Amendments for Net tax act?

Lawmakers may add the CDA II and a repeal of the domain name tax to the Internet Tax Freedom Act.

4 min read
Two controversial proposals could be tacked on to the Internet Tax Freedom Act before it is debated by the Senate today, one proposal to limit minors' access to adult online material, and the other seeking to repeal Congress's approval of a tax on Internet domain names, according to sources.

After a drawn out political fight over the Net Tax Freedom Act--to temporarily halt new taxes on Net access and services for up to three years--the Senate is expected to debate the bill, which was passed by the House in June.

But sources say it could become a vehicle for other Internet bills.

Senate Majority leader Trent Lott (R-Mississippi) is said to be working behind the scenes to push an amendment that would reverse Congress's decision in May to retroactively approve up to $60 million in taxes that were collected in Internet domain name registration fees..

Congress approved the tax after the American Internet Registrants Association initially won a lawsuit to stop the collection of the $30 per two-year domain name registration fee and obtained rebates for those who paid the fee. The fee went into the National Science Foundation's Intellectual Infrastructure Fund to improve the enitre network.

The lawsuit was dismissed once Congress approved the tax, however, but it could be revived if the tax is once again made illegal.

If the case swings back in favor of the American Internet Registrants Association, the millions of dollars in registration fees could be rebated to people who have registered domain names. Some fees also would go to the attorneys in the case.

If passed, it could hurt funding for a major White House project, the Next Generation Internet (NGI). Lawmakers also had pegged $23 million of the infrastructure fund for NGI project to build a high-speed network that was begun by a consortium of universities and then adopted by the Clinton administration.

"We are sure that the Lott amendment will be offered," said a Clinton administration official, who declined to be identified.

"The provision would repeal that ratification of the [domain name tax] and we will not get a big increase in funding for NGI and networking research," the source added. "This lawsuit has shown that the [domain name tax] is not a secure source of funding for the Next Generation Internet."

Lott's office was not immediately available for comment.

William Bode, who represents the American Internet Registrants Association, said he was not banking on the Lott amendment coming up tomorrow.

"I don't anticipate that passing, but that would be a boon for the 1.4 million Internet registrants who paid the tax ,and it would be consistent with the overall moratorium act to insure that no federal taxes would be applied to the Net," Bode said today.

Along with the domain name tax possibly being repealed, sources say the so-called CDA II, named after the Communications Decency Act, has a chance of being attached to the Net Tax Freedom Act.

The Senate already passed Sen. Dan Coats (R-Indiana) legislation to make it a crime for Web sites to give minors access to "harmful" material. But the provision was buried in a complicated spending bill that still must be approved by a conference committee made up of both houses of Congress.

The Net Tax Freedom Act, on the other hand, could be a simpler vehicle to turn the Coats bill into law. A House committee already passed a bill similar to the proposal, Rep. Mike Oxley's (R-Ohio) Child Online Protection Act, so there is support of the legislation. Once approved in the Senate, both chambers also would have to conference over the bill.

Moreover, observers don't expect the domain name tax amendment to be a "deal breaker" so both provisions could make it through the Senate by piggy-backing on the Net Tax Act.

Still when it comes to last minute wheeling and dealing on Capitol Hill, anything is possible; The amendments could potentially never surface.

But that doesn't console supporters of the Next Generation Internet program who fear the Lott amendment will come up and pass.

"You could think of that [domain name registration] money going into three different areas: Internet connectivity for research universities, research into new networking technologies to fix quality of service problems and NSF support for bandwidth-intensive applications so that tomorrow's Internet can handle voice and video as well as today's Net handles email," said David Lytel, a former member of the White House Office of Science and Technology Policy who now runs Sherpa Consulting Group.

"The government's investment in NGI will become a commodity and will reach the commercial Net," he added. "This action by Senator Lott would be a step backwards and this effort to fuel innovation will be stifled."