amendment; therefore, there was no necessity for this federalization,
and that it would lead to potentially increased litigation over the
nuances of this language. I am going to talk about that in a moment.
Finally, that the enactment of this amendment would create special
federalized rules for a very small subset of the retail community. And
it is inappropriate--for a bill that is intended to cause a timeout, a
pause, a moratorium, on State action to allow a commission to develop
recommendations on appropriate rules for taxation--for us now to
essentially preempt that whole process by federalizing a significant,
albeit very niche, area of commerce.
So those are the reasons that the Senate Finance Committee voted to
eliminate this language in the bill. Certainly the Finance Committee
was not adverse to the thrust of the bill, because it passed the bill
on a 19-to-1 vote. The idea that by failing to include this language we
would be ``gutting'' the bill is, in my opinion, an extreme
overstatement.
Mr. President, beyond those reasons that were given by the Finance
Committee, there is also another set of concerns which have come to
light as this

[[Page S11851]]

amendment has been increasingly in the public attention. That is the
fact that there are States which either are or are potentially in
litigation with various providers within the Internet industry over the
question of their tax liability to a State. We have been sensitive to
that in this legislation by providing a grandfather clause, which
essentially protects the right of those States. As presented, this
nexus amendment clause is retroactive, as the discriminatory tax
definition in this bill is not covered by the general grandfather
clause, and would apply to past events.
There is concern that the effect of this legislation would be to tilt
the playing field in the courtroom of that litigation by making it more
difficult on a retroactive basis for the States to make their arguments
about an adequate nexus to the State as the basis of taxation of these
Internet providers.
I don't think that this Congress wants to get into the business of
intruding itself into ongoing litigation which might involve the State
of Mississippi, or the State of North Dakota, or the State of Arizona,
or the State of Florida, or any other State. That is not our business--
to retroactively insert ourselves into that thicket of litigation.
Mr. President, it is for those reasons that I believe this amendment
is defective. This Senate has adopted rules that provide that, after
cloture has been invoked, the only amendments that can be considered
are those that are germane to the bill.
The very fact that the sponsors of this amendment have filed what is
a very unusual motion to suspend the Senate's rules as it relates to
germanity is an indication that, first, they don't think it is germane;
and, second, that under the rules of the Senate it should not be
debatable in this postcloture environment.
As the managers and sponsors of this bill, they have had ample
opportunity to get this language included throughout this long and
tedious process. They have not done so. Now, in the postcloture
environment, they are asking us to waive a fundamental rule of the
Senate, which is, after cloture has been invoked, the cloture which was
filed by the primary sponsor of the bill, now they want to be able to
take up what is tacitly admitted to be a nongermane amendment, an
amendment which was rejected after thorough analysis by the Senate
Finance Committee, a measure which I think would have the effect of
injecting us into litigation and affecting potential litigation between
the States and various Internet providers.
Mr. President, I strongly urge my colleagues that we not adopt this
motion, that we not change our rules, that we play by the rules that we
have all agreed to, and that we play by the rules that have been in
effect between States and the Internet industry in the past, and not
retroactively reach back and adopt a provision which could interfere
with the normal resolution of pending litigation.
Having said all of that, Mr. President, it is my hope that while this
discussion has been going on, there have been good-faith efforts made
to arrive at a resolution of this issue, and it would be my suggestion
to have possibly a brief period by suggesting the absence of a quorum
so that we might see if in fact we have arrived at a resolution that
would obviate the necessity of the several steps that would be required
in order to further pursue this matter. I think that would be in
everybody's interest.
I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Enzi). The clerk will call the role.
The legislative clerk proceeded to call the roll.
Mr. McCAIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered. The
Senator from Arizona.
Mr. McCAIN. Mr. President, I ask unanimous consent that amendment No.
3711 be withdrawn, and I send to the desk amendment No. 3711, with a
modification.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The amendment (No. 3711) was withdrawn.

Amendment No. 3711, As Modified

(Purpose: To define what is meant by the term ``discriminatory tax'' as
used in the bill.)

The PRESIDING OFFICER. The clerk will report the new amendment as so
modified.
The legislative clerk read as follows:

The Senator from Arizona [Mr. McCain], for himself and Mr.
Wyden, proposes an amendment numbered 3711, as modified.

Mr. McCAIN. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.

The amendment is as follows:
On page 26, beginning with line 3, strike through line 5 on
page 27 and insert the following:
(2) Discriminatory tax.--The term ``discriminatory tax''
means--
(A) any tax imposed by a State or political subdivision
thereof on electronic commerce that--
(i) is not generally imposed and legally collectible by
such State or such political subdivision on transactions
involving similar property, goods, services, or information
accomplished through other means;
(ii) is not generally imposed and legally collectible at
the same rate by such State or such political subdivision on
transactions involving similar property, goods, services, or
information accomplished through other means, unless the rate
is lower as part of a phase-out of the tax over not more than
a 5-year period;
(iii) imposes an obligation to collect or pay the tax on a
different person or entity than in the case of transactions
involving similar property, goods, services, or information
accomplished through other means;
(iv) establishes a classification of Internet access
service providers or online service providers for purposes of
establishing a higher tax rate to be imposed on such
providers than the tax rate generally applied to providers of
similar information services delivered through other means;
or
(B) any tax imposed by a State or political subdivision
thereof, if--
(i) except with respect to a tax (on Internet access) that
was generally imposed and actually enforced prior to Oct. 1,
1998, the sole ability to access a site on a remote seller's
out-of-State computer server is considered a factor in
determining a remote seller's tax collection obligation; or
(ii) a provider of Internet access service or online
service is deemed to be the agent of a remote seller for
determining tax collection obligations solely as a result
of--
(I) the display of a remote seller's information or content
on the out-of-State computer server of a provider of Internet
access service or online services; or
(II) the processing of orders through the out-of-State
computer server of a provider of Internet access service or
online services.
Mr. McCAIN. Mr. President, let me say that I intend, after the
Senator from Florida and the Senator from Oregon and the Senator from
North Dakota and I speak on this, there is no controversy associated
with it, that we would ask the amendment be agreed to. I would, at that
time, request unanimous consent to withdraw my motion to suspend the
rules.
The PRESIDING OFFICER. Is the Senator making that request at this
time?
Mr. McCAIN. I make that request at this time. I ask unanimous consent
to withdraw my motion to suspend the rules.
The PRESIDING OFFICER. Without objection, it is so ordered.
The motion was withdrawn.
Mr. McCAIN. Mr. President, I thank the Senator from Florida. This has
been a tough battle. It has been a very difficult set of negotiations.
We have disagreed on several issues, but we have reached a compromise.
I thank him for his willingness to do that.
I also thank the good offices of the Senator from North Dakota whose
calm demeanor has prevailed throughout this entire process we have been
through. This amendment represents a compromise--another compromise--
that has been made in the process of this legislation among ourselves
and the Senator from Florida, and I thank him for it.
After the Senator from Florida and the Senator from Oregon speak, I
hope we can adopt the amendment at that time. Then I hope we can go to
final passage of this legislation.
Mr. President, I yield the floor.
Mr. DORGAN addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from North
Dakota.
Mr. DORGAN. Mr. President, the areas that have been most recently
discussed with respect to this legislation are arcane, complicated
areas dealing with nexus, jurisdiction of tax and so on. There are not
a lot of people who understand the nuances of all of those

[[Page S11852]]

words and all of the provisions. That is why it was hard to sift
through all of this and reach an agreement. But an agreement has been
reached that I think is a good agreement, one that accomplishes the
purpose of this legislation in a manner that is not injurious to any
other interests.
I thank the Senator from Arizona--I would say for his patience, but
he is a Senator who is impatient to get things done on the Senate
floor. I understand that and accept that, as do others. That is the
reason he brings a lot of legislation to the floor and is successful
with it.
I thank the Senator from Oregon who has been at this task for a long,
long time and has been very determined to help get this legislation
through the Senate.
Let me say to the Senator from Florida, one of the admirable
qualities of that Senator, among many, is his stubborn determination to
make certain that when things are done here, they are done the right
way and that he understands it and that the interests affected are
protected in a manner that is consistent with what he views as a matter
of principle. I know that is frustrating for some, but the Senator from
Florida certainly has that right. He contributes to this process by
being determined to make certain we understand the consequences of all
of this.
I thank him for working with us now in these final moments to reach
an agreement that I think is the right agreement. We will pass this
legislation, and I think we have accomplished something significant.
Mr. President, let me also indicate that my staff member, Greg Rohde,
who has been working on these issues for many, many years with me, has
done an outstanding job, as well as have other staff who have helped
work through this process. I thank him for his work. I yield the floor.
Mr. GRAHAM addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from Florida.
Mr. GRAHAM. Mr. President, I understand I only have 22 seconds. I
want to say some positive things. I ask that I may be yielded----
Mr. McCAIN. I yield the Senator from Florida as much time as he may
use from my time.
Mr. GRAHAM. Mr. President, I appreciate that generosity, and I will
not overly indulge. Let me say, we have reached an honorable resolution
to this issue which, for those who have been listening to this arcane
debate, I will summarize by saying a significant issue will be made
prospective in its application and not have retroactive application.
Reading the language we have agreed to add to the McCain amendment
3711, which makes a portion of the nexus language prospective, in
combination with the definition of ``tax on internet access,'' which
was agreed to earlier, this amendment should not interfere with
litigation between States and internet service providers. With that
agreement, that has brought the various parties of interest into
concurrence.
What I want to say, Mr. President, is the three people who have been
particularly active on this issue, who are on the floor now--Senator
McCain of Arizona, Senator Dorgan of North Dakota, Senator Wyden of
Oregon--are three of the finest people with whom I have had the
privilege to serve in public office. If America was going to judge the
quality of its public officials, I would be happy to be judged by these
three men.
As the Senator from Arizona said, we have had some degree of
controversy, but that is the nature of the democratic process. If this
were a passive and tranquil process where everybody voted 400 to 0,
that would be reminiscent of the way in which the Soviet Union used to
operate its parliament, not the U.S. Senate.
I think we have come to not only an appropriate resolution of this
specific amendment, but I am proud where we are overall. We have
achieved the purpose of having a reasonable period of timeout, with a
thoughtful commission to be appointed to study some extremely
complicated areas, the intersection of a legal system that is complex
in areas of State-Federal relations, telecommunications and a highly
complex new set of technologies.
This is an appropriate area for us to stand back and ask for the
assistance of some thoughtful citizens who can bring their wisdom and
experience to bear and give us the framework of some policy that then
will be returned to the Senate and to the House of Representatives for
enactment, as well as to the various State legislatures for their
consideration.
I think we have, at the end of this process, arrived at exactly what
our framers of this Constitution intended the legislative branch to do.
I am proud to vote not only for this amendment but for the bill on
final passage, and I look forward to the commission's work over the
next several months and a return to these subjects in the year 2000 or
2002.
Again, I thank my colleagues for their very significant leadership in
bringing us to this position.
Several Senators addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from North
Dakota.

Privilege of the Floor

Mr. DORGAN. Mr. President, I ask unanimous consent that Tyler Candee
be accorded the privilege of the floor for the rest of the day.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRAHAM addressed the Chair.
The PRESIDING OFFICER. The Senator from Florida.
Mr. GRAHAM. Mr. President, I also would like to take this opportunity
to thank Mr. Russ Sullivan, who is legislative director in my office,
and Kate Mahar, who has worked with him. They have been on a fast
learning curve on these issues, fortunately, about 12 hours ahead of
myself. I publicly thank them for their contribution to this final
conclusion.
Mr. WYDEN addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from Oregon.
Mr. WYDEN. Thank you very much, Mr. President. I think this may well
be a historic day. What the U.S. Senate is doing is beginning to write
the ground rules for the digital economy. As we have seen just in the
last hour again, it is going to be a tough job.
We have had just in the last hour another set of questions that have
come up with respect just to the terminology that is used in this new
field. For example, some States call an Internet access tax a tax on
on-line services.
What we have done now as a result of the agreement among the Senator
from Arizona, the Senator from North Dakota, the Senator from Florida
and myself, is we have said that we are going to treat those terms the
same way when, in fact, they have the same effect. I think that this
exercise, while certainly laborious and difficult, is just an
indication of the kind of challenges we have to overcome.
I thank particularly the Senator from Florida. He feels very strongly
about this issue and has made the case again and again to me that it is
important to do this job right, and I share his view. I thank him for
his courtesies.
The Senator from North Dakota and I have been debating this
legislation now for a year and a half, probably at a much higher
decibel level than either of us would have liked.
The chairman of the committee, Chairman McCain, and I have been
friends for almost 20 years now. For this freshman Senator--not even a
full freshman, an arrival in a special election--to have a chance to
team up on this important piece of legislation is a great thrill. I
thank him and his staff for all of their courtesies.

Before I make any final comments, I want to thank Ms. Carole Grunberg
of our office who again and again, when this legislation simply did not
look like it could go forward, persisted. And she, along with Senator
Dorgan's staff and Senator McCain's staff, has helped to get us to this
exciting day.
I am particularly pleased, Mr. President--I will wrap up with this--
for the benefits that this legislation is going to have for people
without a lot of political power in America. I think about the 100,000
home-based businesses I have in my State. I think about the disabled
folks who are starting little businesses in their homes. For them, the
Internet is the great equalizer. It allows people who think of
themselves as the little guy to basically be able to compete in the
global economy with the big guys.

