[Congressional Record Volume 150, Number 18 (Thursday, February 12, 2004)]
[Senate]
[Pages S1294-S1295]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ALEXANDER (for himself, Mr. Carper, Mr. Dorgan, Mrs. 
        Feinstein, Mr. Graham of Florida, Mr. Hollings, Mrs. Hutchison, 
        Mr. Inouye, Mr. Lautenberg, Mr. Rockefeller, and Mr. 
        Voinovich):
  S. 2084. A bill to revive and extend the Internet Tax Freedom Act for 
2 years, and for other purposes; to the Committee on Commerce, Science, 
and Transportation.
  Mr. ALEXANDER. Mr. President, I ask unanimous consent that the text 
of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2084

       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 Ban Extension 
     and Improvement Act''.

     SEC. 2. 2-YEAR EXTENSION OF MORATORIUM.

       Section 1101(a) of the Internet Tax Freedom Act (47 U.S.C. 
     151 nt) is amended--
       (1) by striking ``2003--'' and inserting ``2005:'';
       (2) by striking paragraph (1) and inserting the following:
       ``(1) Taxes on Internet access.''; and
       (3) by striking ``multiple'' in paragraph (2) and inserting 
     ``Multiple''.

     SEC. 3. EXCEPTIONS FOR CERTAIN TAXES.

       The Internet Tax Freedom Act (47 U.S.C. 151 note) is 
     amended--
       (1) by redesignating section 1104 as section 1105; and
       (2) by inserting after section 1103 the following:

     ``SEC. 1104. EXCEPTIONS FOR CERTAIN TAXES.

       ``(a) Pre-October, 1998, Taxes.--Section 1101(a) does not 
     apply to a tax on Internet access (as that term was defined 
     in section 1104(5) of this Act as that section was in effect 
     on the day before the date of enactment of the Internet Tag 
     Ban Extension and Improvement Act) that was 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 tag to Internet 
     access services; or
       ``(2) a State or political subdivision thereof generally 
     collected such tag on charges for Internet access.
       ``(b) Taxes on Telecommunications Services.--Section 1101 
     (a) does not apply to a tag on Internet access that was 
     generally imposed and actually enforced as of November 1, 
     2003, if, as of that date, the tag 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 service.''.

     SEC. 4. CHANGE IN DEFINITIONS OF INTERNET ACCESS SERVICE.

       (a) In General.--Paragraph (3)(D) of section 1101(e) of the 
     Internet Tax Freedom Act (47 U.S.C. 151 note) is amended by 
     striking the second sentence and inserting ``The term 
     `Internet access service' does not include telecommunications 
     services, except to the extent such services are purchased, 
     used, or sold by an Internet access provider to connect a 
     purchaser of Internet access to the Internet access 
     provider.''.
       (b) Conforming Amendments.--
       (1) Paragraph (2)(B)(i) of section 1105 of that Act, as 
     redesignated by subsection (a), is amended by striking 
     ``except with respect to a tax (on Internet access) that was 
     generally imposed and actually enforced prior to October 1, 
     1998,''.
       (2) Internet access.--Paragraph (5) of section 1105 of that 
     Act, as redesignated by subsection (a), is amended by 
     striking the second sentence and inserting ``The term 
     `Internet access' does not include telecommunications 
     services, except to the extent such services are purchased, 
     used, or sold by an Internet access provider to connect a 
     purchaser of Internet access to the Internet access 
     provider.''.
       (3) Paragraph (10) of section 1105 of that Act, as 
     redesignated by subsection (a), is amended to read as 
     follows:
       ``(10) Tax on internet access.--
       ``(A) In general.--The term `tax on Internet access' means 
     a tax on Internet access, regardless of whether such tax is 
     imposed on a provider of Internet access or a buyer of 
     Internet access and regardless of the terminology used to 
     describe the tax.
       ``(B) General exception.--The term `tax on Internet access' 
     does not include a tax levied upon or measured by net income, 
     capital stock, net worth, or property value.''.

     SEC. 5. ACCOUNTING RULE.

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

     ``SEC. 1106. ACCOUNTING RULE.

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

     SEC. 6. EFFECT ON OTHER LAWS.

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

     ``SEC. 1107. EFFECT ON OTHER LAWS.

