National Tax Association Communications And
Electronic Commerce Tax Project

Report on Operating Committee Meeting of 8/18/97

MINUTES OF AUGUST 18, 1997 MEETING OF NTA OPERATING COMMITTEE

INTRODUCTION

On Monday, August 18th, the members of the Operating Committee of the NTA-sponsored Communications and Electronic Commerce Tax Project (the "Tax Project") met in Salt Lake City, in order to facilitate the formation of the Steering Committee, to prepare proposed project budgets and meeting schedules, and to address/resolve several other issues that will enable the project to get underway. The members of the Operating Committee who met are:

Prof. Gary Cornia (Brigham Young University, Chair of the Tax Project)
Wade Anderson, Tax Policy Director, Texas Comptroller's Office
Harley Duncan, Executive Director, Federation of Tax Administrators
Jim Eads, Tax Counsel, AT&T and Chair, COST Electronic Commerce Task Force
Kendall Houghton, General Counsel, Committee On State Taxation
Val Oveson, MTC Chair and Chair, Utah State Tax Commission
Ken Silverberg, Counsel to Media Industry Tax Group

POINTS COVERED AT THE OPERATING COMMITTEE MEETING

I. Status of Steering Committee Organizations

  1. Business Organizations: Both the Business and Government organizations are to nominate 16 organizations or representatives to the Steering Committee. 16 organizations have been identified, some of which have multiple representatives.

  2. Government Organizations: Harley Duncan presented a nearly final list of the 16 representatives. Because there are fewer Government organizations interested in state and local taxation, the Government side divided its 16 slots among nine organizations, as follows: National League of Cities (2 council members), U.S. Conference of Mayors (2 mayors), National Association of Counties (2 commissioners), Government Finance Officers Association (1 budget director), National Association of Telecommunications Officers and Assessors (1 city finance official), state tax administrators of the MTC/FTA (2 MTC board members/ commissioners, 2 MTC board members/commissioners), National Governors' Association (2 governors), and National Conference of State Legislatures (2 legislators).

  3. Others: According to our charter document, up to seven Steering Committee members may be nominated from "Other" organizations (i.e., not Business or Government, but with a demonstrated interest and expertise in matters relevant to the Tax Project). While the NTA is to oversee the expressions of interest and nominate the slate, the approval of any Other Steering Committee members is left to the Business/Government Steering Committee members. Prof. Cornia informed us that he had already indicated to the AICPA that it would definitely be approved as an Other. All agreed that the AICPA was in fact an appropriate nominee to the Others slate. We thought that some academicians might express interest in the Steering Committee (Prof. Cornia will contact some), and we also thought that the ABA State and Local Taxes Committee might also have an interest. In addition, Bruce Cohen of the U.S. Dep't of Treasury has expressed interest in participating in the Tax Project (Ken Silverberg will follow up with Mr. Cohen). The NTA is to publish a letter of invitation to such potential Steering Committee candidates soon, in State Tax Notes and perhaps other publications. Approval of Other Steering Committee members will occur at our first Steering Committee meeting (see below).

II.  Tax Project Budget

  1. Before we entertained specific budget ranges, we decided to identify the tasks that had to be completed, and how they might be accomplished with/without budget appropriations. We agreed that the following needed to be taken into account:
  1. Support duties, including (1) bi-weekly communications with all involved in the project, (2) meeting planning, and (3) management of correspondence and perhaps press/public relations.

  2. Travel costs of Prof. Cornia (who is volunteering his time to chair this project), and perhaps Prof. Hellerstein (who has volunteered to head up drafting efforts).

  3. Meeting expenses, including room rental fees and breaks.

  4. Possible temporary staff time, TA or RA assistance for the professors, and possible course reduction fees (all to be assessed once the Tax Project is up and running).
  1. Wade Anderson and Ken Silverberg volunteered to make the significant in-kind contribution of their administrative assistants' time to coordinate and carry out the various support staff duties, including communications and meetings planning. By accepting this arrangement, the Tax Project does not have to budget for computers, space, or other incidentals to the hiring of a full- or part-time administrator. A list of the specific duties to be split between the two assistants is being prepared and will be reviewed at the upcoming Steering Committee meeting. It is expected that Ken's assistant will handle billing of the Steering Committee members, maintenance of a trust account, and D.C.-based administrative duties and conference planning; Wade's assistant will handle general communications, paperwork and other meetings planning.

