Taxes
Panel Hears Two Worldviews On Internet Taxation
by Teri Rucker
One might think that the House Judiciary Commercial and Administrative Law Subcommittee heard testimony about two separate efforts at tax reform during a Wednesday hearing on state sales-tax systems, with one group seeing much-improved systems and the others seeing nothing but complications and confusion.
Colorado Gov. Bill Owens fell into the latter category. He criticized the states' agreement on streamlining sales and use taxes and urged federal lawmakers to reject legislation that would sanction the agreement. Owens also argued that requiring buyers to pay online sales taxes would impose a new tax on consumers that would "negate" recent tax cuts enacted by Congress.
But Maureen Riehl, vice president of state and government relations at the National Retail Federation, countered that use taxes on online sales would not constitute a new tax but that the agreement provides an efficient means of collecting taxes that already are owed but ignored.
Use taxes apply to goods that a consumer in one state buys from a company in another state, including Internet sales, but the obligation of remitting the taxes falls to the individual. A Supreme Court decision, on the other hand, found that the maze of state sales-tax systems is too complex for a company to sort out and collect taxes unless it has a physical presence in a given consumer's state.
In addition to sanctioning the state agreement, the bill in question at the hearing, H.R. 3184, would add simplification requirements and let states require companies to collect and remit taxes on remote sales, such as those made over the Internet or from catalogs.
The simplification project was initiated to streamline and harmonize the tax systems by reducing the number of tax rates to one per state, crafting uniform definitions, sourcing rules and other modifications, and creating a governing board to ensure that states stick to the agreement.
George Isaacson, tax counsel for the Direct Marketing Association, argued that the agreement would not reduce the number of tax rates because states could adopt a second rate for certain products. He also said that the definitions in the deal are not really uniform and that the audit exposure to companies would be enormous.
Riehl disagreed. "This is a careful balance of both sovereignty and simplification," she said, noting that the agreement is not perfect but that the centralized administration for calculating and remitting taxes, the uniform definitions, and the limitations on audits and "hold harmless" provisions for retailers who make mistakes using state information would provide certainty and cost-savings for retailers.
The agreement also would allow state and local rates to be averaged so retailers only had to calculate one rate, she said.
Owens also argued that it would be a mistake to allow states to collect sales on Internet purchases just as consumers are adopting the technology. But Jack VanWoerkom, executive vice president and general counsel for Staples, said such taxation "is not a tax on the Internet, nor will it harm the growth of the Internet or the e-commerce marketplace."
Telecom
FCC Chairman Outlines Latest Agenda
by Teri Rucker
The FCC is poised to tackle a fresh roster of issues in its effort to determine proper regulations in the digital age, whether they apply to digital television or telephone service offered over the Internet, FCC Chairman Michael Powell said on Wednesday.
"If there were a theme ... it would be, 'Out with the old and in with the new,'" Powell said in a press briefing to outline his agenda for the coming months. Incidentally, he will be around to implement that agenda: He is not quitting his job so reporters should quit asking, he quipped.
Powell said the commission expects this month to resolve a proceeding over the anti-piracy technology known as the "broadcast flag." He did not offer details but noted that the agency is studying jurisdictional issues.
Powell also said the agency's willingness to wade into a "plug and play" proceeding, which sanctioned an agreement among the cable and electronics industries to make their products work together, indicates "how the commission thinks about copyright and content" issues.
Powell plans to schedule a hearing this fall on issues surrounding the growth in voice-over-Internet protocols (VoIP), and the agency will release a notice of inquiry exploring the proper regulatory framework for traditional services that move to the Internet.
VoIP is only one example of how communications is changing, Powell said, noting that he expects video and data to be offered in a similar fashion. The world is moving to "all over IP," and it is moving there "a lot faster than many expect."
Spectrum reform tops the list of things to do, including finding more spectrum for commercial services, particularly those that can provide solutions to bringing high-speed Internet service to areas where it is physically or economically difficult to offer over wires.
