Senate Extension of Internet Tax Freedom Act 'Virtually Certain'
Prospects remain strong for the Senate to act on an extension of the Internet Tax Freedom Act following House passage Tuesday of the Permanent ITFA (HR-235). Supporters of that bill told us that it’s unlikely that extension will come in the form of the stand-alone Internet Tax Freedom Forever Act (S-431), the Senate’s HR-235 equivalent. HR-235 and S-431 would make ITFA’s ban on state and local Internet access taxes and certain state taxes on e-commerce permanent (see 1501090042). The House passed HR-235 by voice vote Tuesday, just as it did in 2014 before Senate consideration of the bill was derailed by debate over the Marketplace Fairness Act. Congress passed a temporary extension of ITFA during last year’s lame-duck session (see 1412170034, 1412030052 and 1407210077).
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“The clock is ticking down” on extending ITFA ahead of the current Oct. 1 expiration date, said House Judiciary Committee Chairman Bob Goodlatte, R-Va., during House debate on the bill. He noted that HR-235 “does not address the issue of state taxes on remote sales made over the Internet. It merely prevents Internet access taxes and unfair multiple or discriminatory taxes on e-commerce, whether inside the taxing state or without.” Rep. Sheila Jackson Lee, D-Texas, said she opposed the bill because it would end ITFA’s current “grandfather” protections for states that imposed Internet access taxes prior to ITFA’s enactment in 1998.
It’s “virtually certain” that the Senate will pass some sort of ITFA extension, but “whether that’s [S-431] … is another story,” said R Street Institute Executive Director Andrew Moylan. “The Senate has typically been a slightly more difficult challenge in terms of passing that sort of legislation. It remains to be seen whether the Senate is going to go along with [HR-235], but I think we’re certain to see a good push for a relatively long-term extension -- something measured in months rather than years.”
The IFTA Coalition, which includes top wireless carriers, Comcast, CTIA and USTelecom, is pushing for a permanent ITFA extension over other options, Executive Director Jay Driscoll said. “We’re looking to move this however we can,” he said. “However that happens, the coalition will support it.” Six ITFA Coalition members, including the Information Technology and Innovation Foundation and the U.S. Chamber of Commerce, urged House and Senate leaders, including Senate Majority Leader Mitch McConnell, R-Ky., and Senate Minority Leader Harry Reid, D-Nev., to enact HR-235/S-431. February FCC adoption of net neutrality rules means “there has never been a more important time in the history of the Internet for this national policy to finally be made permanent,” the ITFA Coalition members said in a letter.
Many advocates are focusing on attaching S-431’s language -- or an equivalent -- to any available “must-pass” legislation that the Senate takes up before the August recess, a pro-ITFA industry lobbyist said. Most HR-235/S-431 supporters recognize that the Senate isn’t likely to consider a stand-alone version of the legislation before the August recess and they believe that there won’t be enough time to revisit the legislation between Congress’ return and ITFA’s current Oct. 1 expiration date, the lobbyist said. ITFA Coalition members are among those that are “absolutely committed to getting this done by the August recess,” Driscoll said.
It’s likely that supporters of the Marketplace Fairness Act (S-698), including Sens. Mike Enzi, R-Wyo., and Dick Durbin, D-Ill., will “try and make every effort to combine” that bill with S-431, which some IFA extension supporters would be ready to accept, said the pro-ITFA lobbyist. “There is no poison pill at this point” for those supporters, the lobbyist said. Moylan said he also believes it’s likely that S-698 sponsors will attempt to attach S-431 to their bill given that they did the same thing last year, but that remains “a very misguided effort. I think [S-698] is a terrible piece of legislation and it’s directly at odds with the concept of ITFA. But because they both have the words Internet and tax in their titles, there’s an attempt to lump them together.” A permanent ITFA extension “is at its core Congress using its Commerce Clause authority to tell states that they cannot do certain things with tax policy that are damaging to interstate commerce,” Moylan said: MFA "is the direct opposite of that.”
It’s possible that Senate ITFA proponents could pursue S-431 as a standalone bill if Senate Finance Committee Chairman Orrin Hatch, R-Utah, and committee ranking member Ron Wyden, D-Ore., are able to exert enough influence over the bill as their committee considers it, said NetChoice CEO Steve DelBianco. Wyden is one of S-431’s main co-sponsors, and he and Hatch “aren’t big fans of” MFA, DelBianco said. Hatch and Wyden may strongly oppose efforts to attach S-698 to S-431 at the committee level, DelBianco said.