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May 26, 1998
TO: BOARD OF GOVERNORS No. 38-98
FEDERAL LEGISLATION MEMBERS No. 11-98
PRIMARY CONTACTS - MEMBER COMPLEX No. 46-98
PUBLIC INFORMATION COMMITTEE No. 20-98
RE: HOUSE COMMERCE COMMITTEE APPROVES INTERNET TAX MORATORIUM
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On May 14, the House Commerce Committee unanimously approved H.R. 3849, the "Internet
Tax Freedom Act," legislation that was introduced by Representatives Christopher Cox (R-CA) and Rick
White (R-WA) on May 13. The bill would place a three-year moratorium on certain state and local taxes
levied on Internet activities.
H.R. 3849 would prohibit for three years the imposition of "multiple" or "discriminatory" taxes
on electronic commerce, bit taxes, and taxes on Internet access or online services; the bill specifically
provides for extending the latter provision permanently. Under a grandfather clause, certain state taxes
could continue only if the state legislature enacts a law to expressly impose such a tax within a year of
the bill’s enactment. H.R. 3849 would also prohibit state and federal regulators from setting Internet
access and online service fee levels.
A key provision of the legislation calls for the creation of the 29-member Advisory Commission
on Electronic Commerce, which would be tasked to develop a template for a tax system that would be
conducive to the growth of Internet commerce. The bill would require expedited congressional
consideration of recommendations based on the commission’s report. The President would also be
directed to seek international agreements to ensure that Internet activities are free from undue and
discriminatory regulation by foreign governments.
The legislation will next be considered by the House Judiciary Committee. A similar bill, S.
442, was approved by the Senate Commerce Committee last year and may be brought for a vote in the
full Senate in June.
We will keep you informed of further developments.
Matthew P. Fink
President