[[Page S11853]]

Unless we come up with some ways to make uniform some of these
definitions and terms, which is what we have been trying to do in the
last hour--and we have made some real headway and reached a success--
those little guys are going to find it hard to compete.
So I look forward to continuing the discussions with our colleagues
as we look to other questions with respect to the Internet. This, it
seems to me, is just the beginning of the discussion rather than the
end.
Mr. President, I urge my colleagues now to support this modified
amendment, to support the bill, and I yield the floor.
Mr. McCAIN addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from Arizona.
Mr. McCAIN. Mr. President, I again thank Senator Wyden, Senator
Dorgan, the Senator from Florida, Senator Graham, and all who were
involved in this very difficult and very complex issue. I also thank my
staff--all of them, including Mark Buse.
I also would like to add to the comments of the Senator from Florida,
Senator Graham, who said this is how the process should work. It has
been very tough, very difficult, very time-consuming, but I think the
magnitude of the legislation we are considering probably warranted all
of that--and perhaps more. So I thank him very much. And as far as the
freshman from Oregon is concerned, he has certainly earned his spurs as
a member of the Commerce Committee.
By the way, I also thank the Chair for his involvement in this issue.
He is probably the most computer literate Member of the U.S. Senate. We
obviously value his talent and expertise and look forward to the day
when he has his laptop on the floor for its use that so far we have
failed to achieve but someday I hope we do.
I also mention one other person, Congressman Cox over in the other
body, who has also played a key role in the development of their
legislation on the other side. He has done a tremendous job,
Congressman Cox of California.
The PRESIDING OFFICER. The question is on agreeing to amendment No.
3711, as modified.
The amendment (No. 3711), as modified, was agreed to.

Amendment No. 3718, As Further Modified

Mr. McCAIN. I send to the desk a modification to amendment No. 3718
and ask unanimous consent that it to be adopted. Mr. President, the
situation is that some written language that had been included in that
amendment was not legible in the printer, so we had to remodify it.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment (No. 3718), previously agreed to, as further modified,
follows:
On page 29, beginning with line 20, strike through line 19
on page 30 and insert the following:
(8) Tax.--
(A) In general.--The term ``tax'' means--
(i) any charge imposed by any governmental entity for the
purpose of generating revenues for governmental purposes, and
is not a fee imposed for a specific privilege, service, or
benefit conferred; or
(ii) the imposition on a seller of an obligation to collect
and to remit to a governmental entity any sales or use tax
imposed on a buyer by a governmental entity.
(B) Exception.--Such term does not include any franchise
fee or similar fee imposed by a State or local franchising
authority, pursuant to section 622 or 653 of the
Communications Act of 1934 (47 U.S.C. 542, 573), or any other
fee related to obligations or telecommunications carriers
under the Communications Act of 1934 (47 U.S.C. 151 et seq.).
(9) Telecommunications service.--The term
``telecommunications service'' has the meaning given such
term in section 3(46) of the Communications Act of 1934 (47
U.S.C. 153(46)) and includes communications services (as
defined in section 4251 of the Internal Revenue Code of
1986).
(10) Tax on Internet Access.--The term ``tax on Internet
access'' means a tax on Internet access, including the
enforcement or application of any new or preexisting tax on
the sale or use of Internet services; unless such tax was
generally imposed and actually enforced prior to October 1,
1998.

Mr. KERRY. I'd like to take a moment to express my strong support for
S. 442, the Internet Tax Freedom Act. In my view, S. 442 is a necessary
first step to ensure that the Internet remains user-friendly to persons
and businesses who seek to use it as a primary forum in which to
conduct commerce. Before I begin, I'd like to credit my colleague from
Oregon, Senator Wyden, for his hard work on this legislation and for
his longtime and pioneering leadership on Internet issues, both when he
was in the House and now as a member of the Commerce Committee in the
Senate. I'd also like to thank Senator McCain for his steadfastness and
determination in ensuring that this important legislation is considered
by the full Senate.
The Internet holds great promise to expand prosperity and bring ever
more Americans into the national economy. In the past, to open a store
and sell goods to the public, a merchant needed to find a good location
for a storefront, build-out the store front, maintain its interior, pay
rent and deal with myriad other business and legal concerns. All of
these actions consume time and often scarce resources. To many
Americans, they present an unreachably high bar to starting or
maintaining a business. The Internet will allow millions of Americans
to sell goods and services online, and will dispense with many of the
burdensome costs involved with starting and maintaining a business. One
great impediment, however, to the evolution of commerce over the
Internet is the immediate threat of both disparate taxing jurisdictions
and inequitable taxation.
A product offered over the Internet can be purchased by anyone with a
computer and a modem, regardless of the town or state in which the
person lives. Imagine needing to know the tax consequences of selling
to each of the thousands of taxing jurisdictions in the country as a
prerequisite to starting a business. This problem becomes even more
complex if states and localities begin to impose taxes on electronic
transactions or transmissions as such, in addition to sales, use and
other taxes.
This legislation attempts to reasonably address this concern by
imposing a brief moratorium specifically on the inequitable taxation of
electronic commerce. It will allow the federal government, the states,
the Internet industry and Main Street businesses a brief time-out to
rationally discuss the several issues involved in Internet taxation and
to develop a reasonable approach to taxation which permits electronic
commerce to thrive in America. In my view, the legislation does not
seek to deprive states of needed tax revenue. Senators Wyden and McCain
have gone to great lengths to minimize those existing taxes that would
be affected. In addition, the bill expressly grandfathers existing
state taxes on Internet access. What the bill does, however, is attempt
to ensure that the development of the Internet is not hampered by a
hodge-podge of confusing state and local taxes.
This bill was carefully negotiated to address competing equities.
States and localities certainly have very real and legitimate needs to
raise revenue to support vital state and community functions. By the
same token, the Internet and the promise it holds for our economy, for
schools, for children and families, and for our democracy is also very
compelling. It is a wholly new medium whose mechanics, subtleties and
nuances few of us really understand. I do not hear any Senator stating
that electronic commerce should never be the basis of tax revenue, and
I do not believe any Senator is trying to permanently deprive states of
inherent privileges. Instead, the bill strives to create a brief period
during which we in government and those in business can attempt to
better understand this new medium and create a sensible policy that
permits the medium to flourish as we all want.
I urge my colleagues to support this bill.
Mr. ROTH. Mr. President, I rise to express my support for the
Internet Tax Freedom Act. This legislation imposes a temporary
moratorium on taxes relating to the Internet and establishes a
Commission to study and make recommendations for international,
Federal, state, and local government taxes of the Internet and other
comparable sales.
This legislation reflects the exciting times in which we live--a time
when commerce between two individuals located a thousand miles apart
can take place at the speed of light. Today, names like Netscape,
Amazon.com, Yahoo, and America On-Line are household names--each a
successful company in a new and exciting global

[[Page S11854]]

business community. And they are only a few of literally thousands who
provide their goods and services over the Internet.
They compete in a world where technological revolutions take place on
a daily basis, and they benefit the lives of families everywhere. Even
in America's most remote communities, our children have access to the
seven wonders of the world, to metropolitan art museums, electronic
encyclopedias, and the world's great music and literature. These
companies--and the countless companies like them--are pioneers. And the
new frontier is exciting, indeed.
In the new realm of cyberspace, government has three choices: lead,
follow, or get out of the way. The legislation we introduce today is a
clear indication that government is prepared to lead. It demonstrates
that Congress is not going to allow haphazard tax policies, and a lack
of foresight to get in the way of the growth and potential of this new
and promising medium. It makes it clear that government's interaction
with Internet commerce will be well-considered and constructive--
beneficial to future prospects of Internet business and the individuals
they service.
From the introduction of the Internet Tax Freedom Act, in early 1997,
members of the Finance Committee expressed keen interest in considering
this legislation. The Finance Committee has clear jurisdiction over
state and local taxes--it's also the place for trade issues. And this
July, we received a referral of the bill. We conducted a hearing on the
issues and listened to witnesses detail the growth and potential of the
Internet. Witnesses also articulated the many sides and concerns
associated with the tax implications of Internet commerce.
Following our hearing, the Finance Committee held a markup, where we
approved an amendment in the nature of a substitute to the original
bill reported out of the Commerce Committee. The Finance Committee made
significant improvements to the original legislation. We beefed up the
trade component of the bill. We directed the USTR to examine and
disclose the barriers to electronic commerce in its annual report. And
we declared that it is the sense of Congress that international
agreements provide that the Internet remain free from tariffs and
discriminatory taxation.
The Finance Committee's substitute also shortened the moratorium
period on State and local taxes relating to the Internet. We did this
with an understanding that the advisory commission, set up in the
legislation, would not need the five year period that was set out in
the original Commerce bill. At the same time, we streamlined the
Advisory Committee and focused its study responsibilities.
We took out any grandfather provision, feeling that as a policy
matter, there should not be any taxes on the Internet during the
moratorium period--regardless of whether some States had jumped the gun
and applied existing taxes to Internet access. The Finance Committee
also felt that this bill should be an example to our international
negotiating partners--that if we wanted to keep grandfather provisions
out of the international agreements, that we should remove them from
our domestic taxation.
I recognize that there have been various floor amendments that have
changed some of the things we did in the Finance Committee. Despite
those amendments, the central thrust of the legislation, which is to
call a time-out while a commission assesses the Internet and makes some
recommendations about how we should tax electronic commerce, remains.
Important international provisions--relating to trade and tariff
issues--also remain unchanged.
Mr. President, I support the Internet Tax Freedom Act. It is a
demonstration of Congress' understanding of the exciting potential and
the opportunities that will be realized in cyberspace. It is a
thoughtful approach to a very important issue. It meets current needs,
and allows continued growth in this new frontier. I hope my colleagues
will join me in supporting it.
Mr. MOYNIHAN. Mr. President, I first want to thank the Chairman of
the Finance Committee, Senator Roth, for his insistence that the
Internet Tax Freedom Act be considered by the Finance Committee before
any action on this floor. I recognize and applaud all of the effort
that has gone into the other proposals dealing with this subject, and
in particular we should acknowledge the work of Senators Wyden, McCain,
Dorgan, Graham, Lieberman, and Gregg.
Since June of 1997, the chairman and I sought referral of this
legislation to give the Finance Committee the opportunity to consider
the important tax and trade issues related to the Internet, which by
some estimates will grow to $300 billion of commercial transactions
annually by the year 2000. The bill was finally referred to the Finance
Committee on July 21st of this year.
That referral to the Finance Committee was consistent with Senate
precedents. In recent years, the Finance Committee has had jurisdiction
over at least two other pieces of legislation with direct impact on
state and local taxes. Both the ``source tax'' bill that was of great
interest to Senators Bryan, Reid, and Baucus, prohibiting states from
taxing the pensions of former residents, and Senator bumpers' mail
order sales tax proposal, requiring mail order companies to collect and
remit sales taxes due on goods shipped across state lines, were
referred to the Finance Committee.
The legislation before us today also deals directly with
international trade. It requests that the administration continue to
seek trade agreements that keep the Internet free from foreign tariffs
and other trade barriers. As reported by the Finance Committee, this
bill would establish trade objectives designed to guide future
negotiations over the regulation of electronic commerce--issues clearly
within the Finance Committee's jurisdiction.
A few comments on the substance of this legislation. I am not
entirely persuaded that there is a pressing need for a federal
moratorium on the power of state and local governments to impose and
collect certain taxes, but it seems clear that such a moratorium does
enjoy a great deal of support. The two-year moratorium period in the
Finance Committee bill and the three-year period agreed to as a floor
amendment during this debate is surely preferable to the six-year
provision in the Commerce Committee bill.
There is some question whether such a moratorium is actually
necessary. New York is proof that States do not need a directive from
Congress to act on this matter: Governor Pataki and the New York State
legislature have agreed on a bill exempting Internet access services
from State or local sales, use, and telecommunications taxes. The
Governor's legislation also makes it clear that out-of-state businesses
will not be subject to State or local taxes in New York solely because
they advertise on the Internet.
I am pleased that the Finance Committee's bill preserves the right of
States or local governments to collect tax with respect to transactions
occurring before July 29, 1998 (the date of Finance Committee action).
Further, I am pleased that language has been added on the floor that
goes beyond the Finance Committee bill and ``grandfathers'' any
existing State and local taxes on Internet activity occurring during
the period of the moratorium.
With respect to the Advisory Commission on Electronic Commerce
established, a membership of 16, almost half of that in the House bill,
is manageable and is more likely to lead to meaningful recommendations.
An item of particular interest to me is the requirement in that the
Commission examine the application of the existing Federal
``communications services'' excise tax to the Internet and Internet
access. We need to know more about how and whether that tax should
apply to new technology.
This bill is not perfect, but on balance I believe it deserves our
support. I urge its adoption and hope it can be enacted this year.
Mr. LOTT. Mr. President, I am pleased to rise in support of the
Senate's overwhelming passage today of the Internet Tax Freedom Act.
This bill represents several months of thoughtful consideration and
discussion among Members on both sides of the aisle to address the tax
treatment of this emerging medium of commerce.
Throughout history, innovations in technology have dramatically
changed lifestyles. Today, it is the Internet changing lives, and
unlike any other

