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Goals for State-Federal Relations, 1999-2000:AFI Commerce and Communications Committee
Policies:
Banking Regulation The National Conference of State Legislatures is committed to the preservation of the dual banking system. Dual banking refers to the unique American banking system of separate state and federal chartering and regulation of banks and thrifts. States and the federal government act independently to charter, supervise and regulate financial institutions for their citizens benefit. A key feature of the dual banking system is the ability of a bank, whether a commercial or savings bank, to choose between a state or national charter. In doing so, a bank chooses as its primary regulator, a state banking department or the federal Office of the Comptroller of the Currency (OCC). The Federal Deposit Insurance Corporation (FDIC), as deposit insurer, holds back-up regulatory authority over both state and national banks to make sure that banks do not take unnecessary risks with insured deposits. The Federal Reserve, as the central bank, ensures the free flow of funds through the banking system. The FDIC has federal oversight of the state-chartered banks that are not members of the Federal Reserve. Banking is a part of the fabric of the economic life for each and every state. The nation as a whole is weakened by preemptive federal actions to limit the flexibility of state legislatures to deal with local economic problems, such as the capacity to make choices about the financing of housing, small business and community development. The dual system enables state governments to apply to banks and thrifts state laws and regulations that serve the needs of local economies and that respond to the values and concerns of local citizens. The dual system, thus, encourages diversity and innovation. It is no accident that many of the successful innovations in bank services have occurred first at the state level, including interstate banking, Negotiable Order of Withdrawal or NOW accounts, electronic fund transfers, check hold limits, and improved disclosure of credit card fees, rates, and terms as well as community reinvestment standards and basic banking availability. In recognition of the advantages of the dual system to the public and to the health of the financial services industry, NCSL will be opposed to any efforts by the federal government to restrict state authority to charter, supervise, or regulate the powers of state-chartered banks and thrifts. Nonetheless, the states have a responsibility to use their powers responsibly and in a way that does not endanger the deposit insurance system and thereby the nation's financial stability. The Future Of State Banking As state legislators, we are concerned about the financial viability of our state banking systems. We are well aware of the enormous contribution that state banks have made to the economic vitality of our states and we seek to ensure the preservation of the dual banking system. However, we acknowledge the uncertain future for state chartered banks in the new era of financial services modernization, interstate bank branching, bank consolidations and mergers and technological advances such as the Internet and on-line banking services. We also acknowledge that one of the strengths of the dual banking system, the ability of state legislatures and regulators to be the "laboratories" of financial innovation, is in jeopardy as the need for more uniform regulatory systems to meet the demand of global competition is advocated by many within our nation's financial services industry. At present there are over 7,000 state chartered banks and at least 70 percent have assets under $100 million. Most state banks are small community banks which have well served our nation's cities and rural areas and have been the economic backbone of our county for over one hundred years. These are the banks which have responded time and time again to our communities economic needs and crisis'. They may or may not have the desire to become a multinational financial giant, branching from coast to coast or to other countries. As state legislatures we have a responsibility to maintain and increase the number of state chartered banks with assets over $100 million, however, we must ensure that it is not at the expense of our community banks and their customers. Product Deregulation - Reform Of Glass Steagall Congress is considering and may soon enact legislation to deregulate the governance of financial services that may be offered by depository institutions in the areas of securities, insurance, real estate, and similar non-banking services. NCSL has no position on whether it is appropriate to authorize such new powers to national banks and thrifts, but based solely on its defense of the dual banking system and the preservation of state legislative authority, NCSL opposes any provisions in such legislation that would preempt the power of state legislatures and state regulators to determine and regulate the powers of state-chartered institutions. NCSL is opposed to any effort to pre-empt state anti-affiliation laws. Even without the passage of federal Financial Services Modernization legislation, state legislators are concerned about the regulatory encroachment by the OCC of state authority especially with regard to the regulation of insurance. NCSL strongly advocates that if banks are involved in insurance, then they must be regulated for this purpose by the appropriate state insurance supervisory agency, regardless if they are a state or national chartered bank. NCSL supports legislation which would ensure the functional regulation of insurance and securities. NCSL also supports legislation to clarify and expand court and administrative action, authorizing commercial banks to underwrite municipal revenue bonds. Bank underwriting of revenue bonds should be a means of insuring increased competition and thereby lowering the financing costs of state and local government capital projects. Interstate Banking And Branching Well before Congressional passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, forty-nine states enacted legislation that promoted an interstate banking system and that encouraged competition and economic development. In enacting Riegle-Neal, Congress, recognizing that state legislative participation was critical to the preservation of the dual banking system, gave state legislatures the option of deciding their state's involvement in a national interstate bank branching network. On June 1, 1997, national interstate bank branching went into effect in all but two states, Texas and Montana. NCSL urges our colleagues in Congress to oppose any effort to limit or repeal the requirement that branches of nationally chartered banks will be required to observe state consumer protection, interstate branching, fair lending and community reinvestment laws, as well as be subject to state taxing authority. NCSL supports Congressional efforts to reign-in OCC abuse of interpretative letters to preempt state laws. Federal Regulatory Consolidation NCSL recognizes the need for the federal government to reduce federal regulatory burden which can impede the economic vitality of our nation's financial services industries. In consolidating the federal banking regulators, Congress must ensure that any consolidation does not invalidate the regulatory independence of the dual banking system. NCSL will oppose any federal regulatory consolidation plan which would:
NCSL supports the continued federal oversight by the FDIC and the Federal Reserve of state-chartered banks. It would be detrimental to the well-being of the dual banking system for Congress to tamper with present oversight cooperation between state banking departments, the FDIC and the Federal Reserve. State Bank Fees While NCSL strongly advocates that the federal government continue to take appropriate action to reduce the national deficit, state chartered institutions should not be made to bear the burden of such efforts. NCSL would oppose any proposal by the Administration or Congress which would mandate that the FDIC and the Federal Reserve charge and collect from state chartered banks a fee for their yearly examinations. It is estimated that such a tax on state-chartered banks would cost $1.002 Billion over five years and place state banks at a competitive disadvantage to national banks. At present, FDIC examinations are covered by deposit insurance that state banks already pay to the FDIC. Federal Reserve examinations are currently paid for by earnings from the Federal Reserve's monetary policy activities. Consumer Protection With the rapidly changing technological advances in the financial services industries, both state legislatures and Congress must periodically consider legislation to ensure consumer access to basic banking services; to ensure disclosure of information about credit terms, interest rates, fees, and balances; to regulate branch closing; and to otherwise protect the consuming public. In recognition that this is an area of overlapping federal and state jurisdiction, NCSL will ordinarily not oppose such federal consumer protection measures, provided that there is no preemption of complementary state consumer protection legislation. Federal legislation should not prohibit state legislatures and state regulators from providing additional protections for consumers of financial services. Financial Services And Economic Development Adequate investment by banks and thrifts is crucial to the maintenance and growth of state and local economies. Rural communities with agricultural economic bases, suburban communities, and urban neighborhoods must continue to get the banking services that meet their particular economic development needs. NCSL recognizes that racial, ethnic, or gender discrimination by financial services institutions may have an impact on the ability of residents in distressed communities to obtain financial assistance. We also recognize the need for financial institutions to make safe, sound and profitable investments. The National Conference of State Legislatures, recognizing the responsibilities that states have for financial institution regulation and solvency and for providing for fair lending to its constituents, believes that it is the responsibility of each state legislature to address the unique needs of its state. Likewise, the federal government as regulator of national banks must make the same determinations and act accordingly. However, Congress must not mandate federal guidelines that impede the states' abilities to regulate financial services. The National Conference of State Legislatures believes that true economic revitalization will only happen when government, in partnership with the private sector, provides the tools for empowering those Americans within distressed communities to become part of this nation's economic mainstream. July 1998
