TLJ Daily E-Mail Alert No. 284, October 11, 2001.

Tech Law Journal Daily E-Mail Alert

October 11, 2001, 9:00 AM ET, Alert No. 284.
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House Committee Votes 2 Year Extension of Net Tax Moratorium

10/10. The House Judiciary Committee passed a substitute version of HR 1552, the Internet Tax Nondiscrimination Act, a bill to extend the current moratorium on Internet access taxes, and multiple and discriminatory taxes on Internet commerce. The current ban expires on October 20. The Committee approved an amendment in the nature of a substitute offered by Rep. Spencer Bachus (R-AL) that provides a two year extension.

HR 1552, as introduced, and as approved by the Subcommittee on Commercial and Administrative Law on August 2, would have provided a five year extension of the ban on multiple or discriminatory taxes, and permanently banned taxes on Internet access. The vote on Bachus's amendment was 19 to 15. Then, the bill, as amended, passed by a voice vote.

This Bachus amendment provides that "Section 1101(a) of the Internet Tax Freedom Act (47 U.S.C. 151 note) is amended by striking "3 years after the date of the enactment of this Act" and inserting "on November 1, 2003."

Section 1101(a) of the Internet Tax Freedom Act, which was enacted in late 1998, provides that "No State or political subdivision thereof shall impose any of the following taxes during the period beginning on October 1, 1998, and ending 3 years after the date of the enactment of this Act ... (1) taxes on Internet access, unless such tax was generally imposed and actually enforced prior to October 1, 1998 ... (2) multiple or discriminatory taxes on electronic commerce."

Section 1101(b) provides that "Except as provided in this section, nothing in this title shall be construed to modify, impair, or supersede, or authorize the modification, impairment, or superseding of, any State or local law pertaining to taxation that is otherwise permissible by or under the Constitution of the United States or other Federal law and in effect on the date of enactment of this Act".

Rep. Bob Barr (R-GA), Rep. Bob Goodlatte (R-VA), and other proponents of the five year extension, argued that Internet sales account for less than one per cent of retail sales. They also argued that passage of this bill would require fair treatment of Internet commerce, would assist the development of the Internet, and would grow the economy.

Several members, including Rep. Bachus and Rep. William Delahunt (D-MA), argued that the Internet tax moratorium is harming the ability of state and local taxing authorities to finance schools, police, and fire protection. They also argued that any legislation should both extend the current moratorium, and address state collection of sales and use taxes, which is not affected by the moratorium. Currently, Quill v. North Dakota, 504 U.S. 298 (1992), provides that state and local taxing authorities are barred under the Commerce Clause from requiring remote sellers without a substantial nexus to the taxing jurisdiction to collect sales taxes for sales to persons in the jurisdiction; however, the Court added that Congress may extend such authority. Congress has passed no legislation pertaining to sales and use taxes. However, there are several bills pending in the Congress that would provide this authority. See, for example, HR 1410, sponsored by Rep. Ernest Istook (R-OK), and S 512, sponsored by Sen. Byron Dorgan (D-ND).

Rep. Bachus also offered an amendment that would have addressed this issue. However, it was ruled non germane. Rep. Bachus also offered an amendment that would have provided for a mere eight month extension. It was rejected by a vote of 12 to 19. He argued that a shorter extension, as opposed to a longer extension, was necessary to maintain bargaining leverage on the state and local sales tax collection issue.

Anti Terrorism Bills

10/10. On Wednesday, October 10, the Senate continued its consideration of S 1447, the Aviation Security Bill. It did not take up its anti terrorism bill, S 1510, the USA Act. Nor did the House take up its version, HR 2975, the PATRIOT Act. Either or both houses may take up their versions of these anti terrorism bills on Thursday, October 11.

Both bills contain many provisions that would increase the ability of law enforcement, intelligence, and other government agencies to combat terrorism, including expanded authority to conduct electronic surveillance of phone and Internet communications.

The CDT wrote a "Dear Activist" letter regarding the pending anti terrorism bills. It states, in part: "Legislation to expand government surveillance will be considered by the Senate (and maybe the House) on Thursday, October 11. In the Senate, Sen. Russ Feingold is planning to offer amendments Thursday morning that will address some of the privacy concerns raised by the pending bills, by requiring government surveillance to be more focused and subject to meaningful judicial controls. CDT supports the Feingold amendments."

House Committee Considers Cyber Security

10/10. The House Science Committee held a hearing titled "Cyber Security – How Can We Protect American Computer Networks From Attack?" Rep. Sherwood Boehlert (R-NY), the Chairman of the Committee, said in his opening statement that "American society has become vastly more dependent on computers and the Internet in recent years, making us more vulnerable to criminal or terrorist attacks on our computer networks. Yet research and development on computer security have not kept pace with the growing significance of the threat." He said that he intends to follow up with legislation.