       ``(a) Universal Service.--Nothing in this Act shall prevent 
     the imposition or collection of any fees or charges used to 
     preserve and advance Federal universal service or similar 
     State programs--

[[Page S1295]]

       ``(1) authorized by section 254 of the Communications Act 
     of 1934 (47 U.S.C. 254); or
       ``(2) in effect on February 8, 1996.
       ``(b) 911 and E-911 Services.--Nothing in this Act shall 
     prevent the imposition or collection, on a service used for 
     access to 911 or E-911 services, of any fee or charge 
     specifically designated or presented as dedicated by a State 
     or political subdivision thereof for the support of 911 or E-
     911 services if no portion of the revenue derived from such 
     fee or charge is obligated or expended for any purpose other 
     than support of 911 or E-911 services.
       ``(c) Non-Tax Regulatory Proceedings.--Nothing in this Act 
     shall be construed to affect any Federal or State regulatory 
     proceeding that is not related to taxation.''.

     SEC. 7. EFFECTIVE DATE.

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

  Mr. ROCKEFELLER. Mr. President, I am pleased to cosponsor legislation 
introduced today that will reinstate a moratorium on State and local 
taxation of access to the Internet. Senators Alexander and Carper have 
worked very hard to craft legislation that will protect Americans from 
being taxed for using the Internet, while still respecting the States' 
need to raise revenue from traditional telecommunications taxes. As a 
fellow former Governor, I have been pleased to join them in this effort 
and hope that all of my colleagues who have supported a moratorium on 
taxation of Internet access will support this bill.
  Until last fall, there was a moratorium in place prohibiting taxation 
of Internet access. Unfortunately, that lapsed before Congress was able 
to craft an extension. One of the reasons that extending the moratorium 
has been difficult is that we want to apply the lessons learned over 
the last few years. For example, the previous moratorium was not 
technology-neutral. That is, people who accessed the Internet using a 
DSL connection were not always treated the same as those who used dial-
up service or a cable modem. This was clearly an unintended consequence 
of the way that the previous legislation was drafted. In addition, over 
the last few years, we have seen many States struggle with enormous 
budget deficits. Recognizing that a downturn in the economy can 
compromise a state's ability to provide vital services, including 
schools, firefighters, and police officers, we do not want to undermine 
any state's revenue base.
  With these lessons in mind, Senators Alexander, Carper and others 
have crafted an extension of the previous moratorium that would ensure 
that no States impose new taxes on Internet access. The legislation 
specifically requires that all technologies be treated equally. And 
because the moratorium is limited to 2 years, it ensures that Congress 
will revisit the issue periodically as technologies develop and 
circumstances change.
  As a former Governor, I do not take lightly any Federal action that 
limits the options available to local and State elected officials I 
recognize how hard it is to balance a State budget and am only willing 
to support a moratorium on Internet access taxes because I believe that 
we are dealing with a unique new service. The Internet has the power to 
connect Americans as the radio, telephone, and television did for 
previous generations. By sending e-mails, telecommuting, or banking 
online, Americans are communicating in a new way that makes our economy 
more productive and enhances our quality of life. If sparing Internet 
access from taxation increasing the ability of low and moderate income 
Americans to join the technology revolution, then it is certainly a 
worthy public policy goal.
  Now, Senators Allen and Wyden have offered an alternative approach. 
They have proposed legislation that would permanently bar States ad 
cities from taxing Internet access, and they have defined the service 
broadly that many experts believe it will undermine some 
telecommunications taxes on which States currently depend. I am not 
interested in providing enormous tax breaks to the telecommunications 
industry, and so I oppose their approach. Taxes that businesses 
currently pay to access the Internet backbone are reasonable costs of 
doing business. I hope that my colleagues will not be intimidated by 
claims that those of us who oppose tax breaks for telecommuncations 
companies actually want to tax people's e-mails. That is a false 
argument, and anyone who resorts to it is surely trying to avoid the 
difficult issues that are addressed by the bill introduced today by 
Senators Alexander and Carper.
  I would like to make one final point to my colleagues, and that is 
about fallibility. Every day we get fresh evidence that things are not 
always as they seemed and that we do not, in fact, know everything we 
thought we knew. If fallibility is part of being human, then surely it 
is part of any legislative body. If the moratorium that Congress had 
imposed 5 years ago had been permanent, then we would have had a 
difficult time reopening the issue to address the fact that certain 
technologies were not protected under the act. We ought not make that 
mistake now by thinking that we can accurately foresee the exciting 
technological developments on the horizon. It is appropriate for 
Congress to revisit this issue in two years, as the Alexander-Carper 
proposal allows.
  I hope that all of my colleagues will join me in support of a new 
temporary moratorium on Internet access taxes. Enacting this 
legislation quickly will ensure that Americans are not hit with any 
taxes when they try to log on.
                                 ______