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S 442, Internet Tax Freedom Act.
As passed by the U.S. Senate on October 8, 1998.
Source: USGPO. The document was created by TLJ by converting a text version into HTML.
This document has been edited for HTML, but not for content.
Links to some of the key sections of the bill:
Titles I through IV are on this web page. Titles V through VIII, which
pertain to unrelated pork barrel projects in Oregon, Illinois, Tennessee, and Ohio, are on
page two.
105th CONGRESS
2d Session
S. 442
AN ACT
To establish a national policy against State and local government interference with
interstate commerce on the Internet or interactive computer services, and to exercise
congressional jurisdiction over interstate commerce by establishing a moratorium on the
imposition of exactions that would interfere with the free flow of commerce via the
Internet, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Internet Tax Freedom Act''.
TITLE I--MORATORIUM ON CERTAIN TAXES
SEC. 101. MORATORIUM.
(a) Moratorium.--No State or political subdivision thereof shall impose any of the
following taxes during the period beginning on October 1, 1998, and ending 3 years after
the date of the enactment of this Act--
(1) taxes on Internet access, unless such tax was generally imposed and actually
enforced prior to October 1, 1998; and
(2) multiple or discriminatory taxes on electronic commerce.
(b) Preservation of State and Local Taxing Authority.--Except as
provided in this section, nothing in this Act shall be construed to modify, impair, or
supersede, or authorize the modification, impairment, or superseding of, any State or
local law pertaining to taxation that is otherwise permissible by or under the
Constitution of the United States or other Federal law and in effect on the date of
enactment of this Act.
(c) Liabilities and Pending Cases.--Nothing in this Act affects liability for taxes
accrued and enforced before the date of enactment of this Act, nor does this Act affect
ongoing litigation relating to such taxes.
(d) Definition of Generally Imposed and Actually Enforced.--For purposes of this
section, a tax has been generally imposed and actually enforced prior to October 1, 1998,
if, before that date, the tax was authorized by statute and either--
(1) a provider of Internet access services had a reasonable opportunity to know by
virtue of a rule or other public proclamation made by the appropriate administrative
agency of the State or political subdivision thereof, that such agency has interpreted and
applied such tax to Internet access services; or
(2) a State or political subdivision thereof generally collected such tax on charges
for Internet access.
(e) Exception to Moratorium.--
(1) In general.--Subsection (a) shall also not apply in the case of any person or
entity who in interstate or foreign commerce is knowingly engaged in the business of
selling or transferring, by means of the World Wide Web, material that is harmful to
minors unless such person or entity requires the use of a verified credit card, debit
account, adult access code, or adult personal identification number, or such other
procedures as the Federal Communications Commission may prescribe, in order to restrict
access to such material by persons under 17 years of age.
(2) Scope of exception.--For purposes of paragraph (1), a person shall not be
considered to engaged in the business of selling or transferring material by means of the
World Wide Web to the extent that the person is--
(A) a telecommunications carrier engaged in the provision of a telecommunications
service;
(B) a person engaged in the business of providing an Internet access service;
(C) a person engaged in the business of providing an Internet information location
tool; or
(D) similarly engaged in the transmission, storage, retrieval, hosting, formatting, or
translation (or any combination thereof) of a communication made by another person,
without selection or alteration of the communication.
(3) Definitions.--In this subsection:
(A) By means of the world wide web.--The term ``by means of the World Wide Web'' means
by placement of material in a computer server-based file archive so that it is publicly
accessible, over the Internet, using hypertext transfer protocol, file transfer protocol,
or other similar protocols.
(B) Engaged in the business.--The term ``engaged in the business'' means that the
person who sells or transfers or offers to sell or transfer, by means of the World Wide
Web, material that is harmful to minors devotes time, attention, or labor to such
activities, as a regular course of trade or business, with the objective of earning a
profit, although it is not necessary that the person make a profit or that the selling or
transferring or offering to sell or transfer such material be the person's sole or
principal business or source of income.
(C) Internet.--The term ``Internet'' means collectively the myriad of computer and
telecommunications facilities, including equipment and operating software, which comprise
the interconnected world-wide network of networks that employ the Transmission Control
Protocol/Internet Protocol, or any predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio.
(D) Internet access service.--The term ``Internet access service'' means a service that
enables users to access content, information, electronic mail, or other services offered
over the Internet and may also include access to proprietary content, information, and
other services as part of a package of services offered to consumers. Such term does not
include telecommunications services.
