Taxes
Backers Of Sales-Tax Plan Optimistic About Action Next Year
by Teri Rucker
Supporters of legislation that would grant states the right to tax online sales are optimistic that their bill will see congressional action early next year, and they have been traveling the halls of Capitol Hill in an effort to ensure that it does.
Supporters of the measure, S. 1736, anticipate a hearing in the Senate Finance Committee as early as February. Committee staff could not confirm the date but agreed that committee leadership would like to schedule a hearing "early in the year."
The House Judiciary Commercial and Administrative Law Subcommittee conducted a hearing on the companion bill, H.R. 3184, in early October.
State negotiations resulted in "an amazing and comprehensive document," said Lisa Cowell, executive director of the e-Fairness Coalition and executive vice president of government affairs for Westfield Corp. Cowell was in town last week to meet with House and Senate lawmakers and urge them to support the legislation.
The legislation would sanction an agreement reached by 34 states and the District of Columbia to simplify and harmonize their sales-tax systems. Thus far, 20 states representing 32 percent of the population have enacted legislation to change their tax codes to comply with the agreement. On that basis, supporters have taken their case to Congress, urging lawmakers to sanction the agreement and let the participating states require the collection of sales tax on remote sales.
State legislators from Kansas and Tennessee recently visited the Hill, meeting with House and Senate lawmakers from their home states, and they received a very warm reception, according to Neal Osten, director of the National Conference of State Legislatures' Communications, Technology and Interstate Commerce Committee.
For example, Senate Majority Leader Bill Frist, R-Tenn., had lunch with the lawmakers, and he understood "the whole issue front to back," Osten said. Having that powerful leader understand the issue and the need to move the legislation could bolster the effort, Osten said.
The debate has changed dramatically since Congress last considered giving states the right to tax online and catalog sales, Cowell said. That was two years ago, when lawmakers were dealing with legislation to extend a ban on certain Internet-related taxes and the issue of online sale taxes became intertwined with that effort.
Lawmakers now understand that the issues are separate, and they are concerned about state revenue loss from untaxed online sales, she said. The General Accounting Office predicts that states could lose millions of dollars in tax revenue as consumers buy more online. "I do think that members understand this is a way to help states without having to increase taxes," Cowell said.
However, Osten worries that the sales-tax effort could stall next year if the current debate over extending the moratorium on other Internet taxes gets too nasty. That bill has stalled because of concerns raised by state and local groups.
"I just think that the longer this goes, the more bad feelings you are going to have," Osten said.
Science
Energy Would Get $50 Million Boost In Senate Nanotech Bill
by William New
After a week of behind-the-scenes wrangling, an agreement was reached to authorize nearly $50 million in additional funding for Energy Department nanotechnology initiatives in a bill that would span the next four years.
After weeks of negotiations with the House that is designed to speed floor action on the measure, S. 189, lawmakers submitted a unanimous-consent agreement in the Senate on Monday. That compromise boosted the Energy figures but showed no other obvious changes.
Last week's version of the bill, which would authorize nanotechnology programs across the federal government, would authorize $346 million for Energy in fiscal 2006, $365 million in fiscal 2007 and $385 million in fiscal 2008. In the Nov. 10 version now before the Senate, Energy would get $347 million in fiscal 2006, $380 million in fiscal 2007 and $415 million in fiscal 2008, a total increase of $46 million.
For fiscal 2005, the first year the bill covers, the amount remained at $317 million. The Energy boost would move its authorization closer to that of the National Science Foundation as the lead agency on nanotechnology.
The latest version adds a provision that would direct Energy to "carry out projects to develop, plan, construct, acquire, operate or support special equipment, instrumentation, or facilities for investigators conducting research and development in nanotechnology." A portion of Energy's funds would be earmarked for a program to support consortia to conduct interdisciplinary nanotechnology research and development.
The bill would establish a clearinghouse and manufacturing center for commercialization of nanotech research. It also would create a center for studies on the societal, ethical, environmental, educational, legal and workforce implications of nanotechnology. That language has been slightly weakened in negotiations since August.
The bill also calls for several reports and reviews of the administration's nanotech initiatives. It does not directly address the work of several departments and agencies that are large players in the government-wide National Nanotechnology Initiative, such as the Defense Department and the National Institutes of Health, because the Senate Commerce Committee did not have jurisdiction and wanted to move the bill more quickly.
One source speculated that jurisdictional issues led to the change in favor of Energy, but that could not be confirmed by deadline.