Dual Chartering of Credit Unions Credit unions are member owned, not-for-profit cooperative financial institutions formed to permit those in their field of membership to pool their savings, lend to one another, and own the organization where they save, borrow, and obtain related financial services. As with the dual banking system, credit unions have a choice to operate as a federal charter or a state charter. State credit union regulators charter and supervise state chartered credit unions. Federal chartered credit unions are chartered and supervised by the National Credit Union Administration (NCUA). The NCUA is also administer of credit unions' National Share Insurance Fund (NCUSIF) and has responsibility for the safety and soundness of the NCUSIF and to that extent has interest and/or oversight over state chartered, federally insured credit unions. At present, there are over 4,100 state chartered, federally insured credit unions. The historic recognition of the value of maintaining a viable dual chartering system has contributed to today's strong and successful credit union movement. The choice of a credit union charter and regulation plays an important role in creating an innovative operating environment in which all credit unions benefit. However, new challenges to the vitality of the dual chartering system exist in today's environment. The savings-and loan debacle in the 1980's resulted in a major shift of regulatory attention, not only for banks and savings and loans, but for credit unions as well. In order to protect American taxpayers from additional depository institution bailouts, Congress began passing progressively more restrictive banking laws that apply to all federally insured financial institutions. At the same time, all federal financial regulators, including NCUA, began focusing more heavily on regulations and policies to limit insurance losses. Although the NCUSIF is strong, NCUA is nevertheless adopting policies without regard for state laws that standardize the operations of all credit unions, regardless of charter, at the expense of freedom and innovation of individual credit unions. Credit unions' dual chartering system has benefited by the competitive interplay and "balance of power," between NCUA and state regulators, to provide the best system of examination, supervision and regulation. The continuation of this competitive interplay and "balance of power" is essential to the future of the dual chartering system. The National Conference of State Legislatures acknowledges that federal deposit insurance agencies, like the NCUA, have a legitimate role to play if state authorized powers lead to unreasonable risks for the credit union deposit insurance fund. However, NCUA regulations and policies should be crafted in a way that minimizes the preemption of state authority. Any preemption of state credit union laws or regulatory authority must be justified only by a clear and present danger to the credit unions' share insurance fund. NCSL acknowledges that states have a responsibility to provide a credible regulatory environment where powers can be exercised in a way that does not endanger the financial solvency of the NCUSIF. The dual chartering system has benefited consumers, credit union innovation and our states' economies. NCSL will oppose any effort by the Administration and Congress to preempt state credit union laws and regulations which do not adversely impact the financial well-being of state chartered credit unions and thus the National Credit Union Share Insurance Fund. July 1997
Electronic Commerce and the State Sales and Use
Tax WHEREAS, the Internet is a collection of computer networks that enables the user to communicate electronically with other users in states and around the world; and WHEREAS, millions of organizations and consumers are engaging in electronic commerce through their Internet connection; and WHEREAS, business-to-consumer sales transacted through the Internate are projected to exceed $100 billion in 2002, up from just $8 billion in 1998 and $1.5 billion in 1997; WHEREAS, businesses, consumers, and others engaging in interstate and foreign commerce through the Internet could become subject to complex tax structures in multiple jurisdictions; and WHEREAS, the myriad state and local sales and use tax systems could place a significant administrative burden on remote sellers; and WHEREAS, under current court decisions, some Internet vendors and other remote sellers cannot be legally compelled to collect sales and use taxes from consumers in other states; and WHEREAS, the difficulties in requiring sales and use tax collections from remote sellers place loacl "main street" merchants at an unfair competitive disadvantage; and WHEREAS, state sales and use tax revenues comprise, on average, one third of state revenues and provide over half of state revenues in six states; and WHEREAS, states have the primary responsibility for education, public safety, transportation, and health and human services; and WHEREAS, the projected growth of electronic commerce transactions will have a substantial negative impact on state sales and use tax revenues; and WHEREAS, state legislatures recognize the critical role that the telecommunications and information technology industries will continue to play in job creation and economic development; and WHEREAS, state legislatures recognize that there is a need for a simplified and more uniform sales tax structure that is not an impediment to the growth and financial success of these industries; NOW, THEREFORE, BE IT RESOLVED that the National Conference of State Legislatures endorses the following principles governing sales and use taxes: First, that state and local tax systems should treat transactions involving goods and services, including telecommunications and electronic commerce, in a competitively neutral manner; and Second, that a simplified sales and use tax system that treats all transactions in a competitively neutral manner will strengthen and preserve the sales and use tax as vital state and local revenue sources and preserve state fiscal sovereignty; and Third, that the Internet and Internet vendors should not receive preferential tax treatment at the expense of local "main street" merchants, nor should such vendors be burdened with special, discriminatory or multiple taxes; and Fourth, that states recognize the need to undertake significant simplification of state and local sales and use taxes to reduce the administrative burden of collection; and Fifth, that under such a simplified system remote sellers, without regard to physical presence in the purchaser's state, should be required to collect sales and use taxes from the purchaser and remit such taxes to the purchaser's state; and Sixth, that NCSL encourages current and future cooperative efforts by states to simplify the operation and administration of sales and use taxes; and Seventh, NCSL will continue to oppose any federal action to preempt the sovereign and Constitutional right of the states to determine their own tax policies in all areas, including telecommunications and electronic commerce. July 1999