(E) Internet information location tool.--The term ``Internet information location
tool'' means a service that refers or links users to an online location on the World Wide
Web. Such term includes directories, indices, references, pointers, and hypertext links.
(F) Material that is harmful to minors.--The term ``material that is harmful to
minors'' means any communication, picture, image, graphic image file, article, recording,
writing, or other matter of any kind that--
(i) taken as a whole and with respect to minors, appeals to a prurient interest in
nudity, sex, or excretion;
(ii) depicts, describes, or represents, in a patently offensive way with respect to
what is suitable for minors, an actual or simulated sexual act or sexual contact, actual
or simulated normal or perverted sexual acts, or a lewd exhibition of the genitals; and
(iii) taken as a whole, lacks serious literary, artistic, political, or scientific
value for minors.
(G) Sexual act; sexual contact.--The terms ``sexual act'' and ``sexual contact'' have
the meanings given such terms in section 2246 of title 18, United States Code.
(H) Telecommunications carrier; telecommunications service.--The terms
``telecommunications carrier'' and ``telecommunications service'' have the meanings given
such terms in section 3 of the Communications Act of 1934 (47 U.S.C. 153).
(f) Additional Exception to Moratorium.--
(1) In general.--Subsection (a) shall also not apply with respect
to an Internet access provider, unless, at the time of entering into an agreement with a
customer for the provision of Internet access services, such provider offers such customer
(either for a fee or at no charge) screening software that is designed to permit the
customer to limit access to material on the Internet that is harmful to minors.
(2) Definitions.--In this subsection:
(A) Internet access provider.--The term `Internet access provider' means a person
engaged in the business of providing a computer and communications facility through which
a customer may obtain access to the Internet, but does not include a common carrier to the
extent that it provides only telecommunications services.
(B) Internet access services.--The term `Internet access services' means the provision
of computer and communications services through which a customer using a computer and a
modem or other communications device may obtain access to the Internet, but does not
include telecommunications services provided by a common carrier.
(C) Screening software.--The term ``screening software'' means software that is
designed to permit a person to limit access to material on the Internet that is harmful to
minors.
(3) Applicability.--Paragraph (1) shall apply to agreements for the provision of
Internet access services entered into on or after the date that is 6 months after the date
of enactment of this Act.
SEC. 102. ADVISORY COMMISSION ON ELECTRONIC COMMERCE.
(a) Establishment of Commission.--There is established a commission to be known as the
Advisory Commission on Electronic Commerce (in this title referred to as the
``Commission''). The Commission shall--
(1) be composed of 19 members appointed in accordance with subsection (b), including
the chairperson who shall be selected by the members of the Commission from among
themselves; and
(2) conduct its business in accordance with the provisions of this title.
(b) Membership.--
(1) In general.--The Commissioners shall serve for the life of the Commission. The
membership of the Commission shall be as follows:
(A) 3 representatives from the Federal Government, comprised of the Secretary of
Commerce, the Secretary of the Treasury, and the United States Trade Representative (or
their respective delegates).
(B) 8 representatives from State and local governments (one such representative shall
be from a State or local government that does not impose a sales tax and one
representative shall be from a State that does not impose an income tax).
(C) 8 representatives of the electronic commerce industry (including small business),
telecommunications carriers, local retail businesses, and consumer groups, comprised of--
(i) 5 individuals appointed by the Majority Leader of the Senate;
(ii) 3 individuals appointed by the Minority Leader of the Senate;
(iii) 5 individuals appointed by the Speaker of the House of Representatives; and
(iv) 3 individuals appointed by the Minority Leader of the House of Representatives.
(2) Appointments.--Appointments to the Commission shall be made not later than 45 days
after the date of the enactment of this Act. The chairperson shall be selected not later
than 60 days after the date of the enactment of this Act.
(3) Vacancies.--Any vacancy in the Commission shall not affect its powers, but shall be
filled in the same manner as the original appointment.
(c) Acceptance of Gifts and Grants.--The Commission may accept, use, and dispose of
gifts or grants of services or property, both real and personal, for purposes of aiding or
facilitating the work of the Commission. Gifts or grants not used at the expiration of the
Commission shall be returned to the donor or grantor.
(d) Other Resources.--The Commission shall have reasonable access to materials,
resources, data, and other information from the Department of Justice, the Department of
Commerce, the Department of State, the Department of the Treasury, and the Office of the
United States Trade Representative. The Commission shall also have reasonable access to
use the facilities of any such Department or Office for purposes of conducting meetings.
