Digital business: Taxes, gambling, and piracy

Congress is trying to strike a legislative balance that will allow plenty of digital business without endangering copyrights or causing lost tax revenue.

7 min read
Digital business The commercialization of the Net hasn't avoided the regulatory eye of Congress. For example, a bill to federally outlaw online casinos is on the table. Strict penalties for those who distribute, reproduce, and sell illegal copies of digital music, video, or literature are being considered as well. But many lawmakers
Legislation to watch Legislation to watch
Signed into law Signed into law
also want the high-tech and online industries to grow. One effort would shield Net access and services from new state and local taxes. And two appropriations bills doled out more money for telemedicine projects and education technology.


Bills to watch Internet Gambling Prohibition Act
Introduced by Sen. Jon Kyl (R-Arizona)

Includes the Net under the federal Wire Act, which prohibits making or accepting wagers over telephone wires. States would not be allowed to permit online bets under the act. Operators could get a $20,000 fine and four years in prison for accepting just one cyber-wager, and a "casual bettor" would get a $2,500 fine and six months in prison for betting on the Net.

Passed various Senate committees, now awaiting debate and a vote by the full Senate.

Previous coverage
  Net gambling looks grim, October 23, 1997
  Rivals roll dice on Net gambling, August 28, 1997
  Net gambling called Pandora's box, July 28, 1997
  Virtual casinos bet big, July 11, 1997
  Gambling with the law, July 11, 1997


Bills that have passed Software Equity Act
Introduced by Rep. Jennifer Dunn (R-Washington) and Sen. Orrin Hatch (R-Utah)

Cuts software exporters a tax break that was previously enjoyed by most other industries under the 1971 Foreign Sales Corporation statute, which gave U.S. manufacturers up to a 15 percent export tax exemption. Now software exporters can apply for the exemption, which Congress estimates could save them $1.6 billion over the next decade.

Signed into law by President Clinton in August.

Previous coverage
  Software gets export tax exemption, August 5, 1997
  Software tax break on table, February 12, 1997
  Tax break for software on Hill, January 8, 1997

Bills to watch Internet Tax Freedom Act
Introduced by Sen. Ron Wyden (D-Oregon) and Rep. Chris Cox (R-California)

Places a six-year ban on states and localities passing new taxes specifically aimed at online access, e-commerce, and other Net services. The bill has moved forward despite ongoing opposition from U.S. mayors and some state lawmakers, who say the legislation takes away their right to tax and create new revenue streams.

Passed by crucial committees in both the Senate and House; they are expected to vote on the bill early next year.

Previous coverage
  Net Tax Freedom Act closer, November 4, 1997
  Net tax moratorium to committees, October 10, 1997
  Keeping the Net tax-free, July 1, 1997
  Mayors ding bill to ban Net taxes, June 25, 1997
  Net tax freedom bill debated, May 22, 1997


Bills to watch No Electronic Theft Act
Introduced by Rep. Bob Goodlatte (R-Virginia)

Gives online pirates of software, music, video, or literature up to five years in prison and a $250,000 fine for a felony offense, which is defined as "willfully" making or possessing ten or more illegal copies with a retail value of $2,500 or more.

Passed by Congress, awaiting action by President Clinton.

Previous coverage
  Congress approves copyright bill, November 18, 1997
  Bill to make pirates walk plank, September 30, 1997

Bills to watch WIPO Copyright and Performances and Phonograms Treaty Implementation Act
Introduced by Rep. Howard Coble (R-North Carolina) and Sen. Orrin Hatch (R-Utah)

Ratifies international treaties to protect copyrights in cyberspace. The United States signed the treaties at the World Intellectual Property Organization's diplomatic conference in Geneva, Switzerland, last December. One controversial provision would make it a crime to import, manufacture, or distribute technology, which could include PCs, that could be used to "circumvent" copyright protection devices.

House subcommittee hearings held.

Previous coverage
  Trademarks haunt domains, November 5, 1997
  Media moguls lobby for copyright bill, September 25, 1997
  Congress confronts copyrights, September 16, 1997

Bills to watch Online Copyright Limitation Liability Act

Exempts Net access providers and telephone companies from liability for their customers' copyright violations if the providers don't know about the illegal activity on their networks.

House subcommittee hearings held.

Previous coverage
  The CDA: Case closed, June 26, 1997
  Policing the Internet, December 13, 1996

Digital Copyright Clarification and Technology Education Act
Introduced by Sen. John Ashcroft (R-Missouri)

Makes it illegal for Net users to circumvent anticopying technology that protects copyrighted material online. The bill also expands the fair use of a copyrighted work to include digital materials so that teachers, researchers, and libraries will not be in violation of the proposed law.