Empowerment: Revitalizing Urban and Distressed Areas Although poverty and unemployment can be found in any community, deep-rooted poverty and chronic unemployment are all too often characteristic of many rural and inner-city neighborhoods. These distressed communities have suffered long-term economic decline. While the root causes for such decline can vary from rural to urban areas and from inner-city to inner-city, they all share a similar isolation from the mainstream of our nation's economy. They lack access to capital markets. Skilled labor is in short supply, and often they have too few entrepreneurs who can provide the foundation for economic growth. Over the course of our nation's young history, we have witnessed major economic and societal realignments. We have progressed from a mainly rural agricultural economy to one with an industrial base within economic urban centers. Today, the industrial urban giants have been replaced by suburban power centers tied to an expanding technological economy, the future infrastructure of the information superhighway. Through all this realignment, Americans for the most part have adapted to the changes. However, there always have been some who, for varied reasons, have failed to benefit from these advances; and today is no different. Unfortunately, some Americans continue to suffer severe poverty and hopeless unemployment. Recognizing that society has a responsibility for those less fortunate and that the financial well-being of all its citizens is good for the whole economy, state governments have been at the forefront of economic experimentation. States have realized that a variety of economic development tools must be available to residents and community organizations within distressed communities that will have the effect of empowering residents to revitalize the area in which they live. There is little argument that residents of a distressed community itself have the primary responsibility for its economic redevelopment and for their individual self-improvement. Government programs for job training and economic development may be helpful but are not in themselves a complete solution to structural unemployment and economic decline in distressed communities. Community and neighborhood organizations and the private sector, with government as a partner, can provide the empowerment opportunities needed in our poorest rural and urban areas. All too often, government has tried to force economic revitalization by providing "one formula fits all" programs with generous funds but little if any flexibility to meet unique problems. As a result, taxpayers provided at least five trillion dollars to assist their fellow citizens, and many times little or nothing was accomplished. Our distressed communities became poorer and very few benefited, sometimes illegally. The Model Cities and CETA programs of the 1960's and 1970's still stand in many American minds as examples of good government intentions gone bad. Empowerment/Enterprise Zones Since 1980, many states and localities have experimented successfully with enterprise zones to lower taxes and to remove regulatory barriers that stand in the way of economic revival in distressed communities. While the states made funding available, most of the efforts were geared to empowerment, providing the tools to meet particular needs, whether it be crime prevention, education, job training, family preservation, or job creation. By the time Congress passed a federal empowerment program in 1993, 37 states and the District of Columbia had created more than 800 zones. Congress has acknowledged that the enterprise zones created by the states have saved or generated over 250,000 jobs and have been the beneficiaries of almost $28 billion in capital investments. As stated above, economic empowerment cannot be mandated by a single "fit-all" formula. Distressed communities, while suffering similar economic hardships, usually have quite different problems to solve. In many inner-city communities, crime, vandalism and gang related violence may be the strongest deterrents to economic revitalization. For rural communities, the lack of a sufficient infrastructure may be the most pressing barrier. States and localities must have the flexibility to marshal the resources to best respond to the situations that need to be addressed before a community can be empowered. The National Conference of State Legislatures recognizes that the federal government does have a major role to play in the revitalization of our nation's most distressed communities. However, federal revitalization efforts should be complimentary to what states and local governments already have in place. NCSL acknowledges that the Empowerment Zone / Enterprise Community program, as enacted during the 103rd Congress in 1993, meets that requirement. We are pleased that Congress and the Administration have acknowledged the role of state government in this process and that it treats the states, community and neighborhood organizations as well as the private sector as equal partners in the revitalization process. NCSL also acknowledges the intent of Congress to avoid economic warfare between communities and states by mandating that the tax incentives as well as federal funds provided to designated Empowerment Zones / Enterprise Communities not be used to lure businesses to move from other communities or states. NCSL calls upon Congress, in considering any new proposals to renew distressed urban and rural communities, to provide states with the flexibility to use these federal resources to marshal renewal efforts to meet the unique needs of their distressed communities. NCSL also urges Congress to maintain and enhance the present federal Empowerment Zone / Enterprise Community in the creation of new community renewal programs. NCSL also would be concerned about any proposal which fails to enhance public / private partnerships and we support Congressional efforts to require that federal funds for economic development not be used to lure jobs or businesses from one state to another. As states have endeavored to remove burdensome regulatory barriers to economic revitalization in distressed communities, so too must the federal government. NCSL supported the creation by the Clinton Administration of the Community Enterprise Board (CEB), a cabinet-level panel which was to review federal administrative and legislative mandates for their impact on state and local revitalization efforts. We are disappointed that the Community Enterprise Board has, as of yet, failed to provide such a review of federal regulations and NCSL renews its commitment to work with the CEB to identify those federal regulations which impede state efforts to assist distressed communities. Community Development Financial Institutions One of the most important means of self-help is the community-based development organization. These community-organized, private, non-profit organizations work with community residents to improve their neighborhoods through a number of programs. The federal government should cooperate with states in search of new means to encourage community self-help organizations. One such federal effort is the Community Development Financial Institutions Act (CDFI). The new law creates a Community Development Banking and Financial Institutions Fund that will support a program of investment in, and assistance to, community development financial Institutions. These CDFI's will provide capital, credit and development services to targeted investment areas or populations and will promote economic revitalization and community development. CDFI's can be any bank, savings association, credit union, micro-enterprise loan fund, community development corporation and state government agency. NCSL supports such efforts to empower community development organizations. Community Development Block Grant NCSL recognizes the contribution of the Community Development Block Grant (CDBG) program administered by the federal government. CDBG is intended to provide funds, with relatively few conditions, to localities for purposes of providing decent housing, a suitable living environment, and expanded economic opportunity, principally for persons of low and moderate income. The hallmark of CDBG is its flexibility. States are involved as administrators of the CDBG small cities program, under which fund allocations are made on a discretionary basis to areas of the state outside metropolitan cities and urban counties. NCSL urges Congress to maintain its support for CDBG and allow states and localities more flexibility in the use of CDBG funds for economic development and job creation. We also call upon Congress to defeat any attempt to earmark CDBG funds for special projects. Secondary Market Formation The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) have provided vital support in providing affordable housing in distressed communities for low and moderate income Americans through their secondary market activities. NCSL recognizes the contribution such efforts have made in assisting revitalization. We express our continued support for the enhancement of these secondary market activities so as to enable more of our fellow citizens to achieve the "American Dream" of owning their own home. However, NCSL also recognizes the overwhelming financial success of both of these semi-public corporations and we acknowledge the desire of some in Congress to review the corporate status as well as state and local exemptions enjoyed by both corporations. NCSL also supports efforts to develop secondary markets for business and commercial debt. In doing so we can provide the necessary capital for loans to businesses in distressed communities, particularly for small businesses, the backbone of economic revitalization. However, in creating such secondary markets, Congress must endeavor not to preempt state laws which seek to protect the soundness of the financial services industries within their states. We realize that a secondary market for business and commercial debt, while similar to the secondary market for residential mortgages, is untested and, therefore, requires regulatory diligence. States have responsibilities to their taxpayers to protect the solvency of their banks and insurers; NCSL will oppose any preemption scheme which fails to adopt the sunset provisions as provided by Congress in the establishment of the secondary market for residential mortgages. Capital Accessibility Finally, NCSL recognizes that racial, ethnic, geographic or gender discrimination by financial services institutions may have an impact on the ability of residents in distressed communities to obtain financial assistance. We also recognize the need for financial institutions to make safe, sound and profitable investments. The National Conference of State Legislatures, recognizing the responsibilities that states have for financial institution regulation and solvency and for providing for fair lending to its constituents, believes that it is the responsibility of each state legislature to address the unique needs of its state. Likewise, the federal government, as regulator of national financial services, must make the same determinations and act accordingly. However, Congress must not mandate federal guidelines that impede the states' abilities to regulate financial services. The National Conference of State Legislatures believes that true economic revitalization will only happen when government, in partnership with the private sector, provides the tools for empowering those Americans within these communities to become part of this nation's economic mainstream. July 1999
