WASHINGTON-With President Bush’s high-profile push for a ten-year, $1.6 billion tax cut, the political atmosphere could not be better for wireless tax relief on equipment depreciation, sales commissions, telecom service and mobile Internet commerce.
For the wireless industry, the window of opportunity is wide open and the future is now.
But while the timing is just right, the logistics are tricky.
Normally, Bush’s tax-cut bill would be the perfect vehicle for the wireless industry and other business sectors seeking tax breaks. But it isn’t.
Bush and his advisers, fearing a flood of special-interest amendments and the havoc it would create for the president’s politically crucial tax cut, have told U.S. business lobbyists to hold back on their tax-break wish lists.
As such, wireless tax bills will go forward as standalone bills for now.
Several pieces of legislation already have been reintroduced in the young 107th Congress. In recent years, the wireless industry has thrown lots of money at the tax issues. High-profile telecom lobbyists have been hired, including former congressional and White House aides and even the man-Nicholas Calio-who is now Bush’s top lobbyist.
Calio was contracted by the Cellular Telecommunications & Internet Association to seek legislative relief on Internal Revenue Service treatment of sales commissions paid by mobile-phone firms. The wireless industry lobbied the IRS on the issue throughout much of the Clinton administration. The issue apparently arose in response to an IRS letter ruling several years ago.
So far, despite the significant amount of money spent on the issue, it appears the wireless industry has come up short.
“Many of the sales commission issues are being resolved through individual company audits,” said Travis Larson, a CTIA spokesman. Larson said the matter also is being addressed in federal court.
In addition to Calio, the wireless industry has turned for help on sales commissions to Jack Quinn, the former White House counsel and chief of staff to former Vice President Gore who has come under fire recently for helping fugitive commodities trader Marc Rich win an eleventh-hour pardon from President Clinton.
These days, Quinn is working on another tax front. He is co-director of the Coalition to Repeal the Tax on Talking. Joining Quinn is Republican Ed Gillespie, a former aide to House Majority Leader Dick Armey (R-Texas).
In January, one of the first orders of business in the House was the reintroduction of legislation to repeal the century-old 3-percent federal excise tax on wireless and wireline phone service. The bipartisan bill is sponsored by Reps. Rob Portman (R-Ohio) and Bob Matsui (D-Calif.).
Commenting on the bill’s reintroduction, Quinn stated: “We’ve come a long way, and it is now past time for us to end the Spanish-American War. With continued congressional and public support for repealing this tax, I see no reason why we could not finally eliminate it this year. We’ve now seen 103 years of excuses.”
Two weeks ago, Rep. Pat Toomey (R-Pa.), chairman of the House Small Business subcommittee on tax, finance and exports, led a group of Republicans-including Armey-in offering legislation that would repeal the 3-percent telecom tax as part of a broad-based tax relief bill. The Republican faction does no believe Bush’s tax-cut can be bigger.
In the Senate, Finance Committee Chairman Charles Grassley (R-Iowa) and Sen. John Breaux (D-La.) introduced legislation to repeal the phone tax. “The telephone tax is as old as Teddy Roosevelt’s Rough Riders and just as obsolete,” said Grassley, when the measure was introduced in February.
Telecom tax repeal legislation was approved overwhelming by the House and Senate last year, but failed to make it into the final budget compromise last year for reasons unrelated to the measure itself. The Clinton administration-citing concern about the potential loss of billions of dollars to the U.S. Treasury that would result from a repeal of the telephone tax-was ambivalent about the bill. But the previous White House never said it would veto it.
The odds are good Congress will kill the phone tax this year.
The wireless industry also is pressing for wireless equipment depreciation reform. Currently, IRS rules do not address the depreciation treatment of mobile-phone network equipment and recovery periods of wireless system assets. That situation, compounded by the fact that the mobile-phone industry changed out billions of dollars worth of equipment during the transition to digital technology during the 1990s, has led disputes between wireless firms and the IRS.
Rep. Philip Crane (R-Ill.), a high-ranking House Ways & Means Committee member, will reintroduce legislation this year that would address the issue by clarifying that cellular telecommunications equipment is “qualified technological equipment ” as defined by IRS code.
Bryce Dustman, a Crane spokesman, said it had not been settled when the measure will be reintroduced. Joining Crane in sponsoring the “Cellular Telecommunications Depreciation Clarification Act” last October were Reps. Richard Neal (D-Mass.), Nancy Johnson (R-Conn.) and Sam Johnson (R-Texas).
Elsewhere in Congress, lawmakers are fighting to continue the ban on e-commerce sales tax. A bill sponsored by Sens. Ron Wyden (D-Ore.) and Patrick Leahy (D-Vt.) would keep the moratorium in place for another five years and give states time to simplify tax structures to account for online purchases. A similar bill, championed by Sen. Byron Dorgan (D-N.D.), governors and brick-and-mortar retailers, would extend the e-commerce tax ban for another four years. After states have streamlined their tax systems, according to the Dorgan plan, brick-and-mortar retailers and on-line sellers alike would be subject to the same sales tax regime.
On a local level, wireless carriers and other telecom firms face local taxes and fees as municipalities and states seek new sources of revenue to fund public projects.