[[Page S11855]]

technology to date. It is connecting people all around the world in
ways that no one at the Department of Defense ever conceived of when
the network was created. It is a true testament to the fact that
leadership and entrepreneurial drive is alive and well in America.
This new tool of communication and information is also fast becoming
one of the most important and vibrant marketplaces in decades. It holds
great promise for businesses, both large and small, to offer their
products and services for sale to a worldwide market. This is good news
for everyone. It means new jobs, new opportunities and choices for
consumers and retailers, and ultimately more revenue for state and
local governments.
Mr. President, by its very nature, the Internet does not respect the
traditional boundaries of state borders or county lines used to define
our tax policies today. With about 30,000 taxing jurisdictions all
across America, a myriad of overlapping and burdensome taxes is a
legitimate concern for consumers and businesses online. This issue
needs to be explored and resolved.
The Internet Tax Freedom Act is about the potential of technology.
It is about taking a necessary and temporary time-out so that a
Commission of government and industry representatives can thoroughly
study electronic commerce and make sensible recommendations to Congress
about a fair, uniform and consistent Internet tax structure. The
moratorium will apply to discriminatory and multiple taxes as well as
to taxes paid just to access the Internet.
This legislation will treat Internet sales the same as any other type
of remote sale. It will not favor the Internet or disadvantage others.
Businesses and consumers using electronic commerce need and deserve
some level of assurance and sense of uniformity about how they will be
taxed.
Mr. President, over the past several months, I personally heard from
governors and groups across the nation who expressed serious concerns
about the hindering effect on electronic commerce due to ambiguous and
conflicting tax treatment. I also heard from others expressing concerns
about raising revenue and providing services to their citizens. Both
voiced support for passage of a balanced bill that would represent
their views. Adequate time was allowed for the Senate to hear what they
had to say, and their concerns are reflected in the amendments and in
the final bill.
Internet taxes, like many other issues faced in Congress, is not
without controversy. The spirited exchange on the Senate floor during
the past several days is evidence of that. I respect the differences
that have been debated. I recognize the delicate balance in many of the
views expressed, and appreciate the good faith efforts of my colleagues
in working together to reach consensus. I know it was not easy.
Passage of this legislation was made possible by the hard work of
many people.
First, I commend Senator John McCain, Chairman of the Senate's
Commerce Committee, for his diligent leadership and commitment to
tackle this complex and contentious issue. He has been steadfast
throughout this process, and to him I say thank you.
I also owe a debt of gratitude for the work and contributions of the
Chairman of the Senate's Finance Committee, Senator Bill Roth. He
provided a fresh perspective on the issue of electronic commerce.
Clearly, the participation of several Members with diverse interests
was integral in moving this bill forward. I am proud to see Senators
from both sides of the aisle--Senator Byron Dorgan, Senator Judd Gregg,
Senator Tim Hutchinson, Senator Joe Lieberman, and Senator Ron Wyden--
all work together in a respectful manner to get the job done.
Nothing is ever accomplished in the Senate without the dedicated
efforts of staff. I want to take a moment to identify those who worked
hard to prepare this legislation for consideration. From the Senate
Commerce Committee: Mark Buse, Jim Drewry, Carol Grunberg, Paula Ford,
Kevin Joseph, John Raidt, Mike Rawson, and Jessica Yoo. From the
Finance Committee: Stan Fendley, Keith Hennessey, Jeffrey Kupfer,
Brigitta Pari, Frank Polk, and Mark Prater. Other individuals
participated on behalf of their Senators: Renee Bennett, Laureen Daly,
Richard Glick, Hazen Marshall, Greg Rhode, Mitch Rose, Stan Sokul and
Russell Sullivan. I thank them all for their efforts.
Mr. President, the current power of the Internet and its future
potential will advance America into the next millennium. Passage of the
Internet Tax Freedom Act is a crucial step in recognizing the
significance of the Internet in electronic commerce and what it will
mean in the lives of every American consumer, to American businesses,
and to America's economy.
Mr. LEAHY. Mr. President, I want to add my own support to promoting
electronic commerce and keeping it free from new Federal, State or
local taxes. I am a cosponsor of the Internet Tax Freedom Act, S. 442.
In ways that are becoming increasingly apparent, the Internet is
changing the way we do business. More than 50 million people around the
world surf the net--50 million. And more and more of these users turn
to the World Wide Web and the Internet to place orders with suppliers
or to sell products or services to customers or to communicate with
clients.
The Internet market is growing at a tremendous pace. Over the past 2
years, sales generated through the web grew more than 5,000 percent. In
fact, in a recent Business Week article, electronic commerce sales are
estimated to reach $379 billion by the year 2002, pumping up the
Nation's gross domestic sales by $10 to $20 billion every year by 2002.
And I see it in my own State of Vermont. On my home page on the web,
I have put together a section called ``Cyber Selling In Vermont.'' It
is a step-by-step resource guide for exploring how you can have on-line
commerce and other business uses of the Internet. It has links to
businesses in Vermont that are already cyberselling.
As of today, this site includes links to web sites of more than 100
Vermont businesses doing business on the Internet. They range from the
Quill Bookstore in Manchester Center to Al's Snowmobile Parts Warehouse
in Newport.
For the past 3 years, I have held annual workshops on doing business
on the Internet in my home State. I have received a tremendous response
to these workshops from Vermont businesses of all sizes and customer
bases, from Main Street merchants to boutique entrepreneurs.
At my last Doing Business on the Internet Workshop in Vermont, we had
these small business owners from all over our State. They told how
successful they have been selling on the web. They had such Main Street
businesses as a bed and breakfast, or in one case a wool boutique, and
a real estate company. One example is Megan Smith of the Vermont Inn in
Killington. She attended one of my workshops. Now she is taking
reservations over the net, reservations not just from Vermont, but from
throughout the country. So cyberselling pays off for Vermonters.
Now Vermont businesses have an opportunity to take advantage of this
tremendous growth by selling their goods on line. I have tried to be a
missionary for this around our State, because I believe the Internet
commerce can help Vermonters ease some of the geographic barriers that
historically have limited our access to markets where our products can
thrive.
The World Wide Web and Internet businesses can sell their goods all
over the world in the blink of an eye, and they can do it any time of
the day or night.
As this electronic commerce continues to grow--for even a small State
like mine; we can see it all over the country--I hope we in Congress
can be leaders in developing tax policy that will nurture this new
market. I followed closely the Internet Tax Freedom Act since Senator
Wyden introduced it last summer. I want to commend the senior Senator
from Oregon for his leadership on cyber tax policy.
More than 30,000 cities and towns in the United States are able to
levy discriminatory sales on electronic commerce. Because of that, we
need this national bill to provide the stability necessary if this
electronic commerce is going to flourish.
We are not asking for a tax-free zone on the Internet. If sales taxes
and

[[Page S11856]]

other taxes would apply to traditional sales and services under State
or local law, then those taxes would also apply to Internet sales under
our bill. But the bill would outlaw taxes that are applied only to
Internet sales in a discriminatory manner.
We do not want somebody to kill these businesses before they even
begin because they think it is some way they can pluck the money out of
the pockets of those who are using the Internet. We should not allow
the future of electronic commerce--electronic commerce that can greatly
expand the markets of even our Main Street businesses--we should not
allow it to be crushed by the weight of multiple taxation. Without this
legislation, they would have faced multiple taxation, and a lot of
these Internet businesses now creating jobs, now flourishing, now
adding to the commerce of our States would have been wiped out of
business.
This legislation creates a temporary national commission to study and
recommend appropriate rules for international, Federal, State, and
local government taxation of transactions over the Internet. This also
will help us very, very much.
The commission would submit its findings and recommendations to
Congress within the next 18 months. With the help of this commission,
Congress should be able to put a tax framework in place to foster
electronic commerce and protect the rights of state and local
governments when the three-year moratorium ends.
During my time in the Senate, I always tried to protect the rights of
Vermont state and local legislators to craft their laws free from
interference from Washington. Thus, the imposition of a broad, open-
ended moratorium on state and local taxes relating to the Internet in
the original bill gave me pause. I certainly agreed with the goal of no
new state and local taxation of online commerce, but the means were
questionable.
I believe those questions have been fully answered by the changes
made to this legislation during its consideration in the Commerce and
Finance Committees.
I want to commend Senators Burns, Kerry, McCain, Moynihan and Roth
for working with Senator Wyden, the sponsor of the original bill, to
craft a substitute bill that protects the free flow of online commerce
while accommodating the rights of state and local governments.
Today there are more than 400,000 businesses selling their sales and
services on the World Wide Web around the world. This explosion in web
growth has led to thousands of new and exciting opportunities for
businesses, from Main Street to Wall Street. The Internet Tax Freedom
Act will ensure that these businesses, and many others, continue to
reap the rewards of electronic commerce.
Mr. President, I am proud to cosponsor the Internet Tax Freedom Act
to foster the growth of online commerce and urge my colleagues to
support its swift passage into law.
Mr. LIEBERMAN. Mr. President, I want to say how pleased I am that
this chamber has finally come to agreement on S. 442, the Internet Tax
Freedom Act. First, I would like to thank Senator Wyden for introducing
this bill and his perseverance to see this legislation through. I would
like to thank Chairman McCain for his management of this bill, and
Senator Dorgan for working so closely with Senator Wyden to arrive at a
compromise. I would like to thank Senator Gregg for his unwavering
insistence on what he believes is right. I would like to acknowledge
the efforts of Senator Bumpers and Senator Graham who come to this
issue from a different viewpoint but have tried to seek a common ground
in what has been a polarizing and difficult negotiation.
I truly believe the most important things accomplished by this bill
will be, first, to raise the visibility of the issue of taxation of the
Internet. Just having this debate in Congress has stimulated discussion
and thought about the future of electronic commerce and the Internet
throughout the country. Three states--Texas, South Carolina, and my
home State of Connecticut--came forward and said that they did not want
their States' taxes to be grandfathered into the tax moratorium, but
instead preferred to stop taxing the Internet. This debate has raised
the consciousness of public leaders as to the great benefits electronic
commerce holds for U.S. business to improve its productivity and reach
new customers, and even more importantly, the level playing field the
Internet provides for small businesses. At the same time, we have
become aware of the enormous problems faced by small businesses which
are suddenly, over the net, selling beyond their physical reach and the
uncertainties they face in the legal and tax environment in 30,000
taxing jurisdictions.
The second major benefit of this bill will be to slow down the
taxation of the Internet. The moratorium in S. 442, while
grandfathering in existing State taxes on Internet access, will prevent
new taxes from being added.
The third, and I consider the most important, major benefit of this
legislation will be the creation of a commission to draft model State
legislation creating uniform categories for these new Internet
companies and transactions that gives these firms some certainty as to
how they will be treated tax-wise in the different States. This is the
essence of the bill that Senator Gregg and myself introduced in March,
called NETFAIR, S. 1888--to remove the uncertainty under which
electronic commerce companies have had to operate in the United States
and bring some order into the present business climate. It is our
intent that this model State legislation would not preempt the States,
but would be adopted by the States, at their choice.
The Senate agreed to expand the duties of the commission beyond that
of drafting model State legislation to looking at the States'
collection of use taxes on all remote sales. This is a legitimate area
of study and of concern to the States and to their revenue base. In
opposing this amendment, I was merely voicing my concern that the
commission may become bogged down in a debate over the taxation of
catalog sales that I fear it will not be able to stay focused on the
Internet and accomplish the very useful purpose of helping create a
predictable legal environment for electronic commerce. It is my hope
that the commission will try to complete the draft State legislation
outlined in S. 442 first before turning to this larger debate.
At this point, I want to thank Senators Roth and Moynihan and the
rest of the Finance Committee members for adding the international
element to this bill. The Finance Committee reminded us to consider our
domestic policies toward the Internet in the context of the
international environment. Just as the Internet puts small companies on
an equal footing with large companies, it also is creating a new level
playing field internationally. Developing countries that have not yet
fully industrialized, and countries whose telephone penetration is only
a fraction of that in the United States, can leap frog entire stages of
technology and move straight into fiber optic and wireless technologies
that will carry video, sound, data, and voice.
A number of my colleagues and I have had an opportunity to speak with
John Chambers, the President and CEO of Cisco Systems, one of the major
suppliers of networking equipment at a breakfast last week. He knows
something about electronic commerce since his company accounted for
one-third of all electronic commerce last year. I was very impressed
when he said that, on his trip through Asia, the political leaders of
Singapore, Malaysia, Hong Kong and China wanted to hold substantive
one- to two-hour conversations with him because they understand the
power on the Internet and understand that information technology will
change, not just their country's economy, but the economy of the world.
They understand that those countries that embrace the information age
will prosper and those who don't will fall behind.
Once again, Mr. President, I want to thank my colleagues and their
staffs for the extraordinary effort they made to reach this point where
we can finally vote on this bill. Finally, I would like to thank
Laureen Daly of my staff who put in an enormous amount of work to
assure that Connecticut's constituents, businesses and government will
benefit from this legislation.
Mr. WARNER. Mr. President, I rise to restate my strong support for
the Internet Tax Freedom Act. I am proud to be a cosponsor of this
legislation

[[Page S11857]]

and pleased that with end the 105th Congress legislation that brings
fairness and equitable tax treatment to hundreds of Virginia Internet
and online companies.
It has been a difficult week, but we have succeeded reaching a
resolution on this most important issue. This moratorium is critical to
the development of an industry that has become a pillar of Virginia's,
and our Nation's, economy.
I will ask a resolution passed earlier this year expressing the sense
of the General Assembly of Virginia that the Internet should remain
free from State and local taxes.
Mr. President, I also wish to commend Governor Jim Gilmore. He has
been a tireless advocate and a true leader on this issue. He was one of
a handful of governors to recognize the potential of this industry and
the irreparable harm that could come to it at the hands of tens of
thousands of tax collectors across the Nation. He shares my view that
we will remain the leader in the information technology industry only
as long as we pursue policies of lower taxes and less regulation--
policies that have made Virginia such an attractive home to thousands
of high tech companies and their employees.