(e) Sunset.--The Commission shall terminate 18 months after the date of the enactment
of this Act.
(f) Rules of the Commission.--
(1) Quorum.--Nine members of the Commission shall constitute a quorum for conducting
the business of the Commission.
(2) Meetings.--Any meetings held by the Commission shall be duly noticed at least 14
days in advance and shall be open to the public.
(3) Opportunities to testify.--The Commission shall provide opportunities for
representatives of the general public, taxpayer groups, consumer groups, and State and
local government officials to testify.
(4) Additional rules.--The Commission may adopt other rules as needed.
(g) Duties of the Commission.--
(1) In general.--The Commission shall conduct a thorough study of Federal, State and
local, and international taxation and tariff treatment of transactions using the Internet
and Internet access and other comparable intrastate, interstate or international sales
activities.
(2) Issues to be studied.--The Commission may include in the study under subsection
(a)--
(A) an examination of--
(i) barriers imposed in foreign markets on United States providers of property, goods,
services, or information engaged in electronic commerce and on United States providers of
telecommunications services; and
(ii) how the imposition of such barriers will affect United States consumers, the
competitiveness of United States citizens providing property, goods, services, or
information in foreign markets, and the growth and maturing of the Internet;
(B) an examination of the collection and administration of consumption taxes on
electronic commerce in other countries and the United States, and the impact of such
collection on the global economy, including an examination of the relationship between the
collection and administration of such taxes when the transaction uses the Internet and
when it does not;
(C) an examination of the impact of the Internet and Internet access (particularly
voice transmission) on the revenue base for taxes imposed under section 4251 of the
Internal Revenue Code of 1986;
(D) an examination of model State legislation that--
(i) would provide uniform definitions of categories of property, goods, service, or
information subject to or exempt from sales and use taxes; and
(ii) would ensure that Internet access services, online services, and communications
and transactions using the Internet, Internet access service, or online services would be
treated in a tax and technologically neutral manner relative to other forms of remote
sales;
(E) an examination of the effects of taxation, including the absence of taxation, on
all interstate sales transactions, including transactions using the Internet, on retail
businesses and on State and local governments, which examination may include a review of
the efforts of State and local governments to collect sales and use taxes owed on in-State
purchases from out-of-State sellers; and
(F) the examination of ways to simplify Federal and State and local taxes imposed on
the provision of telecommunications services.
(3) Effect on the communications act of 1934.--Nothing in this section shall include an
examination of any fees or charges imposed by the Federal Communications Commission or
States related to--
(A) obligations under the Communications Act of 1934 (47 U.S.C. 151 et seq.); or
(B) the implementation of the Telecommunications Act of 1996 (or of amendments made by
that Act).
(h) National Tax Association Communications and Electronic Commerce Tax Project.--The
Commission shall, to the extent possible, ensure that its work does not undermine the
efforts of the National Tax Association Communications and Electronic Commerce Tax
Project.
SEC. 103. REPORT.
Not later than 18 months after the date of the enactment of this Act, the Commission
shall transmit to Congress for its consideration a report reflecting the results,
including such legislative recommendations as required to address the findings of the
Commission's study under this title. Any recommendation agreed to by the Commission shall
be tax and technologically neutral and apply to all forms of remote commerce. No finding
or recommendation shall be included in the report unless agreed to by at least two-thirds
of the members of the Commission serving at the time the finding or recommendation is
made.
SEC. 104. DEFINITIONS.
For the purposes of this title:
(1) Bit tax.--The term ``bit tax'' means any tax on electronic commerce expressly
imposed on or measured by the volume of digital information transmitted electronically, or
the volume of digital information per unit of time transmitted electronically, but does
not include taxes imposed on the provision of telecommunications services.