Powell also strives to craft policies that "promote as many routes as possible" into the home, so the agency should focus its attention on that "rather than worrying about [older systems]," he said.
That does not mean the agency will ignore "common carrier" issues, he said. The regional Bell telecommunications companies are nearing the end of their quest to provide long-distance service in their local calling areas, which means the FCC will have to address those issues in an age of competition.
One idea is establishing a set of performance measurements to ensure that competition thrives, Powell said. The agency also will examine inter-carrier compensation rules, as well as the pricing structure governing how much the Bells can charge competitors to use their networks.
The FCC also is charged with implementing and monitoring the "do not call" registry banning telemarketing calls to those sign a list. Powell said the agency has the capacity to handle complaints and enforcement of the rules.
The chairman also said he is optimistic that the registry ultimately will exist, despite court challenges. It is something consumers want and Congress is intent upon providing, he said.
Broadband
TechNet Chief: Rural America Is Driving Broadband Growth
by Ted Leventhal
With the technology industry still looking for the "killer application" that will drive the deployment of high-speed Internet traffic to every American home, TechNet President and CEO Rick White said on Wednesday that rural America is doing more to drive the deployment of broadband services than urban areas.
Delivering closing remarks at a conference of the Rural Telecommunications Congress, White said rural communities are putting broadband to use for health care, education and entertainment applications that could serve as models for the rest of the country. "The network is not worth too much if you can't do something with it," he said.
White, a former two-term member of Congress from Washington state, noted that in 2000, TechNet's industry membership vetoed a plan to have the group focus on privacy policies and demanded instead that the group lobby on broadband.
Today's full-motion video requires 3-megabit-per-second connections, VHS-quality video requires 6 megabits per second, and high-definition video requires as much as 15 megabits per second, White said. But broadband holds the promise of delivering a "qualitative level" of interactive services, specifically high-quality interactive video, that cannot be delivered now.
TechNet is calling for 100-megabit connections to every home by the end of the decade, an incredibly expensive project, White said. Running fiber-optic cable to every neighborhood without the "last-mile" connection would cost $400 billion, he said.
New wireless technologies could help lower that estimate, he said, but America will not make such a huge investment "unless there's something to do with it," he said.
He noted that broadband already is providing healthcare services to rural areas as rural hospitals close. "With broadband, you can reach patients more quickly and improve their treatment," he said. And in the future, it could deliver telemedicine services to ambulances, improving the chances for gravely injured patients to survive.
"With video capability, it will be possible to consult with specialists worldwide" and even provide remote robotic surgery in the future, he said.
He added that "pretty amazing" distance-learning projects are underway, too, allowing rural schools to offer more classes and continuing education for teachers.
Industry is banking on entertainment as the first paying application for broadband, although White said a sufficient business plan does not yet exist to justify the enormous initial investment.
He said rural communities should look to states to devise public policies that will drive broadband demand. In a July 2003 report, TechNet found that Michigan, Florida, Missouri, Texas and Ohio all have excellent broadband incentives.
White urged local businesses to ask state and federal officials to work with them for broadband. "Most legislators would like to promote broadband but don't know what to do," he said.
Crime
Panel Chairman Sees Need For Driver's License Standard
by Drew Clark
The chairman of the House Homeland Security Committee said on Wednesday that the risk of terrorists using fraudulent identification documents means that Congress must consider imposing national standards for driver's licenses.
Presiding over a hearing about the homeland security implications of fraudulent driver's licenses, birth certificates and foreign ID cards, Rep. Christopher Cox, R-Calif., said Congress needs to reconsider its objection to a national identification system in light of California's decision to issue driver's licenses to undocumented immigrants.
"This is hardly a sign of post-9/11 progress," Cox said of the law signed last month by California's embattled Democratic governor, Gray Davis.
"To meet the terrorist threat, we need to get better, more reliable identification information to our customs and immigration inspectors, to state [departments of motor vehicles]," and to homeland security and local law enforcement officials, Cox said.
