[House Report 112-188]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    112-188

======================================================================



 
                   WIRELESS TAX FAIRNESS ACT OF 2011

                                _______
                                

 July 29, 2011.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

       Mr. Smith of Texas, from the Committee on the Judiciary, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1002]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1002) to restrict any State or local jurisdiction 
from imposing a new discriminatory tax on cell phone services, 
providers, or property, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     4
Background and Need for the Legislation..........................     4
Hearings.........................................................    10
Committee Consideration..........................................    10
Committee Votes..................................................    10
Committee Oversight Findings.....................................    10
New Budget Authority and Tax Expenditures........................    10
Congressional Budget Office Cost Estimate........................    10
Performance Goals and Objectives.................................    12
Advisory on Earmarks.............................................    12
Section-by-Section Analysis......................................    12
Dissenting Views.................................................    14

                             The Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Wireless Tax Fairness Act of 2011''.

SEC. 2. FINDINGS.

  Congress finds the following:
          (1) It is appropriate to exercise congressional enforcement 
        authority under section 5 of the 14th Amendment to the 
        Constitution of the United States and Congress' plenary power 
        under article I, section 8, clause 3 of the Constitution of the 
        United States (commonly known as the ``commerce clause'') in 
        order to ensure that States and political subdivisions thereof 
        do not discriminate against providers and consumers of mobile 
        services by imposing new selective and excessive taxes and 
        other burdens on such providers and consumers.
          (2) In light of the history and pattern of discriminatory 
        taxation faced by providers and consumers of mobile services, 
        the prohibitions against and remedies to correct discriminatory 
        State and local taxation in section 306 of the Railroad 
        Revitalization and Regulatory Reform Act of 1976 (49 U.S.C. 
        11501) provide an appropriate analogy for congressional action, 
        and similar Federal legislative measures are warranted that 
        will prohibit imposing new discriminatory taxes on providers 
        and consumers of mobile services and that will assure an 
        effective, uniform remedy.

SEC. 3. MORATORIUM.

  (a) In General.--No State or local jurisdiction shall impose a new 
discriminatory tax on or with respect to mobile services, mobile 
service providers, or mobile service property, during the 5-year period 
beginning on the date of enactment of this Act.
  (b) Definitions.--In this Act:
          (1) Mobile service.--The term ``mobile service'' means 
        commercial mobile radio service, as such term is defined in 
        section 20.3 of title 47, Code of Federal Regulations, as in 
        effect on the date of enactment of this Act, or any other 
        service that is primarily intended for receipt on, transmission 
        from, or use with a mobile telephone or other mobile device, 
        including but not limited to the receipt of a digital good.
          (2) Mobile service property.--The term ``mobile service 
        property'' means all property used by a mobile service provider 
        in connection with its business of providing mobile services, 
        whether real, personal, tangible, or intangible (including 
        goodwill, licenses, customer lists, and other similar 
        intangible property associated with such business).
          (3) Mobile service provider.--The term ``mobile service 
        provider'' means any entity that sells or provides mobile 
        services, but only to the extent that such entity sells or 
        provides mobile services.
          (4) New discriminatory tax.--The term ``new discriminatory 
        tax'' means a tax imposed by a State or local jurisdiction that 
        is imposed on or with respect to, or is measured by, the 
        charges, receipts, or revenues from or value of--
                  (A) a mobile service and is not generally imposed, or 
                is generally imposed at a lower rate, on or with 
                respect to, or measured by, the charges, receipts, or 
                revenues from other services or transactions involving 
                tangible personal property;
                  (B) a mobile service provider and is not generally 
                imposed, or is generally imposed at a lower rate, on 
                other persons that are engaged in businesses other than 
                the provision of mobile services; or
                  (C) a mobile service property and is not generally 
                imposed, or is generally imposed at a lower rate, on or 
                with respect to, or measured by the value of, other 
                property that is devoted to a commercial or industrial 
                use and subject to a property tax levy, except public 
                utility property owned by a public utility subject to 
                rate of return regulation by a State or Federal 
                regulatory authority;
        unless such tax was imposed and actually enforced on mobile 
        services, mobile service providers, or mobile service property 
        prior to the date of enactment of this Act.
          (5) State or local jurisdiction.--The term ``State or local 
        jurisdiction'' means any of the several States, the District of 
        Columbia, any territory or possession of the United States, a 
        political subdivision of any State, territory, or possession, 
        or any governmental entity or person acting on behalf of such 
        State, territory, possession, or subdivision that has the 
        authority to assess, impose, levy, or collect taxes or fees.
          (6) Tax.--
                  (A) In general.--The term ``tax'' means a charge 
                imposed by a governmental entity for the purpose of 
                generating revenues for governmental purposes, and 
                excludes a fee imposed on a particular entity or class 
                of entities for a specific privilege, service, or 
                benefit conferred exclusively on such entity or class 
                of entities.
                  (B) Exclusion.--The term ``tax'' does not include any 
                fee or charge--
                          (i) used to preserve and advance Federal 
                        universal service or similar State programs 
                        authorized by section 254 of the Communications 
                        Act of 1934 (47 U.S.C. 254); or
                          (ii) specifically dedicated by a State or 
                        local jurisdiction for the support of E-911 
                        communications systems.
  (c) Rules of Construction.--
          (1) Determination.--For purposes of subsection (b)(4), all 
        taxes, tax rates, exemptions, deductions, credits, incentives, 
        exclusions, and other similar factors shall be taken into 
        account in determining whether a tax is a new discriminatory 
        tax.
          (2) Application of principles.--Except as otherwise provided 
        in this Act, in determining whether a tax on mobile service 
        property is a new discriminatory tax for purposes of subsection 
        (b)(4)(A)(iii), principles similar to those set forth in 
        section 306 of the Railroad Revitalization and Regulatory 
        Reform Act of 1976 (49 U.S.C. 11501) shall apply.
          (3) Exclusions.--Notwithstanding any other provision of this 
        Act--
                  (A) the term ``generally imposed'' as used in 
                subsection (b)(4) shall not apply to any tax imposed 
                only on--
                          (i) specific services;
                          (ii) specific industries or business 
                        segments; or
                          (iii) specific types of property; and
                  (B) the term ``new discriminatory tax'' shall not 
                include a new tax or the modification of an existing 
                tax that--
                          (i) replaces one or more taxes that had been 
                        imposed on mobile services, mobile service 
                        providers, or mobile service property;
                          (ii) is designed so that, based on 
                        information available at the time of the 
                        enactment of such new tax or such modification, 
                        the amount of tax revenues generated thereby 
                        with respect to such mobile services, mobile 
                        service providers, or mobile service property 
                        is reasonably expected to not exceed the amount 
                        of tax revenues that would have been generated 
                        by the respective replaced tax or taxes with 
                        respect to such mobile services, mobile service 
                        providers, or mobile service property; and
                          (iii) is a local jurisdiction tax that may 
                        not be imposed without voter approval, provides 
                        for at least 90 days' prior notice to mobile 
                        service providers, and is required by law to be 
                        collected from mobile service customers.

SEC. 4. ENFORCEMENT.

