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Net Tax Act a mixed blessing?

To civil liberties advocates, the breakthrough three-year tax holiday is also a Trojan horse for CDA-like amendments.

To civil liberties advocates, the Internet Tax Freedom Act will be a mixed blessing if it passes as early as today.

Federal lawmakers say they aim to temporarily halt the nation's 30,000 tax jurisdictions from sucking the life out of the budding e-commerce industry. The Senate sweepingly passed the bill Thursday, and the House could approve the Senate's version as early as today.

But the Net tax act, which places a three-year moratorium on new Net taxes, also contains two controversial provisions. One would require Net sites to get permission to collect information from children, a move strongly supported by privacy advocates. The other allows states to tax commercial sites that are found to give minors access to "harmful" material, a move that the same advocates have staunchly opposed.

Privacy advocates support the Children's Online Privacy Protection Act by Sen. Richard Bryan (D-Nevada), which was tacked on to the Senate version of the Net Tax Act last Friday. The provision requires parental consent before Internet sites can collect information online from children age 12 and under.

The proposal comes in the wake of the Federal Trade Commission's critical report about Web sites that lure sensitive information from children without parental permission or disclosure. Of the 212 children's sites surveyed, 89 percent collected personal details from youngsters, but a meager 7 percent promised to notify parents of their practices, and fewer than 10 percent offered parents control over the harnessing and use of their children's data.

The FTC called for a new law akin to Bryan's proposal. Soon after, the Clinton administration pledged its support of legislation to protect preteens' online privacy.

But while that provision has been widely praised, many privacy advocates have been fighting a second section added to the law: Sen. Dan Coats's (R-Indiana) amendment exempting from the tax moratorium any commercial Web site found giving minors access to "harmful" material.

With the Coats proposal, Congress heads toward the first online content regulations since the Supreme Court ruled a major part of the Communications Decency Act unconstitutional last summer. An infamous provision made it a felony to transmit "indecent" material to minors via the Net, and could have applied to content within an array of topics including art and medical science.

The House has already shown that it supports the principle behind the Coats proposal, having cleared Rep. Mike Oxley's (R-Ohio) Child Online Protection Act, which contains privacy protections for preteens as well as a broader provision to penalize commercial sites that give minors unfettered access to "harmful" material.

"We are happy with the child protection law in the Net Tax Freedom Act. This is Congress's first real effort to address this growing issue of privacy online, and it's a precursor to broader legislation," said Alan Davidson, staff counsel for the Center for Democracy and Technology.

But, he added, "We believe that both Coats's and Oxley's proposals defy common sense and the Constitution."

Like another proposal by Coats--the so-called Communications Decency Act II, which passed the Senate in July as part of spending bill--Oxley's bill states that unless sites check identification, they could be fined up to $50,000. Those who run Web sites could be imprisoned for six months if they let underage surfers access any communication, image, or writing that contains nudity or actual or simulated sex, or "lacks serious literary, artistic, political, or scientific" value.

"They will not effectively protect children online and they chill free speech in a way that violates the Constitution," Davidson said. "But the No. 1 possibility is that they will pass Congress as part of the Net Tax Freedom Act with both these provisions."

The House probably must clear the same bill that passed the Senate--or the Net tax act could be killed because Congress is running out of time and is expected to adjourn no later than Tuesday.