  2. With respect to the remaining items, an initial budget of $30,000 is proposed by the Operating Committee. Again, this budget would be designed to cover the following contingent expenses: travel expenses, meeting expenses, supplies and related administrative expenses, and required support for the professors.

  3. The budget is proposed to be split 50/50 between the Business and Government Steering Committee members. Although we noted that the charter document states the costs will be born in a pro rata fashion, nevertheless the Operating Committee thought this was a very fair and more flexible way to divide the budget; hence, specific funding decisions and mechanisms should be deferred to each of the two major interest groups.

  4. Because we do not yet know who will be participating as an Other Steering Committee member, it was too difficult to divide the $30,000 budget among the three groups. However, the Operating Committee proposes that once an Other is appointed, it should be subject to the following funding requirements: $500 if an organization, $100 if an individual who is not an academician (they are exempt from funding requirements under the charter document). In this manner, the budget may continue to expand, so that another call for funds may not be necessary; in addition, requiring Others to fund their participation should ensure a certain level of commitment to the Tax Project.

  5. There should be no membership fee imposed on those groups and individuals who choose to participate in the Tax Project, but which were not selected for Steering Committee membership. This recommendation is made based on the facts that such a fee structure would be too hard to monitor and collect/enforce, and that we want to encourage open and free public participation and comment.

  6. Ken Silverberg has volunteered to set up a Web page at the Nixon Web site (where he has maintained a Convergence Forum page), to serve as a central location for dissemination of communications. This will be in addition to all fax-based communications, and will provide information to the public that may not have access to fax-based communications (e.g., because they are not members of the Steering Committee or a Working Group), including: the organization and operations document, member lists, reports like this one, and the substantive work product of the Tax Project.

III.  Drafting Committee:

  1. Prof. Walter Hellerstein originally volunteered to head up drafting efforts for the Tax Project, but he recognizes that he has limited free time, and that he needs additional perspectives in addressing this very complex arena of tax policy. Therefore, he has requested that a Drafting Committee be formed, with himself as Chair, and with additional members to include: Bruce Reid (Microsoft), Jim Eads (AT&T), Andy Ireland (Netscape), Paull Mines (MTC), and Harley Duncan (FTA).

  2. Kendall Houghton is currently preparing a paper summarizing the various substantive policy proposals that have been made concerning taxation of electronic commerce. She has agreed to provide that paper to the Drafting Committee so that they have exposure to a variety of approaches before suggesting one or another to the Steering Committee, and before they begin drafting efforts in earnest. A full discussion of drafting perspectives and approaches will be held at the first working session/public meeting, in November (see schedule/agendas below).

  3. Harvard Legislative Project: In case others of you had not heard, the Harvard International Tax Program, in conjunction with the Harvard Legislative Research Bureau and the Harvard Journal of Legislation, has undertaken a tax statute drafting project designed address electronic commerce, over the upcoming academic year. The Harvard project has associated a variety of professors, including Profs. Hellerstein, Pomp. McIntyre, Oldman, Avi-Yonah, and Bruce Cohen (Treasury) to advise it, as it examines whether "we need to formulate new definitions of taxable transactions, new nexus rules, or new conceptions of what constitutes a permanent business establishment." The Harvard project has contacted all 50 state revenue departments to offer its "assistance." We discussed with the tax administrators on the Operating Committee our concerns regarding how such a project could be taken seriously, given its business-exclusive approach and arguable lack of focus on practical considerations; they responded that anyone's help was appreciated in thinking through the issues, but that few if any states had accepted the Harvard invitation. We agreed that the Tax Project should invite the Harvard project's administrator to sit in on our meetings, and to encourage them to open their doors to industry participation if they were going to actually undertake drafting assignments.

IV.  Public Meetings and Working Sessions

  1. Prof. Cornia reported that the NTA wants the Tax Project to hold a session in conjunction with its November conference in Chicago; this generated discussion of what such a meeting would accomplish, how to integrate it into our working schedule, and how to ensure that attendance would be maximized. Concern was expressed that the Tax Project yield some tangible results within a reasonable time frame, so that the recommendations/model statutes, etc., could be of use to either state legislatures or Congress; therefore, the pressure is on to hold some working/drafting sessions in the near term. However, it was noted that many of the Government Steering Committee members were not tax experts or otherwise technically oriented, and were not ready to jump into the project. The NGA specifically requested that one or more educational/tutorial sessions be held prior to engaging in working sessions, to orient the Government participants to the relevant policy/technical/legal considerations that would drive the work of the Tax Project. With this in mind, the Operating Committee has devised the following schedule.