  Notwithstanding any provision of section 1341 of title 28, United 
States Code, or the constitution or laws of any State, the district 
courts of the United States shall have jurisdiction, without regard to 
amount in controversy or citizenship of the parties, to grant such 
mandatory or prohibitive injunctive relief, interim equitable relief, 
and declaratory judgments as may be necessary to prevent, restrain, or 
terminate any acts in violation of this Act.
          (1) Jurisdiction.--Such jurisdiction shall not be exclusive 
        of the jurisdiction which any Federal or State court may have 
        in the absence of this section.
          (2) Burden of proof.--The burden of proof in any proceeding 
        brought under this Act shall be upon the party seeking relief 
        and shall be by a preponderance of the evidence on all issues 
        of fact.
          (3) Relief.--In granting relief against a tax which is 
        discriminatory or excessive under this Act with respect to tax 
        rate or amount only, the court shall prevent, restrain, or 
        terminate the imposition, levy, or collection of not more than 
        the discriminatory or excessive portion of the tax as 
        determined by the court.

SEC. 5. GAO STUDY.

  (a) Study.--The Comptroller General of the United States shall 
conduct a study, throughout the 5-year period beginning on the date of 
the enactment of this Act, to determine--
          (1) how, and the extent to which, taxes imposed by local and 
        State jurisdictions on mobile services, mobile service 
        providers, or mobile property, impact the costs consumers pay 
        for mobile services; and
          (2) the extent to which the moratorium on discriminatory 
        mobile services taxes established in this Act has any impact on 
        the costs consumers pay for mobile services.
  (b) Report.--Not later than 6 years after the date of the enactment 
of this Act, the Comptroller General shall submit, to the Committee on 
the Judiciary of the House of Representatives and Committee on the 
Judiciary of the Senate, a report containing the results of the study 
required subsection (a) and shall include in such report 
recommendations for any changes to laws and regulations relating to 
such results.

                          Purpose and Summary

    The average combined state and local tax rate on wireless 
telecommunications services is significantly higher than the 
combined state and local sales tax rate imposed on the purchase 
of other goods and services.\1\ The wireless industry and many 
state and local government groups agree that wireless tax 
reform is needed.\2\ The Wireless Tax Fairness Act of 2011, 
without affecting any existing state or local tax laws, imposes 
a 5-year moratorium, effective from the date of enactment, on 
new ``discriminatory'' taxes on wireless services, providers, 
or property, so that states and localities may use that period 
to enact meaningful communications tax reform on their own 
terms.\3\ According to the bill's sponsor, ``[t]he Wireless Tax 
Fairness Act would advance core national priorities of 
innovation, economic growth, and competitiveness, by fostering 
the expansion of next-generation communications and information 
networks.''\4\
---------------------------------------------------------------------------
    \1\See generally Daniel M. Rothschild, The Case Against Taxing Cell 
Phone Subscribers (Mercatus Center at George Mason University ed., June 
2011); Glenn Woroch, The ``Wireless Tax Premium'' Harms American 
Consumers and Squanders the Potential of the Mobile Economy (Georgetown 
Center for Business & Public Policy ed., June 2011); Scott Mackey, A 
Growing Burden: Taxes, Fees, and Government Charges on Wireless 
Service, 59 State Tax Notes 475 (Feb. 14, 2011) [hereinafter Mackey 
2011].
    \2\See Press Release, CTIA-The Wireless Association, Statement 
After the House Judiciary Committee Hearing [sic] on the Wireless Tax 
Fairness Act (July 14, 2011), http://ctia.org/media/press/body.cfm/
prid/2093 (expressing wireless industry's support for H.R. 1002); 
Letter from Government Finance Officers Association, National 
Association of Counties, National League of Cities, and the U.S. 
Conference of Mayors to Deborah Bierbaum, Director of External Taxes, 
AT&T (Oct. 15, 2010) (on file with Committee) (confessing authors' 
understanding of the need for reform); State Taxation of Interstate 
Telecommunications Services: Hearing Before the Subcomm. on Commercial 
& Admin. Law of the H. Comm. on the Judiciary, 109th Cong. 32 (2006) 
[hereinafter 2006 Hearing] (testimony of David Quam, Director, Office 
of State and Federal Relations, National Governors Association) 
(acknowledging that ``changes [in state taxation of wireless services] 
do need to be made'').
    \3\Wireless Tax Fairness Act of 2011, H.R. 1002, 112th Cong. Sec. 3 
(2010).
    \4\Wireless Tax Fairness Act of 2011: Hearing on H.R. 1002 Before 
the Subcomm. on Courts, Commercial & Admin. Law of the H. Comm. on the 
Judiciary, 112th Cong. 15 (2011) [hereinafter 2011 Hearing] (statement 
of Rep. Zoe Lofgren (D-CA).
---------------------------------------------------------------------------

                Background and Need for the Legislation

                            I. INTRODUCTION

    On March 10, 2011, Rep. Zoe Lofgren (D-CA) (sponsor) and 
Rep. Trent Franks (R-AZ) (lead cosponsor) introduced H.R. 1002, 
the Wireless Tax Fairness Act of 2011 (as amended, the 
``WTFA'').\5\ An identical bill was introduced in the Senate by 
Senators Ron Wyden (D-OR) and Olympia J. Snowe (R-ME).\6\ The 
WTFA is substantially similar to the Cell Tax Fairness Act of 
2009 and the Cell Phone Tax Moratorium Act of 2007, which Ms. 
Lofgren and Mr. Franks introduced in the 111th and 110th 
Congresses, respectively.\7\
---------------------------------------------------------------------------
    \5\H.R. 1002.
    \6\Wireless Tax Fairness Act of 2011, S. 543, 112th Cong. (2011).
    \7\See Cell Tax Fairness Act of 2009, H.R. 1529, 111th Cong. 
(2009); Cell Phone Tax Moratorium Act of 2007, H.R. 436, 109th Cong. 
(2007).
---------------------------------------------------------------------------
    In general, the WTFA prohibits state and local governments 
from imposing any ``new discriminatory tax on or with respect 
to mobile services, mobile service providers, or mobile service 
property'' for 5 years from the date of its enactment.\8\ The 
bill specifically excludes from its scope charges assessed to 
support universal access (primarily in rural and low-income 
areas) and E-911 fees.\9\ The bill also provides concurrent 
Federal court jurisdiction to a party seeking an injunction 
under the WTFA, which would not otherwise be available due to 
the Tax Injunction Act.\10\
---------------------------------------------------------------------------
    \8\H.R. 1002 Sec. 3.
    \9\Id. Sec. 3(b)(6)(B).
    \10\See 28 U.S.C. Sec. 1341 (prohibiting a Federal court from 
enjoining tax collection if a state court remedy is available).
---------------------------------------------------------------------------

