RealTime IT News

Stumping For Telecom Reform at CES

Lawmakers who will be shaping the technology agenda for the 109th Congress will be in Las Vegas this weekend for their annual roundtable appearance at the Consumer Electronics Show (CES). At least one of the panelists says the message will be simple: don't tax broadband.

In a telephone interview from the CES, George Allen (R-Va.) told internetnews.com proposed Congressional efforts to reform the 1996 Telecommunications Act are all about "making sure broadband is there" for consumers to take advantage of the innovation currently on display at the show.

"The only things taxed higher than telecommunications in this country are alcohol and tobacco," Allen said. "That's what revising or upgrading the Telecom Act is all about -- making sure we don't put more taxes on broadband [services]."

Although there are early rumors that telecom reform may not actually materialize in the wake of what is expected to be a time-consuming, highly controversial debate over Social Security reform and the war in Iraq, Allen said incoming Senate Commerce Committee Chairman Ted Stevens (R.-Ala.) "... has told me he will hold hearings on telecom reform."

While Allen's big picture is simple, he readily admits there will be some "tough and close fights" on a number of technology policy issues this year, including stock options expensing, spyware and Web sales taxes.

In mid-December, the Financial Accounting Standards Board (FASB) set a June 1 deadline for corporations to deduct the cost of all employee stock options from their profits. Currently, employee stock options are included as footnotes in financial statements and do not count against a corporation's bottom line profit and loss statement.

In the 108th Congress, the House passed legislation mandating the expensing of stock options granted to the CEO and the next four most highly compensated officers of a company, but exempted the expensing of stock options for all other employees. The Senate took no action to stop the FASB rule and now the deadline for changing the accounting standard looms.

"It is so important to so many [technology] companies. There is no accurate way to account for stock options," Allen said.

Another issue that split the House and the Senate in the last session is spyware. The House passed two separate pieces of legislation aimed at curbing spyware, but the Senate, as it did with stock option expensing, took no action.

The House Energy and Commerce Committee pushed through an anti-spyware measure that prohibited unfair or deceptive practices related to spyware. Rep. Mary Bono (R-Calif.) reintroduced the bill this week for the new Congress to consider.

The House Judiciary Committee successfully passed another measure last year increasing the criminal penalties for spyware purveyors, an approach Allen said he supports.

"Spyware is going to come up again. It [spyware] is like spam and all the rest of these types of things. It takes up so much time and threatens consumer privacy," Allen said. "We need to address it in a way that you don't hit those who are not culpable."

Allen is also opposed to the implementation of a sales tax on Internet purchases, a proposal that is gaining momentum as a way for cash-strapped states to replace project income losses to IP-based services, such as Internet telephony. The Federal Communications Commission recently ruled Voice over IP is an interstate service and not subject to state and local regulations and taxes.

The Streamlined Sales and Use Tax Act, which failed to pass either the House or the Senate in the last session of Congress, would permit states that become voluntary members of a national compact to require remote sellers to collect and remit sales and use taxes. The states would only have the authority to collect, however, if they simplify their sales and use tax system for all sales, including remote sales.

According to National Governors Association (NGA), 21 states have already done exactly that and another 24 are in the process of simplifying their sales and use taxes. David Quam, the NGA's director of federal relations, said his group hopes that by Oct. 1 the first 21 states will be certified to begin charging sales taxes on Internet and catalogue sales. Without Congressional action, Internet merchants are not obligated to participate in the program.

Currently, sales and use taxes are owed on all online transactions, but states are prohibited from requiring remote sellers to collect and remit those levies. A 1992 U.S. Supreme Court decision said states could only require sellers that have a physical presence or "nexus" in the same state as the consumer to collect so-called use taxes.

The court ruled that the current patchwork of taxing jurisdictions across the country is too complex and burdensome for online retailers to charge and collect sales taxes. In order to collect the taxes, the court ruled, states would need to first simplify the existing system.

"States may want to do this, but it should be voluntary," Allen said.