Talking Points on HR 49/ S 150
"Internet Tax Non-Discrimination Act"
The Truth About the Manager's Amendment:
It Fails to Address the Concerns of State
and Local Governments
November 12, 2003
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While state and local government officials are
grateful to the Managers for attempting to meet our concerns, the
Managers’ Amendment falls short. The proposed legislative
language neither addresses local government concerns nor achieves
the relief, which the accompanying Talking Points to the Amendment
claim to be the Managers’ intent.
Senators must know that a vote in favor of the Managers’ Amendment
is a vote to take away funds from state and local governments. Funds
that are used to provide first responders, teachers, schools and
other governmental services. And while the Managers will tell you
the organizations that are scoring the vote, no Senator should ever
doubt that a vote to protect public safety and schools is always
the right vote.
Definition of Internet Access
The Managers claim that they have added language to clarify that
only those telecommunications services (high-speed access to the
Internet) that are explicitly used by an Internet Service Provider
(ISP) to provide Internet access services are exempt from taxation.
- Truth #1: Were the legislative language to achieve the
Managers’ intent, which it does not, it will none-the -less
cost local governments hundreds of millions of dollars. Senator
Alexander’s letter from the CBO reflects that the CBO agrees
with local governments’ reading of the language.
- Truth #2: The use of the terms “purchased, used
or sold" to identify what telecommunications services are
exempt from tax means that any dial-up line is exempted from taxation.
- Truth #3: The Managers fail to recognize the litigious
nature of the telecommunications industry.
Local governments will not only lose hundreds of millions of dollars
of tax revenues, state and local government will be forced to
expend hundreds of thousands of dollars defending against the
industry as it looks to expand the scope of the law in court.
- Truth #4 : The Managers fail to recognize that it is
the telephone industry which seeks to circumvent the original
intent of the Internet Tax Freedom Act by moving traditional voice
services to the Internet
Definition of Tax on Internet Access
The Managers claim their amendment addresses the state and local
governments’ concern that the removal of the grandfather provision
could bar states and localities from collecting franchise fees,
property and income taxes from telecommunications companies and
ISPs.
Truth: While the Managers amendment does provides protection
for property, income and some other corporate taxes, it does not
extend the protection to certain taxes levied in lieu of income
taxes or franchise fees, a practice in multiple states. The Managers
have ensured that the language protects their state and local
governments, but it is not clear that it protects all states and
local governments.
Duration
Because there are so many ambiguities in the Managers’ Amendment,
local governments request that Senators adopt a two-year extension
and spend the time to ensure that the legislative language achieves
the intent of the Senate. That opportunity may be lost forever,
as will the revenues to local government from the unintended consequences
of the Managers Amendment.
For More Information: http://www.telecommunityalliance.org/issues/internettaxation.html
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