Tech groups push for R&D credit, Internet tax ban

With the U.S. Congress winding down its work for 2004, technology lobbying groups are stepping up their push for lawmakers to pass several pieces of legislation, including extensions to a research and development (R&D) tax credit and an Internet access tax moratorium.

Many tech groups have pushed for a permanent R&D tax credit, but separate bills passed by both the House of Representatives and Senate only extend the credit for 18 months. The R&D tax credit is one small piece of the huge corporate tax bills passed by the chambers, but significant differences exist between the two pieces of legislation, and a compromise isn't likely to be ironed out in conference committee before Congress adjourns for its election recess around Oct. 1.

Congress may return for a lame-duck session after the November election.

Tech groups also have asked Congress for a permanent ban on taxes unique to the Internet, but a Senate version of the Internet tax moratorium, passed in April, would only extend the moratorium for four years. House legislation, passed in September 2003, would permanently ban Internet access taxes and other taxes unique to the Internet, but a group of senators questioned whether the ban would limit states and local governments from levying taxes on telecommunications services as telecom companies move their traffic to IP (Internet Protocol).

The moratorium expired last November, and if Congress fails to act, state legislatures may begin to look at taxing Internet access, said Joe Tasker, senior vice president and general counsel at the Information Technology Association of America (ITAA). "If Congress doesn't get it done in conference, it sends a signal to states," he added. "It's important for the Internet."

While supporters of the tax moratorium say access and other Internet taxes would slow the grow of the Internet in the U.S., a group of senators, lead by Tennessee Republican Lamar Alexander, have said a broad ban on Internet taxes, including voice over IP service, could cost states billions of dollars in tax revenues.

The House version of the moratorium would have "permanently taken away state and local authority to include high-speed Internet access in its taxation plans and would have put at risk literally billions of dollars in revenues that states, cities and towns now depend on to pay for police, schools, parks and other local services," Alexander said, in a speech on the Senate floor earlier this month.

Alexander urged the House to adopt the Senate temporary moratorium, and he questioned whether taxing the Internet would hurt its growth as much as some proponents of a permanent tax ban have suggested. Broadband adoption has outpaced the adoption of cell phones, color television and CD players, he noted.

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