House Joint Resolution No. 36

Expressing the sense of the General Assembly of Virginia
that services which provide access to the international
network of computer systems (commonly known as the Internet)
and other related electronic communication services, as well
as data and software transmitted via such services, should
remain free from fees, assessments, or taxes imposed by the
Commonwealth or its political subdivisions.
Agreed to by the House of Delegates, February 17, 1998;
agreed to by the Senate, March 10, 1998.
Whereas, services which provide access to the international
network of computer systems (commonly known as the Internet)
and other related electronic communication services, as well
as data and software transmitted via such services, have
provided immeasurable social, educational, and economic
benefits to the citizens of Virginia, the United States, and
the world; and
Whereas, technological advancements made by and to the
Internet and other related electronic communication services,
as well as data and software transmitted via such services,
develop at an ever-increasing rate, both qualitatively and
quantitatively; and
Whereas, these advancements have been encouraged, in part,
by public policies which facilitate technological innovation,
research, and development; and
Whereas, companies which provide Internet access services
and other related electronic communication services are
making substantial capital investments in new plants and
equipment; and
Whereas, it has been estimated that consumers, businesses,
and others engaging in interstate and foreign commerce
through the Internet or other related electronic
communication services could be subject to more than 30,000
separate taxing jurisdictions in the United States alone; and
Whereas, multiple and excessive taxation places such
investment at risk and discourages increased investment to
provide such services, which, in turn, could put such
jurisdictions at a long-term social, educational, and
economic disadvantage; and
Whereas, the growth and development of electronic
communication services should be nurtured and encouraged by
appropriate state and federal policies; and
Whereas, the Commonwealth's exercise of its taxation and
regulatory powers in relation to electronic communication
services would likely impede the future viability and
enhancement of Internet access services and other electronic
communication services in the Commonwealth, which, in turn,
could restrict access to such services, as well as data and
software transmitted via such services, for all Virginians;
and
Whereas, previous rulings of departments of taxation or
revenue in several states have resulted in state taxes being
levied on Internet service providers or Internet-related
services, and have, in some cases, prompted action by those
states' legislatures to overturn such rulings; and
Whereas, a majority of the states that have addressed the
issue of taxing Internet-related services have chosen to
exercise restraint in taxing Internet service providers and
Internet-related services; and
Whereas, Virginia's existing tax code (Sec. 58.1-609.5)
exempts from retail sales and use tax purchases of services
where no tangible personal property is exchanged; and
Whereas, pursuant to Sec. 58.1-609.5, the Commissioner of
the Department of Taxation has promulgated regulations (Title
23 Virginia Administrative Code 10-210-4040) which provide
that charges for services generally are exempt from retail
sales and use tax, but that services provided in connection
with sales of tangible personal property are taxable; and
Whereas, in interpreting and applying Virginia's tax code
and regulations, the Commissioner has ruled that sales of
software via the Internet are not subject to Virginia's
retail sales and use tax (P.D. 97-405, October 2, 1997); and
Whereas, in further interpreting and applying Virginia's
tax code and regulations, the Commissioner has ruled that
providers of Internet access services and other electronic
communication services are not subject to Virginia's retail
sales and use tax (P.D. 97-425, October 21, 1997); and
Whereas, services which provide access to the Internet and
other related electronic communication services, as well as
data and software transmitted via such services, are not
tangible personal property and, therefore, should not be
subject to Virginia's retail sales and use tax: now,
therefore, be it
Resolved by the House of Delegates, the Senate concurring,
That Internet access services and other related electronic
communication services, as well as data and software
transmitted via such services, should remain free from fees,
assessments, or taxes imposed by the Commonwealth and its
political subdivisions; and, be it
Resolved further, That P.D. 97-405 (October 2, 1997), by
which the Commissioner ruled that sales of software via the
Internet are not subject to Virginia's retail sales and use
tax, correctly reflects the sense of the General Assembly and
the law of the Commonwealth regarding this issue; and, be it
Resolved further, That P.D. 97-425 (October 21, 1997), by
which the Commissioner ruled that providers of Internet
access services and other related electronic communication
services are not subject to Virginia's retail sales and use
tax, correctly reflects the sense of the General Assembly and
the law of the Commonwealth regarding this issue; and, be it
Resolved further, That, to the greatest extent possible,
future rulings of the Commissioner reflect the sense of the
General Assembly that Internet access services and other
related electronic communication services, as well as data
and software transmitted via such services, should remain
free from fees, assessments, or taxes imposed by the
Commonwealth and its political subdivisions; and, be it
Resolved finally, That the Clerk of the House of Delegates
transmit a copy of this resolution to the Commissioner of the
Department of Taxation that he may be apprised of the sense
of the General Assembly in this matter.
Mr. McCAIN. Mr. President, I ask unanimous consent that no further
amendments be in order to S. 442, the Senate proceed immediately to
third reading, and final passage then occur, without debate, and I
further ask that the final passage vote occur now, and that paragraph 4
of rule XII be waived.
And, Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Without objection, it is so ordered.
Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed for a third reading and was read
the third time.
The PRESIDING OFFICER. The bill having been read the third time, the
question is, Shall the bill, as amended, pass? The yeas and nays have
been ordered. The clerk will call the roll.
The legislative clerk called the roll.
Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) and the
Senator from South Carolina (Mr. Hollings) are necessarily absent.
The PRESIDING OFFICER. (Mr. Kyl). Are there any other Senators in the
Chamber desiring to vote?
The result was announced--yeas 96, nays 2, as follows:

[Rollcall Vote No. 308 Leg.]

YEAS--96

Abraham
Akaka
Allard
Ashcroft
Baucus
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bryan
Burns
Byrd
Campbell
Chafee
Cleland
Coats
Cochran
Collins
Conrad
Coverdell
Craig
D'Amato
Daschle
DeWine
Dodd
Domenici
Dorgan
Durbin
Enzi
Faircloth
Feingold
Feinstein
Ford
Frist
Graham
Gramm
Grams
Grassley
Gregg
Hagel
Harkin
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Inouye
Jeffords
Johnson
Kempthorne
Kennedy
Kerrey
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lott
Lugar
Mack
McCain
McConnell
Mikulski
Moseley-Braun
Moynihan
Murkowski
Murray
Nickles
Reed
Reid
Robb
Roberts
Rockefeller
Roth
Santorum
Sarbanes
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Torricelli
Warner
Wellstone
Wyden

NAYS--2

Bumpers
Gorton

[[Page S11858]]

NOT VOTING--2

Glenn
Hollings

The bill (S. 442), as amended was passed, as follows:

S. 442

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''.

TITLE I--MORATORIUM ON CERTAIN TAXES

SEC. 101. MORATORIUM.

(a) Moratorium.--No State or political subdivision thereof
shall impose any of the following taxes during the period
beginning on October 1, 1998, and ending 3 years after the
date of the enactment of this Act--
(1) taxes on Internet access, unless such tax was generally
imposed and actually enforced prior to October 1, 1998; and
(2) multiple or discriminatory taxes on electronic
commerce.
(b) Preservation of State and Local Taxing Authority.--
Except as provided in this section, nothing in this Act shall
be construed to modify, impair, or supersede, or authorize
the modification, impairment, or superseding of, any State or
local law pertaining to taxation that is otherwise
permissible by or under the Constitution of the United States
or other Federal law and in effect on the date of enactment
of this Act.
(c) Liabilities and Pending Cases.--Nothing in this Act
affects liability for taxes accrued and enforced before the
date of enactment of this Act, nor does this Act affect
ongoing litigation relating to such taxes.
(d) Definition of Generally Imposed and Actually
Enforced.--For purposes of this section, a tax has been
generally imposed and actually enforced prior to October 1,
1998, if, before that date, the tax was authorized by statute
and either--
(1) 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
(2) a State or political subdivision thereof generally
collected such tax on charges for Internet access.
(e) Exception to Moratorium.--
(1) In general.--Subsection (a) shall also not apply in the
case of any person or entity who in interstate or foreign
commerce is knowingly engaged in the business of selling or
transferring, by means of the World Wide Web, material that
is harmful to minors unless such person or entity requires
the use of a verified credit card, debit account, adult
access code, or adult personal identification number, or such
other procedures as the Federal Communications Commission may
prescribe, in order to restrict access to such material by
persons under 17 years of age.
(2) Scope of exception.--For purposes of paragraph (1), a
person shall not be considered to engaged in the business of
selling or transferring material by means of the World Wide
Web to the extent that the person is--
(A) a telecommunications carrier engaged in the provision
of a telecommunications service;
(B) a person engaged in the business of providing an
Internet access service;
(C) a person engaged in the business of providing an
Internet information location tool; or
(D) similarly engaged in the transmission, storage,
retrieval, hosting, formatting, or translation (or any
combination thereof) of a communication made by another
person, without selection or alteration of the communication.
(3) Definitions.--In this subsection:
(A) By means of the world wide web.--The term ``by means of
the World Wide Web'' means by placement of material in a
computer server-based file archive so that it is publicly
accessible, over the Internet, using hypertext transfer
protocol, file transfer protocol, or other similar protocols.
(B) Engaged in the business.--The term ``engaged in the
business'' means that the person who sells or transfers or
offers to sell or transfer, by means of the World Wide Web,
material that is harmful to minors devotes time, attention,
or labor to such activities, as a regular course of trade or
business, with the objective of earning a profit, although it
is not necessary that the person make a profit or that the
selling or transferring or offering to sell or transfer such
material be the person's sole or principal business or source
of income.
(C) Internet.--The term ``Internet'' means collectively the
myriad of computer and telecommunications facilities,
including equipment and operating software, which comprise
the interconnected world-wide network of networks that employ
the Transmission Control Protocol/Internet Protocol, or any
predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio.
(D) Internet access service.--The term ``Internet access
service'' means a service that enables users to access
content, information, electronic mail, or other services
offered over the Internet and may also include access to
proprietary content, information, and other services as part
of a package of services offered to consumers. Such term does
not include telecommunications services.
(E) Internet information location tool.--The term
``Internet information location tool'' means a service that
refers or links users to an online location on the World Wide
Web. Such term includes directories, indices, references,
pointers, and hypertext links.
(F) Material that is harmful to minors.--The term
``material that is harmful to minors'' means any
communication, picture, image, graphic image file, article,
recording, writing, or other matter of any kind that--
(i) taken as a whole and with respect to minors, appeals to
a prurient interest in nudity, sex, or excretion;
(ii) depicts, describes, or represents, in a patently
offensive way with respect to what is suitable for minors, an
actual or simulated sexual act or sexual contact, actual or
simulated normal or perverted sexual acts, or a lewd
exhibition of the genitals; and
(iii) taken as a whole, lacks serious literary, artistic,
political, or scientific value for minors.
(G) Sexual act; sexual contact.--The terms ``sexual act''
and ``sexual contact'' have the meanings given such terms in
section 2246 of title 18, United States Code.
(H) Telecommunications carrier; telecommunications
service.--The terms ``telecommunications carrier'' and
``telecommunications service'' have the meanings given such
terms in section 3 of the Communications Act of 1934 (47
U.S.C. 153).
(f) Additional Exception to Moratorium.--
(1) In general.--Subsection (a) shall also not apply with
respect to an Internet access provider, unless, at the time
of entering into an agreement with a customer for the
provision of Internet access services, such provider offers
such customer (either for a fee or at no charge) screening
software that is designed to permit the customer to limit
access to material on the Internet that is harmful to minors.
(2) Definitions.--In this subsection:
(A) Internet access provider.--The term `Internet access
provider' means a person engaged in the business of providing
a computer and communications facility through which a
customer may obtain access to the Internet, but does not
include a common carrier to the extent that it provides only
telecommunications services.
(B) Internet access services.--The term `Internet access
services' means the provision of computer and communications
services through which a customer using a computer and a
modem or other communications device may obtain access to the
Internet, but does not include telecommunications services
provided by a common carrier.
(C) Screening software.--The term ``screening software''
means software that is designed to permit a person to limit
access to material on the Internet that is harmful to minors.
(3) Applicability.--Paragraph (1) shall apply to agreements
for the provision of Internet access services entered into on
or after the date that is 6 months after the date of
enactment of this Act.

SEC. 102. ADVISORY COMMISSION ON ELECTRONIC COMMERCE.