The Bush administration is seeking a way to include a single security feature on a driver's license that "works across the U.S. and gives everyone the ability to say you are who you say you are." Such a system would not necessarily require a one-size-fits-all solution, said Stuart Verdery, assistant Homeland Security secretary for policy and planning.
The administration is considering "how the feds should be encouraging the states to come up with more secure documents."
But Verdery said the administration has not taken a position on national standards for driver's licenses or on states issuing driver's licenses to illegal aliens, a statement that appeared to take Cox and Rep. John Shadegg, R-Ariz, by surprise. "The department is going to have to take a position pretty soon," Shadegg said.
"How is that we can be completely without a view on whether people can be issued a driver's license when they are in the country illegally?" Cox asked in a follow-up question.
Verdery replied:, "If a driver's license is not secure, we have to look at the apparatus that has been built up around it." Referring to the use of driver's licenses for boarding aircraft and accessing federal buildings, he said: "It serves in some ways as a national ID card. If we are not confident that they are not going to imposters, we have to look at that apparatus."
Keith Kiser, chairman of the American Association of Motor Vehicle Administrators, repeated his group's call for Congress to mandate national standards for driver's licenses.
Del. Eleanor Holmes Norton, D-D.C., said she is a "card-carrying civil libertarian, and I kind of have a gut reaction against a national identity card. There are many people like me who have begun to rethink that matter because there are more intrusive measures that the government is using to ascertain identity," she said, citing racial profiling.
When she asked the witnesses whether such identification is needed, Kiser said: "We believe that the infrastructure to issue identities is in place at state motor-vehicle divisions. We believe the appropriate approach is to build on what is already there."
Budget
First Homeland Security Budget Signed Amid Questions
by William New
President Bush on Wednesday signed the first-ever appropriations bill for the Homeland Security Department after criticism that it shortchanges states, localities and industry.
The appropriation for fiscal 2004 is $29.4 billion and includes various technology-related provisions. The total is $535.8 million, or 1.8 percent, more than enacted for the same purposes in fiscal 2003, which ended Tuesday. It also is $1 billion, or 3.7 percent, more than Bush sought.
"We're doing a lot here," Bush said. "This is a major step forward in our ongoing effort" to secure the domestic United States.
In the final bill, the House deferred to the lower Senate number on information technology investments, providing $185 million instead of $206 million. The total includes $72.5 million for IT services, $31 million for security activities and $100 million for wireless programs.
By Dec. 15, the department must report on the ability of officials to use the federal wireless program to communicate with state and local officials, and the department also must provide a complete inventory and plans for its IT structure.
Congress also cut funding for the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) out of concern over planning and deployment of the system. The program will use biometric scanning to track the entry and exit of visitors to the United States.
The final US-VISIT budget is $330 million, down from $350 million proposed by the House and $380 million proposed by the Senate. The conference report on the bill, H.R. 2555, directs Homeland Security to submit a privacy policy for protecting information in the system and monthly reports on the system's deployment. The first report is due to appropriators on Oct. 15.
The report also directs the Transportation Security Administration to evaluate technologies and devise plans for identification cards for transportation workers, but the law does not provide funding for the card project.
Congress provided $52 million for information and warning advisories, including $32.8 million for cyber security, as proposed by the Senate.
The final bill deleted Senate language requiring a report on state and local law enforcement officials' access to the State Department TIPOFF database of potential terrorists and a separate report on all data-mining programs at Homeland Security.
As the bill made its way through Congress, Democrats criticized it for not going far enough to aid ports and state and local "first responders" to emergencies. The Bush administration also has come under fire for a perceived lack of progress on security two years after the Sept. 11, 2001, attacks.
Zeichner Risk Assessment reported that the Homeland Security appropriation does not include any direct or significant monetary support for industry, despite requirements by federal and state governments that infrastructure owners assess risks and invest in more security.
The Zeichner report said the bill provides about $926.5 million for programs to develop critical infrastructures, equal to less than 4 percent of the fiscal 2004 appropriation. The critical infrastructure funding is mostly for long-term program development, covering office space, labor and other incidentals, Zeichner said.