II. WIRELESS TAX RATES ARE GENERALLY HIGHER THAN AVERAGE SALES TAX RATE

    Before the popularization of wireless telecommunications 
services, the American Bell Telephone System (commonly referred 
to as ``Ma Bell''), which later became AT&T, had a regulated 
monopoly over telephony services. As one commentator explains, 
the regulated monopoly system ``involved extraordinary 
privileges (protected monopoly) in return for shouldering 
extraordinary burdens--taxes, government controls, special 
service obligations and others.''\11\ As a regulated monopoly, 
AT&T charged taxes on telephone services that were higher than 
the state's taxes on the purchase of other goods and services.
---------------------------------------------------------------------------
    \11\Larry F. Darby & Joseph P. Fuhr, Jr., Investing in Economic 
Growth: Broadband Network Tax Forbearance, 18 Media L. & Pol'y 1, 16 
(2008).
---------------------------------------------------------------------------
    The U.S. Department of Justice forced the breakup and 
divestiture of AT&T in 1984. The regulated monopoly structure 
continued with the smaller Bell companies until the 
Telecommunications Act of 1996 introduced competition into 
local telephone services markets.\12\ A corresponding decrease 
in taxes on telephone services presumably should have attended 
the disappearance of the government-protected monopoly, but it 
did not. Not only did high tax rates persist on traditional 
landline telephone customers but they were extended to the 
growing number of wireless telecommunications consumers as 
well. ``Rather than reducing excessive taxes on local landline 
phone companies and their customers, which would reduce 
existing state and local revenue, some policymakers claim that 
they have leveled the playing field by expanding discriminatory 
taxes to wireless services.''\13\ To date, in almost every 
state, the combined state and local tax rate on wireless 
telecommunication service is still significantly higher than 
the tax rate on other goods and services.\14\
---------------------------------------------------------------------------
    \12\Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 
56 (1996).
    \13\Scott Mackey, Excessive Taxes and Fees on Wireless Service: 
Recent Trends, 47 State Tax Notes 519, 520 (Feb. 18, 2008) [hereinafter 
Mackey 2008].
    \14\Mackey 2011, supra note 1, at 475.
---------------------------------------------------------------------------
    The effective rate of taxation on wireless services 
increased 4 times faster than the rate on other taxable goods 
and services between January 2003 and July 2007.\15\ These tax 
increases have affected a substantial portion of the 
population. The wireless industry has grown exponentially, from 
33.8 million customers in 1995 to over 300 million customers in 
2010.\16\ According to a recent report, these 300 million users 
``now face a combined federal, state, and local tax and fee 
burden of 16.3 percent, a rate two times higher than the 
average retail sales tax rate and the highest wireless rate 
since 2005.''\17\ In Nebraska, for example, a consumer pays a 
combined state and local tax rate of 23.69 percent for wireless 
service while the average state and local combined sales tax 
rate applicable to other goods and services in that state is 7 
percent.\18\ These high tax rates are in addition to the 
Federal USF (Universal Service Fund) tax, which has increased 
0.9 percent since 2007 (compared to state and local wireless 
tax increases of 0.2 percent).\19\ A report published on 
January 24, 2011, observed the following variations between 
state and local wireless and generally applicable sales tax 
rates, ranked beginning with the state whose effective tax on 
wireless services exceeds its generally applicable sales tax 
the most:\20\
---------------------------------------------------------------------------
    \15\Mackey 2008, supra note 13, at 521.
    \16\http://ctia.org/media/industry_info/index.cfm/AID/10323.
    \17\Mackey 2011, supra note 1, at 475.
    \18\Id. at 478.
    \19\Id. at 477. The USF was created by the Telecommunications Act 
of 1996, supra note 12. Proceeds of the USF are used to subsidize 
telecommunications service to schools, libraries, hospitals, and rural 
consumers.
    \20\Id. at 478.
    
    
    The proceeds of certain taxes imposed uniquely on wireless 
services are increasingly being used to fund government 
programs that have nothing to do with communications services. 
In 2009, Wisconsin raised wireless taxes by 75 cents per line 
to fund police and fire services.\21\ Utah finances its poison 
control centers with wireless fees.\22\ Some municipalities in 
New York are allowed to tax wireless services to pay for local 
schools or transportation infrastructure.\23\ In addition, 
states collect E-911 fees, which they are supposed to use to 
support local emergency communications systems, but some states 
have diverted millions of dollars from E-911 revenues to fund 
unrelated programs.\24\
---------------------------------------------------------------------------
    \21\Mackey 2011, supra note 1, at 479.
    \22\Id.
    \23\Woroch, supra note 1, at 4.
    \24\Federal Communications Commission, Second Annual Report to 
Congress on State Collection and Distribution of Enhanced 911 Fees and 
Charges 10-11 (Aug. 13, 2010), available at http://transition.fcc.gov/
pshs/services/911-services/statecollections.html (last visited July 26, 
2011).
---------------------------------------------------------------------------

               III. THE IMPACT OF HIGH WIRELESS TAX RATES

    High wireless tax rates artificially alter the demand 
market for wireless services. Economic studies have shown that 
wireless services are elastic: as price increases, quantity 
demanded decreases.\25\ In fact, state and local governments 
may be disadvantaging themselves by imposing such high taxes. A 
2009 study concluded:
---------------------------------------------------------------------------
    \25\Jerry Hausman, Efficiency Effects on the U.S. Economy from 
Wireless Taxation, Nat'l Tax J. 53, no. 3 (Sept. 2000).

        The distortionary effects of an ad valorem tax on 
        wireless services vary inversely with the own-price 
        elasticity of demand for wireless services. Although 
        the demand for wireless service has become more elastic 
        over the last decade, wireless taxes have increased. 
        Consequently, the efficiency loss from wireless 
        taxation has also risen during that period. In states 
        that tax wireless services most aggressively, the 
        efficiency loss from an additional dollar of tax 
        revenue raised may be as high as two dollars. 
        Therefore, federal, local, and state governments should 
        carefully scrutinize the tax rates they currently 
        impose on wireless consumers, recognizing that the tax 
        policies in place can produce more harm than good.\26\
---------------------------------------------------------------------------
    \26\Allan T. Ingraham and J. Gregory Sidak, Do States Tax Wireless 
Services Inefficiently? Evidence on the Price Elasticity of Demand, 24 
Va. Tax Rev. 249, 261 (2004) (emphasis added).