In the last several years, the downward trend of homeownership rates has reversed. In the past three years alone, the number of homeowners has increased by 3.4 million or 5.5 percent, thus pushing the national homeownership rate to a near peak of 65.4 percent. The combination of lower mortgage interest rates, moderate home price inflation, renewed income growth, and a healthy economy has made homeownership much more affordable. While the trend towards homeownership is no longer declining, for many hard working Americans, particularly those under 34, the American dream of owning their own home is still out of reach. For many low-income Americans and the communities in which they reside, the situation has not improved. According to the Joint Center for Housing Studies of Harvard University, rents remain too high in urban areas, and many poor households cannot afford to live in decent housing or move to a better neighborhood. As a result, large numbers of low-income households pay high shares of their income to live in inadequate housing, located in concentrated poverty. The Failure of Federal Housing Programs In the past, the federal government has tried to force economic revitalization by providing "one formula fits all "programs with lots of funds but little if any flexibility to meet unique problems. As a result, taxpayers, which have provided billions of dollars to assist their fellow citizens, and witnessed so many times that little or nothing was accomplished, have become disillusioned. The nation's taxpayers have voiced their unhappiness with a system that pours billions of tax dollars into programs for distressed communities, only to see them become more devastated and poorer. The Department of Housing and Urban Development In response to this disillusionment with federal housing programs, the Department of Housing and Urban Renewal (HUD) has begun to move forward to reinvent the way the Department delivers its services. The National Conference of State Legislatures is generally supportive of efforts to revitalize HUD and welcome the proposals put forth by the Administration. State legislators are well aware of the promises of federal housing and development assistance for distressed communities within their states, only to see those resources tied up in the bureaucratic maze of HUD headquarters in Washington. While NCSL does not wish to lay blame for delays on the many dedicated employees of HUD, we realize that various scandals of previous Administrations and lack of communications between agencies within the Department, have left HUD personnel too inflexible to respond to the different needs of our distressed communities. As a result of such rigidity, needed and appropriated funds have many times failed to reach those most in need of assistance and have only contributed to the further decline of America's housing stock. While state legislators share some of the same frustrations over HUD's poor performance with those who are working to revitalize our distressed communities, NCSL, however, is concerned that total elimination of the Department could lead to a lessening of the importance of housing as a national priority. NCSL stands ready to work with the Administration and Congress to reinvent HUD into a community development department which would work in partnership with state and local governments and the private sector to provide the tools and flexibility for empowering those Americans within distressed communities to become part of this nation's economic mainstream. Impediments to Affordable Housing For many potential homebuyers, the lack of available funds to meet down payment and closing costs is a major impediment to purchasing a home. For others, the lack of sufficient income to make monthly payments on a mortgage at market interest rates and standard loan terms keeps them out of the home buying market. Both the Bush and Clinton Administrations have recognized the costs of regulatory burdens to affordable housing. In 1991, a special advisory commission to President George Bush, chaired by HUD Secretary Kemp, found that unnecessary regulation can add 20 to 35 percent to the cost of building a new home, In 1994, HUD convened the leaders of major national organizations, including NCSL, to discuss the impediments to affordable housing and develop a strategy to increase homeownership. This effort once again identified government regulatory burden as a leading impediment to keeping home building prices low. From the discussions with these organizations, the Administration has put forward the National Homeownership Strategy, a 100 point action plan to reduce costs, open markets and expand opportunities for homeownership. The National Conference of State Legislatures endorses efforts both by the federal government and the private sector to make the dream of homeownership a reality for more Americans. NCSL is pleased to be a partner with our federal colleagues and the private sector in this endeavor. Financing True to their nature as "laboratories of democracy," the states have developed an array of innovative housing affordability policies. The states are responding to the homeownership problem by issuing mortgage revenue bonds and by establishing housing trust funds to expand homeownership opportunities for moderate income families. NCSL believes that these efforts will be complimented by proposals in the National Partnership for Homeownership. We are encouraged by such initiatives in the action plan to cut home buying transaction costs, reduce down payment and mortgage carrying costs, and increasing the availability of financing. NCSL is supportive of this public private partnership which includes secondary market entities such as Freddie Mac and Fannie Mae, government and conventional lenders and insurers, and for-profit and not-for profit enterprises as well as trade associations such as the National Association of Home Builders and The National Association of Realtors. Regulatory NCSL applauds the actions of our colleagues in many state legislatures which have acted to remove regulatory burdens and thus help bring down the cost of new home building and in doing so open the market to more middle and low income Americans. California, Florida, Illinois, Kansas, Kentucky, Missouri, New York, Rhode Island, Virginia, Washington, and Wisconsin are just some of the states which have begun to reduce regulatory burdens on new home building. NCSL is encouraged by the efforts of the 104th Congress to review and reduce regulatory burden on the federal level. We especially request Congress and the Administration to fully review and examine the impact on housing affordability of relevant federal laws and regulations. We urge our federal colleagues to help working Americans realize the dream of homeownership by working with us to make housing affordable. July 1998
The safety and soundness of insurance companies operating in the United States are the prime objectives of state insurance regulation. To ensure that these objectives are met, an effective financial surveillance and regulation system is vital. State legislatures have endeavored to strengthen state insurance departments and to create standards for financial regulation that have improved the solvency of insurance companies. State insurance regulation has been successful and effective. However, state solvency regulation standards should be reviewed and modified on an ongoing basis in order to meet the changes of a constantly evolving financial services marketplace. In doing so, states are protecting insurance company policyholders and investors. The public depends on solvent insurance companies to provide retirement income, income protection in case of death or disability, health care coverage, protection from catastrophic loss, and safe investment opportunities. In the first half of this decade, states witnessed an unprecedented effort by some within the federal government and some within the insurance industry to preempt state authority to regulate the business of insurance. This effort resulted from a small increase in the number of insurance company insolvencies in the late 1980's, which raised concerns over the financial health and solvency of our nation's insurance industry. Some members of the 103rd Congress introduced sweeping legislation which would have preempted state authority by establishing a new