(2) Discriminatory tax.--The term ``discriminatory tax'' means--
(A) any tax imposed by a State or political subdivision thereof on electronic commerce
that--
(i) is not generally imposed and legally collectible by such State or such political
subdivision on transactions involving similar property, goods, services, or information
accomplished through other means;
(ii) is not generally imposed and legally collectible at the same rate by such State or
such political subdivision on transactions involving similar property, goods, services, or
information accomplished through other means, unless the rate is lower as part of a
phase-out of the tax over not more than a 5-year period;
(iii) imposes an obligation to collect or pay the tax on a different person or entity
than in the case of transactions involving similar property, goods, services, or
information accomplished through other means;
(iv) establishes a classification of Internet access service providers or online
service providers for purposes of establishing a higher tax rate to be imposed on such
providers than the tax rate generally applied to providers of similar information services
delivered through other means; or
(B) any tax imposed by a State or political subdivision thereof, if--
(i) except with respect to a tax (on Internet access) that was generally imposed and
actually enforced prior to October 1, 1998, the sole ability to access a site on a remote
seller's out-of-State computer server is considered a factor in determining a remote
seller's tax collection obligation; or
(ii) a provider of Internet access service or online services is deemed to be the agent
of a remote seller for determining tax collection obligations solely as a result of--
(I) the display of a remote seller's information or content on the out-of-State
computer server of a provider of Internet access service or online services; or
(II) the processing of orders through the out-of-State computer server of a provider of
Internet access service or online services.
(3) Electronic commerce.--The term ``electronic commerce'' means any transaction
conducted over the Internet or through Internet access, comprising the sale, lease,
license, offer, or delivery of property, goods, services, or information, whether or not
for consideration, and includes the provision of Internet access.
(4) Internet.--The term ``Internet'' means collectively the myriad of computer and
telecommunications facilities, including equipment and operating software, which comprise
the interconnected world-wide network of networks that employ the Transmission Control
Protocol/Internet Protocol, or any predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio.
(5) Internet access.--The term ``Internet access'' means a service that enables users
to access content, information, electronic mail, or other services offered over the
Internet, and may also include access to proprietary content, information, and other
services as part of a package of services offered to users. Such term does not include
telecommunications services.
(6) Multiple tax.--
(A) In general.--The term ``multiple tax'' means any tax that is imposed by one State
or political subdivision thereof on the same or essentially the same electronic commerce
that is also subject to another tax imposed by another State or political subdivision
thereof (whether or not at the same rate or on the same basis), without a credit (for
example, a resale exemption certificate) for taxes paid in other jurisdictions.
(B) Exception.--Such term shall not include a sales or use tax imposed by a State and 1
or more political subdivisions thereof on the same electronic commerce or a tax on persons
engaged in electronic commerce which also may have been subject to a sales or use tax
thereon.
(C) Sales or use tax.--For purposes of subparagraph (B), the term ``sales or use tax''
means a tax that is imposed on or incident to the sale, purchase, storage, consumption,
distribution, or other use of tangible personal property or services as may be defined by
laws imposing such tax and which is measured by the amount of the sales price or other
charge for such property or service.
(7) State.--The term ``State'' means any of the several States, the District of
Columbia, or any commonwealth, territory, or possession of the United States.
(8) Tax.--
(A) In general.-- The term ``tax'' means--
(i) any charge imposed by any governmental entity for the purpose of generating
revenues for governmental purposes, and is not a fee imposed for a specific privilege,
service, or benefit conferred; or
(ii) the imposition on a seller of an obligation to collect and to remit to a
governmental entity any sales or use tax imposed on a buyer by a governmental entity.
(B) Exception.--Such term does not include any franchise fee or similar fee imposed by
a State or local franchising authority, pursuant to section 622 or 653 of the
Communications Act of 1934 (47 U.S.C. 542, 573), or any other fee related to obligations
or telecommunications carriers under the Communications Act of 1934 (47 U.S.C. 151 et
seq.).
(9) Telecommunications service.--The term ``telecommunications service'' has the
meaning given such term in section 3(46) of the Communications Act of 1934 (47 U.S.C.
153(46)) and includes communications services (as defined in section 4251 of the Internal
Revenue Code of 1986).
(10) Tax on internet access.--The term ``tax on Internet access'' means a tax on
Internet access, including the enforcement or application of any new or preexisting tax on
the sale or use of Internet services unless such tax was generally imposed and actually
enforced prior to October 1, 1998.
TITLE II--OTHER PROVISIONS
SEC. 201. DECLARATION THAT INTERNET SHOULD BE FREE OF NEW FEDERAL TAXES.
It is the sense of Congress that no new Federal taxes similar to the taxes described in
section 101(a) should be enacted with respect to the Internet and Internet access during
the moratorium provided in such section.
SEC. 202. NATIONAL TRADE ESTIMATE.