Taxes
Sen. Grassley Hears GOP Objections Over Rate Cuts
by Martin Vaughan, CongressDaily
The corporate tax proposal offered by the chairman of the Senate Finance Committee got off to a rocky start Wednesday.
Chairman Charles Grassley, R-Iowa, successfully navigated past a dispute over life insurance provisions -- which delayed the committee markup for an hour -- only to hear objections from committee Republicans and a Bush administration official over the bill's proposed rate cut for manufacturers.
Sens. Don Nickles, R-Okla., and Jon Kyl, R-Ariz., charged that the Grassley bill would favor manufacturers to the detriment of sales and services corporations, and they offered an amendment to extend the proposal's 3-percent rate cut to all U.S. companies.
Pamela Olson, the Treasury Department's assistant secretary for tax policy, said the manufacturing cut would be difficult to administer and expressed doubt that small businesses could take advantage of it because of its complexity. She said Canada is repealing a similar tax break, in part because it discriminates against some sectors of the economy.
Grassley shot back, "It's ludicrous that you take the position that we're favoring one [industry sector] over another."
Grassley added to his bill a host of provisions popular with multinational companies in an effort to defuse criticism that the bill would not do enough to boost U.S. competitiveness against foreign firms. That brought the gross cost of the proposal to more than $110 billion, but Grassley added in other offsets to keep the bill revenue neutral.
The revised plan also includes a provision that would give U.S. companies one year to bring foreign-earned income back to the United States at a 5.25-percent tax rate. Another amendment would require that to qualify for the reduced tax rate, companies would have to use the income for job-creating activities like capital investment or research and development.
The revised measure also includes a quicker phase-out, beginning in 2009, of a provision limiting the benefit of the manufacturing tax break to firms that manufacture offshore. Still pending at presstime were amendments to eliminate that provision all together.
On The Hill
House Panel Easily Approves E911, E-Commerce Measures
by Greta Wodele
The House Energy and Commerce Committee on Wednesday overwhelmingly approved three technology-related bills that would address "enhanced 911" telecommunications service, prescriptions for contact lens and cross-border consumer fraud.
The E911 bill, H.R. 2898, would push states to speed the implementation of services designed to let officials pinpoint the locations of people who place emergency calls on cellular telephones. The measure would punish states for raiding funds that are designated to upgrade emergency call centers to handle such 911 calls.
"No states that divert E911 funds should be eligible to participate in the grant program established under [the bill]," said committee Chairman W.J. (Billy) Tauzin, R-La. "It is costing lives when that happens."
The bill would authorize $100 million for grants each year from fiscal 2004 to fiscal 2008. It also would require states to certify that they have stopped using the resources for other purposes and have appointed E911 coordinators.
Illinois Republican John Shimkus, a co-sponsor of the legislation, said he believes the House will vote on the legislation this year. Committee staffers plan to work with the White House on recommended changes to the bill, an aide to Shimkus said. The bill now moves to the House floor.
The second committee-approved measure, H.R. 3140, would block eye-care professionals from refusing to release prescriptions for contact lens to those patients who want to fill them with different sellers. The bill also would create a system, such as 1-800-CONTACTS, to let third-party sellers call doctors to verify prescriptions and then fill the prescriptions if the calls are not returned within a certain time.
"This bill gives the power back to consumers by requiring doctors to release to patients a copy of their contact-lens prescriptions," Tauzin said.
Finally, the panel approved a bill, H.R. 3143, to enhance the FTC's capabilities to protect U.S. consumers from fraud by companies outside the country. Cross-border fraud complaints were 14 percent of all complaints in 2002, at a cost of more than $72 million to U.S. consumers, according to FTC data.
"We know that the FTC has seen a significant rise in consumer complaints against foreign companies," Tauzin said. "Certainly the widespread use of the Internet has opened out country's door to foreign scam artists to target U.S. citizens."
