Governors Praise Actions of Senators on Extension of Internet Tax Freedom Act

The National Governors Association (NGA) today praised Delaware Sen. Thomas Carper, Tennessee Sen. Lamar Alexander, California Sen. Diane Feinstein, Ohio Sen. George Voinovich and Wyoming Sen. Mike Enzi, all former state and local elected officials, for their introduction of legislation that would extend the Internet Tax Freedom Act (ITFA).

"This bill represents a reasonable extension of ITFA that closes tax loopholes, promotes Internet usage and protects states," said Raymond C. Scheppach, NGA executive director. "Governors must maintain the authority to manage their state's revenue streams. This legislation protects that authority and clarifies the definition of Internet access so states are not at risk of losing significant revenues."

The bill alters the definition of tax-free Internet access to ensure a consumer's email and instant messaging remain free; closes a loophole that puts state revenues at risk; extends the moratorium for four years; and continues the original grandfather clause to protect existing revenues.

The language is consistent with governors' priorities laid out in NGA testimony yesterday before the House Judiciary Subcommittee on Commercial and Administrative Law. David Quam, NGA director of federal relations, testified that NGA supports a temporary extension of ITFA that clarifies the definition of Internet access and does not further limit state authority.

"Governors remain steadfast in their insistence that decisions regarding state and local taxes should remain with state and local officials," Quam testified this morning. "We urge congress to maintain the balance intended by the original moratorium -- one that encourages the growth of the Internet and respects state sovereignty."

As congress begins to consider more permanent changes to ITFA, Quam noted that governors ask lawmakers to "be clear in their definitions, stay flexible and do no harm."

Governors also recommend congress:

• Examine the scope of the moratorium in light of technological advancements;
• Update definitions to ensure they reflect congressional intent and do not interfere with taxing authority;
• Extend the moratorium on a temporary basis to respect state sovereignty; and
• Retain the original grandfather clause to preserve existing state and local tax revenues.
• Quam is scheduled to testify today before the Senate Commerce, Science, and Transportation Committee tomorrow regarding Communications, Taxation and Federalism.