Issue Brief: Communications ReformUpdated January 2012
Background
In 1996 Congress passed legislation, the Telecommunications Act of 1996, and began its first efforts to deregulate the communications industry. In this deregulatory environment, came some of the first initiatives to preempt the essential and long-standing authority of states and local governments to regulate communications providers and services. In the area of taxation, in particular, some members of Congress argued that state and local taxation of the communications industry would stifle the competition and industry growth deregulation hoped to achieve. Industry maintained that in a deregulated environment, where there is increased competition among service providers, “monopoly” type taxation was overly burdensome. States and local governments argued the detrimental impacts of loss of authority and revenues. Since 1996, states and localities have engaged in substantial advocacy activities to protect their taxing and franchising authority over communications services and providers. These efforts continue today, as Congress, industry and the Federal Communications Commission propose new initiatives to preempt state and local governments in the areas of taxing and franchising.
Legislative Activity
There has been a flurry of legislative activity this Congress, particularly in the communications tax reform area. Unfortunately, some of the initiatives considered and approved have not been favorable to states and localities.
Despite strong opposition by state and local groups, including the GFOA, the House of Representatives approved H.R. 1002, the Wireless Tax Fairness Act of 2011, introduced by Rep. Zoe Lofgren (D-CA). The bill would ban new state and local taxes on wireless communications for a period of 5 years. It would exempt taxes to support enhanced 911 emergency systems and universal service programs to provide wireless service to rural areas, as well as taxes that must be approved by voters, like those in California and Washington. Attention has now turned to the Senate where Senator Ron Wyden (D-Oregon) has introduced a companion measure, S. 543. GFOA members are urged to contact their Senators ASAP to encourage them to oppose S. 543. Additional information and talking points for discussions with your Senators can be found on the GFOA’s Web site at: http://www.gfoa.org/index.php?option=com_content&task=view&id=2007
Of equal concern to states and localities is the Digital Goods and Services Tax Fairness Act of 2011 (H.R. 1860/S.971), a bill to regulate state and local government’s taxation of downloaded music, movies and online services. The legislation purports to ban “multiple” and “discriminatory” taxation of digital goods and services. However, proponents of this measure have been able to provide no concrete examples of multiple and discriminatory taxation of digital goods and services by states and localities. The GFOA and its state and local partners oppose the legislation for several reasons. First, it threatens to reduce state and local tax revenues even as states and localities struggle to fund critical services like education, health care, and public safety. Secondly, it would seriously disrupt fundamental features of state and local sales taxation that extend far beyond the kinds of online goods and services covered by the bill. Finally, it opens up major tax-avoidance opportunities for large multistate corporations selling physical goods online. State and local governments have expressed these significant concerns at recent congressional hearings on the legislation. It is significant to note that there is a coalition of interest groups supporting this legislation that has developed its own Web site and is aggressively pursuing members of Congress to move the measure forward (http://unfairdownloadtaxes.com/). GFOA and it state and local government partners are urging members of Congress to ignore the rhetoric and to focus instead on how this legislation would curtail tax revenues and undermine state and local taxing authority.
Fortunately, there is also some good news to share. In early November, a bi-partisan group of Senators, including Richard Durbin (D-IL), Michael Enzi (R-WY), and Lamar Alexander (R-TN), introduced the Marketplace Fairness Act, (S. 1832), that would allow states that have simplified their sales and use tax laws to begin collecting such taxes from vendors who sell goods through remote means (e.g., Internet and catalogue sales). Unlike previous legislation, S. 1832 does not include a provision that calls on state and local governments to simplify their communication taxes before being able to collect taxes made remote sales.
In other good news, the House Communications and Technology subcommittee of the Energy and Commerce Committee approved the Jumpstarting Opportunity with Broadband Spectrum (JOBS) Act of 2011, introduced by Rep. Greg Walden (R-OR), the subcommittee’s chair. The bill would reallocate the 700 MHz D-Block of spectrum from commercial to public safety to create a nationwide public safety communications network, helping to implement a recommendation of the 911 Commission. The bill would also dedicate up to $6.5 billion for a grant program to help states construct public safety broadband networks. Several groups representing states and local governments, including the National League of Cities, the National Association of Counties and the National Conference of State Legislatures, have stated that the measure is a positive step forward.
Regulatory Activity
On April 7, 2011 the Federal Communications Commission (Commission/FCC) released a Notice of Inquiry (“NOI”) entitled “Expanding the Reach and Reducing the Cost of Broadband Deployment by Improving Policies Regarding Public Rights of Way and Wireless Facilities Siting,” to obtain detailed information regarding local governments’ rights-of-way management and compensation practices and policies. The FCC maintains that the NOI is intended to assist the agency in its understanding of these practices and how they may be related to facilitating or obstructing broadband deployment around the country. The Commission seeks to compile a detailed record of broadband deployment issues to have a factual basis upon which to determine the nature and extent of any problems.
In July 2011, the GFOA, along with a broader coalition of national associations representing local governments, submitted comments in response to the FCC’s NOI. In its comments the groups maintain that regulatory action by the FCC that severely limits or otherwise changes the way local governments are permitted to manage and collect compensation for use of the public rights-of-way would have far-reaching implications for localities around the country, such as reducing local government revenue used to enhance public interest objectives, including ensuring the public safety, maintaining the roadways and making other infrastructure investments, to name a few. The comments also challenge the FCC’s implications that local rights-of-way management and compensation practices are thwarting broadband deployment in communities around the country. The GFOA’s comments to the FCC can be found on the GFOA Web site at:
http://www.gfoa.org/downloads/GFOA_LocalGovernmentAssociationsResponsetoFCCNOIonBroadbandDeploymentandRightsofWayPolicies.pdf
Related Public Policy Statements Additional Resources GFOA • Federal Liaison Center • (202) 393-8020 • (202) 393-0780 FAX • Email
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