Minutes 9/4/97

National Tax Association Communications And
Electronic Commerce Tax Project

Report on Operating Committee Meeting of 9/4/97

Minutes of the September 4, 1997 Meeting of the NTA Communications and Electronic Commerce Tax Project Steering Committee

On September 4, 1997, the first meeting of the National Tax Association's Communications and Electronic Commerce Tax Project Steering Committee was held in Washington, D.C. Professor Gary Cornia, chairman of the tax project, presided over the meeting. Following his welcoming remarks and introductions of the individuals present at the meeting, Prof. Cornia gave a brief background statement concerning the history and reasons for the formation of the tax project.

Following this opening presentation, Prof. Cornia called on Ken Silverberg, Counsel to the Media Industry Tax Group, to describe a web site which he had set up for the tax project. At present the organizing document is on the web site. In the future, the web site will include a calendar of events, agendas, and minutes of previous meetings together with other information concerning the tax project which may be of interest to the members of the project as well as the general public. the web site may be access at:

http://www.nhdd.com/nta/docs/nta 1.htm

Thereafter, Kendall Houghton, General Counsel, Committee on State Taxation, distributed a copy of the organizing document of the tax project. She talked about the initial partnership groups including such industry groups as the Interactive Services Association, Committee on State Taxation, National Cable Television Association, and the Information Technology Association of America and the various state organizations including the NTA, MTC, NCSL, NGA, and FTA. She then described the organizing document and the efforts of the governmental and business groups to contact other groups that might wish to participate in the project. She went into some detail about the make up of the Steering Committee being composed of 16 business representatives, 16 state and local representatives, and up to 7 other representatives that do not fall into either major category. She also described the use of consensus as contemplated in the organizing document.

Harley Duncan, Executive Director, Federation of Tax Administrators, then described the state and local groups that have been included in the Steering Committee and distributed the most recent list of those representatives together with the names of staff support personnel.

The next item on the agenda was the budget recommended by the operating committee. The budget proposal presented by Ken Silverberg was as follows:

$10,000 Travel for Cornia

10,000 Hotel Meeting Rooms

2,000 Supplies

8,000 Research Assistants & Course Assistance for Cornia and Hellerstein

$30,000

Mr. Silverberg pointed out that the original budget proposal had been larger but by use of project member resources, particularly his office and those of Wade Anderson's administrative assistant, to do the accounting, scheduling and secretarial work associated with the tax project, substantial savings could be made with the resulting lower budget recommendation. It was the recommendation of the operating committee that the $30,000 budget be shared equally between the business and government groups. Any funds remaining at the conclusion of the project will be distributed to the original contributing members.

During the discussion of meeting places, Joseph Hilson, Council Member Hayward, California representing the National League of Cities offered to obtain a meeting location in San Jose for the December 11, 1997, public forum.

The next item on the agenda involved the charges for other members. The operating committee had proposed that individuals be charge $100 and firms and organizations be charged $500. There was substantial debate concerning why organizations such as the American Bar Association should pay less than business and government organizations. It was finally resolved that individuals and organizations, such as Prof. Hellerstein and the U.S. Treasury that were asked to participate on the Steering Committee should not be charged a fee. That firms and organizations seeking participation on the Steering Committee should be charged $1000. It was further agreed that any money received from the other firms or organizations would be used to increase the budget. Therefore, if five organizations were accepted and paid $5000, the $5000 would be added to the $30,000 for a total budget of $35,000.

Wade Anderson then discussed other organizations which had expressed an interest in the steering committee. A letter from the American Institute of Certified Public Accountants (AICPA) requesting to participate in the project was distributed. It was noted that the American Bar Association (ABA) had also made a request to participate. Val Oveson, Utah Tax Commissioner, made a motion to ask the AICPA, the ABA, the U.S. Treasury, and Professor Hellerstein to serve on the Steering Committee. After considerable debate concerning the organizing document and the process to be used, it ultimately decided to invite the above three groups and Prof. Hellerstein.

Bruce Reid was of the opinion that we should fill the remaining three positions before the November meeting in Chicago. It was agreed that the opening should be placed on the Internet and a letter prepared by Kendall Houghton should be placed in Tax Notes. Applications received by October 1 will be directed to Wade Anderson at 1-800-531-5441, extension 3-4004, Fax (512) 463-4902, or E-mail wade.anderson@cpa.state.tx.us. As soon thereafter, the Steering Committee will be contacted concerning the vacant positions.

Prof. Hellerstein then proceeded to give a status report on the Drafting Committee. The committee is made up of Prof. Hellerstein, Harley Duncan, Jim Eads, Andy Ireland, Paull Mines, and Bruce Reid. Prof. Hellerstein said he views his role as that of a technician. The assumptions the committee will operate under are as follows:

the proposals will not be a blue print for taxation but a way to address the Internet issues
they will be practical and politically acceptable
they will wait to present alternatives
their focus will be limited to sales/use and consumption taxes

He anticipates the committee will offer some statutory alternatives within 6-8 weeks. His goal is to have a first cut in writing by the November 12 meeting so that the Steering Committee can talk about where it is going. There was some discussion as to whether the Drafting Committee should present alternatives before it received drafting direction from the Steering Committee, but it was decided that unless alternatives were suggested the process could go on indefinitely. The alternatives will be placed on the web site. Prof. Hellerstein will try to distribute the alternatives for comment to the Steering Committee a few days before putting them on the web site.

Gary Cornia raised the issue of whether local franchise fees should be considered as part of the project. Industry representatives from the telephone companies pointed out that the fees were a growing problem for them. On the other hand, it was observed by other members that franchise fees were a local problem, very complicated, diverse, and a no compromise issue for many jurisdictions because it involves use of government property. Jim Eads proposed that a 6-7 person committee be appointed to examine the problem and report back to the Steering Committee with a recommendation. Wade Anderson proposed that the Steering Committee not look at franchise fees. Lisa Schoenthaler suggested Wade Anderson's proposal be modified to the extent that they could be examined to the extent that they impacted the Drafting Committees work. Wade's proposal, as modified, was accepted and no committee was appointed.

Next on the agenda was the November 12, 1997 meeting in Chicago. The Steering Committee will meet in the morning. At that time, Gary Cornia will give a brief description of what has been done. Kendall Houghton will talk about the proposals. Wally and his committee will then open up the meeting for discussion. There will be a public forum that afternoon when it is anticipated non-members of the Steering Committee will make comments.

A possible "educational" meeting on October 14, 1997 in Washington, D.C. was discussed. It would be a policy issues meeting with public officials invited. It was the consensus of the Steering Committee that the meeting was premature and should not be held.

It was decided that a Public Forum meeting be held in San Jose, California on December 11, 1997.

Jim Eads and Wade Anderson were made the media contacts.

Gary Cornia stated that some time within the next two months, a delegation from the Steering Committee would spend a day or so in Washington, D.C. meeting with Congressional representatives to let them know about the work of the tax project. This met with general approval.

It was also agreed that Kendall Houghton's summary of proposals that have been made so far should be distributed to the Steering Committee.