(a) Establishment of Commission.--There is established a
commission to be known as the Advisory Commission on
Electronic Commerce (in this title referred to as the
``Commission''). The Commission shall--
(1) be composed of 19 members appointed in accordance with
subsection (b), including the chairperson who shall be
selected by the members of the Commission from among
themselves; and
(2) conduct its business in accordance with the provisions
of this title.
(b) Membership.--
(1) In general.--The Commissioners shall serve for the life
of the Commission. The membership of the Commission shall be
as follows:
(A) 3 representatives from the Federal Government,
comprised of the Secretary of Commerce, the Secretary of the
Treasury, and the United States Trade Representative (or
their respective delegates).
(B) 8 representatives from State and local governments (one
such representative shall be from a State or local government
that does not impose a sales tax and one representative shall
be from a State that does not impose an income tax).
(C) 8 representatives of the electronic commerce industry
(including small business), telecommunications carriers,
local retail businesses, and consumer groups, comprised of--
(i) 5 individuals appointed by the Majority Leader of the
Senate;
(ii) 3 individuals appointed by the Minority Leader of the
Senate;
(iii) 5 individuals appointed by the Speaker of the House
of Representatives; and
(iv) 3 individuals appointed by the Minority Leader of the
House of Representatives.
(2) Appointments.--Appointments to the Commission shall be
made not later than 45 days after the date of the enactment
of this Act. The chairperson shall be selected not later than
60 days after the date of the enactment of this Act.
(3) Vacancies.--Any vacancy in the Commission shall not
affect its powers, but shall be filled in the same manner as
the original appointment.
(c) Acceptance of Gifts and Grants.--The Commission may
accept, use, and dispose of gifts or grants of services or
property, both real and personal, for purposes of

[[Page S11859]]

aiding or facilitating the work of the Commission. Gifts or
grants not used at the expiration of the Commission shall be
returned to the donor or grantor.
(d) Other Resources.--The Commission shall have reasonable
access to materials, resources, data, and other information
from the Department of Justice, the Department of Commerce,
the Department of State, the Department of the Treasury, and
the Office of the United States Trade Representative. The
Commission shall also have reasonable access to use the
facilities of any such Department or Office for purposes of
conducting meetings.
(e) Sunset.--The Commission shall terminate 18 months after
the date of the enactment of this Act.
(f) Rules of the Commission.--
(1) Quorum.--Nine members of the Commission shall
constitute a quorum for conducting the business of the
Commission.
(2) Meetings.--Any meetings held by the Commission shall be
duly noticed at least 14 days in advance and shall be open to
the public.
(3) Opportunities to testify.--The Commission shall provide
opportunities for representatives of the general public,
taxpayer groups, consumer groups, and State and local
government officials to testify.
(4) Additional rules.--The Commission may adopt other rules
as needed.
(g) Duties of the Commission.--
(1) In general.--The Commission shall conduct a thorough
study of Federal, State and local, and international taxation
and tariff treatment of transactions using the Internet and
Internet access and other comparable intrastate, interstate
or international sales activities.
(2) Issues to be studied.--The Commission may include in
the study under subsection (a)--
(A) an examination of--
(i) barriers imposed in foreign markets on United States
providers of property, goods, services, or information
engaged in electronic commerce and on United States providers
of telecommunications services; and
(ii) how the imposition of such barriers will affect United
States consumers, the competitiveness of United States
citizens providing property, goods, services, or information
in foreign markets, and the growth and maturing of the
Internet;
(B) an examination of the collection and administration of
consumption taxes on electronic commerce in other countries
and the United States, and the impact of such collection on
the global economy, including an examination of the
relationship between the collection and administration of
such taxes when the transaction uses the Internet and when it
does not;
(C) an examination of the impact of the Internet and
Internet access (particularly voice transmission) on the
revenue base for taxes imposed under section 4251 of the
Internal Revenue Code of 1986;
(D) an examination of model State legislation that--
(i) would provide uniform definitions of categories of
property, goods, service, or information subject to or exempt
from sales and use taxes; and
(ii) would ensure that Internet access services, online
services, and communications and transactions using the
Internet, Internet access service, or online services would
be treated in a tax and technologically neutral manner
relative to other forms of remote sales;
(E) an examination of the effects of taxation, including
the absence of taxation, on all interstate sales
transactions, including transactions using the Internet, on
retail businesses and on State and local governments, which
examination may include a review of the efforts of State and
local governments to collect sales and use taxes owed on in-
State purchases from out-of-State sellers; and
(F) the examination of ways to simplify Federal and State
and local taxes imposed on the provision of
telecommunications services.
(3) Effect on the communications act of 1934.--Nothing in
this section shall include an examination of any fees or
charges imposed by the Federal Communications Commission or
States related to--
(A) obligations under the Communications Act of 1934 (47
U.S.C. 151 et seq.); or
(B) the implementation of the Telecommunications Act of
1996 (or of amendments made by that Act).
(h) National Tax Association Communications and Electronic
Commerce Tax Project.--The Commission shall, to the extent
possible, ensure that its work does not undermine the efforts
of the National Tax Association Communications and Electronic
Commerce Tax Project.

SEC. 103. REPORT.

Not later than 18 months after the date of the enactment of
this Act, the Commission shall transmit to Congress for its
consideration a report reflecting the results, including such
legislative recommendations as required to address the
findings of the Commission's study under this title. Any
recommendation agreed to by the Commission shall be tax and
technologically neutral and apply to all forms of remote
commerce. No finding or recommendation shall be included in
the report unless agreed to by at least two-thirds of the
members of the Commission serving at the time the finding or
recommendation is made.

SEC. 104. DEFINITIONS.

For the purposes of this title:
(1) Bit tax.--The term ``bit tax'' means any tax on
electronic commerce expressly imposed on or measured by the
volume of digital information transmitted electronically, or
the volume of digital information per unit of time
transmitted electronically, but does not include taxes
imposed on the provision of telecommunications services.
(2) Discriminatory tax.--The term ``discriminatory tax''
means--
(A) any tax imposed by a State or political subdivision
thereof on electronic commerce that--
(i) is not generally imposed and legally collectible by
such State or such political subdivision on transactions
involving similar property, goods, services, or information
accomplished through other means;
(ii) is not generally imposed and legally collectible at
the same rate by such State or such political subdivision on
transactions involving similar property, goods, services, or
information accomplished through other means, unless the rate
is lower as part of a phase-out of the tax over not more than
a 5-year period;
(iii) imposes an obligation to collect or pay the tax on a
different person or entity than in the case of transactions
involving similar property, goods, services, or information
accomplished through other means;
(iv) establishes a classification of Internet access
service providers or online service providers for purposes of
establishing a higher tax rate to be imposed on such
providers than the tax rate generally applied to providers of
similar information services delivered through other means;
or
(B) any tax imposed by a State or political subdivision
thereof, if--
(i) except with respect to a tax (on Internet access) that
was generally imposed and actually enforced prior to October
1, 1998, the sole ability to access a site on a remote
seller's out-of-State computer server is considered a factor
in determining a remote seller's tax collection obligation;
or
(ii) a provider of Internet access service or online
services is deemed to be the agent of a remote seller for
determining tax collection obligations solely as a result
of--

(I) the display of a remote seller's information or content
on the out-of-State computer server of a provider of Internet
access service or online services; or
(II) the processing of orders through the out-of-State
computer server of a provider of Internet access service or
online services.

(3) Electronic commerce.--The term ``electronic commerce''
means any transaction conducted over the Internet or through
Internet access, comprising the sale, lease, license, offer,
or delivery of property, goods, services, or information,
whether or not for consideration, and includes the provision
of Internet access.
(4) Internet.--The term ``Internet'' means collectively the
myriad of computer and telecommunications facilities,
including equipment and operating software, which comprise
the interconnected world-wide network of networks that employ
the Transmission Control Protocol/Internet Protocol, or any
predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio.
(5) Internet access.--The term ``Internet access'' means a
service that enables users to access content, information,
electronic mail, or other services offered over the Internet,
and may also include access to proprietary content,
information, and other services as part of a package of
services offered to users. Such term does not include
telecommunications services.
(6) Multiple tax.--
(A) In general.--The term ``multiple tax'' means any tax
that is imposed by one State or political subdivision thereof
on the same or essentially the same electronic commerce that
is also subject to another tax imposed by another State or
political subdivision thereof (whether or not at the same
rate or on the same basis), without a credit (for example, a
resale exemption certificate) for taxes paid in other
jurisdictions.
(B) Exception.--Such term shall not include a sales or use
tax imposed by a State and 1 or more political subdivisions
thereof on the same electronic commerce or a tax on persons
engaged in electronic commerce which also may have been
subject to a sales or use tax thereon.
(C) Sales or use tax.--For purposes of subparagraph (B),
the term ``sales or use tax'' means a tax that is imposed on
or incident to the sale, purchase, storage, consumption,
distribution, or other use of tangible personal property or
services as may be defined by laws imposing such tax and
which is measured by the amount of the sales price or other
charge for such property or service.
(7) State.--The term ``State'' means any of the several
States, the District of Columbia, or any commonwealth,
territory, or possession of the United States.
(8) Tax.--
(A) In general.-- The term ``tax'' means--
(i) any charge imposed by any governmental entity for the
purpose of generating revenues for governmental purposes, and
is not a fee imposed for a specific privilege, service, or
benefit conferred; or
(ii) the imposition on a seller of an obligation to collect
and to remit to a governmental entity any sales or use tax
imposed on a buyer by a governmental entity.
(B) Exception.--Such term does not include any franchise
fee or similar fee imposed by a State or local franchising
authority, pursuant to section 622 or 653 of the

[[Page S11860]]

Communications Act of 1934 (47 U.S.C. 542, 573), or any other
fee related to obligations or telecommunications carriers
under the Communications Act of 1934 (47 U.S.C. 151 et seq.).
(9) Telecommunications service.--The term
``telecommunications service'' has the meaning given such
term in section 3(46) of the Communications Act of 1934 (47
U.S.C. 153(46)) and includes communications services (as
defined in section 4251 of the Internal Revenue Code of
1986).
(10) Tax on internet access.--The term ``tax on Internet
access'' means a tax on Internet access, including the
enforcement or application of any new or preexisting tax on
the sale or use of Internet services unless such tax was
generally imposed and actually enforced prior to October 1,
1998.

TITLE II--OTHER PROVISIONS

SEC. 201. DECLARATION THAT INTERNET SHOULD BE FREE OF NEW
FEDERAL TAXES.

It is the sense of Congress that no new Federal taxes
similar to the taxes described in section 101(a) should be
enacted with respect to the Internet and Internet access
during the moratorium provided in such section.

SEC. 202. NATIONAL TRADE ESTIMATE.

Section 181 of the Trade Act of 1974 (19 U.S.C. 2241) is
amended--
(1) in subsection (a)(1)--
(A) in subparagraph (A)--
(i) by striking ``and'' at the end of clause (i);
(ii) by inserting ``and'' at the end of clause (ii); and
(iii) by inserting after clause (ii) the following new
clause:
``(iii) United States electronic commerce,''; and
(B) in subparagraph (C)--
(i) by striking ``and'' at the end of clause (i);
(ii) by inserting ``and'' at the end of clause (ii);
(iii) by inserting after clause (ii) the following new
clause:
``(iii) the value of additional United States electronic
commerce,''; and
(iv) by inserting ``or transacted with,'' after ``or
invested in'';
(2) in subsection (a)(2)(E)--
(A) by striking ``and'' at the end of clause (i);
(B) by inserting ``and'' at the end of clause (ii); and
(C) by inserting after clause (ii) the following new
clause:
``(iii) the value of electronic commerce transacted
with,''; and
(3) by adding at the end the following new subsection:
``(d) Electronic Commerce.--For purposes of this section,
the term `electronic commerce' has the meaning given that
term in section 104(3) of the Internet Tax Freedom Act.''.

SEC. 203. DECLARATION THAT THE INTERNET SHOULD BE FREE OF
FOREIGN TARIFFS, TRADE BARRIERS, AND OTHER
RESTRICTIONS.

(a) In General.-- It is the sense of Congress that the
President should seek bilateral, regional, and multilateral
agreements to remove barriers to global electronic commerce
through the World Trade Organization, the Organization for
Economic Cooperation and Development, the Trans-Atlantic
Economic Partnership, the Asia Pacific Economic Cooperation
forum, the Free Trade Area of the America, the North American
Free Trade Agreement, and other appropriate venues.
(b) Negotiating Objectives.--The negotiating objectives of
the United States shall be--
(1) to assure that electronic commerce is free from--
(A) tariff and nontariff barriers;
(B) burdensome and discriminatory regulation and standards;
and
(C) discriminatory taxation; and
(2) to accelerate the growth of electronic commerce by
expanding market access opportunities for--
(A) the development of telecommunications infrastructure;
(B) the procurement of telecommunications equipment;
(C) the provision of Internet access and telecommunications
services; and
(D) the exchange of goods, services, and digitalized
information.
(c) Electronic Commerce.--For purposes of this section, the
term ``electronic commerce'' has the meaning given that term
in section 104(3).

SEC. 204. NO EXPANSION OF TAX AUTHORITY.

Nothing in this Act shall be construed to expand the duty
of any person to collect or pay taxes beyond that which
existed immediately before the date of the enactment of this
Act.

SEC. 205. PRESERVATION OF AUTHORITY.

Nothing in this Act shall limit or otherwise affect the
implementation of the Telecommunications Act of 1996 (Public
Law 104-104) or the amendments made by such Act.

SEC. 206. SEVERABILITY.

If any provision of this Act, or any amendment made by this
Act, or the application of that provision to any person or
circumstance, is held by a court of competent jurisdiction to
violate any provision of the Constitution of the United
States, then the other provisions of that section, and the
application of that provision to other persons and
circumstances, shall not be affected.

TITLE III--GOVERNMENT PAPERWORK ELIMINATION ACT

SEC. 301. SHORT TITLE.

This title may be cited as the ``Government Paperwork
Elimination Act''.

SEC. 302. AUTHORITY OF OMB TO PROVIDE FOR ACQUISITION AND USE
OF ALTERNATIVE INFORMATION TECHNOLOGIES BY
EXECUTIVE AGENCIES.

Section 3504(a)(1)(B)(vi) of title 44, United States Code,
is amended to read as follows:
``(vi) the acquisition and use of information technology,
including alternative information technologies that provide
for electronic submission, maintenance, or disclosure of
information as a substitute for paper and for the use and
acceptance of electronic signatures.''.

SEC. 303. PROCEDURES FOR USE AND ACCEPTANCE OF ELECTRONIC
SIGNATURES BY EXECUTIVE AGENCIES.

(a) In General.--In order to fulfill the responsibility to
administer the functions assigned under chapter 35 of title
44, United States Code, the provisions of the Clinger-Cohen
Act of 1996 (divisions D and E of Public Law 104-106) and the
amendments made by that Act, and the provisions of this
title, the Director of the Office of Management and Budget
shall, in consultation with the National Telecommunications
and Information Administration and not later than 18 months
after the date of enactment of this Act, develop procedures
for the use and acceptance of electronic signatures by
Executive agencies.
(b) Requirements for Procedures.--(1) The procedures
developed under subsection (a)--
(A) shall be compatible with standards and technology for
electronic signatures that are generally used in commerce and
industry and by State governments;
(B) may not inappropriately favor one industry or
technology;
(C) shall ensure that electronic signatures are as reliable
as is appropriate for the purpose in question and keep intact
the information submitted;
(D) shall provide for the electronic acknowledgment of
electronic forms that are successfully submitted; and
(E) shall, to the extent feasible and appropriate, require
an Executive agency that anticipates receipt by electronic
means of 50,000 or more submittals of a particular form to
take all steps necessary to ensure that multiple methods of
electronic signatures are available for the submittal of such
form.
(2) The Director shall ensure the compatibility of the
procedures under paragraph (1)(A) in consultation with
appropriate private bodies and State government entities that
set standards for the use and acceptance of electronic
signatures.