Industry groups expressed satisfaction with the measure. "We're very pleased with the bill," said Paul Stimers, a lawyer at Preston Gates Ellis & Rouvelas Meeds, who represents the NanoBusiness Alliance. "It lays the future for American leadership in nanotechnology."
Stimers predicted that the House would pass the bill and that it will be on the president's desk for signature within "a couple of weeks." "We think it deals adequately and responsibly with legitimate concerns related to nanotechnology while at the same time taking advantage of the tremendous benefits of nanotechnology," Stimers said.
"It is widely anticipated that nanotechnology will be one of the next big economic drivers both in terms of new products and new jobs," he added. The bill would authorize funds for federal research and then set up programs that take research from the lab to the marketplace.
Budget
Defense Bill Elevates Debate On Two Tech Issues
by William New
The House-Senate compromise bill for authorizing Defense Department programs in fiscal 2004 contains provisions that have raised questions about software security requirements, as well as abuse of the right to keep intelligence information secret.
One provision calls for the department to ensure that its recent emphasis on using commercial, off-the-shelf software will not make sensitive command, control, communications and intelligence for Defense more vulnerable. The measure says the department "must be more proactive" in protecting its information systems and urges implementation of an "architecture or blueprint" for all of its information technology systems.
The provision would specify that the blueprint protect against unauthorized modifications or insertions of malicious code into critical software and against "reverse engineering" of intellectual property within that software. Reverse engineering involves taking a product apart to see how it works in order to duplicate or improve its functions.
The provision also would direct the department to assess the usefulness of tamper-resistant security software and other security tools. It says tamper-resistant software inserts "security-related functionality directly into the binary level of software code."
Ronald Lee, a partner at the law firm of Arnold and Porter, said that while the concept of increasing Defense security is not new, what is new is that "the authorizers are sufficiently concerned and unified about it to come up with a provision like this."
"They clearly put down their marker here," Lee said. "I think it's a way of opening dialogue and elevating" the issue. He added that the language could benefit vendors working on high-end assurance products and affect procurement and research and development of defense products.
Lee said the language could lead appropriators to back the idea of an assessment and technology blueprint and possibly attach conditions on future funding related to security. And because Defense is seen as a bellwether for the federal government on some issues, it also could extend to other agencies.
Another provision would give the National Security Agency (NSA) an exemption it requested from the Freedom of Information Act (FOIA) for so-called "operational files." Those files are intended to involve the technical collection of intelligence, according to Steve Aftergood, director of the Project on Government Secrecy at the Federation of American Scientists.
But the exemption could be abused if extended to other types of intelligence, he said. The provision would relieve NSA from having to search or review documents for FOIA requests if they are considered operational.
Aftergood said such documents probably would not have been released anyway, so the provision "makes some administrative sense." However, "openness" advocates worry because they say a similar clause has been abused by other agencies such as the National Reconnaissance Office (NRO), which builds spy satellites, and the CIA.
The NRO rejected a request for budget documents, calling them operational, but Aftergood is challenging that rejection.
The compromise version of the provision is narrowed to two NSA directorates: signals intelligence, which intercepts electronic signals, and research associations.
Security
Defense Firm Showcases Anti-Missile Device For Planes
by Greta Wodele
A large defense company on Tuesday demonstrated its solution for protecting commercial aircraft from shoulder-fired missiles.
Calling the threat of shoulder-fired missiles "real and present," an official with Northrop Grumman said its system would use a pod placed on the plane's underbelly and equipped with infrared beams to fire at an incoming missile. The lasers would jam the missile's homing device and throw if off course. The estimated cost would be between $1 million and $2 million to equip more than 6,000 commercial airliners.
Robert Del Boca, a vice president with the company, said during a news briefing that the Homeland Security Department is considering this type of technology for a prototype program to develop and demonstrate anti-missile systems. The department last month began soliciting bids for the $100 million, two-year project but does not plan to deploy anti-missile technology before 2005.
Boca called Northrop Grumman's anti-missile device the "most successful system" on the market, saying that the company has done "extensive testing" over the last eight years, including more than 200,000 jamming tests. The technology is currently operational for 13 types of aircraft.
Boca said more than 500,000 shoulder-fired missiles exist worldwide, with 27 terrorist groups known to possess the weapons. They are relatively cheap -- ranging from $25,000 to $80,000 each -- take only seconds to prepare, require minimal training and have a flight time of three to 10 seconds. He said the missiles are most effective at 10,000 to 15,000 feet, when an airplane is at its most vulnerable altitude -- during predictable landing and take-off routes.
