[Congressional Record (Bound Edition), Volume 153 (2007), Part 20]
[Senate]
[Pages 28422-28424]
[From the U.S. Government Publishing Office, www.gpo.gov]




            INTERNET TAX FREEDOM ACT AMENDMENTS ACT OF 2007

  Mr. REID. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of Calendar No. 429, H.R. 3678.
  The PRESIDING OFFICER. The clerk will report the bill by title.
  The assistant legislative clerk read as follows:


[[Page 28423]]

       A bill (H.R. 3678) to amend the Internet Tax Freedom Act to 
     extend the moratorium on certain taxes relating to the 
     Internet and to electronic commerce.

  There being no objection, the Senate proceeded to consider the bill.
  Mr. REID. Mr. President, I ask unanimous consent that the amendment 
at the desk be agreed to, the bill, as amended, be read a third time 
and passed, the motion to reconsider be laid upon the table, and that 
any statements relating to this matter be printed in the Record.
  The PRESIDING OFFICER. Is there objection?
  The Republican leader is recognized.
  Mr. McCONNELL. Mr. President, reserving the right to object--and I 
certainly will not object--I just want to take a brief moment to say 
how pleased I am we are able to reach this bipartisan compromise. This 
package will extend the current Internet tax moratorium for 7 years--
nearly twice as long as the bill passed over in the House of 
Representatives. This is a positive step in protecting American 
consumers from taxes on Internet access, taxes that strike at the heart 
of innovation and economic growth in America.
  I particularly thank the distinguished Senator from New Hampshire for 
his skillful role in bringing this issue before the Senate, for pushing 
it aggressively, and getting, in my judgment, a much better solution to 
this problem than was achieved in the House of Representatives. I know 
he shares my view, and I assume the view of everyone in the Senate, 
that the House will simply take up the Sununu measure and pass it.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The amendment (No. 3466) was agreed to, as follows:

     (Purpose: To amend the Internet Tax Freedom Act to extend the 
moratorium on certain taxes relating to the Internet and to electronic 
                               commerce)

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Internet Tax Freedom Act 
     Amendments Act of 2007''.

     SEC. 2. MORATORIUM.

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

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

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

     SEC. 4. DEFINITIONS.

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

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

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

     SEC. 5. CONFORMING AMENDMENTS.

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

     SEC. 6. SUNSET OF GRANDFATHER PROVISIONS.

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

     SEC. 7. EFFECTIVE DATE.

       This Act, and the amendments made by this Act, shall take 
     effect on November 1, 2007, and shall apply with respect to 
     taxes in effect as of such date or thereafter enacted,

[[Page 28424]]

     except as provided in section 1104 of the Internet Tax 
     Freedom Act (47 U.S.C. 151 note).

  The amendment was ordered to be engrossed, and the bill to be read a 
third time.
  The bill was read the third time.
  The bill (H.R. 3678), as amended, was passed.
  The PRESIDING OFFICER. The majority leader is recognized.
  Mr. REID. Mr. President, I also want to express my appreciation for 
the diligent work of my friend from Delaware. Senator Carper has worked 
on this issue for years. We have had a number of others who have been 
involved in this issue. Of course, the chairman of the committee, 
Senator Inouye, has been very helpful during the day. We have had 
assistance from Senator Rockefeller and Senator Wyden, but I and the 
Senate owe a debt of gratitude for the work done by my friend from 
Delaware, working with our friend from New Hampshire.

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