SEC. 304. DEADLINE FOR IMPLEMENTATION BY EXECUTIVE AGENCIES
OF PROCEDURES FOR USE AND ACCEPTANCE OF
ELECTRONIC SIGNATURES.

In order to fulfill the responsibility to administer the
functions assigned under chapter 35 of title 44, United
States Code, the provisions of the Clinger-Cohen Act of 1996
(divisions D and E of Public Law 104-106) and the amendments
made by that Act, and the provisions of this title, the
Director of the Office of Management and Budget shall ensure
that, commencing not later than five years after the date of
enactment of this Act, Executive agencies provide--
(1) for the option of the electronic maintenance,
submission, or disclosure of information, when practicable as
a substitute for paper; and
(2) for the use and acceptance of electronic signatures,
when practicable.

SEC. 305. ELECTRONIC STORAGE AND FILING OF EMPLOYMENT FORMS.

In order to fulfill the responsibility to administer the
functions assigned under chapter 35 of title 44, United
States Code, the provisions of the Clinger-Cohen Act of 1996
(divisions D and E of Public Law 104-106) and the amendments
made by that Act, and the provisions of this title, the
Director of the Office of Management and Budget shall, not
later than 18 months after the date of enactment of this Act,
develop procedures to permit private employers to store and
file electronically with Executive agencies forms containing
information pertaining to the employees of such employers.

SEC. 306. STUDY ON USE OF ELECTRONIC SIGNATURES.

(a) Ongoing Study Required.--In order to fulfill the
responsibility to administer the functions assigned under
chapter 35 of title 44, United States Code, the provisions of
the Clinger-Cohen Act of 1996 (divisions D and E of Public
Law 104-106) and the amendments made by that Act, and the
provisions of this title, the Director of the Office of
Management and Budget shall, in cooperation with the National
Telecommunications and Information Administration, conduct an
ongoing study of the use of electronic signatures under this
title on--
(1) paperwork reduction and electronic commerce;
(2) individual privacy; and
(3) the security and authenticity of transactions.
(b) Reports.--The Director shall submit to Congress on a
periodic basis a report describing the results of the study
carried out under subsection (a).

[[Page S11861]]

SEC. 307. ENFORCEABILITY AND LEGAL EFFECT OF ELECTRONIC
RECORDS.

Electronic records submitted or maintained in accordance
with procedures developed under this title, or electronic
signatures or other forms of electronic authentication used
in accordance with such procedures, shall not be denied legal
effect, validity, or enforceability because such records are
in electronic form.

SEC. 308. DISCLOSURE OF INFORMATION.

Except as provided by law, information collected in the
provision of electronic signature services for communications
with an executive agency, as provided by this title, shall
only be used or disclosed by persons who obtain, collect, or
maintain such information as a business or government
practice, for the purpose of facilitating such
communications, or with the prior affirmative consent of the
person about whom the information pertains.

SEC. 309. APPLICATION WITH INTERNAL REVENUE LAWS.

No provision of this title shall apply to the Department of
the Treasury or the Internal Revenue Service to the extent
that such provision--
(1) involves the administration of the internal revenue
laws; or
(2) conflicts with any provision of the Internal Revenue
Service Restructuring and Reform Act of 1998 or the Internal
Revenue Code of 1986.

SEC. 310. DEFINITIONS.

For purposes of this title:
(1) Electronic signature.--The term ``electronic
signature'' means a method of signing an electronic message
that--
(A) identifies and authenticates a particular person as the
source of the electronic message; and
(B) indicates such person's approval of the information
contained in the electronic message.
(2) Executive agency.--The term ``Executive agency'' has
the meaning given that term in section 105 of title 5, United
States Code.

TITLE IV--CHILDREN'S ONLINE PRIVACY PROTECTION

SEC. 401. SHORT TITLE.

This title may be cited as the ``Children's Online Privacy
Protection Act of 1998''.

SEC. 402. DEFINITIONS.

In this title:
(1) Child.--The term ``child'' means an individual under
the age of 13.
(2) Operator.--The term ``operator''--
(A) means any person who operates a website located on the
Internet or an online service and who collects or maintains
personal information from or about the users of or visitors
to such website or online service, or on whose behalf such
information is collected or maintained, where such website or
online service is operated for commercial purposes, including
any person offering products or services for sale through
that website or online service, involving commerce--
(i) among the several States or with 1 or more foreign
nations;
(ii) in any territory of the United States or in the
District of Columbia, or between any such territory and--

(I) another such territory; or
(II) any State or foreign nation; or

(iii) between the District of Columbia and any State,
territory, or foreign nation; but
(B) does not include any nonprofit entity that would
otherwise be exempt from coverage under section 5 of the
Federal Trade Commission Act (15 U.S.C. 45).
(3) Commission.--The term ``Commission'' means the Federal
Trade Commission.
(4) Disclosure.--The term ``disclosure'' means, with
respect to personal information--
(A) the release of personal information collected from a
child in identifiable form by an operator for any purpose,
except where such information is provided to a person other
than the operator who provides support for the internal
operations of the website and does not disclose or use that
information for any other purpose; and
(B) making personal information collected from a child by a
website or online service directed to children or with actual
knowledge that such information was collected from a child,
publicly available in identifiable form, by any means
including by a public posting, through the Internet, or
through--
(i) a home page of a website;
(ii) a pen pal service;
(iii) an electronic mail service;
(iv) a message board; or
(v) a chat room.
(5) Federal agency.--The term ``Federal agency'' means an
agency, as that term is defined in section 551(1) of title 5,
United States Code.
(6) Internet.--The term ``Internet'' means collectively the
myriad of computer and telecommunications facilities,
including equipment and operating software, which comprise
the interconnected world-wide network of networks that employ
the Transmission Control Protocol/Internet Protocol, or any
predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio.
(7) Parent.--The term ``parent'' includes a legal guardian.
(8) Personal information.--The term ``personal
information'' means individually identifiable information
about an individual collected online, including--
(A) a first and last name;
(B) a home or other physical address including street name
and name of a city or town;
(C) an e-mail address;
(D) a telephone number;
(E) a Social Security number;
(F) any other identifier that the Commission determines
permits the physical or online contacting of a specific
individual; or
(G) information concerning the child or the parents of that
child that the website collects online from the child and
combines with an identifier described in this paragraph.
(9) Verifiable parental consent.--The term ``verifiable
parental consent'' means any reasonable effort (taking into
consideration available technology), including a request for
authorization for future collection, use, and disclosure
described in the notice, to ensure that a parent of a child
receives notice of the operator's personal information
collection, use, and disclosure practices, and authorizes the
collection, use, and disclosure, as applicable, of personal
information and the subsequent use of that information before
that information is collected from that child.
(10) Website or online service directed to children.--
(A) In general.--The term ``website or online service
directed to children'' means--
(i) a commercial website or online service that is targeted
to children; or
(ii) that portion of a commercial website or online service
that is targeted to children.
(B) Limitation.--A commercial website or online service, or
a portion of a commercial website or online service, shall
not be deemed directed to children solely for referring or
linking to a commercial website or online service directed to
children by using information location tools, including a
directory, index, reference, pointer, or hypertext link.
(11) Person.--The term ``person'' means any individual,
partnership, corporation, trust, estate, cooperative,
association, or other entity.
(12) Online contact information.--The term ``online contact
information'' means an e-mail address or another
substantially similar identifier that permits direct contact
with a person online.

SEC. 403. REGULATION OF UNFAIR AND DECEPTIVE ACTS AND
PRACTICES IN CONNECTION WITH THE COLLECTION AND
USE OF PERSONAL INFORMATION FROM AND ABOUT
CHILDREN ON THE INTERNET.

(a) Acts Prohibited.--
(1) In general.--It is unlawful for an operator of a
website or online service directed to children, or any
operator that has actual knowledge that it is collecting
personal information from a child, to collect personal
information from a child in a manner that violates the
regulations prescribed under subsection (b).
(2) Disclosure to parent protected.--Notwithstanding
paragraph (1), neither an operator of such a website or
online service nor the operator's agent shall be held to be
liable under any Federal or State law for any disclosure made
in good faith and following reasonable procedures in
responding to a request for disclosure of personal
information under subsection (b)(1)(B)(iii) to the parent of
a child.
(b) Regulations.--
(1) In general.--Not later than 1 year after the date of
the enactment of this Act, the Commission shall promulgate
under section 553 of title 5, United States Code, regulations
that--
(A) require the operator of any website or online service
directed to children that collects personal information from
children or the operator of a website or online service that
has actual knowledge that it is collecting personal
information from a child--
(i) to provide notice on the website of what information is
collected from children by the operator, how the operator
uses such information, and the operator's disclosure
practices for such information; and
(ii) to obtain verifiable parental consent for the
collection, use, or disclosure of personal information from
children;
(B) require the operator to provide, upon request of a
parent under this subparagraph whose child has provided
personal information to that website or online service, upon
proper identification of that parent, to such parent--
(i) a description of the specific types of personal
information collected from the child by that operator;
(ii) the opportunity at any time to refuse to permit the
operator's further use or maintenance in retrievable form, or
future online collection, of personal information from that
child; and
(iii) notwithstanding any other provision of law, a means
that is reasonable under the circumstances for the parent to
obtain any personal information collected from that child;
(C) prohibit conditioning a child's participation in a
game, the offering of a prize, or another activity on the
child disclosing more personal information than is reasonably
necessary to participate in such activity; and
(D) require the operator of such a website or online
service to establish and maintain reasonable procedures to
protect the confidentiality, security, and integrity of
personal information collected from children.
(2) When consent not required.--The regulations shall
provide that verifiable parental consent under paragraph
(1)(A)(ii) is not required in the case of--

[[Page S11862]]

(A) online contact information collected from a child that
is used only to respond directly on a one-time basis to a
specific request from the child and is not used to recontact
the child and is not maintained in retrievable form by the
operator;
(B) a request for the name or online contact information of
a parent or child that is used for the sole purpose of
obtaining parental consent or providing notice under this
section and where such information is not maintained in
retrievable form by the operator if parental consent is not
obtained after a reasonable time;
(C) online contact information collected from a child that
is used only to respond more than once directly to a specific
request from the child and is not used to recontact the child
beyond the scope of that request--
(i) if, before any additional response after the initial
response to the child, the operator uses reasonable efforts
to provide a parent notice of the online contact information
collected from the child, the purposes for which it is to be
used, and an opportunity for the parent to request that the
operator make no further use of the information and that it
not be maintained in retrievable form; or
(ii) without notice to the parent in such circumstances as
the Commission may determine are appropriate, taking into
consideration the benefits to the child of access to
information and services, and risks to the security and
privacy of the child, in regulations promulgated under this
subsection;
(D) the name of the child and online contact information
(to the extent reasonably necessary to protect the safety of
a child participant on the site)--
(i) used only for the purpose of protecting such safety;
(ii) not used to recontact the child or for any other
purpose; and
(iii) not disclosed on the site,

if the operator uses reasonable efforts to provide a parent
notice of the name and online contact information collected
from the child, the purposes for which it is to be used, and
an opportunity for the parent to request that the operator
make no further use of the information and that it not be
maintained in retrievable form; or
(E) the collection, use, or dissemination of such
information by the operator of such a website or online
service necessary--
(i) to protect the security or integrity of its website;
(ii) to take precautions against liability;
(iii) to respond to judicial process; or
(iv) to the extent permitted under other provisions of law,
to provide information to law enforcement agencies or for an
investigation on a matter related to public safety.
(3) Termination of service.--The regulations shall permit
the operator of a website or an online service to terminate
service provided to a child whose parent has refused, under
the regulations prescribed under paragraph (1)(B)(ii), to
permit the operator's further use or maintenance in
retrievable form, or future online collection, of personal
information from that child.
(c) Enforcement.--Subject to sections 404 and 406, a
violation of a regulation prescribed under subsection (a)
shall be treated as a violation of a rule defining an unfair
or deceptive act or practice prescribed under section
18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C.
57a(a)(1)(B)).
(d) Inconsistent State Law.--No State or local government
may impose any liability for commercial activities or actions
by operators in interstate or foreign commerce in connection
with an activity or action described in this title that is
inconsistent with the treatment of those activities or
actions under this section.

SEC. 404. SAFE HARBORS.

(a) Guidelines.--An operator may satisfy the requirements
of regulations issued under section 403(b) by following a set
of self-regulatory guidelines, issued by representatives of
the marketing or online industries, or by other persons,
approved under subsection (b).
(b) Incentives.--
(1) Self-regulatory incentives.--In prescribing regulations
under section 403, the Commission shall provide incentives
for self-regulation by operators to implement the protections
afforded children under the regulatory requirements described
in subsection (b) of that section.
(2) Deemed compliance.--Such incentives shall include
provisions for ensuring that a person will be deemed to be in
compliance with the requirements of the regulations under
section 403 if that person complies with guidelines that,
after notice and comment, are approved by the Commission upon
making a determination that the guidelines meet the
requirements of the regulations issued under section 403.
(3) Expedited response to requests.--The Commission shall
act upon requests for safe harbor treatment within 180 days
of the filing of the request, and shall set forth in writing
its conclusions with regard to such requests.
(c) Appeals.--Final action by the Commission on a request
for approval of guidelines, or the failure to act within 180
days on a request for approval of guidelines, submitted under
subsection (b) may be appealed to a district court of the
United States of appropriate jurisdiction as provided for in
section 706 of title 5, United States Code.