The numbers mirror those in a Congressional Research Service report issued in September.
He also said the economic impact of closing the airline industry due to a missile attack would cost $10 billion a week.
The threat of shoulder-fired missiles -- also called man-portable air-defense systems, or MANPADS -- has been an issue for years, but since the Sept. 11, 2001, terrorist attacks, it has become a cause for recurring debate among lawmakers and Bush administration officials.
"We take the threat of MANPADS extremely seriously and continue to perform vulnerability assessments on our airports," Adm. James Loy, head of the Transportation Security Administration, said in recent testimony before Congress. He also emphasized that there is "no credible evidence" that any terrorists in the United States have the missile systems.
Lawmakers, however, are not taking chances. Congress appropriated $60 million to Homeland Security in fiscal 2004 to fund the project and plans to allocate another $60 million in fiscal 2005. Some members are pushing for additional funding and quick action to equip commercial aircraft with anti-missile devices.
Sens. Charles Schumer, D-N.Y., and Barbara Boxer, D-Calif., recently introduced legislation to equip 300 commercial aircrafts used to transport troops overseas with the anti-missile devices. The senators also introduced a bill earlier this year to require that turbo-jet commercial aircraft be equipped with the systems starting next month.
Others have argued that it is important to test the technology before placing it on airliners.
Intellectual Property
Campus E-Music Services Spark Different Industry Reactions
by Drew Clark
In the past two weeks, two universities have offered free, interactive music services so their students can use their computers to select the songs they want to hear.
Pennsylvania State University's decision on Thursday to offer the paid version of Napster to 18,000 students next semester has been greeted with acclaim by the recording industry and by a key legislator as a solution to stopping on-campus music piracy. The student-designed Library Access to Music Project (LAMP) at the Massachusetts Institute of Technology (MIT), on the other hand, was taken offline less than a week after its Oct. 27 launch.
The Penn State-Napster deal, announced at a conference of technology administrators in higher education, is seen by many as a template for licensed music on campuses, places that many legislators believe to be rife with illegal file-sharing on peer-to-peer (P2P) computer networks.
"If other colleges and universities take similar steps, the widespread violation of intellectual property rights on campuses will be sharply reduced," Rep. Lamar Smith, chairman of the House Judiciary Courts, the Internet and Intellectual Property Subcommittee, said about the deal.
"A legal online music marketplace -- one that compensates artists and offers listeners high-quality music -- is what we all want to see flourish," Smith added.
MIT's LAMP system also gave students seemingly legal access to music -- but without paying a penny to the recording industry. That key difference likely explains the hostility some recording labels showed for the system. It was taken offline Oct. 31 after Loudeye, MIT's source for the recordings, abandoned its original assurances that it had proper licenses for the songs.
In its week of operation, LAMP allowed MIT students to go online and virtually "check out" songs with their computers. But instead of being downloading to the computer -- the way both the new Napster and the P2P services operate -- the student-created system avoided recording company royalties by operating on the university's analog cable system.
Analog cable and traditional radio transmissions do not require royalties to the recording labels because their transmissions are considered "public performances," not reproductions. Instead, broadcasters and cable operators pay artists under a blanket license offered by the American Society of Composers, Authors and Publishers (ASCAP), and Broadcast Music Inc. (BMI). The fees are about 3.5 percent of transmitters' revenue, but educational institutions pay less.
"MIT took on the responsibility of having the proper public performing licenses from ASCAP and BMI," the university said in a statement. "After the LAMP service was launched, Loudeye informed us that some of their assurances to us may have been mistaken."
"MIT continues to be committed to developing a fully licensed service," the university said.
Ian Rosenberger, the student government president for Penn State undergraduates, praised the university for choosing Napster, which he called the easiest-to-use legal service, and for using the university's student technology budget to pay the subscription costs. "If universities don't offer some type of [service] to their students, Congress has said, 'We are going to come after your students,'" he said.
Today's Feature:
People Column
The Senate Democratic High-Tech and Innovation Working Group held its first staff meeting Nov. 3, with aides to co-chairs Barbara Boxer, D-Calif., and Ron Wyden, D-Ore., and seven other senators meeting to work out scheduling and logistics, according to a senior aide present.