Section 181 of the Trade Act of 1974 (19 U.S.C. 2241) is amended--
(1) in subsection (a)(1)--
(A) in subparagraph (A)--
(i) by striking ``and'' at the end of clause (i);
(ii) by inserting ``and'' at the end of clause (ii); and
(iii) by inserting after clause (ii) the following new clause:
``(iii) United States electronic commerce,''; and
(B) in subparagraph (C)--
(i) by striking ``and'' at the end of clause (i);
(ii) by inserting ``and'' at the end of clause (ii);
(iii) by inserting after clause (ii) the following new clause:
``(iii) the value of additional United States electronic commerce,''; and
(iv) by inserting ``or transacted with,'' after ``or invested in'';
(2) in subsection (a)(2)(E)--
(A) by striking ``and'' at the end of clause (i);
(B) by inserting ``and'' at the end of clause (ii); and
(C) by inserting after clause (ii) the following new clause:
``(iii) the value of electronic commerce transacted with,''; and
(3) by adding at the end the following new subsection:
``(d) Electronic Commerce.--For purposes of this section, the term `electronic
commerce' has the meaning given that term in section 104(3) of the Internet Tax Freedom
Act.''.
SEC. 203. DECLARATION THAT THE INTERNET SHOULD BE FREE OF FOREIGN TARIFFS,
TRADE BARRIERS, AND OTHER RESTRICTIONS.
(a) In General.-- It is the sense of Congress that the President should seek bilateral,
regional, and multilateral agreements to remove barriers to global electronic commerce
through the World Trade Organization, the Organization for Economic Cooperation and
Development, the Trans-Atlantic Economic Partnership, the Asia Pacific Economic
Cooperation forum, the Free Trade Area of the America, the North American Free Trade
Agreement, and other appropriate venues.
(b) Negotiating Objectives.--The negotiating objectives of the United States shall be--
(1) to assure that electronic commerce is free from--
(A) tariff and nontariff barriers;
(B) burdensome and discriminatory regulation and standards; and
(C) discriminatory taxation; and
(2) to accelerate the growth of electronic commerce by expanding market access
opportunities for--
(A) the development of telecommunications infrastructure;
(B) the procurement of telecommunications equipment;
(C) the provision of Internet access and telecommunications services; and
(D) the exchange of goods, services, and digitalized information.
(c) Electronic Commerce.--For purposes of this section, the term ``electronic
commerce'' has the meaning given that term in section 104(3).
SEC. 204. NO EXPANSION OF TAX AUTHORITY.
Nothing in this Act shall be construed to expand the duty of any person to collect or
pay taxes beyond that which existed immediately before the date of the enactment of this
Act.
SEC. 205. PRESERVATION OF AUTHORITY.
Nothing in this Act shall limit or otherwise affect the implementation of the
Telecommunications Act of 1996 (Public Law 104- 104) or the amendments made by such Act.
SEC. 206. SEVERABILITY.
If any provision of this Act, or any amendment made by this Act, or the application of
that provision to any person or circumstance, is held by a court of competent jurisdiction
to violate any provision of the Constitution of the United States, then the other
provisions of that section, and the application of that provision to other persons and
circumstances, shall not be affected.
TITLE III--GOVERNMENT PAPERWORK
ELIMINATION ACT
SEC. 301. SHORT TITLE.
This title may be cited as the ``Government Paperwork Elimination Act''.
SEC. 302. AUTHORITY OF OMB TO PROVIDE FOR ACQUISITION AND USE OF ALTERNATIVE
INFORMATION TECHNOLOGIES BY EXECUTIVE AGENCIES.
Section 3504(a)(1)(B)(vi) of title 44, United States Code, is amended to read as
follows:
``(vi) the acquisition and use of information technology, including alternative
information technologies that provide for electronic submission, maintenance, or
disclosure of information as a substitute for paper and for the use and acceptance of
electronic signatures.''.
SEC. 303. PROCEDURES FOR USE AND ACCEPTANCE OF ELECTRONIC SIGNATURES BY
EXECUTIVE AGENCIES.
(a) In General.--In order to fulfill the responsibility to administer the functions
assigned under chapter 35 of title 44, United States Code, the provisions of the
Clinger-Cohen Act of 1996 (divisions D and E of Public Law 104-106) and the amendments
made by that Act, and the provisions of this title, the Director of the Office of
Management and Budget shall, in consultation with the National Telecommunications and
Information Administration and not later than 18 months after the date of enactment of
this Act, develop procedures for the use and acceptance of electronic signatures by
Executive agencies.