Judiciary Committee hearings held.

Previous coverage
  Johnny Cash sings copyright blues, September 17, 1997
  Congress confronts copyrights, September 16, 1997
  Copyright law revision urged, September 5, 1997
  Copyright bill splits PC industry, August 29, 1997
  Bill to take ISPs off copyright hook, July 18, 1997

Digital Era Copyright Enhancement Act
Introduced by Rep. Rick Boucher (D-Virginia) and Rep. Tom Campbell (R-California)

This bill also implements the WIPO treaties. The proposal would make it a crime to break anticopying devices, but would not outlaw products that could be used to destroy copyright-protection devices. In addition, this act lays out more exemptions for libraries and distance-learning institutions regarding fair use and fair sale, so that downloading or sharing copies of protected online material that was purchased legally by someone else is not a crime for these entities. Finally, the bill overturns software makers' claims that by unwrapping their products or clicking past an online licensing agreement, end users have agreed to honor certain copyright stipulations.

Previous coverage
  Shrinkwrapping the social contract, April 23, 1997
  Who owns information?, July 1, 1997
  Copyrights in classrooms, January 4, 1997
  Geneva treaty wins over skeptics, December 23, 1996
  Global copyrights on table, December 2, 1996

Criminal Copyright Improvement Act
Introduced by Sen. Patrick Leahy (D-Vermont)

Amends existing copyright laws to include electronic piracy under existing criminal code.

Referred to Senate Judiciary Committee.

Previous coverage
  Bill to OK Net copyright treaties, July 30, 1997
  Software piracy rife in Latin America, May 23, 1997
  Piracy in Middle East, Africa still high, May 16, 1997
  Microsoft slams Lebanese piracy, May 13, 1997
  CNET Special Report: Crime on the Net, February 7, 1997

Net Access

Internet Protection Act
Introduced by Rep. Rick White (R-Washington)

Prohibits any new regulation targeted specifically at the Net, including any action by the Federal Communications Commission concerning Internet access providers.

Referred to House Subcommittee on Telecommunications, Trade, and Consumer Protection.

Next Generation Internet Initiative

White House plan to create new applications for the Internet and develop networking technologies to improve communication among the nation's academic and research centers as well as federal agencies and the health care industry. NGI technology also promises to route data at 1,000 times the speed of today's Net, setting aside bandwidth so that huge packets of data can be transmitted in real time. The Clinton administration sought $100 million for the project for 1998; Congress allocated $95 million.

Sent to President Clinton on October 21.

Previous coverage
  Domain fund marked for next Net, October 14, 1997
  New Net may not get '98 funding, September 10, 1997
  Private dollars wanted for next Net, June 5, 1997

Bills that have passed Technology Literacy Challenge Fund appropriation bill

Earmarked $425 million of the Education Department's 1998 budget for education technology spending--more than doubling the 1997 budget. The one-year-old federal program allocates funds to states for hardware, software, and online access, but on the condition that localities work with private industry to turn out tech-savvy students. In addition, the part of the tech-literacy fund known as the Technology Challenge Grant Program will receive $116 million next year to distribute technology grants to low-income schools.

Signed by President Clinton on November 13.

Previous coverage
  Budget doubled for wiring schools, November 18, 1997
  Study tracks school tech use, November 12, 1997
  Wired schools: It takes a village, October 16, 1997
  School tech money may double, July 29, 1997


Bills that have passed Balanced Budget Act

Provides funding for a demonstration project that uses computers and networks to provide primary care and preventative services to diabetes patients in medically underserved rural and urban areas.

Signed by President Clinton on August 5.

Medicare Modernization and Patient Protection Act
Introduced by Sen. Ron Wyden (D-Oregon)

Reforms Medicare; calls for the creation of a Commission on Telemedicine to make recommendations regarding which telemedicine services should be covered by Medicare. In addition, it doles out benefits for telemedicine providers and Net access for physicians in rural areas who deliver medical information via electronic systems including videoconferencing to share patient records and diagnostic images.

Referred to House Finance Committee.

Previous coverage
  Bill backs telemedicine, March 7, 1997

High-Tech Stocks

Bills to watch Securities Litigation Uniform Standards Act
Introduced by Rep. Tom Campbell (R-California)

Moves all civil securities lawsuits under federal jurisdiction.

Referred to Subcommittee on Finance and Hazardous Materials from the House Commerce Committee.

Previous coverage
  High tech christens lobby group, July 8, 1997
  Shareholder suit nixed again, May 29, 1997
  Investor suits flood Valley, March 28, 1997
  Clinton flip-flops on litigation, August 8, 1996

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