In mid-September, civil-liberties groups testified before the panel that they are concerned with provisions in the bill that would allow the FTC to delay notifying defendants of its intent to prosecute and give the agency certain exemptions from the Freedom of Information Act. Rep. Janice Schakowsky, D-Ill., said the "major [civil liberties] concerns have been addressed."
E-Government
Lack Of Skilled Federal IT Managers Troubles Officials
by Amelia Gruber, Government Executive
When Karen Evans becomes the technology chief at the White House Office of Management and Budget (OMB) this month, she will face a shortage of well-trained managers for information technology projects, panelists predicted at a technology forum Tuesday.
Evans, scheduled to begin her new job as early as next week, will inherit an IT workforce adept at technological innovation but lacking in business acumen, according to Dan Chenok, branch chief for information policy and technology at OMB. The Bush administration is engaged in a major ongoing effort to develop skilled technology managers, he said at a National Press Club forum.
Building a workforce with both scientific and management expertise should be one of the "defining concerns" of any chief information officer, said Scott Hastings, the CIO for the customs bureau at the Homeland Security Department. The government already has made some progress recruiting staffers with business degrees and others with significant business experience to head IT initiatives, he said.
But more progress on developing in-house management talent is needed, according to Kim Nelson, the CIO for the Environmental Protection Agency. Her agency has some very able IT managers, she said, but in general, the state and federal tech workers under her charge are ill-equipped to handle big-budget projects, she said. As a result, they take too long to complete work and spend more money than planned.
Failure to meet deadlines and overspending can influence OMB's recommendations for future project funding. When forced to prioritize among various tech initiatives during the budget process, the Bush administration favors projects for which managers present a strong "business case" and demonstrate that they have met previous performance standards, Chenok said.
The Office of Personnel Management is addressing the gap in IT management skills through its e-learning Web site, one of its five e-government projects. A section of the site called the "IT Workforce Development Roadmap" allows tech specialists to assess their level of management competency, formulate career-development plans and find training courses to help them reach their goals.
Privately run programs also offer management courses for federal tech experts. For instance, the Council for Excellence in Government runs a yearlong fellows program to prepare mid-managers for senior executive positions. Fellows can specialize in e-government.
In addition, the e-government bill signed into law last December gives agency CIOs the option of sending staff members on exchange programs, where they could temporarily switch positions with private-sector technology managers. This type of "cross-fertilization" would benefit agencies greatly, George Molaski, president and CEO of E-Associates, a technology consulting company in Falls Church, Va., said on Wednesday.
Other issues Evans will face include: information security, privacy concerns and a lack of adequate funding for some projects, the panelists said.
The federal government also will need to do a better job of coordinating its tech projects with those at the state and local levels, said panelist Jim Flyzik, a security consultant and a former senior adviser to Homeland Security Secretary Tom Ridge.
Today's Feature: International Roundup
The Internet, heralded as a modern tool of free and open communication, is increasingly facing censorship by governments and industry around the world, according to a new report that examines developments in dozens of countries.
Every Wednesday, read the International Roundup by Senior Writer William New
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E-briefs
Budget: President Bush on Wednesday signed into law a bill to allocate $368 billion to the Defense Department in fiscal 2004. The law provides nearly $65 billion for research and development, testing and evaluation across the armed services, some of which depends on filing advance, detailed reports on the planned uses. The act requires Defense's chief information officer to certify that financial management systems are modernized. And it requires a report by March 1, 2005, on the impact that waivers from agreements restricting trade in defense products have on the nation's technology and industrial base. The signing comes as Congress is working through a separate White House request for $87 billion for the ongoing conflict in Iraq. The signing also officially eliminates the controversial Terrorism Information Awareness data-mining research project, but allows such analysis to be done for foreign intelligence matters.