SEC. 405. ACTIONS BY STATES.

(a) In General.--
(1) Civil actions.--In any case in which the attorney
general of a State has reason to believe that an interest of
the residents of that State has been or is threatened or
adversely affected by the engagement of any person in a
practice that violates any regulation of the Commission
prescribed under section 403(b), the State, as parens
patriae, may bring a civil action on behalf of the residents
of the State in a district court of the United States of
appropriate jurisdiction to--
(A) enjoin that practice;
(B) enforce compliance with the regulation;
(C) obtain damage, restitution, or other compensation on
behalf of residents of the State; or
(D) obtain such other relief as the court may consider to
be appropriate.
(2) Notice.--
(A) In general.--Before filing an action under paragraph
(1), the attorney general of the State involved shall provide
to the Commission--
(i) written notice of that action; and
(ii) a copy of the complaint for that action.
(B) Exemption.--
(i) In general.--Subparagraph (A) shall not apply with
respect to the filing of an action by an attorney general of
a State under this subsection, if the attorney general
determines that it is not feasible to provide the notice
described in that subparagraph before the filing of the
action.
(ii) Notification.--In an action described in clause (i),
the attorney general of a State shall provide notice and a
copy of the complaint to the Commission at the same time as
the attorney general files the action.
(b) Intervention.--
(1) In general.--On receiving notice under subsection
(a)(2), the Commission shall have the right to intervene in
the action that is the subject of the notice.
(2) Effect of intervention.--If the Commission intervenes
in an action under subsection (a), it shall have the right--
(A) to be heard with respect to any matter that arises in
that action; and
(B) to file a petition for appeal.
(3) Amicus curiae.--Upon application to the court, a person
whose self-regulatory guidelines have been approved by the
Commission and are relied upon as a defense by any defendant
to a proceeding under this section may file amicus curiae in
that proceeding.
(c) Construction.--For purposes of bringing any civil
action under subsection (a), nothing in this title shall be
construed to prevent an attorney general of a State from
exercising the powers conferred on the attorney general by
the laws of that State to--
(1) conduct investigations;
(2) administer oaths or affirmations; or
(3) compel the attendance of witnesses or the production of
documentary and other evidence.
(d) Actions by the Commission.--In any case in which an
action is instituted by or on behalf of the Commission for
violation of any regulation prescribed under section 403, no
State may, during the pendency of that action, institute an
action under subsection (a) against any defendant named in
the complaint in that action for violation of that
regulation.
(e) Venue; Service of Process.--
(1) Venue.--Any action brought under subsection (a) may be
brought in the district court of the United States that meets
applicable requirements relating to venue under section 1391
of title 28, United States Code.
(2) Service of process.--In an action brought under
subsection (a), process may be served in any district in
which the defendant--
(A) is an inhabitant; or
(B) may be found.

SEC. 406. ADMINISTRATION AND APPLICABILITY OF ACT.

(a) In General.--Except as otherwise provided, this title
shall be enforced by the Commission under the Federal Trade
Commission Act (15 U.S.C. 41 et seq.).
(b) Provisions.--Compliance with the requirements imposed
under this title shall be enforced under--
(1) section 8 of the Federal Deposit Insurance Act (12
U.S.C. 1818), in the case of--
(A) national banks, and Federal branches and Federal
agencies of foreign banks, by the Office of the Comptroller
of the Currency;
(B) member banks of the Federal Reserve System (other than
national banks), branches and agencies of foreign banks
(other than Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial lending
companies owned or controlled by foreign banks, and
organizations operating under section 25 or 25(a) of the
Federal Reserve Act (12 U.S.C. 601 et seq. and 611 et. seq.),
by the Board; and
(C) banks insured by the Federal Deposit Insurance
Corporation (other than members of the Federal Reserve
System) and insured State branches of foreign banks, by the
Board of Directors of the Federal Deposit Insurance
Corporation;
(2) section 8 of the Federal Deposit Insurance Act (12
U.S.C. 1818), by the Director of the Office of Thrift
Supervision, in the case of a savings association the
deposits of which are insured by the Federal Deposit
Insurance Corporation;
(3) the Federal Credit Union Act (12 U.S.C. 1751 et seq.)
by the National Credit Union Administration Board with
respect to any Federal credit union;
(4) part A of subtitle VII of title 49, United States Code,
by the Secretary of Transportation with respect to any air
carrier or foreign air carrier subject to that part;

[[Page S11863]]

(5) the Packers and Stockyards Act, 1921 (7 U.S.C. 181 et.
seq.) (except as provided in section 406 of that Act (7
U.S.C. 226, 227)), by the Secretary of Agriculture with
respect to any activities subject to that Act; and
(6) the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) by
the Farm Credit Administration with respect to any Federal
land bank, Federal land bank association, Federal
intermediate credit bank, or production credit association.
(c) Exercise of Certain Powers.--For the purpose of the
exercise by any agency referred to in subsection (a) of its
powers under any Act referred to in that subsection, a
violation of any requirement imposed under this title shall
be deemed to be a violation of a requirement imposed under
that Act. In addition to its powers under any provision of
law specifically referred to in subsection (a), each of the
agencies referred to in that subsection may exercise, for the
purpose of enforcing compliance with any requirement imposed
under this title, any other authority conferred on it by law.
(d) Actions by the Commission.--The Commission shall
prevent any person from violating a rule of the Commission
under section 403 in the same manner, by the same means, and
with the same jurisdiction, powers, and duties as though all
applicable terms and provisions of the Federal Trade
Commission Act (15 U.S.C. 41 et seq.) were incorporated into
and made a part of this title. Any entity that violates such
rule shall be subject to the penalties and entitled to the
privileges and immunities provided in the Federal Trade
Commission Act in the same manner, by the same means, and
with the same jurisdiction, power, and duties as though all
applicable terms and provisions of the Federal Trade
Commission Act were incorporated into and made a part of this
title.
(e) Effect on Other Laws.--Nothing contained in the Act
shall be construed to limit the authority of the Commission
under any other provisions of law.

SEC. 407. REVIEW.

Not later than 5 years after the effective date of the
regulations initially issued under section 403, the
Commission shall--
(1) review the implementation of this title, including the
effect of the implementation of this title on practices
relating to the collection and disclosure of information
relating to children, children's ability to obtain access to
information of their choice online, and on the availability
of websites directed to children; and
(2) prepare and submit to Congress a report on the results
of the review under paragraph (1).

SEC. 408. EFFECTIVE DATE.

Sections 403(a), 405, and 406 of this title take effect on
the later of--
(1) the date that is 18 months after the date of enactment
of this Act; or
(2) the date on which the Commission rules on the first
application filed for safe harbor treatment under section 404
if the Commission does not rule on the first such application
within one year after the date of enactment of this Act, but
in no case later than the date that is 30 months after the
date of enactment of this Act.

TITLE V--OREGON INSTITUTE OF PUBLIC SERVICE AND CONSTITUTIONAL STUDIES

SEC. 501. DEFINITIONS.

In this title:
(1) Endowment fund.--The term ``endowment fund'' means a
fund established by Portland State University for the purpose
of generating income for the support of the Institute.
(2) Institute.--The term ``Institute'' means the Oregon
Institute of Public Service and Constitutional Studies
established under this title.
(3) Secretary.--The term ``Secretary'' means the Secretary
of Education.

SEC. 502. OREGON INSTITUTE OF PUBLIC SERVICE AND
CONSTITUTIONAL STUDIES.

From the funds appropriated under section 506, the
Secretary is authorized to award a grant to Portland State
University at Portland, Oregon, for the establishment of an
endowment fund to support the Oregon Institute of Public
Service and Constitutional Studies at the Mark O. Hatfield
School of Government at Portland State University.

SEC. 503. DUTIES.

In order to receive a grant under this title the Portland
State University shall establish the Institute. The Institute
shall have the following duties:
(1) To generate resources, improve teaching, enhance
curriculum development, and further the knowledge and
understanding of students of all ages about public service,
the United States Government, and the Constitution of the
United States of America.
(2) To increase the awareness of the importance of public
service, to foster among the youth of the United States
greater recognition of the role of public service in the
development of the United States, and to promote public
service as a career choice.
(3) To establish a Mark O. Hatfield Fellows program for
students of government, public policy, public health,
education, or law who have demonstrated a commitment to
public service through volunteer activities, research
projects, or employment.
(4) To create library and research facilities for the
collection and compilation of research materials for use in
carrying out programs of the Institute.
(5) To support the professional development of elected
officials at all levels of government.

SEC. 504. ADMINISTRATION.

(a) Leadership Council.--
(1) In general.--In order to receive a grant under this
title Portland State University shall ensure that the
Institute operates under the direction of a Leadership
Council (in this title referred to as the ``Leadership
Council'') that--
``(A) consists of 15 individuals appointed by the President
of Portland State University; and
``(B) is established in accordance with this section.
(2) Appointments.--Of the individuals appointed under
paragraph (1)(A)--
(A) Portland State University, Willamette University, the
Constitution Project, George Fox University, Warner Pacific
University, and Oregon Health Sciences University shall each
have a representative;
(B) at least 1 shall represent Mark O. Hatfield, his
family, or a designee thereof;
(C) at least 1 shall have expertise in elementary and
secondary school social sciences or governmental studies;
(D) at least 2 shall be representative of business or
government and reside outside of Oregon;
(E) at least 1 shall be an elected official; and
(F) at least 3 shall be leaders in the private sector.
(3) Ex-officio member.--The Director of the Mark O.
Hatfield School of Government at Portland State University
shall serve as an ex officio member of the Leadership
Council.
(b) Chairperson.--
(1) In general.--The President of Portland State University
shall designate 1 of the individuals first appointed to the
Leadership Council under subsection (a) as the Chairperson of
the Leadership Council. The individual so designated shall
serve as Chairperson for 1 year.
(2) Requirement.--Upon the expiration of the term of the
Chairperson of the individual designated as Chairperson under
paragraph (1), or the term of the Chairperson elected under
this paragraph, the members of the Leadership Council shall
elect a Chairperson of the Leadership Council from among the
members of the Leadership Council.

SEC. 505. ENDOWMENT FUND.

(a) Management.--The endowment fund shall be managed in
accordance with the standard endowment policies established
by the Oregon University System.
(b) Use of Interest and Investment Income.--Interest and
other investment income earned (on or after the date of
enactment of this subsection) from the endowment fund may be
used to carry out the duties of the Institute under section
503.
(c) Distribution of Interest and Investment Income.--Funds
realized from interest and other investment income earned (on
or after the date of enactment of this subsection) shall be
spent by Portland State University in collaboration with
Willamette University, George Fox University, the
Constitution Project, Warner Pacific University, Oregon
Health Sciences University, and other appropriate educational
institutions or community-based organizations. In expending
such funds, the Leadership Council shall encourage programs
to establish partnerships, to leverage private funds, and to
match expenditures from the endowment fund.

SEC. 506. AUTHORIZATION OF APPROPRIATIONS.

There is authorized to be appropriated to carry out this
title $3,000,000 for fiscal year 1999.

TITLE VI--PAUL SIMON PUBLIC POLICY INSTITUTE

SEC. 601. DEFINITIONS.

In this title:
(1) Endowment fund.--The term ``endowment fund'' means a
fund established by the University for the purpose of
generating income for the support of the Institute.
(2) Endowment fund corpus.--The term ``endowment fund
corpus'' means an amount equal to the grant or grants awarded
under this title plus an amount equal to the matching funds
required under section 602(d).
(3) Endowment fund income.--The term ``endowment fund
income'' means an amount equal to the total value of the
endowment fund minus the endowment fund corpus.
(4) Institute.--The term ``Institute'' means the Paul Simon
Public Policy Institute described in section 602.
(5) Secretary.--The term ``Secretary'' means the Secretary
of Education.
(6) University.--The term ``University'' means Southern
Illinois University at Carbondale, Illinois.

SEC. 602. PROGRAM AUTHORIZED.

(a) Grants.--From the funds appropriated under section 606,
the Secretary is authorized to award a grant to Southern
Illinois University for the establishment of an endowment
fund to support the Paul Simon Public Policy Institute. The
Secretary may enter into agreements with the University and
include in any agreement made pursuant to this title such
provisions as are determined necessary by the Secretary to
carry out this title.
(b) Duties.--In order to receive a grant under this title,
the University shall establish the Institute. The Institute,
in addition to recognizing more than 40 years of public
service to Illinois, to the Nation, and to the world, shall
engage in research, analysis, debate, and policy
recommendations affecting world hunger, mass media, foreign
policy, education, and employment.
(c) Deposit Into Endowment Fund.--The University shall
deposit the proceeds of any

[[Page S11864]]

grant received under this section into the endowment fund.
(d) Matching Funds Requirement.--The University may receive
a grant under this section only if the University has
deposited in the endowment fund established under this title
an amount equal to one-third of such grant and has provided
adequate assurances to the Secretary that the University will
administer the endowment fund in accordance with the
requirements of this title. The source of the funds for the
University match shall be derived from State, private
foundation, corporate, or individual gifts or bequests, but
may not include Federal funds or funds derived from any other
federally supported fund.
(e) Duration; Corpus Rule.--The period of any grant awarded
under this section shall not exceed 20 years, and during such
period the University shall not withdraw or expend any of the
endowment fund corpus. Upon expiration of the grant period,
the University may use the endowment fund corpus, plus any
endowment fund income for any educational purpose of the
University.