federal bureaucracy to regulate the solvency of insurance. In 1990, in response to insolvency problems, the National Conference of State Legislatures, along with the National Governors Association and the National Conference of Insurance Legislators endorsed a limited series of model laws developed by the National Association of Insurance Commissioners, which served to strengthen state regulation of insurance for solvency protection. As a result of the concerted effort by states to improve solvency regulation, the number of insurance insolvencies has decreased markedly and the threat of wholesale Congressional preemption has subsided. However, NCSL acknowledges that efforts to erode the state regulation of the business of insurance continue. States are facing numerous challenges from court rulings, Congressional legislation to regulate the banks sales of insurance and creating a national no-fault auto insurance system and federal agency directives and trade agreements which serve to undermine state authority. Members of NCSL believe there are advantages to state regulatory authority, including regulatory staff expertise that has developed over the years. While there are some who favor the preemption of state regulatory authority for insurance, few, if any, propose any equivalent federal oversight in the place of state regulation. Federal efforts such as the Employee Retirement Income Security Act (ERISA), while protecting the pensions of many Americans, also preempts certain state consumer protection laws with regard to health insurance and have left the consumer with little protection. While the federal Department of Labor is tasked with the responsibilities to enforce the consumer protection provisions of ERISA, consumers have found this federal agency with little staff or the capacity to do so. NCSL believes that a heavy burden of proof must be established before federal intervention and preemption are justified. Swift and effective action by state legislatures to reform state solvency regulation proves that states are more capable of adjusting to changes in the marketplace than Congress or federal regulatory agencies. State regulation of the business of insurance provides a preferable alternative to unjustified federal preemption. The National Conference of State Legislatures therefore will oppose any proposals to establish federal standards for state solvency regulation, cede any authority to federal agencies to regulate financial institutions involved in the business of insurance and Congressional ratification of trade agreements which preempts state regulation of insurance for solvency purposes. While NCSL continues to support the NAIC Financial Regulation Standards and Accreditation Program, NCSL acknowledges that state legislatures and governors have the responsibility to enact policy which state regulators enforce. NCSL also recognizes that interstate compact proposals have the potential of addressing binding uniformity and effectiveness in specific areas of regulation. The Conference objects to any action that could lead to federal preemption of states' insurance premium tax base. The Conference also objects to actions taken or contemplated by the Internal Revenue Service or other federal agencies to assert priority claims to the assets of failed insurers. The states should first be allowed to distribute an insolvent company's assets to pensioners, family businesses, other policyholders and others protected by the McCarren-Ferguson Act delegation for the business of insurance to the states. In the same vein, the National Conference of State Legislatures is concerned by recent federal bankruptcy rulings under Section 304 of the federal bankruptcy code which would allow foreign insurers and reinsurers to move certain trust fund assets to bankruptcy proceedings in their domicile country. The trust funds established by foreign insurers and reinsurers are to serve as collateral for insurance and reinsurance underwriting in the United States and which allows such foreign insurers and reinsurers to be exempt from state solvency regulation. Federal bankruptcy courts in ruling in favor of foreign insurers and reinsurers under Section 304 of the federal bankruptcy code have placed these collateral trust funds out of the reach of state insurance departments which are solely responsible for solvency protection. NCSL urges Congress to rectify this situation by amending Section 304 to eliminate or limit this exemption for foreign insurers and reinsurers under the bankruptcy code. July 1999
Insurance Fraud - Federal Criminalization Insurance fraud has become an ever increasing burden on the solvency of insurance companies and on the costs of consumers to obtain insurance coverage. The most conservative estimates place the cost of insurance fraud in the tens of billions of dollars annually, a cost that many times, especially in the case of an insolvent insurer, may be passed onto to state taxpayers. The kinds of insurance fraud can vary from policyholder filing of exaggerated claims to the setting up of a phony insurance company for the sole intent of stealing insurance premiums. The National Conference of State Legislatures recognizes the toll that policyholder/claimant initiated fraud has on the cost of insurance and the solvency of the insurer. We applaud the action by our colleagues in various states that have passed laws making it more difficult to file a false claim, increasing the penalties for those who are guilty of fraudulent activities and expanding state insurance department fraud units. In those states that have taken appropriate action to curtail fraud, the rates of illegal activity has decreased. NCSL believes that the prosecution of policyholder/claimant fraud should and must remain in the jurisdiction of state and local law enforcement officials. However, in cases of internal insurer fraud that may be the result of interstate and international conspiracies to defraud, loot or plunder an insurance company, states and the federal government should cooperate to prosecute such criminal activity. NCSL joined state insurance regulators, state and local law enforcement officials and the insurance industry in supporting Congressional passage of legislation that has made it a federal crime to engage in certain fraudulent activity such as knowingly file a false report with a state insurance regulator; the embezzlement and theft of insurance company money, assets, funds, premiums, or credits; the falsification of company records with the intent to defraud, loot or plunder a company or its policyholders and creditors; and the criminal obstruction of proceedings before state insurance regulatory authorities. NCSL's endorsement of federal involvement in the criminal prosecution of certain kinds of insurance fraud does not diminish our support for continued state regulation of the insurance business. Federal criminal sanctions will assist state regulators in their efforts to prevent future insolvencies. July 1999
The Internet and Electronic Commerce The Internet is fundamentally changing the way we communicate, learn, conduct business, transact financial services and are entertained. Every day the nature of the Internet changes, as people add more material, build faster computers, devise cheaper means of electronic storage, create improved software, and develop more capable communications. Such explosive growth is projecting our nation, indeed our world, into a new, almost borderless frontier. As the Internet empowers citizens and democratizes societies, it also is changing traditional business and economic rules. The Internet provides consumers with access to products and services never before possible. It is estimated that by the dawn of the new millennium commerce on the Internet, electronic commerce, could total tens of billions of dollars. Geographic borders cannot contain the Internet. Its ability to transcend state and national borders makes some existing laws and regulations of states and nations obsolete. At the same time, the Internet defies detailed one-size-fits-all approach to public policy and regulation. America's federal and state lawmakers, as well as policy makers from other countries should be guided by principles that foster the Internet's progress and ensure the realization of its potential. The National Conference of State Legislatures supports the following principles in formulating laws and regulations that impact the Internet and electronic commerce:
Our nation's state legislatures are well aware of the impact that access to the Internet and electronic commerce will have on the economic vitality of our states and communities. State legislatures also recognize that the marketplace for electronic commerce is not just Main Street USA, but the vast global market. State legislatures share the concern of many of our colleagues in Congress that ill-conceived or over regulation of the evolving Internet and electronic commerce services could cause much harm to our nation's own ability to compete globally. However, state legislatures also recognize that they have an obligation to act, when and if necessary, to protect the general welfare of their constituents. The National Conference of State Legislatures will oppose unnecessary or unwarranted federal legislation or regulation that would impede efforts by states to promote access to the Internet, limit competition or increased consumer choice or ensure the security of personal information of consumers conducting electronic commerce transactions. July 1998
