[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 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 October 
     1, 1998, the 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 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.

  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.

  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) imposes the obligation to collect or pay the tax on 
     any provider of products or services made available and 
     obtained digitally where the location, business, or residence 
     address of the recipient is not provided as part of the 
     transaction or otherwise is unknown to the provider; or
       (v) 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) the 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 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. 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.

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