[108th Congress Public Law 435]
[From the U.S. Government Printing Office]
<DOC>
[DOCID: f:publ435.108]
[[Page 118 STAT. 2615]]
Public Law 108-435
108th Congress
An Act
To make permanent the moratorium on taxes on Internet access and
multiple and discriminatory taxes on electronic commerce imposed by the
Internet Tax Freedom Act. <<NOTE: Dec. 3, 2004 - [S. 150]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, <<NOTE: Internet Tax
Nondiscrimi- nation Act.>>
SECTION 1. SHORT TITLE. <<NOTE: 47 USC 609 note.>>
This Act may be cited as the ``Internet Tax Nondiscrimination Act''.
SEC. 2. FOUR-YEAR EXTENSION OF INTERNET TAX MORATORIUM.
(a) In General.--Subsection (a) of section 1101 of the Internet Tax
Freedom Act (47 U.S.C. 151 note) is amended to read as follows:
``(a) Moratorium.--No State or political subdivision thereof may
impose any of the following taxes during the period beginning November
1, 2003, and ending November 1, 2007:
``(1) Taxes on Internet access.
``(2) Multiple or discriminatory taxes on electronic
commerce.''.
(b) Conforming Amendments.--(1) Section 1101 of the Internet Tax
Freedom Act (47 U.S.C. 151 note) is amended by striking subsection (d)
and redesignating subsections (e) and (f) as subsections (d) and (e),
respectively.
(2) Section 1104(10) of the Internet Tax Freedom Act (47 U.S.C. 151
note) is amended to read as follows:
``(10) Tax on internet access.--
``(A) In general.--The term `tax on Internet access'
means a tax on Internet access, regardless of whether
such tax is imposed on a provider of Internet access or
a buyer of Internet access and regardless of the
terminology used to describe the tax.
``(B) General exception.--The term `tax on Internet
access' does not include a tax levied upon or measured
by net income, capital stock, net worth, or property
value.''.
(3) Section 1104(2)(B)(i) of the Internet Tax Freedom Act (47 U.S.C.
151 note) is amended by striking ``except with respect to a tax (on
Internet access) that was generally imposed and actually enforced prior
to October 1, 1998,''.
(c) Internet Access Service; Internet Access.--
(1) Internet access service.--Paragraph (3)(D) of section
1101(d) (as redesignated by subsection (b)(1) of this section)
of the Internet Tax Freedom Act (47 U.S.C. 151 note) is amended
by striking the second sentence and inserting ``The
[[Page 118 STAT. 2616]]
term `Internet access service' does not include
telecommunications services, except to the extent such services
are purchased, used, or sold by a provider of Internet access to
provide Internet access.''.
(2) Internet access.--Section 1104(5) <<NOTE: 47 USC 151
note.>> of that Act is amended by striking the second sentence
and inserting ``The term `Internet access' does not include
telecommunications services, except to the extent such services
are purchased, used, or sold by a provider of Internet access to
provide Internet access.''.
SEC. 3. GRANDFATHERING OF STATES THAT TAX INTERNET ACCESS.
The Internet Tax Freedom Act (47 U.S.C. 151 note) is amended--
(1) by redesignating section 1104 as section
1105; <<NOTE: 47 USC 151 note.>> and
(2) by inserting after section 1103 the following:
``SEC. 1104. GRANDFATHERING OF STATES THAT TAX INTERNET ACCESS.
``(a) Pre-October 1998 Taxes.--
``(1) In general.--Section 1101(a) does not apply to a tax
on Internet access that was generally imposed and actually
enforced prior to October 1, 1998, if, before that date--
``(A) the tax was authorized by statute; and
``(B) either--
``(i) a provider of Internet access services had
a reasonable opportunity to know, by virtue of a
rule or other public proclamation made by the
appropriate administrative agency of the State or
political subdivision thereof, that such agency
has interpreted and applied such tax to Internet
access services; or
``(ii) a State or political subdivision thereof
generally collected such tax on charges for
Internet access.
``(2) Termination.--
``(A) In general.--Except as provided in
subparagraph (B), this subsection shall not apply after
November 1, 2007.
``(B) State telecommunications service tax.--
``(i) Date for termination.--This subsection
shall not apply after November 1, 2006, with
respect to a State telecommunications service tax
described in clause (ii).
``(ii) Description of tax.--A State
telecommunications service tax referred to in
subclause (i) is a State tax--
``(I) enacted by State law on or
after October 1, 1991, and imposing a
tax on telecommunications service; and
``(II) applied to Internet access
through administrative code or
regulation issued on or after December
1, 2002.''.
``(b) Pre-November 2003 Taxes.--
``(1) In general.--Section 1101(a) does not apply to a tax
on Internet access that was generally imposed and actually
enforced as of November 1, 2003, if, as of that date, the tax
was authorized by statute and--
``(A) a provider of Internet access services had a
reasonable opportunity to know by virtue of a public
rule or other public proclamation made by the
appropriate
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administrative agency of the State or political
subdivision thereof, that such agency has interpreted
and applied such tax to Internet access services; and
``(B) a State or political subdivision thereof
generally collected such tax on charges for Internet
access.