WHEREAS, the mobility afforded to millions of American consumers by mobile telecommunications servers helps to fuel the American economy, facilitate the development of the information superhighway and provide important safety benefits; and WHEREAS, users of mobile telecommunications services can originate a call in one state or local jurisdiction and travel through other states or local jurisdictions during the course of the call; and WHEREAS, these circumstances make it more difficult to track the separate segments of a particular call with all of the states and local jurisdictions involved with the call; and WHEREAS, expanded home calling areas, bundled service offerings and other marketing advances make it increasingly difficult to assign each transaction to a specific taxing jurisdiction; and WHEREAS, state and local taxes imposed on mobile telecommunications services that are not uniformly sourced for tax purposes can subject consumers, businesses and others engaged in interstate commerce to multiple, confusing and burdensome state and local taxes; and WHEREAS, state and local taxes that are not uniformly sourced for tax purposes can result in some telecommunications revenues inadvertently escaping state and local taxation altogether, thereby violating standards of tax fairness, creating inequities among competitors in the telecommunications market and depriving state and local governments of needed tax revenues; and WHEREAS, because many state and local tax laws and regulations were established before the proliferation of mobile telecommunications services, the application of these laws to the provisions of mobile telecommunications services may produce conflicting or unintended tax results; and WHEREAS, state and local governments provide essential public services; and WHEREAS, state and local governments provide services that support the flow of interstate commerce, including services that support the use and development of mobile telecommunications services; and WHEREAS, state governments as sovereign entities in our federal system may require that interstate commerce conducted within their borders pay its fair share of tax to support the governmental services provided by these governments; and WHEREAS, local governments as autonomous subdivisions of a state government may require that interstate commerce conducted within their borders pay its fair share of tax to support the governmental services provided by these governments; and WHEREAS, to balance the needs of interstate commerce and the mobile telecommunications industry with the legitimate role of state and local governments in our system of federalism, Congress needs to establish a uniform and coherent national policy regarding the taxation of mobile telecommunications services through the exercise of its constitutional authority (Article I, Section 8 of the United States Constitution) to regulate interstate commerce; and WHEREAS, representatives of the mobile telecommunications services industry and state and local government national organizations have voluntarily negotiated and agreed to a solution on the taxing of mobile telecommunications services; and WHEREAS, the National Conference of State Legislatures was a party to
these negotiations; and NOW, THEREFORE BE IT RESOLVED THAT, the National Conference of
State Legislatures supports the agreement reached between the mobile
telecommunications industry and the representatives of the state and local
governments; and The National Conference of State Legislatures Executive Committee Task Force on State and Local Taxation of Telecommunications and Electronic Commerce unanimously voted to endorse the Mobile Telecommunications Sourcing proposal at its Meeting in Chicago on Saturday, November 6, 1999. The Task Force reported the resolution to the Assembly on Federal Issues Committee on Commerce and Communications for its consideration Resolution approved by the AFI Commerce and Communications Committee by a vote of 19-0 on Thursday, December 2, 1999 Unanimously approved by the Assembly on Federal Issues on Friday, December 3, 1999
National Standard for Electronic Signatures WHEREAS, 43 states have enacted laws recognizing the validity of electronic signatures and allowing for the electronic transmission of records; and WHEREAS, the state legislatures, the "Laboratories of Democracy", have once again risen to the challenges brought about by changes in technology; and WHEREAS, the National Conference of Commissioners of Uniform State Laws in July of this year adopted model legislation, the Uniform Electronic Transaction ACT (UETA) for state legislative consideration; and WHEREAS, UETA will provide more uniformity between the states in the recognition of electronic signatures; and WHEREAS, Congress is considering legislation which would make electronic signatures acceptable for all transactions as are traditional signed documents; and WHEREAS, such legislation may preempt state laws with regard to electronic signatures in setting a national standard; and WHEREAS, the United States House of Representatives has passed H.R. 1714, the Electronic Signatures in Global and National Commerce Act; and WHEREAS, H. R. 1714 goes beyond the scope of merely setting a national standard for the acceptance of electronic signatures to include federal mandates as to how state and local governments are to receive electronic records in fulfilling our regulatory and oversight responsibilities and preempts existing state laws with regard to the electronic transmission of records; and WHEREAS, the Senate of the United States has passed bipartisan legislation, S. 761, the Millennium Digital Commerce Act, by Senator Spencer Abraham of Michigan and Senator Patrick Leahy of Vermont, which sets a national standard for acceptance of electronic signatures; and WHEREAS, S. 761, which also preempts state laws, allows for states to re-establish their oversight authority by enacting the UETA model legislation; NOW, THEREFORE BE IT RESOLVED THAT, the National Conference of State Legislatures urges that any federal legislation seeking to ensure that electronic signatures are as acceptable as written signatures, meet the following four criteria:
BE IT FURTHER RESOLVED THAT, the NCSL urges the members of the conference committee responsible for reconciling H.R. 1714 and S. 761, to accept the Senate version and report it to the Congress for final consideration; and BE IT FURTHER RESOLVED THAT, a copy of this resolution be sent to the President of the United States and to all members of the 106th Congress. December 1999
Natural Disaster Mitigation and Insurance The forecast of increased and more severe natural disasters requires that the federal government in conjunction with the states develop a new national policy which provides disaster mitigation, response and recovery. The National Conference of State Legislatures urges Congressional action which would provide for and encourage appropriate insurance and reinsurance mechanisms for coping with catastrophic natural disasters. However, any plan for natural disaster insurance and reinsurance must not adversely impact a state's ability to levy premium taxes, regulate the business of insurance and set solvency standards for property and casualty insurers. July 1999
Regulation of real estate and of land use are traditional state and local responsibilities. The federal government may have some legitimate interests with respect to federal lands and protecting the environment, but the regulation of land development and use as well as real estate services generally should remain a state and local enterprise. The National Conference of State legislatures opposes federal preemption of state laws and regulations related to real estate services, real estate development and land use. A high burden of proof must be met before federal preemption is justified. July 1998
The National Conference of State Legislatures recognizes the electromagnetic spectrum, as managed by the federal government, to be a vital national resource for public, as well as private sector radio frequency needs. The National Conference of State Legislatures supports an examination of current and future radio frequency spectrum requirements and uses. In view of the limitations of the radio frequency spectrum, management reforms should be instituted to improve the current allocation and assignment process. Access needs to be provided to all users of the spectrum. Spectrum resources as utilized at the state and local level provides a reliable means of communication in matters of public safety and interest. State law enforcement operations, emergency responders, and public utilities have made substantial investment in facilities and equipment necessary for accessing the allocated frequency assigned to them. These investments have been made in recognition of the limitations in alternative methods of transmission for public purposes. Proposals allowing developing technologies to share the same bandwidth presently utilized by state and local governments and public utilities should not be adopted until such time as transmission can sufficiently be assured to avoid signal interference with public users. The National Conference of State Legislatures opposes any effort to provide additional frequency by means of reallocating what is currently allocated for state, local, public utility uses and transportation direction and safety purposes until the aforementioned concerns are adequately addressed. Any amount of spectrum which is reallocated from the federal government must be made available for not only new commercial technologies, but also state and local government and public safety services. NCSL supports the exemption of state and local governments from any competitive bidding process. July 1998