The irony of state and local governments' imposition of high 
taxes on wireless services is that decreasing taxes on wireless 
service may actually generate more revenue by broadening the 
wireless tax base and flattening the rate to bring it more in 
line with sales taxes on other goods and services. One study 
concluded that state and local governments lose $15 billion per 
year because of hikes in tax rates.\27\
---------------------------------------------------------------------------
    \27\Woroch, supra note 1, at 10.
---------------------------------------------------------------------------
    High wireless taxes discourage a percentage of potential 
customers from subscribing to wireless services, which results 
in a smaller tax base and consequently less tax revenue to 
governments. Wireless carriers' inability to attract these 
potential customers because of high tax rates means they have 
less capital to invest in and improve telecommunications 
infrastructure. ``Wireless carriers invested about $25 billion 
in their wireless networks in 2008, or roughly 17 percent of 
their gross revenues. If wireless services were subject to the 
same tax treatment as other taxable goods and services, 
carriers would have had up to $2.5 billion more available to 
invest in network improvements.''\28\ On February 10, 2011, 
President Obama announced his Wireless Innovation and 
Infrastructure Initiative, which seeks to expand wireless 
services to 98 percent of Americans to bring ``considerable 
benefits to our economy and society.''\29\ State and local 
taxes that deprive the wireless industry of capital it could 
invest in infrastructure hinder the president's objective and 
slow his goal of universal access.
---------------------------------------------------------------------------
    \28\Mackey 2011, supra note 1, at 479.
    \29\Press Release, White House, President Obama Details Plan to Win 
the Future through Expanded Wireless Access (Feb. 10, 2011), http://
www.whitehouse.gov/the-press-office/2011/02/10/president-obama-details-
plan-win-future-through-expanded-wireless-access.
---------------------------------------------------------------------------
    Consumers ultimately pay the price of high discriminatory 
taxes on wireless services. In other contexts, high taxes on 
particular goods and services reflect a legislature's measured 
view that the good or service imposes a harm on society or the 
environment or causes some other negative externality. For 
example, taxes on cigarettes discourage decisions that result 
in poor health; they also fund the health costs borne by the 
state or locality when a smoker is unable to pay for a tobacco-
related illness at the local hospital. Similarly, taxes on 
gasoline encourage commuters to travel more efficiently and 
conserve resources. An analogy between these so-called ``sin'' 
taxes and taxes on wireless services, however, is inapposite. 
There is nothing inherently dangerous about using cell phones; 
their use actually projects a positive externality on society, 
e.g. more efficient business communications and more intimate 
social connections. High taxes on wireless subscriptions are 
akin to taxes on cigarettes and gasoline even though there is 
no justifiable reason to discourage use of a cell phone.
    Finally, tax policies that discourage wireless use also 
negatively affect secondary markets for smartphone 
applications, wireless-based Internet service, and digital 
goods and services delivered over telecommunications 
networks.\30\ These electronically delivered goods and services 
are used in a variety of important fields, including the 
provision of e-health services and Internet-base education. 
High wireless taxes incidentally burden the demand for these 
beneficial goods and discourage innovation in the digital 
economy.\31\
---------------------------------------------------------------------------
    \30\Cf. Digital Goods and Services Tax Fairness Act of 2011, H.R. 
1860, 112th Cong. (2011) (prohibiting state and local taxation of 
digital goods and services at rate higher than generally applicable 
sales tax rate).
    \31\See generally Digital Goods and Services Tax Fairness Act of 
2011: Hearing on H.R. 1860 Before Subcomm. on Courts, Commercial & 
Admin. Law of the H. Comm. on the Judiciary, 112th Cong. (2011).
---------------------------------------------------------------------------

              IV. LEGISLATIVE HISTORY IN PRIOR CONGRESSES

    In the 111th Congress, the Subcommittee on Commercial and 
Administrative Law held a legislative hearing on the Cell Tax 
Fairness Act of 2009 on June 9, 2009.\32\ On September 15, 
2011, the subcommittee forwarded the bill to the full Committee 
by voice vote, but the full Committee did not act on it.\33\
---------------------------------------------------------------------------
    \32\See generally Cell Tax Fairness Act of 2009: Hearing on H.R. 
1521 Before the Subcomm. on Commercial & Admin. Law of the H. Comm. on 
the Judiciary, 111th Cong. (2009).
    \33\A transcript of the subcommittee markup is on file with the 
Committee.
---------------------------------------------------------------------------
    In the 110th Congress, the Subcommittee on Commercial and 
Administrative Law held a legislative hearing on the Cell Tax 
Fairness Act of 2008 on September 18, 2008.\34\ No further 
action was taken that Congress.
---------------------------------------------------------------------------
    \34\See generally Cell Tax Fairness Act of 2008: Hearing on H.R. 
5793 Before Subcomm. on Commercial & Admin. Law of the H. Comm. on the 
Judiciary, 110th Cong. (2008).
---------------------------------------------------------------------------
    In the 109th Congress, the Subcommittee on Commercial and 
Administrative Law held an oversight hearing entitled ``State 
Taxation of Interstate Telecommunications Services'' on June 
13, 2006.\35\
---------------------------------------------------------------------------
    \35\See generally 2006 Hearing, supra note 1.
---------------------------------------------------------------------------

                                Hearings

    On March 15, 2011, the Subcommittee on Courts, Commercial 
and Administrative Law held a legislative hearing on H.R. 1002 
and heard testimony from: Harry Alford, President and CEO of 
the National Black Chamber of Commerce; Bernita Sims, 
Councilwoman, High Point, North Carolina; and Scott Mackey, a 
partner at KSE Partners LLP and the former Chief Economist of 
the National Conference of State Legislatures.\36\
---------------------------------------------------------------------------
    \36\See generally 2011 Hearing, supra note 4.
---------------------------------------------------------------------------

                        Committee Consideration

    On July 14, 2011, the Committee met in open session and 
ordered the bill H.R. 1002 favorably reported with two 
amendments by voice vote, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that there 
were no recorded votes during the Committee's consideration of 
H.R. 1002.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 1002, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 28, 2011.
Hon. Lamar Smith, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1002, the 
``Wireless Tax Fairness Act of 2011.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Martin von 
Gnechten, who can be reached at 226-2860.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 1002--Wireless Tax Fairness Act of 2011.

                                SUMMARY

    H.R. 1002 would prohibit State and local governments from 
imposing certain new taxes on providers of wireless 
communications service for 5 years after enactment of the 
legislation. The bill would also require the Government 
Accountability Office (GAO) to conduct a study examining the 
impact of the moratorium on consumers. CBO estimates that 
enacting H.R. 1002 would have no significant impact on the 
Federal budget. Pay-as-you-go procedures do not apply to this 
legislation because it would not affect direct spending or 
revenues.
    H.R. 1002 contains an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA), but CBO estimates 
that the mandate would impose no cost on State, local, or 
tribal governments. This bill contains no private-sector 
mandates as defined in UMRA.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    H.R. 1001 would not assign any significant new 
responsibilities to any Federal agencies, and CBO estimates 
that implementing the legislation would have no significant 
cost to the Federal Government.

        ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

    The bill would impose an intergovernmental mandate as 
defined in UMRA because it would preempt the authority of State 
and local governments to impose new taxes, or change existing 
taxes, on wireless services, providers, or property. The 
authority of State and local governments to impose or change 
taxes that they broadly impose on services, businesses, or 
property would be preserved under the bill. The bill also would 
not preempt the authority of governments to collect revenue 
from taxes on wireless services that have already been enacted 
and enforced. CBO did not identify any State or local 
governments that planned to change or impose new wireless taxes 
in the next 5 years; therefore, CBO estimates that the 
preemption would impose no cost on State, local, or tribal 
governments.

                 ESTIMATED IMPACT ON THE PRIVATE SECTOR

    This bill contains no private-sector mandates as defined in 
UMRA.