  2. STEERING COMMITTEE MEETING: September 4th, Washington, D.C.
  1. The purpose of this meeting is to gather the key players, approve the budget and sign off on the meetings schedule, and start to establish some key goals, procedures, issues to be covered, and other relevant action items.

  2. Agenda:
  1. Approve proposed budget.

  2. Review meetings schedule.

  3. Approve a slate for Others nominated by the NTA to the Steering Committee.

  4. Approve educational/tutorial session, and develop "curriculum," faculty (see below for suggested location and date).

  5. Present Drafting Committee and discuss its progress, plans.

  6. Discuss goals, policies, and identify issues.

  7. Possible items: discuss scope of project and possible examination of local franchise fees (establish a Working Group?); discuss Congressional/White House interactions.
  1. This meeting will be held at the offices of Gannett (1100 Wilson Blvd, Arlington (Rosslyn), VA), and will run from 10 a.m. to 3:00 p.m.
  1. EDUCATIONAL FORUM: October 14th (tentative), Washington, D.C.
  1. This session would be called in response to a request from the NGA, but it would be open to any Steering Committee member or other Tax Project participant who had interest.

  2. RSVPs would be required, and a curriculum /faculty must be established by consensus of the Steering Committee. If held in D.C., Operating Committee members Harley Duncan and Ken Silverberg volunteered to coordinate the program, with the assistance of Tim Masanz of NGA. Many of the Steering Committee organizations' staff members could serve on the faculty.

  3. The focus would not be on how the Internet works, or technology aspects; rather, it would focus on how tax policy is made, and a variety of technical and other considerations that will come into play in the Tax Project.
  1. PUBLIC WORKING SESSION: November 12th, Chicago (full day)
  1. Details: The meeting will be held the day after the NTA meeting, so that it does not conflict with the TEI Silicon Valley High Tech Tax Conference.


    The meeting will be held at the Drake Hotel in Chicago, and NTA has arranged both a meeting room and sleeping room availability for the previous night. Details to come.

  2. Steering Committee Meeting: The first component of this public working session will be the Tax Project's second Steering Committee meeting. While that meeting will be open to the public, participation will be limited to the organizations on the Steering Committee. This meeting should cover any open issues form the previous meeting, and set the tome for the working session to follow.

  3. Working Session Agenda (tentative):
  1. Chair Gary Cornia to welcome participants, and briefly summarize status of Tax Project.

  2. Kendall Houghton to join Drafting Committee in presentation of various substantive proposals regarding taxation of electronic commerce. If new ideas have been developed or any consensus reached as to drafting perspectives, the Drafting Committee will elaborate.

  3. Public interaction concerning the various drafting proposals introduced; possible division into Working Groups to address sub-issues.
  1. PUBLIC WORKING SESSION: December (tentative), San Jose (full day)
  1. The Operating Committee believes moving the meeting locations across the country encourages nationwide participation in the Tax Project. It suggests that another meeting in December on the West Coast may be appropriate. To be discussed.

  2. NOTE: The goal of the Tax Project would seem to be to yield some recommendations or other work product in time to be considered and/or applied in the 1999 federal/state legislative sessions. Therefore, much of the initial work should be accomplished by Summer 1998. Therefore, the Operating Committee believes that an aggressive but realistic meeting schedule must be developed.

V.   Press and Public Relations

  1. The members of the Operating Committee have received several calls from the press about the nature, goals and progress of the Tax Project, and it is obviously the subject of attention in Congress, where the Tax Project has been specifically referenced in the Internet Tax Freedom Act. Therefore, the Operating Committee is compiling a press packet with information on the Tax Project, the NTA's letter of invitation to Others to participate in the project, the list of Steering Committee members, and our work to date. The packet will be sent to State Tax Notes, The Wall Street Journal, and other press contacts of the members of the Tax Project.

  2. The Operating Committee recommends that the Steering Committee approve putting together a "tri-partisan" delegation of Steering Committee members to brief the Congress and White House/Treasury on the status of the Tax Project, upon the reconvening of Congress in September.

 

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