Every Tuesday, read the People Column by Senior Writer Ted Leventhal
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E-briefs
Lobbying: As Senate and House lawmakers reconcile differences between their versions of legislation to fund the Agriculture Department and rural programs in fiscal 2004, telecommunications and technology companies and organizations are urging legislators to retain funding for high-speed Internet loans. In letters sent to Capitol Hill, 45 organizations urged House lawmakers and President Bush to support $15.1 million for loans to deploy broadband services to rural areas. "Considering that these monies serve the dual purpose of providing broadband connectivity for rural communities and creating new jobs for the nation, this expenditure would appear to be money well spent," one of the letters said. The letter sent to the Senate thanks lawmakers for backing an amendment to restore funding to the program and urges their continued support as the two versions are harmonized. The Telecommunications Industry Association, Cisco Systems and the Electronics Industries Alliance signed the letters.
On The Hill: Wyoming Republican Mike Enzi has scheduled a Senate Banking Securities and Investment Subcommittee hearing for Wednesday on small business and its role in the U.S. economy. The hearing also will examine how companies use employee stock options and the proposed accounting changes for those options. The Financial Accounting Standards Board (FASB) is deciding whether it will require companies to record the options as expenses rather than continuing with the practice of simply having companies mention the value of options in the footnotes of their balance sheets. Witnesses at the hearing will include: Nevada Republican John Ensign, who has proposed Senate legislation to halt the implementation of any accounting rules that would require stock-options expensing; FASB Chairman Robert Herz; Richard Forrestel, chief financial officer for Cold Spring Construction; and James Glassman, a resident fellow at the American Enterprise Institute.
Intellectual Property: The recording industry on Tuesday announced an international agreement allowing webcasters to stream programs to consumers over the Internet with a single license. A statement from the London-based International Federation of the Phonographic Industry (IFPI) said the agreement will allow webcasters to protect producers' rights in numerous countries through a single license in one participating country. The agreement will take effect when it is signed by national collecting societies over the next few weeks, IFPI said. Up to now, webcasters have needed separate producer licenses from each nation. Webcasting has gained ground in the United States, where there are 1,250 licensed services, but the agreement is seen as having the potential to boos webcasting elsewhere. "It will be much easier for these companies to operate across borders, and we expect to see webcasting gain momentum as a result of this agreement," IFPI Chairman and CEO Jay Berman said.
Crime: Law enforcement is having greater success in its effort to thwart Internet-related sex crimes, according to a new study from the National Center For Missing and Exploited Children. The Crimes against Children Research Center at the University of New Hampshire evaluated 2,500 people arrested for sex crimes between July 2000 and June 2001, surveyed law enforcement agencies and interviewed 600 criminal investigators for the report. They found that a quarter of those 2,500 arrests were made after undercover agents posed as minors on the Internet and were solicited for sexual acts, while a third were arrested for downloading and trading child pornography. Approximately 95 percent of the state and 93 percent of the federal prosecutions led to convictions. The results pointed to the difficulty in apprehending criminals across state lines and urged continued law enforcement training, with emphasis on multi-jurisdictional cooperation.
Intellectual Property: A software company whose main product permits consumers to copy digital videodiscs announced on Tuesday that it will donate $25 to the Electronic Frontier Foundation (EFF) each time it sells a package that bundles its software and a DVD burner. "This is a natural partnership that allows our customers to join the fight for digital rights," said Robert Moore, president and founder of 321 Studios. "The EFF is working to protect those rights, including that of Americans to protect their home-entertainment investment through DVD backup and repair." The movie industry and 321 Studios have sued each other, with the studios arguing that 321's DVD X Copy software violates the bar on circumventing anti-piracy technology. EFF submitted a friend-of-the-court brief arguing that the law cannot constitutionally prohibit tools that enable the public to make "fair use" of legally purchased movies. The court has not yet ruled.
Cyber Security: Officials with the National Cyber Security Summit on Tuesday announced the names of the co-chairmen for a task force to oversee the development, implementation and metrics for solutions to major security challenges. The chairs will be: Bill Conner, CEO of Entrust; Amit Yoran, cyber-security director at the Homeland Security Department; and Art Coviello, CEO of RSA Security. The summit will be held in Santa Clara, Calif., on Dec. 2-3. The task force is charged with creating a mission statement, an overview of key strategies and a high-level implementation plan. Also participating in the overall summit will be Homeland Security Secretary Tom Ridge and Bob Liscouski, the department's assistant secretary for infrastructure. The summit was convened as a response to the security challenges outlined in the White House cyber-security plan.
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