                         ESTIMATE PREPARED BY:

Federal Costs: Martin von Gnechten
Impact on State, Local, and Tribal Governments: Elizabeth Cove 
    Delisle
Impact on the Private Sector: Samuel Wice

                         ESTIMATE APPROVED BY:

Theresa Gullo
Deputy Assistant Director for Budget Analysis

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
1002 prohibits state and local governments from imposing new 
discriminatory taxes on mobile services, mobile services 
providers, or mobile service property, or any combination 
thereof, for 5 years from the date of its enactment.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 1002 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.

                      Section-by-Section Analysis

    Sec. 1. Short Title. Section 1 sets forth the short title 
of the Act as the ``Wireless Tax Fairness Act of 2011.''
    Sec. 2. Findings. Section 2 makes findings that Congress 
may use its Commerce Clause power and its power under Section 5 
of the 14th Amendment to enact the legislation. Section 2 also 
compares discriminatory wireless taxes to the taxes on 
railroads remedied by the Railroad Revitalization and 
Regulatory Reform Act of 1976 (the ``4-R Act''). Section 2 
states that discriminatory taxes on wireless services should be 
remedied in a manner consistent with the remedies set forth in 
the 4-R Act for railroad taxes.
    Sec. 3. Moratorium. Section 3(a) provides that no state or 
local jurisdiction shall impose a new discriminatory tax on 
mobile services, mobile service providers, or its mobile 
service property during the 5-year period beginning on the date 
of enactment.
    Section 3(b)(1) defines ``mobile service.'' ``Mobile 
Service'' means commercial mobile radio service or any other 
service that is primarily intended for receipt on, transmission 
from, or use with a mobile telephone or other mobile device. 
For example, if streamed music is primarily intended for 
receipt on a desktop computer, but sometimes is received on a 
mobile telephone, the bill would not affect a state's ability 
to impose a new discriminatory tax on streamed music. The bill 
is agnostic with respect to whose intent--whether society's, 
each individual user's, or otherwise--is to be considered in 
making a ``primary intent'' determination. ``Mobile service'' 
includes without limitation the receipt of a ``digital good,'' 
but the bill does not define ``digital good.''
    Section 3(b)(2) defines ``mobile service property.'' 
``Mobile service property'' means all property of any type used 
by a mobile service provider in connection with its business of 
providing mobile services.
    Section 3(b)(3) defines ``mobile service provider.'' 
``Mobile service provider'' means any entity that sells or 
provides mobile services, but only to the extent that it 
provides mobile services.
    Section 3(b)(4) defines ``new discriminatory tax.'' That 
term means a tax imposed by a state or local jurisdiction on or 
with respect to (A) mobile services, and is not generally 
imposed, or is generally imposed at a lower rate, on or with 
respect to tangible personal property, (B) a mobile service 
provider, and is not generally imposed, or is generally imposed 
at a lower rate, on other businesses, or (C) mobile service 
property, and is not generally imposed, or is generally imposed 
at a lower rate, on other commercial or industrial property 
(without regard to taxes on public utility property). This 
provision prohibits state and local governments from imposing 
any new tax on mobile services, mobile service property, or 
mobile service providers that is not also imposed on tangible 
goods and services, non-mobile property, or non-mobile service 
providers, respectively. The bill would not preclude a state or 
locality from raising taxes on all goods and services 
generally, even though doing so would result in raising taxes 
on wireless services. The bill specifically does not prohibit 
any tax that was imposed and actually enforced on mobile 
services, mobile service providers, or mobile service property 
prior to the date of enactment, even if such tax, were it to be 
imposed in the future, would be considered discriminatory under 
the bill.
    Section 3(b)(5) defines ``State or local jurisdiction'' to 
mean any of the several states, the District of Columbia, and 
U.S. territories and possessions, and any subdivisions thereof.
    Section 3(b)(6) defines ``tax.'' ``Tax'' means a charge 
imposed by a governmental entity for the purpose of generating 
revenues for governmental purposes. It excludes a fee imposed 
on a particular entity or class of entities for a specific 
privilege, service, or benefit conferred exclusive on such 
entity or entities. The term ``tax'' does not include a fee or 
charge used to preserve and advance universal service or 
dedicated to supporting E-911 communications systems.
    Section 3(c) provides rules of construction. Under section 
3(c)(1), for purposes of determining what constitutes a ``new 
discriminatory tax,'' all taxes, tax rates, exemptions, 
credits, deductions, and all other adjustments to a generally 
imposed tax, by whatever name called, are to be taken into 
account. Thus, a state that currently imposes a 5 percent 
general sales tax and gives a 2 percent credit on wireless 
subscriptions so that customers currently pay only 3 percent on 
wireless service may not reduce the amount of that credit 
because doing so would result in a higher tax rate only on 
mobile services.
    Section 3(c)(2) states that the principles applicable in 
determining whether a tax is discriminatory under the 4-R Act 
shall apply in determining whether a tax is discriminatory 
under this bill.
    Section 3(c)(3) states that the term ``generally imposed'' 
does not take into account any tax imposed only on specific 
services, industries, or types of property. If a state has a 
generally imposed tax on tangible personal property but 
excludes all taxation on skateboards, the one-off exemption for 
skateboards is excluded from the comparison class of 
``generally imposed'' taxes. This section also provides that 
the term ``new discriminatory tax'' does not include a 
replacement tax that a jurisdiction imposes that is designed to 
result in less revenue to the taxing authority, so long as it 
gives 90 days' prior notice to mobile service providers, is 
approved by popular vote, and is collected from mobile service 
customers. Without this section, a state that currently imposes 
a 10 percent tax on mobile services and a 5 percent tax on all 
other services could not lower its mobile services tax to 8 
percent because the new imposition, still 3 percent higher than 
the generally imposed tax, would be considered new and 
discriminatory.
    Sec. 4. Enforcement. Section 4 permits review of violations 
of the Act in Federal district court notwithstanding the Tax 
Injunction Act. It also establishes a burden of proof that a 
party seeking relief must meet when bringing lawsuits under the 
Act and allows for specific relief for that party. This section 
does not pre-empt state court jurisdiction; rather, it gives 
Federal courts concurrent jurisdiction with state courts.
    Sec. 5. GAO Study. Section 5 requires the Comptroller 
General of the United States to study, throughout the 5-year 
moratorium, (i) how, and the extent to which, taxes imposed by 
state and local jurisdictions on mobile services, mobile 
service providers, and mobile service property impact the costs 
consumers pay for mobile services, and (ii) the extent to which 
the bill impacts those costs. A report containing the results 
of the study must be transmitted to Congress within 6 years of 
the enactment of the Act.

                            Dissenting Views

    When considering legislation affecting state taxation, we 
should carefully balance competing interests. On one hand, we 
should ensure that the states do not burden interstate commerce 
through their taxing authority. On the other hand, we should 
respect the right of states to tax activity within their 
borders, especially during these difficult economic times.
    H.R. 1002 is one such bill that presents this challenge.
    I agree that increased taxes and fees on wireless services 
hurt consumers. Every penny matters and every increased 
expenditure can have a negative impact on consumers' 
pocketbooks and their choices to spend on other goods and 
services.
    While we consider this legislation, we should also consider 
how we can help our state and local governments. One solution 
would be legislation similar to H.R. 5660, the ``Main Street 
Fairness Act,'' which was introduced by my former colleague, 
Representative Bill Delahunt (D-MA) in the 110th Congress. H.R. 
5660 would help level the playing field between remote 
retailers and their brick and mortar counterparts as well as 
provide an equitable avenue to ensure state and local 
governments are able to collect sales and use taxes.
    I cannot support H.R. 1002 unless it is combined with 
legislation similar to the Main Street Fairness Act.