William Wulf (AT&T) said in his prepared statement that "We have virtually no research base on which to build truly secure systems and only a tiny cadre of academic, long term, basic researchers who are thinking deeply about these problems. ... Well funded, long term basic research on computer security is crucial to our national security." See also, prepared statements of Eugene Spafford (Purdue University's CERIAS), Terry Benzel (Network Associates), and Robert Weaver (Secret Service). See also, Committee release.

Pelosi Elected House Minority Whip

10/10. House Democrats elected Rep. Nancy Pelosi (D-CA) to be House Minority Whip, the second ranking position in the House Democratic leadership. She defeated Rep. Steny Hoyer (D-MD). The previous Minority Whip, Rep. David Bonior (D-MI), stepped down, because he is running for Governor of Michigan. The top position in the House Democratic leadership is House Minority Leader. Rep. Dick Gephardt (D-MO) continues in this position.

House Passes Internet Education Bill

10/10. The House passed HR 1992, the Internet Equity and Education Act of 2001, by a vote of 354 to 70. See, Roll Call No. 375. This bill would make it easier to obtain student loans for Internet based education, and other distance learning. The bill is sponsored by Rep. Johnny Isakson (R-GA).

The House rejected an amendment in the nature of a substitute [PDF] that was offered by Rep. Patsy Mink (D-HI), by a vote of 99 to 327. See, Roll Call No. 374. She had argued that the relaxed standards of the bill would facilitate fraud, and increase student loan default rates.

The bill amends the Higher Education Act of 1965 by removing the burden of the "12-hour rule" for non-traditional programs. This rule requires educational institutions to keep voluminous attendance records to demonstrate that their students attended certain types of work sessions. The bill also makes exceptions to the 50% requirement by allowing a limited number of institutions to offer more than 50% of their courses by telecommunications, or to serve more than 50% of their students through telecommunications courses. The bill also addresses incentive compensation provisions.

On September 21, Sen. Mike Enzi (R-WY), and others, introduced S 1445, a companion bill in the Senate. It has been referred to the Senate Committee on Health, Education, Labor and Pensions.

Committee Approves Financial Services Antifraud Network Act

10/10. The House Judiciary Committee approved HR 1408, the Financial Services Antifraud Network Act of 2001, by a voice vote. This bill, which was approved by the House Financial Services Committee on August 2, provides that "financial regulators shall ... develop procedures to provide a network for the sharing of antifraud information", such as formal findings in disciplinary proceedings of various regulatory bodies. One of the purposes of the bill is to "to take advantage of Internet technology and other advanced data-sharing technology to modernize the fight against fraud in all of its evolving manifestations and permutations."

House Committee to Mark Up Internet Gambling Bill

10/10. The House Financial Services Committee is scheduled to mark up HR 3004, the Financial Anti Terrorism Act of 2001, on Thursday morning, October 11. This is a large bill introduced by Rep. Mike Oxley (R-OH) and others on October 3 which is intended to combat the financing of terrorism and other financial crimes. Title III of the bill pertains to combating international money laundering. However, it also contains, at §§ 303 and 304, provisions which are aimed at drying up the flow of money in Internet gambling.

§ 303 provides, in part, that: "No person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling (1) credit, or the proceeds of credit, extended to or on behalf of such other person (including credit extended through the use of a credit card); (2) an electronic fund transfer or funds transmitted by or through a money transmitting business, or the proceeds of an electronic fund transfer or money transmitting service, from or on behalf of the other person; (3) any check, draft, or similar instrument which is drawn by or on behalf of the other person and is drawn on or payable at or through any financial institution; or (4) the proceeds of any other form of financial transaction as the Secretary may prescribe by regulation which involves a financial institution ..." § 304 requires the U.S. government to encourage foreign governments and international fora to further to goals of the bill with respect to illegal Internet gambling.

FTC Files Complaint Against MSC.Software

10/10. The FTC filed an administrative complaint against MSC.Software alleging violation of the Clayton Act. The FTC challenges MSC's 1999 acquisitions of Universal Analytics and Computerized Structural Analysis & Research on the basis that the acquisitions eliminate competition in the market for a type of computer aided engineering software known as Nastran. The FTC seeks the establishment of two competing businesses. See also, FTC release.

NTIA to Hold Conference on Broadband Deployment

10/10. The National Telecommunications and Information Administration (NTIA) announced that it will hold a day long conference on Friday, October 12, on the status of broadband deployment in the United States. See, NTIA release and agenda.

More News

10/10. The U.S. District Court (DDC) issued its Order [PDF] approving the stipulation for dismissal of the State of New Mexico in the Microsoft antitrust case.

10/10. The Senate Judiciary Committee's Subcommittee on Administrative Oversight and the Courts postponed its hearing to examine new priorities and challenges for the FBI, which had been scheduled for October 10.