State Sovereignty in Financial Services One of the unique attributes of the American system of federalism is the ability of states to regulate financial services. For most of our history this bifurcation of regulatory authority has well served our nation's economic well being. The choice of regulator has served to ensure that the financial services industry is subject to the most efficient and cost effective form of oversight. The ability of states to regulate banking, insurance, securities and credit unions has allowed state legislatures and governments to meet the needs of local economies and respond to the values and concerns of local citizens. The role of states in financial services regulation is in jeopardy. Over the last five years, the National Conference of State Legislatures has held numerous special sessions on the impending impact of financial services modernization, the consolidation and merger of financial services, the technological advances such as the Internet and on-line financial services and the pressure by our large national financial services institutions for a uniform system of regulation in order to compete more efficiently in the global market. NCSL is concerned that Congress, which has heralded the benefits of devolution in social services has as quickly sought to further federal control of financial services. The National Conference of State Legislatures has consistently and strongly advocated for state sovereignty in financial service regulation. NCSL will oppose any federal preemption of state legislative or regulatory authority in financial services. A high burden of proof that federal action is necessary, for example, as in a national emergency, should be met before any preemption of state financial services laws and regulations. Preservation Of Dual Banking NCSL opposes any federal attempts to erode the dual banking system, preempt state revenues derived from banking fees placed on state institutions for duplicative federal oversight, revise Regulation Y or damage the dual, competitive system of banking regulation that has effectively served consumers and the industry. State Regulation Of Insurance The National Conference of State Legislatures supports the continuation of state regulation of the insurance industry as provided under the McCarren Ferguson Act and opposes any attempts at federal preemption. Securities Regulation Corporate governance and securities regulation traditionally are areas where the federal government and the states share regulatory authority. NCSL recognizes that the federal government has an interest in efficient capital markets and fair dealing in securities transactions. Nonetheless, the states securities agencies are responsible for protecting local investors, workers, and communities by ensuring compliance with securities laws. NCSL is concerned that the unnecessary preemption of state laws regulating corporations and securities trading could threaten the system of state regulation. NCSL will oppose such federal preemption. Dual Chartering Of Credit Unions The dual chartering of credit unions has benefited consumers, credit union innovation and our states' economies. NCSL will oppose any effort by the Administration and Congress to erode the dual chartering system for credit unions by preempting state credit union laws and regulations which do not adversely impact the financial well being of state chartered credit unions and thus the National Credit Union Share Insurance Fund. July 1998
WHEREAS, the wine industry plays an important role in the American economy, directly contributing more than $16.1 billion in economic activity, employing over 210,000 people and providing over $2 billion in tax revenue to state and local governments; and WHEREAS, the wine industry also is responsible for helping to create 554,600 additional jobs in the United States in relted industries which support wine production, generating an additional $41.1 billion in economic activity and providing an additional #3 billion in tax revenue to state and local governments; and WHEREAS, many states have provided assistance to help nurture their states' grape and wine industries; and WHEREAS, such state investment has helped to stabilize our states' agricultural economies; and WHEREAS, direct sales across state lines, primarily through wine clubs, catalog and Internet sales, provide consumers with the ability to choose from the many premium wines produced throughout the country; and WHEREAS, the direct sales of wine from the vineyard to the customer is sometimes the only opportunity that small vineyards have to market their product; and WHEREAS, the direct sale of wine across state lines, where permitted, has further aided in the stabilization and growth of our nation's wine industry, thus ensuring the employment of thousands of Americans in the wine industry and additional revenues to state treasuries; and WHEREAS, some states have enacted laws to prohibit the sale of wine across state lines; and WHEREAS, such state prohibition laws are enforced by the U.S. Bureau of Alcohol, Tobacco and Firearms, which has the authority to revoke a winery's federal basic permit should a winery ship its product into a state in violation of the laws of that state; and WHEREAS, legislation has been introduced in Congress which, if enacted, would allow a state tobring an action in the U.S. District Court against an out-of-state winery for shipping wine to consumers in the state; and WHEREAS, such legislation would be duplicative of the authority which Congress has already granted to the U.S. Bureau of Alcohol, Tobacco and Firearms, and thus become an unnecessary and costly burden on legitimate business throughout the United States; and WHEREAS, the National Conference of State Legisatures will oppose any unnecessary federal interference in the enforcement of state laws; NOW, THEREFORE, BE IT RESOLVED that the National Conference of State Legislatures calls upon Congress to support the continued growth and stability of our nation's grape and wine industry; and BE IT FURTHER RESOLVED that NCSL calls upon Congress to refrain from consideration of legislation which could seriously jeopardize the jobs of hundreds of thousands of Americans, negatively impact our nation's and our states' economies, and cause the loss of vital revenue to state and local governments; and BE IT FURTHER RESOLVED that nothing herein shall prohibit any state from collecting its taxes or enforcing collection of any state taxes or any state regulation affecting the same; BE IT FURTHER RESOLVED that NCSL will transmit copies of this resolution to all members of the 106th Congress. July 1999
Supporting State Authority to Regulate Insurance WHEREAS, financial institutions, including thrifts, savings and loan associations, credit unions, national banks and state-chartered banks and their affiliates and subsidiaries are becoming more involved in the business of insurance; and WHEREAS, a Congressional Conference Committee ill soon meet to reconcile the differences between the House-passed H.R. 10 and the Senate-approved S. 900, which would remove existing separations between banks and other financial services, like insurance and securities; and WHEREAS, state laws contain comprehensive provisions for licensing and regulating insurance agents and protections for consumers against unfair trade practices, coercion and product confusion in the marketing of insurance products that apply to all persons acting or holding themselves out as insurance agents; and WHEREAS, state insurance laws safeguard the solvency of insurers and protect the insurer's control over its underwriting activities so that an agent cannot expose the insurer to excessive rsiks; and WHEREAS, the states have responsibly demonstrated that bank sales of insurance products can be regulated effectively and fairly by the states; and WHEREAS, if the insurance business of financial institutions is not subject to state insurance regulation, insurance consumers will lose important protections provided by state laws against the transaction of business by unqualified persons; and WHEREAS, the Barnett Bank decision by the U.S. Supreme Court confirms that national banks are subject to state regulation where state regulation does not prevent or significantly interfere with a national bank's exercise of its powers; NOW, THEREFORE, BE IT RESOLVED that the National Conference of State Legislatures joins with the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL) in urging Congress and the Administration to reaffirm that states are principally and primarily responsible for the regulation of all insurance activities conducted by financial institutions, including national banks, regardless of the medium or sales channel; and BE IT FURTHER RESOLVED that the National Conference of State Legislatures calls upon the membres of the Congressional Conference Committee to:
BE IT FURTHER RESOLVED that copies of this Special Calendar Resolution be sent to the President and all the members of the 106th Congress. July 1999