                                   John Conyers, Jr.

                            I. INTRODUCTION

    H.R. 1002, the ``Wireless Tax Fairness Act of 2011,'' would 
impose on states a 5-year moratorium on any new discriminatory 
tax on mobile services, mobile service providers, and mobile 
service property. The bill will undermine the ability of states 
to pay for essential services, such as public health and 
safety, education, and maintenance of state highways and will 
be especially harmful during this difficult economic time as it 
impacts the flexibility of states to respond to the economic 
downturn. The legislation is based on faulty information and 
will benefit the wireless services industry. Further, the 
legislation contains vague language that will lead to increased 
litigation for both state and local governments and the 
wireless industry. Because of these and other concerns 
presented by the bill, local governments, the American 
Federation of State, County and Municipal Employees, and the 
Federation of Tax Administrators oppose H.R. 1002.\1\
---------------------------------------------------------------------------
    \1\Letter from the National Association of Counties, the National 
League of Cities, the United States Conference of Mayors, the 
International City/County Management Association, the Government 
Finance Officers Association, and the National Association of 
Telecommunications Officers and Advisors to Representative Lamar Smith, 
Chairman of the House Committee on the Judiciary (July 13, 2011) (on 
file with the House of Representatives Committee on the Judiciary, 
Democratic Staff); General Letter from Charles M. Loveless, Director of 
Legislation for the American Federation of State, County and Municipal 
Employees, AFL-CIO (July 13, 2011) (on file with the House of 
Representatives Committee on the Judiciary, Democratic Staff); Letter 
from Patrick T. Carter, President of the Federation of Tax 
Administrators to Representative Lamar Smith, Chairman of the House 
Committee on the Judiciary and Representative John Conyers, Jr., 
Ranking Member of the House Committee on the Judiciary (July 12, 2011) 
(on file with the House of Representatives Committee on the Judiciary, 
Democratic Staff).
---------------------------------------------------------------------------
    For these reasons, and those discussed below, I 
respectfully dissent and urge my colleagues to reject this 
seriously flawed legislation.

                        II. SUMMARY OF H.R. 1002

    H.R. 1002 imposes on states a 5-year moratorium on any new 
discriminatory taxes on mobile services, mobile service 
providers, and mobile service property. The legislation will 
prevent states from imposing taxes on:

         Lmobile services unless the tax is also 
        imposed on all other services or tangible personal 
        property;

         Lmobile service providers unless the tax is 
        also imposed on all other businesses; and

         Lmobile service property unless the tax is 
        also imposed on all other commercial or industry 
        property.

III. H.R. 1002 WILL FORCE STATES TO CUT SERVICES AND INCREASE TAXES ON 
                         NON-WIRELESS TAXPAYERS

    As a policy matter, we note that state and local 
governments work closely with the federal government to provide 
essential government services such as educating our children, 
maintaining needed transportation infrastructure, and 
protecting us from domestic and foreign terrorism. State and 
local governments pay for these services through tax revenues. 
States, however, would be hampered in their ability to provide 
these essential services if Congress restricts their ability to 
collect needed revenues as proposed by H.R. 1002.
    H.R. 1002 will have a substantial negative impact state 
revenues. Although the Congressional Budget Office estimates 
that the bill's impact would not exceed the Unfunded Mandates 
threshold, it will restrain the states' ability to cope with 
economic downturns in several respects.\2\
---------------------------------------------------------------------------
    \2\Congressional Budget Office Cost Estimate, H.R. 1002: Wireless 
Tax Fairness Act of 2011 (July 28, 2011).
---------------------------------------------------------------------------
    In addition, H.R. 1002 will deny states the flexibility to 
raise revenue in several respects.\3\ First, the legislation's 
moratorium becomes effective upon enactment,\4\ which would 
prevent states from enforcing enacted tax laws that have yet to 
become effective. This will give states insufficient time to 
adjust to the expected revenue losses. Second, H.R. 1002 will 
hinder the states' ability to balance their budgets. Most 
states and local governments are required, either statutorily 
or constitutionally, to balance their budgets.\5\ To balance 
their budgets, they increase revenue through taxes and fees, or 
cut spending.
---------------------------------------------------------------------------
    \3\State Taxation: The Impact of Congressional Legislation on State 
and Local Government Revenues: Hearing Before the Subcommittee on 
Commercial and Administrative Law of the H. Comm. on the Judiciary, 
111th Cong. 27-28 (2010) (Testimony of Vermont Governor Jim Douglas).
    \4\H.R. 1002, Section 3(b)(4).
    \5\State Taxation: The Impact of Congressional Legislation on State 
and Local Government Revenues: Hearing Before the Subcommittee on 
Commercial and Administrative Law of the H. Comm. on the Judiciary, 
111th Cong. 5 (2010) (testimony of Vermont Governor Jim Douglas) (``As 
you know, states must balance their budgets.''); id. at 14 (testimony 
of B. Glen Whitley, Tarrant County Judge on behalf of the National 
Association of Countie s) (``Unlike the Federal Government, local 
governments must balance their budgets. . . .''); National Association 
of State Budget Officers, Budget Processes in the States, at 40 (Summer 
2008).
---------------------------------------------------------------------------
    During the current economic climate, the tax revenue base 
has declined as a result of higher unemployment, lower real 
estate property taxes, and less sales tax revenue. The need for 
state and local government services, however, has not 
correspondingly declined. In fact, demand for many of these 
essential services, such as unemployment payments and other 
social programs, has increased during the current economic 
downturn.\6\ The Center on Budget and Policy Priorities 
estimates that the states will face combined budget shortfalls 
of $103 billion for fiscal year 2012.\7\ To balance their 
budgets, state and local governments have had to respond 
through regressive measures. For example, 44 states have cut 
more than 400,000 government jobs since August 2008; 
California, Michigan, and Delaware have slashed benefits to 
families living below the poverty line; and Texas cut about $1 
billion in education funding over the past two years from its 
already below-average education budget and another $1 billion 
from its higher education budget.\8\ Additionally, some states 
have reduced their aid to local governments for fiscal 2012.\9\ 
while others, such as Hawaii, Connecticut, and Illinois, have 
significantly raised personal and corporate income taxes.\10\
---------------------------------------------------------------------------
    \6\Donald J. Boyd, Nelson A. Rockefeller Institute of Government, 
Recession, Recovery, and State-Local Finances, Presentation before the 
Forecasters Club of New York, at 2 (Jan. 28, 2010).
    \7\Center on Budget and Policy Priorities, New Fiscal Year Brings 
Further Budget Cut to Most States, Slowing Economic Recovery (June 28, 
2011).
    \8\Instead of Signs of Recovery, a Sucker Punch for State Budgets, 
Wash. Post, May 29, 2011, at G7.
    \9\National Governors Association and National Association of State 
Budget Officers, The Fiscal Survey of States, Spring 2011, at 8, 
available at http://www.nasbo.org/
LinkClick.aspx?fileticket=yNV8Jv3X7Is%3d&tabid=38.
    \10\Instead of Signs of Recovery, a Sucker Punch for State Budgets, 
Wash. Post, May 29, 2011, at G7.
---------------------------------------------------------------------------
    H.R. 1002, however, will prevent states from considering 
all potential tax bases to respond to economic changes. The 
moratorium will exclude from possible state taxation millions 
if not billions of dollars in future revenue from wireless 
services taxes.\11\ Thus, to balance their budgets, states will 
be forced to cut even more services and shift more of the tax 
burden onto other local taxpayers. For example, state and local 
governments may have to increase taxes on traditional land line 
phone services, which will impact older and less well-to-do 
residents who continue to rely more heavily on those 
services.\12\
---------------------------------------------------------------------------
    \11\``[T]he legislation would effectively create a ban on all 
wireless services taxes because of the difficulties involved in raising 
other taxes, for example, property and sales taxes. . . .'' The Cell 
Tax Fairness Act of 2009: Hearing on H.R. 1521 Before the Subcommittee 
on Commercial and Administrative Law of the H. Comm. on the Judiciary, 
111th Cong. 84 (2009) (written responses of Joanne Hovis).
    \12\Id. at 86.
---------------------------------------------------------------------------
    In sum, H.R. 1002 will foreclose from state and local 
governments millions of dollars in revenue which they 
desperately needed to rebound from the recent recession.

