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105th Congress                                            Rept. 105-570
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 2
_______________________________________________________________________


 
                        INTERNET TAX FREEDOM ACT

_______________________________________________________________________


                 June 19, 1998.--Ordered to be printed

                                _______
                                

 Mr. Hyde, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                        [To accompany H.R. 3849]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 3849) to amend the Communications Act of 1934 to 
establish a national policy against Federal and State 
regulation of Internet access and online services, and to 
exercise congressional jurisdiction over interstate and foreign 
commerce by establishing a moratorium on the imposition of 
exactions that would interfere with the free flow of commerce 
conducted over the Internet, and for other purposes, having 
considered the same, report favorably thereon with amendments 
and recommend that the bill as amended do pass.

                           TABLE OF CONTENTS

                                                                   Page
The Amendment....................................................     1
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearing..........................................................     2
Committee Consideration..........................................     2
Committee Oversight Findings.....................................     2
Committee on Government Reform and Oversight Findings............     3
New Budget Authority and Tax Expenditures........................     3
Committee Cost Estimate..........................................     3
Constitutional Authority Statement...............................     3
Section-by-Section Analysis and Discussion.......................     3
Changes in Existing Law Made by the Bill, as Reported............     3

                               Amendments

  The amendments (stated in terms of the page and line numbers 
of the introduced bill) are as follows:
  Beginning on page 5, strike line 22 and all that follows 
through line 6 on page 14 (and make such technical and 
conforming changes as may be appropriate).
  Beginning on page 15, strike line 18 and all that follows 
through line 25 on page 20 (and make such technical and 
conforming changes as may be appropriate).

                          Purpose and Summary

    The provisions of H.R. 3849 contained in the bill as 
introduced established a three-year moratorium on certain state 
taxes applied with respect to the Internet. Such a policy is 
necessary in order to avoid stifling the potential for an 
innovative form of technology to provide information, goods and 
services quickly and cheaply throughout the world. In addition, 
recognizing the concern that the current subfederal tax system 
was developed in a time and for a form of commerce that could 
make it inappropriate for its application to the technology 
employed by the Internet, the bill established an Advisory 
Commission on Electronic Commerce to examine numerous relevant 
issues and make recommendations to Congress.
    The Committee on the Judiciary struck all provisions of 
H.R. 3849 relating to these state tax issues, because it had 
previously addressed those identical issues in H.R. 3529. The 
bill as reported by the Committee on the Judiciary contains no 
provisions within the subject matter jurisdiction of the 
Committee on the Judiciary.

                Background and Need for the Legislation

    For a discussion of the background and need for legislation 
addressing the state tax issues relating to electronic commerce 
and the Internet, see the Report of the Committee on the 
Judiciary to H.R. 3529, the ``Internet Tax Freedom Act of 
1998.''

                                Hearings

    The Committee's Subcommittee on Commercial and 
Administrative Law held one day of hearings on H.R. 1054 (the 
predecessor bill to H.R. 3849) on July 17, 1997.

                        Committee Consideration

    On October 9, 1997, the Subcommittee on Commercial and 
Administrative Law met in open session and ordered reported a 
committee print containing an amendment to the bill H.R. 1054, 
by a voice vote, a quorum being present. On June 17, 1998, the 
Committee met in open session and ordered reported the bill 
H.R. 3849 with amendment by voice vote, a quorum being present.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
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.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House Rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

                        Committee Cost Estimate

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the Committee believes that the 
portions of the bill within the jurisdiction of the Committee 
on the Judiciary will have no budget effect.

                   Constitutional Authority Statement

    Pursuant to rule XI, clause 2(l)(4) of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, section 8 of the Constitution.

                      Section-by-Section Analysis

    H.R. 3849, as reported by the Committee on the Judiciary, 
contains no sections within the Committee's jurisdiction.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                       COMMUNICATIONS ACT OF 1934

TITLE I--GENERAL PROVISIONS

           *       *       *       *       *       *       *


SEC. 9. REGULATORY FEES.

    (a) * * *

           *       *       *       *       *       *       *

    (h) Exceptions.--The charges established under this section 
shall not be applicable to (1) governmental entities or 
nonprofit entities; [or] (2) to amateur radio operator licenses 
under part 97 of the Commission's regulations (47 C.F.R. Part 
97; or (3) providers of Internet access or online service).

           *       *       *       *       *       *       *


TITLE II--COMMON CARRIERS

           *       *       *       *       *       *       *


SEC. 231. PROHIBITION ON REGULATION OF INTERNET ACCESS AND ONLINE 
                    SERVICES.

    (a) The Commission shall have no authority or jurisdiction 
under this title or section 4(i) of the Communications Act of 
1934, as amended (47 U.S.C. 154(i)), nor shall any State 
commission have any authority or jurisdiction, to regulate the 
prices or charges paid by subscribers for Internet access or 
online services.
    (b) Preservation of Authority.--Nothing in this subsection 
shall limit or otherwise affect--
          (1) the Commission's or State Commission's 
        implementation of the Telecommunications Act of 1996 
        (Public Law 104-104) or the amendments made by such 
        Act; and
          (2) the Commission's or State Commission's authority 
        to regulate common carriers that offer Internet access 
        or online services in conjunction with the provision of 
        any telephone toll, telephone exchange, or exchange 
        access services as such terms are defined in title I.
    (c) Definitions.--As used in this section:
          (1) Internet.--The term ``Internet'' means the 
        combination of computer facilities and electro-magnetic 
        transmission media, and related equipment and software, 
        comprising the interconnected world-wide network of 
        computer networks that employ the Transmission Control 
        Protocol/Internet Protocol, or any predecessor or 
        successor protocol, to transmit information.
          (2) Internet access.--The term ``Internet access'' 
        means a service that enables users to access content, 
        information, and other services offered over the 
        Internet.
          (3) Online service.--The term ``online service'' 
        means the offering or provision of content or 
        information services to a user as part of a package of 
        services that are combined with Internet access.

           *       *       *       *       *       *       *