``(2) Termination.--This subsection shall not apply after
November 1, 2005.''.
SEC. 4. ACCOUNTING RULE.
The Internet Tax Freedom Act (47 U.S.C. 151 note) is amended by
adding at the end the following:
``SEC. 1106. ACCOUNTING RULE.
``(a) In General.--If charges for Internet access are aggregated
with and not separately stated from charges for telecommunications
services or other charges that are subject to taxation, then the charges
for Internet access may be subject to taxation unless the Internet
access provider can reasonably identify the charges for Internet access
from its books and records kept in the regular course of business.
``(b) Definitions.--In this section:
``(1) Charges for internet access.--The term `charges for
Internet access' means all charges for Internet access as
defined in section 1105(5).
``(2) Charges for telecommunications services.--The term
`charges for telecommunications services' means all charges for
telecommunications services, except to the extent such services
are purchased, used, or sold by a provider of Internet access to
provide Internet access.''.
SEC. 5. EFFECT ON OTHER LAWS.
The Internet Tax Freedom Act (47 U.S.C. 151 note), as amended by
section 4, is amended by adding at the end the following:
``SEC. 1107. EFFECT ON OTHER LAWS.
``(a) Universal Service.--Nothing in this Act shall prevent the
imposition or collection of any fees or charges used to preserve and
advance Federal universal service or similar State programs--
``(1) authorized by section 254 of the Communications Act of
1934 (47 U.S.C. 254); or
``(2) in effect on February 8, 1996.
``(b) 911 and E-911 Services.--Nothing in this Act shall prevent the
imposition or collection, on a service used for access to 911 or E-911
services, of any fee or charge specifically designated or presented as
dedicated by a State or political subdivision thereof for the support of
911 or E-911 services if no portion of the revenue derived from such fee
or charge is obligated or expended for any purpose other than support of
911 or E-911 services.
``(c) Non-Tax Regulatory Proceedings.--Nothing in this Act shall be
construed to affect any Federal or State regulatory proceeding that is
not related to taxation.''.
SEC. 6. EXCEPTION FOR VOICE AND OTHER SERVICES OVER THE INTERNET.
The Internet Tax Freedom Act (47 U.S.C. 151 note), as amended by
section 5, is amended by adding at the end the following:
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``SEC. 1108. EXCEPTION FOR VOICE SERVICES OVER THE INTERNET.
``Nothing in this Act shall be construed to affect the imposition of
tax on a charge for voice or similar service utilizing Internet Protocol
or any successor protocol. This section shall not apply to any services
that are incidental to Internet access, such as voice-capable e-mail or
instant messaging.''.
SEC. 6A. EXCEPTION FOR TEXAS MUNICIPAL ACCESS LINE FEE.
The Internet Tax Freedom Act (47 U.S.C. 151 note), as amended by
section 6, is amended by adding at the end the following:
``SEC. 1109. EXCEPTION FOR TEXAS MUNICIPAL ACCESS LINE FEE.
``Nothing in this Act shall prohibit Texas or a political
subdivision thereof from imposing or collecting the Texas municipal
access line fee pursuant to Texas Local Govt. Code Ann. ch. 283 (Vernon
2005) and the definition of access line as determined by the Public
Utility Commission of Texas in its `Order Adopting Amendments to Section
26.465 As Approved At The February 13, 2003 Public Hearing', issued
March 5, 2003, in Project No. 26412.''.
SEC. 7. GAO STUDY OF EFFECTS OF INTERNET TAX MORATORIUM ON STATE
AND LOCAL GOVERNMENTS AND ON BROADBAND
DEPLOYMENT.
The Comptroller General shall conduct a study of the impact of the
Internet tax moratorium, including its effects on the revenues of State
and local governments and on the deployment and adoption of broadband
technologies for Internet access throughout the United States, including
the impact of the Internet Tax Freedom Act (47 U.S.C. 151 note) on
build-out of broadband technology resources in rural underserved areas
of the country. The study shall compare deployment and adoption rates in
States that tax broadband Internet access service with States that do
not tax such service, and take into account other factors to determine
whether the Internet Tax Freedom Act has had an impact on the deployment
or adoption of broadband Internet access
services. <<NOTE: Reports. Deadline.>> The Comptroller General shall
report the findings, conclusions, and any recommendations from the study
to the Senate Committee on Commerce, Science, and Transportation and the
House of Representatives Committee on Energy and Commerce no later than
November 1, 2005.
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SEC. 8. EFFECTIVE DATE. <<NOTE: 47 USC 151 note.>>
The amendments made by this Act take effect on November 1, 2003.
Approved December 3, 2004.
LEGISLATIVE HISTORY--S. 150 (H.R. 49):
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HOUSE REPORTS: No. 108-234 accompanying H.R. 49 (Comm. on the
Judiciary).
SENATE REPORTS: No. 108-155 (Comm. on Commerce, Science, and
Transportation).
CONGRESSIONAL RECORD:
Vol. 149 (2003):
Nov. 6, 7, considered in Senate.
Vol. 150 (2004):
Apr. 27-29, considered and passed
Senate.
Nov. 19, considered and passed
House.
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