As our nation moves forward into the next millennium, advanced telecommunications services stand ready to be the economic force that will provide financial health and stability to our country and our states. The information age is no longer merely a segment of economic growth but must be addressed as the underpinning of the entire marketplace. There is hardly an industry or trade that does not depend in some way on telecommunications and the infrastructure that provides vital information at the push of a button or the command of the voice. Telecommunications Infrastructure The United States telecommunications infrastructure is the combined product of a wide range of service providers, including historically regulated common carriers, new entrants and operators of private networks. This infrastructure is the most advanced in the world. With proper attention given to infrastructure development, it presents boundless opportunities for America to lead the world into the 21st century. It will achieve its fullest potential only if it allows every American, regardless of geographic location, the opportunity to realize the full benefits of the information age. Government and industry, working cooperatively, must continue to provide our citizens, businesses and governments with the best telecommunications infrastructure in the world. Our goal is the creation of affordable, easily accessible communications and information networks serving the societal needs of a broad range of users and industries. To that end, government and industry should strive for a telecommunications policy framework that promotes and ensures fair and open competition, preserves and advances universal service, encourages innovation and investment, and allows for effective participation of all parties on a non-discriminatory basis. As competitive markets alone are not able to provide an advanced communications infrastructure to all citizens, institutions, and businesses, government should continue to encourage the availability of such an infrastructure to all. While investments in telecommunications infrastructure have received considerable national attention, the federal government must recognize that states have unique priorities that require state and regional specific solutions. Creation of Competitive Markets State legislatures and state regulators have been at the forefront of deregulation of the telecommunications industry, removing barriers to competition in local markets and advocating the infrastructure for the delivery of advanced telecommunications. Before Congress was able to agree to legislation which would be the first major revision of our national telecommunications laws in over 62 years, states were removing barriers to competition. State legislators recognize that competition is the means to reach the goals of advanced infrastructure development, universal service, expanded consumer choice, availability of services and cost effectiveness for our constituents. States were able to move forward in deregulation and providing for competition through the traditional powers states have used to regulate intrastate telecommunications under the Communications Act of 1934. The Telecommunications Act of 1996 The National Conference of State Legislatures through its policy process has supported the sovereign rights and responsibilities of states to regulate intrastate telecommunications. This principle guided NCSL's position with regard to Congressional action to deregulate and provide for competition in telecommunications. In enacting the Telecommunications Act of 1996, NCSL believes that the Congress and the President acknowledged the rights and responsibilities of states to regulate intrastate telecommunications, providing that states use such authority in a competitively neutral manner. We believe that it is the intent of Congress and the President that states and the federal government continue its joint partnership in sharing regulatory responsibilities which will serve to preserve universal service, promote effective competition in telecommunications, foster the development of a national infrastructure policy and encourage a positive impact on our nation's economic future. The State-Federal Partnership The National Conference of State Legislatures believes that the traditional sovereign rights and responsibilities of states to regulate intrastate telecommunications services provided for in the Communications Act of 1934, have been preserved under the Telecommunications Act of 1996. Just as the states have the responsibilities to preserve and advance universal service, protect the public safety and welfare, ensure quality telecommunications services and safeguard the rights of consumers for intrastate telecommunications so to does the federal government have a similar responsibility for interstate telecommunications. However, in providing for those responsibilities in interstate telecommunications, the federal government must refrain from exceeding its legally constituted regulatory boundaries. NCSL will oppose any preemptive actions by the Federal Communications Commission (FCC), other federal agencies or federal courts which seek to undermine the traditional sovereign rights and responsibilities of the states to regulate intrastate telecommunications as provided for by Congress in the Communications Act of 1934 and the Telecommunications Act of 1996. If the FCC or federal courts preempt state regulatory authority, NCSL will call upon Congress to negate such rulings and restore the traditional regulatory balance between the states and the federal governments. States must also have the authority to consider meeting universal service goals by equitable treatment of all companies that provide telecommunications services. July 1999
WHEREAS, until 1984, telephone service was a highly regulated service provided by a few companies generally subject to tax under statutes applicable to "public utilities"; and WHEREAS, such taxes in the form of special gross receipts, franchise and property taxes were generally passed on to consumers as part of the "rates"; and WHEREAS, as a result of the 1984 consent decree breaking up the Bell System into AT&T and the seven "Baby Bells" and followed by the enactment of the Telecommunications Act of 1996 which established a policy framework which eliminated the distinction between long distance and local service and barriers between telephone and other forms of communications, the telephone industry was no longer composed of a few public utility type phone companies; and WHEREAS, the deregulation of the industry was not accompanied by any corresponding elimination of the taxes that had historically been tied to the regulatory status of telecommunications companies; and WHEREAS, the telecommunications companies in some states are subject to special gross receipts, franchise and property taxes that had been assessed and paid in exchange for the special monopoly status granted such companies due to their classification as "utilities"; and WHEREAS, in the last decade many states expanded their sales and use taxes to telecommunications services, including long-distance service; and WHEREAS, the extension of state and local sales and use tax statutes to telecommunications services was generally not coupled with an elimination of the industry-specific taxes that historically applied to telephone services under the public utility taxes; and WHEREAS, a number of additional state fees have been imposed to fund special public service programs such as 911 and hearing impaired services (TDD); and WHEREAS, the culmination of such actions has resulted in some states having hundreds of different state and local taxes and fees which apply to sales of telecommunications services; and WHEREAS, taxes that are tied to the historic regulation of an industry as a monopoly are likely to become inequitable and increasingly difficult to administer in an era of deregulation and competition in providing telecommunications services; and WHEREAS, the increase in the taxation of telecommunications services impacts the cost of telecommunications service for both business and residential consumers; and WHEREAS, state and local taxes coupled with the federal taxes such as the federal excise tax on telecommunications amounts to a national average effective consumer tax rate of 18 percent on telecommunications services; and WHEREAS, such taxes can act as a barrier for some of our constituents to be able to afford access to telecommunications services and advanced telecommunications services; and WHEREAS, Congress in passing the Internet Tax Freedom Act of 1998, created a federal Advisory Commission on Electronic Commerce and stipulated that the Commission should make recommendations on the scope and burden of federal, state and local taxes on telecommunications service providers; and WHEREAS, the Executive Committee of the National Conference of State Legislatures acknowledged the possible burden of the present state and local tax system on telecommunications services by creating a special Task Force on State and Local Taxation of Telecommunications and Electronic Commerce to review the status of state and local taxes on the telecommunications industry;
BE IT FURTHER RESOLVED THAT, the Task Force make final recommendations for state legislative consideration of telecommunications tax reform to the 26th Annual Meeting of the Conference in Chicago, Illinois; and BE IT FURTHER RESOLVED THAT, the Task Force is charged by the Assembly to also review the impact of the Federal Excise Tax on telecommunications services and to make a recommendation to the Assembly as to whether NCSL should support its elimination. December 1999
Neal Osten, Committee
Director |