10/10. The NCTA wrote a letter [PDF] to FCC Chairman Michael Powell, and others at the FCC, regarding recent "measures to facilitate the retail availability of set-top boxes" undertaken by cable companies. It concludes that "The policies adopted by the NCTA Board represent a major advance towards meeting the goals of Section 629 of the Communications Act – the 'commercial availability' provision." See also, NCTA release.

10/10. The Supreme Court of the United States heard oral argument in a telric case: Verizon v. FCC (00-511), WorldCom v. Verizon (00-555), FCC v. Iowa Utilities Board (00-587), AT&T v. Iowa Utilities Board (00-590), and General Communications v. Iowa Utilities Board (00-602), consolidated. See, USTA reaction.

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Thursday, Oct 11

9:30 AM. The FCC will hold a meeting. See, agenda, below. Location: Commission Meeting Room, FCC, 445 12th Street, SW, Room TWC305, Washington DC.

9:30 AM. The House Finance Committee will hold a meeting to mark up HR 3004, the Financial Anti Terrorism Act of 2001. Section 303 prohibits the use of credit, electronics funds transfers, or checks in connection with unlawful Internet gambling. Location: Room 2128, Rayburn Building.

CANCELLED. 10:00 AM. The Senate Judiciary Committee will hold an business meeting to consider pending calendar business. Location: Room 226, Dirksen Building.

10:00 AM. The House Judiciary Committee will hold an oversight hearing titled "Using Information Technology to Secure America's Borders: INS Problems with Planning and Implementation." Location: Room 2141, Rayburn Building.

12:00 NOON. The Federal Communications Bar Association (FCBA) will host a luncheon titled "Competition in Japan's Telecommunications Sector." The speaker will be Shogo Itoda, Commissioner, Japan Fair Trade Commission. RSVP to DC Bar Sections Office at 202-626-3463. The price is $25 for FCBA members. Location: Arnold & Porter, Paul Porter Room, 10th Floor, 555 12th Street, NW, Washington DC.

POSTPONED TO OCTOBER 17. ~~2:00 PM. The Senate Judiciary Committee will hold hearings to examine homeland defense matters. Location: Room 226, Dirksen Building.~~

4:15 PM. FTC Commissioner Thomas Leary will speak at the Transatlantic Business Dialogue on "Regulatory Policy Networked Economy." Location: Folger's Shakespeare Library, 201 East Capitol Street, SE, Old Reading Room, Washington DC.

6:00 - 8:00 PM. The Federal Communications Bar Association (FCBA) will host a reception featuring David Gross, Deputy Assistant Secretary of State for Communications and Information Policy, and Nancy Victory, head of the NTIA. The price of admission is $35 for private sector members and $20 for government or students. RSVP to Wendy Parish at fcba@fcba.org by Tuesday, October 9, at 10:00 AM. Location: Capital Hilton Hotel, 16th & K Streets, NW, Washington DC.

Deadline to submit comments to the FCC in its rule making proceeding regarding locating spectrum bands below 3 Ghz for possible reallocation for Third Generation (3G) wireless services, and for other purposes. (ET Docket Nos. 00-258 and 95-18 and IB Docket No. 99-81.) See, notice in Federal Register, September 13, 2001, Vol. 66, No. 178, at Pages 47618 - 47621.

Deadline to submit comments to the FCC in its rule making proceeding regarding permitting Mobile Satellite Service (MSS) operators flexibility to use their spectrum for land based transmitters. (IB Docket No. 01-185, ET Docket No. 95-18.) See, notice in Federal Register, September 13, 2001, Vol. 66, No. 178, at Pages 47621 - 47625.

FCC Meeting Agenda
Thursday, Oct 11

Multi-Association Group (MAG) Plan. The FCC will consider a several reports, orders and NPRMs concerning interstate access charge and universal service reform for ILECs subject to rate of return regulation, alternative forms of regulation for such carriers, pricing flexibility, and the "all or nothing" rule. (CC Docket Nos. 00-256, 98-77 and 98-166.)

2000 Biennial Regulatory Review. The FCC will consider a Report and Order and a FNPRM concerning streamlining and modifying the accounting rules and reporting requirements for incumbent local exchange carriers. (CC Docket Nos. 00-199, 97-212, 80-286, 00-199, 99-301 and 80-286.)

Ancillary or Supplementary Use of Digital TV Capacity by Noncommercial Licensees. The FCC will consider a Report and Order concerning the ability of noncommercial educational (NCE) TV stations to use excess capacity on their digital television (DTV) channels for commercial purposes. (MM Docket No. 98-203).

The Commission will consider a NPRM concerning the exclusivity provisions of the program access rules.

International Calling Plans. The International Bureau and the Consumer Information Bureau will make a joint presentation on the status of international calling prices and an initiative to educate consumers about international calling options.