SEC. 603. INVESTMENTS.

(a) In General.--The University shall invest the endowment
fund corpus and endowment fund income in those low-risk
instruments and securities in which a regulated insurance
company may invest under the laws of the State of Illinois,
such as federally insured bank savings accounts or comparable
interest bearing accounts, certificates of deposit, money
market funds, or obligations of the United States.
(b) Judgment and Care.--The University, in investing the
endowment fund corpus and endowment fund income, shall
exercise the judgment and care, under circumstances then
prevailing, which a person of prudence, discretion, and
intelligence would exercise in the management of the person's
own business affairs.

SEC. 604. WITHDRAWALS AND EXPENDITURES.

(a) In General.--The University may withdraw and expend the
endowment fund income to defray any expenses necessary to the
operation of the Institute, including expenses of operations
and maintenance, administration, academic and support
personnel, construction and renovation, community and student
services programs, technical assistance, and research. No
endowment fund income or endowment fund corpus may be used
for any type of support of the executive officers of the
University or for any commercial enterprise or endeavor.
Except as provided in subsection (b), the University shall
not, in the aggregate, withdraw or expend more than 50
percent of the total aggregate endowment fund income earned
prior to the time of withdrawal or expenditure.
(b) Special Rule.--The Secretary is authorized to permit
the University to withdraw or expend more than 50 percent of
the total aggregate endowment fund income whenever the
University demonstrates such withdrawal or expenditure is
necessary because of--
(1) a financial emergency, such as a pending insolvency or
temporary liquidity problem;
(2) a life-threatening situation occasioned by a natural
disaster or arson; or
(3) another unusual occurrence or exigent circumstance.
(c) Repayment.--
(1) Income.--If the University withdraws or expends more
than the endowment fund income authorized by this section,
the University shall repay the Secretary an amount equal to
one-third of the amount improperly expended (representing the
Federal share thereof).
(2) Corpus.--Except as provided in section 602(e)--
(A) the University shall not withdraw or expend any
endowment fund corpus; and
(B) if the University withdraws or expends any endowment
fund corpus, the University shall repay the Secretary an
amount equal to one-third of the amount withdrawn or expended
(representing the Federal share thereof) plus any endowment
fund income earned thereon.

SEC. 605. ENFORCEMENT.

(a) In General.--After notice and an opportunity for a
hearing, the Secretary is authorized to terminate a grant and
recover any grant funds awarded under this section if the
University--
(1) withdraws or expends any endowment fund corpus, or any
endowment fund income in excess of the amount authorized by
section 604, except as provided in section 602(e);
(2) fails to invest the endowment fund corpus or endowment
fund income in accordance with the investment requirements
described in section 603; or
(3) fails to account properly to the Secretary, or the
General Accounting Office if properly designated by the
Secretary to conduct an audit of funds made available under
this title, pursuant to such rules and regulations as may be
proscribed by the Comptroller General of the United States,
concerning investments and expenditures of the endowment fund
corpus or endowment fund income.
(b) Termination.--If the Secretary terminates a grant under
subsection (a), the University shall return to the Treasury
of the United States an amount equal to the sum of the
original grant or grants under this title, plus any endowment
fund income earned thereon. The Secretary may direct the
University to take such other appropriate measures to remedy
any violation of this title and to protect the financial
interest of the United States.

SEC. 606. AUTHORIZATION OF APPROPRIATIONS.

There is authorized to be appropriated to carry out this
title $3,000,000 for fiscal year 1999. Funds appropriated
under this section shall remain available until expended.

TITLE VII--HOWARD BAKER SCHOOL OF GOVERNMENT

SEC. 701. DEFINITIONS.

In this title:
(1) Board.--The term ``Board'' means the Board of Advisors
established under section 704.
(2) Endowment fund.--The term ``endowment fund'' means a
fund established by the University of Tennessee in Knoxville,
Tennessee, for the purpose of generating income for the
support of the School.
(3) School.--The term ``School'' means the Howard Baker
School of Government established under this title.
(4) Secretary.--The term ``Secretary'' means the Secretary
of Education.
(5) University.--The term ``University'' means the
University of Tennessee in Knoxville, Tennessee.

SEC. 702. HOWARD BAKER SCHOOL OF GOVERNMENT.

From the funds authorized to be appropriated under section
706, the Secretary is authorized to award a grant to the
University for the establishment of an endowment fund to
support the Howard Baker School of Government at the
University of Tennessee in Knoxville, Tennessee.

SEC. 703. DUTIES.

In order to receive a grant under this title, the
University shall establish the School. The School shall have
the following duties:
(1) To establish a professorship to improve teaching and
research related to, enhance the curriculum of, and further
the knowledge and understanding of, the study of democratic
institutions, including aspects of regional planning, public
administration, and public policy.
(2) To establish a lecture series to increase the knowledge
and awareness of the major public issues of the day in order
to enhance informed citizen participation in public affairs.
(3) To establish a fellowship program for students of
government, planning, public administration, or public policy
who have demonstrated a commitment and an interest in
pursuing a career in public affairs.
(4) To provide appropriate library materials and
appropriate research and instructional equipment for use in
carrying out academic and public service programs, and to
enhance the existing United States Presidential and public
official manuscript collections.
(5) To support the professional development of elected
officials at all levels of government.

SEC. 704. ADMINISTRATION.

(a) Board of Advisors.--
(1) In general.--The School shall operate with the advice
and guidance of a Board of Advisors consisting of 13
individuals appointed by the Vice Chancellor for Academic
Affairs of the University.
(2) Appointments.--Of the individuals appointed under
paragraph (1)--
(A) 5 shall represent the University;
(B) 2 shall represent Howard Baker, his family, or a
designee thereof;
(C) 5 shall be representative of business or government;
and
(D) 1 shall be the Governor of Tennessee, or the Governor's
designee.
(3) Ex officio members.--The Vice Chancellor for Academic
Affairs and the Dean of the College of Arts and Sciences at
the University shall serve as an ex officio member of the
Board.
(b) Chairperson.--
(1) In general.--The Chancellor, with the concurrence of
the Vice Chancellor for Academic Affairs, of the University
shall designate 1 of the individuals first appointed to the
Board under subsection (a) as the Chairperson of the Board.
The individual so designated shall serve as Chairperson for 1
year.
(2) Requirements.--Upon the expiration of the term of the
Chairperson of the individual designated as Chairperson under
paragraph (1) or the term of the Chairperson elected under
this paragraph, the members of the Board shall elect a
Chairperson of the Board from among the members of the Board.

SEC. 705. ENDOWMENT FUND.

(a) Management.--The endowment fund shall be managed in
accordance with the standard endowment policies established
by the University of Tennessee System.
(b) Use of Interest and Investment Income.--Interest and
other investment income earned (on or after the date of
enactment of this subsection) from the endowment fund may be
used to carry out the duties of the School under section 703.
(c) Distribution of Interest and Investment Income.--Funds
realized from interest and other investment income earned (on
or after the date of enactment of this subsection) shall be
available for expenditure by the University for purposes
consistent with section 703, as recommended by the Board. The
Board shall encourage programs to establish partnerships, to
leverage private funds, and to match expenditures from the
endowment fund.

SEC. 706. AUTHORIZATION OF APPROPRIATIONS.

There is authorized to be appropriated to carry out this
title $10,000,000 for fiscal year 2000.

[[Page S11865]]

TITLE VIII--JOHN GLENN INSTITUTE FOR PUBLIC SERVICE AND PUBLIC POLICY

SEC. 801. DEFINITIONS.

In this title:
(1) Endowment fund.--The term ``endowment fund'' means a
fund established by the University for the purpose of
generating income for the support of the Institute.
(2) Endowment fund corpus.--The term ``endowment fund
corpus'' means an amount equal to the grant or grants awarded
under this title plus an amount equal to the matching funds
required under section 802(d).
(3) Endowment fund income.--The term ``endowment fund
income'' means an amount equal to the total value of the
endowment fund minus the endowment fund corpus.
(4) Institute.--The term ``Institute'' means the John Glenn
Institute for Public Service and Public Policy described in
section 802.
(5) Secretary.--The term ``Secretary'' means the Secretary
of Education.
(6) University.--The term ``University'' means the Ohio
State University at Columbus, Ohio.

SEC. 802. PROGRAM AUTHORIZED.

(a) Grants.--From the funds appropriated under section 806,
the Secretary is authorized to award a grant to the Ohio
State University for the establishment of an endowment fund
to support the John Glenn Institute for Public Service and
Public Policy. The Secretary may enter into agreements with
the University and include in any agreement made pursuant to
this title such provisions as are determined necessary by the
Secretary to carry out this title.
(b) Purposes.--The Institute shall have the following
purposes:
(1) To sponsor classes, internships, community service
activities, and research projects to stimulate student
participation in public service, in order to foster America's
next generation of leaders.
(2) To conduct scholarly research in conjunction with
public officials on significant issues facing society and to
share the results of such research with decisionmakers and
legislators as the decisionmakers and legislators address
such issues.
(3) To offer opportunities to attend seminars on such
topics as budgeting and finance, ethics, personnel
management, policy evaluations, and regulatory issues that
are designed to assist public officials in learning more
about the political process and to expand the organizational
skills and policy-making abilities of such officials.
(4) To educate the general public by sponsoring national
conferences, seminars, publications, and forums on important
public issues.
(5) To provide access to Senator John Glenn's extensive
collection of papers, policy decisions, and memorabilia,
enabling scholars at all levels to study the Senator's work.
(c) Deposit Into Endowment Fund.--The University shall
deposit the proceeds of any grant received under this section
into the endowment fund.
(d) Matching Funds Requirement.--The University may receive
a grant under this section only if the University has
deposited in the endowment fund established under this title
an amount equal to one-third of such grant and has provided
adequate assurances to the Secretary that the University will
administer the endowment fund in accordance with the
requirements of this title. The source of the funds for the
University match shall be derived from State, private
foundation, corporate, or individual gifts or bequests, but
may not include Federal funds or funds derived from any other
federally supported fund.
(e) Duration; Corpus Rule.--The period of any grant awarded
under this section shall not exceed 20 years, and during such
period the University shall not withdraw or expend any of the
endowment fund corpus. Upon expiration of the grant period,
the University may use the endowment fund corpus, plus any
endowment fund income for any educational purpose of the
University.

SEC. 803. INVESTMENTS.

(a) In General.--The University shall invest the endowment
fund corpus and endowment fund income in accordance with the
University's investment policy approved by the Ohio State
University Board of Trustees.
(b) Judgment and Care.--The University, in investing the
endowment fund corpus and endowment fund income, shall
exercise the judgment and care, under circumstances then
prevailing, which a person of prudence, discretion, and
intelligence would exercise in the management of the person's
own business affairs.

SEC. 804. WITHDRAWALS AND EXPENDITURES.

(a) In General.--The University may withdraw and expend the
endowment fund income to defray any expenses necessary to the
operation of the Institute, including expenses of operations
and maintenance, administration, academic and support
personnel, construction and renovation, community and student
services programs, technical assistance, and research. No
endowment fund income or endowment fund corpus may be used
for any type of support of the executive officers of the
University or for any commercial enterprise or endeavor.
Except as provided in subsection (b), the University shall
not, in the aggregate, withdraw or expend more than 50
percent of the total aggregate endowment fund income earned
prior to the time of withdrawal or expenditure.
(b) Special Rule.--The Secretary is authorized to permit
the University to withdraw or expend more than 50 percent of
the total aggregate endowment fund income whenever the
University demonstrates such withdrawal or expenditure is
necessary because of--
(1) a financial emergency, such as a pending insolvency or
temporary liquidity problem;
(2) a life-threatening situation occasioned by a natural
disaster or arson; or
(3) another unusual occurrence or exigent circumstance.
(c) Repayment.--
(1) Income.--If the University withdraws or expends more
than the endowment fund income authorized by this section,
the University shall repay the Secretary an amount equal to
one-third of the amount improperly expended (representing the
Federal share thereof).
(2) Corpus.--Except as provided in section 802(e)--
(A) the University shall not withdraw or expend any
endowment fund corpus; and
(B) if the University withdraws or expends any endowment
fund corpus, the University shall repay the Secretary an
amount equal to one-third of the amount withdrawn or expended
(representing the Federal share thereof) plus any endowment
fund income earned thereon.

SEC. 805. ENFORCEMENT.

(a) In General.--After notice and an opportunity for a
hearing, the Secretary is authorized to terminate a grant and
recover any grant funds awarded under this section if the
University--
(1) withdraws or expends any endowment fund corpus, or any
endowment fund income in excess of the amount authorized by
section 804, except as provided in section 802(e);
(2) fails to invest the endowment fund corpus or endowment
fund income in accordance with the investment requirements
described in section 803; or
(3) fails to account properly to the Secretary, or the
General Accounting Office if properly designated by the
Secretary to conduct an audit of funds made available under
this title, pursuant to such rules and regulations as may be
prescribed by the Comptroller General of the United States,
concerning investments and expenditures of the endowment fund
corpus or endowment fund income.
(b) Termination.--If the Secretary terminates a grant under
subsection (a), the University shall return to the Treasury
of the United States an amount equal to the sum of the
original grant or grants under this title, plus any endowment
fund income earned thereon. The Secretary may direct the
University to take such other appropriate measures to remedy
any violation of this title and to protect the financial
interest of the United States.

SEC. 806. AUTHORIZATION OF APPROPRIATIONS.

There is authorized to be appropriated to carry out this
title $6,000,000 for fiscal year 2000. Funds appropriated
under this section shall remain available until expended.

____________________