             IV. H.R. 1002 SECURES FAVORABLE TREATMENT FOR 
                       WIRELESS SERVICE PROVIDERS

    H.R. 1002 specifically benefits one industry. Although 
wireless service providers contend that they have been unfairly 
singled out for taxation, which inhibits economic growth and 
development, evidence reveals otherwise.\13\
---------------------------------------------------------------------------
    \13\The Cell Tax Fairness Act of 2008: Hearing on H.R. 5793 Before 
the Subcommittee on Commercial and Administrative Law of the H. Comm. 
on the Judiciary, 110th Cong. 73 (2008) (lay responses to post-hearing 
questions).
---------------------------------------------------------------------------
    First, many types of industries are subject to taxes that 
are specifically targeted to their industries. These include 
the travel, hotel, entertainment, and transportation 
industries, and non-telecom public utilities.\14\ As disparate 
tax treatment is not unconstitutional.\15\ state and local 
legislators may decide whether an industry, such as the 
wireless industry, should be subject to different tax 
rates.\16\
---------------------------------------------------------------------------
    \14\Tillman L. Lay, Some Thoughts on Our System of Federalism in a 
World of Convergence, L. Rev. Mich. State Univ.-Detroit C. L. 223-237 
(2000).
    \15\In Regan v. Taxation With Representation, the Supreme Court 
stated that ``legislatures have especially broad latitude in creating 
classifications and distinctions in tax statutes.'' 461 U.S. 540, 547 
(1983). See also Madden v. Kentucky, 309 U.S. 83, 87-88 (1940) (``The 
broad discretion as to classification possessed by a legislature in the 
field of taxation has long been recognized . . . [T]he passage of time 
has only served to underscore the wisdom of that recognition of the 
large area of discretion which is needed by a legislature in 
formulating sound tax policies.'').
    \16\The Wireless Tax Fairness Act of 2011: Hearing on H.R. 1002 
Before the Subcommittee on Courts, Commercial and Administrative Law of 
the H. Comm. on the Judiciary, 112th Cong. 42 (2011) (testimony of 
Bernita Sims).
---------------------------------------------------------------------------
    Second, some jurisdictions have, in fact, favored the 
wireless services industry over other industries.\17\ Although 
many states treat telecommunications as a separate 
classification, and therefore tax it at a different rate than 
other goods and services, some jurisdictions, including Idaho, 
Louisiana, and Nevada, favor wireless services by imposing on 
them lower rates than the general sales tax rate.\18\
---------------------------------------------------------------------------
    \17\The Cell Tax Fairness Act of 2009: Hearing on H.R. 1521 Before 
the Subcommittee on Commercial and Administrative Law of the H. Comm. 
on the Judiciary, 111th Cong. 87 (2009) (written responses of Joanne 
Hovis).
    \18\The Wireless Tax Fairness Act of 2011: Hearing on H.R. 1002 
Before the Subcommittee on Courts, Commercial and Administrative Law of 
the H. Comm. on the Judiciary, 112th Cong. 30 (2011) (testimony of 
Scott Mackey).
---------------------------------------------------------------------------
    Additionally, the actual state and local tax burden on 
wireless services and providers is lower than reported. H.R. 
1002 addresses state and local taxes and fees, and does not 
include federal taxes and fees. However, supporters commonly 
include federal fees and taxes to assert the burdensomeness of 
state and local taxes on wireless services.\19\ Further, 
providers do not pay more in property taxes when compared to 
other businesses; in fact, they pay roughly the same 
percentage.\20\
---------------------------------------------------------------------------
    \19\The Cell Tax Fairness Act of 2008: Hearing on H.R. 5793 Before 
the Subcommittee on Commercial and Administrative Law of the H. Comm. 
on the Judiciary, 110th Cong. 50 (2008) (testimony of Tillman Lay).
    \20\H.R. 1521, the Cell Tax Fairness Act of 2009: Hearing Before 
the Subcomm. on Com. and Admin. Law of the H. Comm. on the Judiciary, 
111th Cong. 51 (2009) (Written Testimony of Don Stapley).
---------------------------------------------------------------------------
    Finally, supporters of H.R. 1002 suggest that wireless 
taxes burden broadband development and competitiveness and 
therefore a moratorium is needed.\21\ However, state and local 
taxes on wireless services and providers have not diminished 
adoption rates.\22\ Taxes also have not inhibited broadband 
expansion. As City Council Member from High Point, North 
Carolina Bernita Sims stated,
---------------------------------------------------------------------------
    \21\H.R. 1002, the Wireless Tax Fairness Act of 2011: Hearing 
Before the Subcomm. on Courts, Com. and Admin. Law of the H. Comm. on 
the Judiciary, 112th Cong. 25-26 (2011) (Written Testimony of Scott 
Mackey); id. at 15 (Written Testimony of Representative Zoe Lofgren); 
State Taxation: The Impact of Congressional Legislation on State and 
Local Government Revenues: Hearing Before the Subcomm. on Com. and 
Admin. Law of the H. Comm. on the Judiciary, 111th Cong. 80 (2010) 
(Written Responses of Honorable B. Glen Whitley) (``[T]he cell phone 
industry claims that it is unfairly taxed, which hinders innovation, 
growth, and profitability.'').
    \22\H.R. 1002, the Wireless Tax Fairness Act of 2011: Hearing 
Before the Subcomm. on Courts, Com. and Admin. Law of the H. Comm. on 
the Judiciary, 112th Cong. 44 (2011) (Written Testimony of Bernita 
Sims); H.R. 1521, the Cell Tax Fairness Act of 2009: Hearing Before the 
Subcomm. on Com. and Admin. Law of the H. Comm. on the Judiciary, 111th 
Cong. 29 (2009) (Written Testimony of Joanne Hovis); H.R. 1521, the 
Cell Tax Fairness Act of 2009: Hearing Before the Subcomm. on Com. and 
Admin. Law of the H. Comm. on the Judiciary, 111th Cong. 94 (2009) 
(Written Responses of Honorable Don Stapley); H.R. 5793, the Cell Tax 
Fairness Act of 2008: Hearing Before the Subcomm. on Com. and Admin. 
Law of the H. Comm. on the Judiciary, 110th Cong. 49 (2008) (Written 
Testimony of Tillman Lay).
---------------------------------------------------------------------------
    ``[p]rofit motivation is the reason for slower (or 
nonexistent) deployment in rural areas. Deployment of 
communications networks is extremely costly; communications 
carriers are private, for-profit companies and they quite 
rationally allocate their investment resources to areas of the 
country where they are likely to achieve the highest return on 
investment--those areas that have relatively dense populations 
and thereby greater potential penetration and higher revenues 
per mile of construction.''\23\
---------------------------------------------------------------------------
    \23\H.R. 1002, the Wireless Tax Fairness Act of 2011: Hearing 
Before the Subcomm. on Courts, Com. and Admin. Law of the H. Comm. on 
the Judiciary, 112th Cong. 44 (2011) (Written Testimony of Bernita 
Sims).
---------------------------------------------------------------------------
    H.R. 1002 relies upon inaccurate arguments to benefit 
wireless service providers.