E-Government: A House Republican on Wednesday announced the introduction of a bill aimed at utilizing "DNA to the fullest extent possible." The measure seeks to "improve tremendously the federal criminal-justice system and help states upgrade the deficiencies some might have in their systems," Rep. James Sensenbrenner of Wisconsin said at a press conference. Specifically, the measure would work to reduce DNA backlogs, improve training for the handling of DNA, improve the technology used to compile DNA samples, strengthen the quality of legal representation in death-penalty cases and facilitate access to DNA testing for current inmates. "Getting this legislation to the president this year is my goal, and I believe, with the broad bipartisan support we've marshaled, it is attainable," Sensenbrenner said. Michigan Democrat John Conyers said the bill is "a 'win-win' proposition for crime victims and their loved ones."
Telecom: A federal appeals court in Denver on Wednesday set a deadline for telemarketers to respond to the FTC's emergency motion to enforce the legality of the "do not call" registry on telemarketing. The FTC has been barred from enforcing its registry or transferring it to the FCC, which had planned to enforce similar rules against the telecommunications and financial institutions it oversees. FCC Chairman Michael Powell instead urged consumers to tell telemarketers to put their names on company-specific "do not call" lists. Meanwhile, the Direct Marketing Association pledged that its members will not make telephone solicitations to the 51 million Americans on the list. The American Teleservices Association, which sued the FTC over the list, made no such pledge. Forty-six states and the District of Columbia joined the FTC in appealing the ruling that the list infringes on the free-speech rights of telemarketers.
E-Government: South Korea on Wednesday unveiled a plan to replace its current government software with "open source" alternatives whose underlying code can be viewed and altered. ZDNet reports that the Ministry of Information and Communication plans to replace 20 percent of desktop software and 30 percent of server software with open-source alternatives by 2007. Other government-related organizations and universities will follow the ministry's lead. "If the change is successful, we will be able to save about $300 million a year," a spokesman said. "Also, we may ensure security and inter-connectivity of national information systems." Industry experts, however, have expressed skepticism, saying that the country's software developers do not have the resources to support multiple operating systems.
Lobbying: The Computer Systems Policy Project (CSPP) Wednesday named Intel CEO Craig Barrett its new chairman. Barrett succeeds Dell Computer founder and CEO Michael Dell, who chaired the group for the past two years, and oversaw efforts to improve broadband deployment, anti-piracy technologies, and improve affordability of business technology. In addition to naming a new chairman, CSPP members also recommended the Bush administration launch a yearlong initiative to develop a new spectrum policy and create a permanent national spectrum management group. CSPP was founded in 1989 and is comprised exclusively of tech industry CEOs who travel to Washington twice a year to lobby on industry issues.
Intellectual Property: A new online forum was launched Tuesday with a goal of overcoming global differences on digital media and copy-protection technologies. The Digital Media Project, based in Switzerland, brings together industry experts worldwide and on Tuesday published a "Digital Media Manifesto" that described major actions to bring change. Policy actions would include the standardization of rules, and technical actions would include the development of specifications for anti-piracy platforms and devices for users that can communicate with each other, as well as recommended practices for assessing conformance with rules. The next objective is to seek adoption of the proposal to establish the Digital Media Project as an independent, nonprofit organization.
Security: Americans have mixed reactions to the 2001 anti-terrorism law known as the USA PATRIOT Act, according to a CNN/Gallup/USA Today poll released Wednesday. Of the 495 adults surveyed in the last week of August who were familiar with the act, 22 percent said it goes too far in creating new powers to pursue suspected terrorists, 48 percent said it is about right, and 21 percent said it does not go far enough. Respondents were evenly split in their knowledge of the law's provisions.
Telecom: Officials from the Dutch Economic Affairs, Health and Telecommunications ministries on Wednesday unveiled a groundbreaking study saying that signals used to power advanced mobile telephones may cause nausea and headaches. Reuters reports that the study tested the impact of radiation from base stations used for current mobile networks against those for advanced networks for fast data transfer. The report said that the test group exposed to the advanced base stations felt "tingling sensations, got headaches and felt nauseous," while standard signals did not have a negative affect on the test group. The study also found that both signal types boosted brain activity. The Dutch ministers said follow-up research is needed to confirm the findings. The Global System for Mobile Communications Association downplayed the Dutch findings and said more research is needed to prove them.
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