  V. H.R. 1002 WILL NOT ENSURE TAX REFORM AND MAY LEAD TO SUCCESSIVE 
                          TEMPORARY MORATORIA

    Supporters of a 5-year moratorium suggest that the 
moratorium will inspire state and local governments to reform 
their telecommunications taxes.\24\ This suggestion ignores the 
efforts that such governments have already been making toward 
reforming their telecommunications taxes.\25\ By excluding from 
the discussion the wireless services platform, the moratorium 
will effectively prevent for the next five years a broad and 
meaningful reform which is both technology and revenue 
neutral.\26\ Further, as with the Internet Tax Freedom Act.\27\ 
the temporary moratorium at the heart of H.R. 1002 may be 
continued for future years.
---------------------------------------------------------------------------
    \24\H.R. 1521, the Cell Tax Fairness Act of 2009: Hearing Before 
the Subcomm. on Com. and Admin. Law of the H. Comm. on the Judiciary, 
111th Cong. 88 (2009) (Written Responses of Honorable Joseph A. 
Gibbons).
    \25\Hearing on State Taxation: The Impact of Congressional 
Legislation on State and Local Government Revenues: Hearing Before the 
Subcomm. on Com. and Admin. Law of the H. Comm. on the Judiciary, 111th 
Cong. 15 (2010) (Statement of Honorable B. Glen Whitley) (``NACo has 
long supported communication, tax reform, and simplification.''); H.R. 
1521, the Cell Tax Fairness Act of 2009: Hearing Before the Subcomm. on 
Com. and Admin. Law of the H. Comm. on the Judiciary, 111th Cong. 82 
(2009) (Written Responses of Honorable Mara Candelaria Reardon).
    \26\Hearing on State Taxation: The Impact of Congressional 
Legislation on State and Local Government Revenues: Hearing Before the 
Subcomm. on Com. and Admin. Law of the H. Comm. on the Judiciary, 111th 
Cong. 15 (2010) (Statement of Honorable B. Glen Whitley) (``Moratoriums 
harm local governments' ability to reform their tax systems, and are 
especially troubling for local jurisdictions that rely on wireless 
taxes.''); H.R. 1002, the Wireless Tax Fairness Act of 2011: Hearing 
Before the Subcomm. on Courts, Com. and Admin. Law of the H. Comm. on 
the Judiciary, 112th Cong. 67 (2011) (Statement of the Federation of 
Tax Administrators); H.R. 1521, the Cell Tax Fairness Act of 2009: 
Hearing Before the Subcomm. on Com. and Admin. Law of the H. Comm. on 
the Judiciary, 111th Cong. 95 (2009) (Written Responses of Honorable 
Don Stapley).
    \27\Pub. L. No. 110-108, 121 Stat. 1024 (2007).
---------------------------------------------------------------------------

          VI. VAGUE DEFINITIONS WITHIN H.R. 1002 WILL LEAD TO 
                          INCREASED LITIGATION

    H.R. 1002 will increase litigation costs for wireless 
services providers and state and local governments.\28\
---------------------------------------------------------------------------
    \28\H.R. 1002, the Wireless Tax Fairness Act of 2011: Hearing 
Before the Subcomm. on Courts, Com. and Admin. Law of the H. Comm. on 
the Judiciary, 112th Cong. 68 (2011) (Statement of the Federation of 
Tax Administrators).
---------------------------------------------------------------------------
    Two simple examples highlight the many uncertainties that 
H.R. 1002 creates. First, H.R. 1002 describes ``new 
discriminatory tax'' as a tax that is ``not generally imposed, 
or is generally imposed at a lower rate'' on similar services, 
businesses, or property.\29\ Courts will undoubtedly have to 
interpret the vague term ``generally imposed.'' Second, H.R. 
1002 requires as part of the determination as to whether a tax 
is a ``new discriminatory tax'' ``all taxes, tax rates, 
exemptions, deductions, credits, incentives, exclusions, and 
other similar factors.''\30\ Because many jurisdictions exclude 
from sales tax imposition milk, for example, courts will have 
to determine whether the legislation is intended to compare the 
tax rates on wireless services and something as disparate as 
milk.
---------------------------------------------------------------------------
    \29\H.R. 1002, Section 3(b)(4). Also see Hearing on State Taxation: 
The Impact of Congressional Legislation on State and Local Government 
Revenues: Hearing Before the Subcomm. on Com. and Admin. Law of the H. 
Comm. on the Judiciary, 111th Cong. 27 (2010) (Statement of Vermont 
Governor Jim Douglas) (``[the wireless tax bill] uses the term 
`discriminatory,' and there will probably be a lot of debate over what 
constitutes a discriminatory tax.'').
    \30\H.R. 1002, Section 3(c)(1).
---------------------------------------------------------------------------
    Given these and other new limitations on their ability to 
raise revenue, states will litigate to establish the narrowest 
interpretations of the terms within H.R. 1002. Likewise, 
wireless service providers will litigate to establish the 
broadest interpretations of the terms within H.R. 1002.

                            VII. CONCLUSION

    H.R. 1002 is irresponsible legislation that will restrict 
state flexibility to raise much-needed revenues, which will 
force state governments to eliminate essential governmental 
programs and services, and shift tax burdens to other 
taxpayers. For all of these reasons, I respectfully dissent.

                                   Judy Chu.

                                  