(b) Requirements for Procedures.--
(1) The procedures developed under subsection (a)--
(A) shall be compatible with standards and technology for electronic signatures that
are generally used in commerce and industry and by State governments;
(B) may not inappropriately favor one industry or technology;
(C) shall ensure that electronic signatures are as reliable as is appropriate for the
purpose in question and keep intact the information submitted;
(D) shall provide for the electronic acknowledgment of electronic forms that are
successfully submitted; and
(E) shall, to the extent feasible and appropriate, require an Executive agency that
anticipates receipt by electronic means of 50,000 or more submittals of a particular form
to take all steps necessary to ensure that multiple methods of electronic signatures are
available for the submittal of such form.
(2) The Director shall ensure the compatibility of the procedures under paragraph
(1)(A) in consultation with appropriate private bodies and State government entities that
set standards for the use and acceptance of electronic signatures.
SEC. 304. DEADLINE FOR IMPLEMENTATION BY EXECUTIVE AGENCIES OF PROCEDURES FOR
USE AND ACCEPTANCE OF ELECTRONIC SIGNATURES.
In order to fulfill the responsibility to administer the functions assigned under
chapter 35 of title 44, United States Code, the provisions of the Clinger-Cohen Act of
1996 (divisions D and E of Public Law 104-106) and the amendments made by that Act, and
the provisions of this title, the Director of the Office of Management and Budget shall
ensure that, commencing not later than five years after the date of enactment of this Act,
Executive agencies provide--
(1) for the option of the electronic maintenance, submission, or disclosure of
information, when practicable as a substitute for paper; and
(2) for the use and acceptance of electronic signatures, when practicable.
SEC. 305. ELECTRONIC STORAGE AND FILING OF EMPLOYMENT FORMS.
In order to fulfill the responsibility to administer the functions assigned under
chapter 35 of title 44, United States Code, the provisions of the Clinger-Cohen Act of
1996 (divisions D and E of Public Law 104-106) and the amendments made by that Act, and
the provisions of this title, the Director of the Office of Management and Budget shall,
not later than 18 months after the date of enactment of this Act, develop procedures to
permit private employers to store and file electronically with Executive agencies forms
containing information pertaining to the employees of such employers.
SEC. 306. STUDY ON USE OF ELECTRONIC SIGNATURES.
(a) Ongoing Study Required.--In order to fulfill the responsibility to administer the
functions assigned under chapter 35 of title 44, United States Code, the provisions of the
Clinger-Cohen Act of 1996 (divisions D and E of Public Law 104-106) and the amendments
made by that Act, and the provisions of this title, the Director of the Office of
Management and Budget shall, in cooperation with the National Telecommunications and
Information Administration, conduct an ongoing study of the use of electronic signatures
under this title on--
(1) paperwork reduction and electronic commerce;
(2) individual privacy; and
(3) the security and authenticity of transactions.
(b) Reports.--The Director shall submit to Congress on a periodic basis a report
describing the results of the study carried out under subsection (a).
SEC. 307. ENFORCEABILITY AND LEGAL EFFECT OF ELECTRONIC RECORDS.
Electronic records submitted or maintained in accordance with procedures developed
under this title, or electronic signatures or other forms of electronic authentication
used in accordance with such procedures, shall not be denied legal effect, validity, or
enforceability because such records are in electronic form.
SEC. 308. DISCLOSURE OF INFORMATION.
Except as provided by law, information collected in the provision of electronic
signature services for communications with an executive agency, as provided by this title,
shall only be used or disclosed by persons who obtain, collect, or maintain such
information as a business or government practice, for the purpose of facilitating such
communications, or with the prior affirmative consent of the person about whom the
information pertains.
SEC. 309. APPLICATION WITH INTERNAL REVENUE LAWS.
No provision of this title shall apply to the Department of the Treasury or the
Internal Revenue Service to the extent that such provision--
(1) involves the administration of the internal revenue laws; or
(2) conflicts with any provision of the Internal Revenue Service Restructuring and
Reform Act of 1998 or the Internal Revenue Code of 1986.
SEC. 310. DEFINITIONS.
For purposes of this title:
(1) Electronic signature.--The term ``electronic signature'' means a method of signing
an electronic message that--
(A) identifies and authenticates a particular person as the source of the electronic
message; and
(B) indicates such person's approval of the information contained in the electronic
message.
(2) Executive agency.--The term ``Executive agency'' has the meaning given that term in
section 105 of title 5, United States Code.
TITLE IV--CHILDREN'S ONLINE PRIVACY
PROTECTION
SEC. 401. SHORT TITLE.
This title may be cited as the ``Children's Online Privacy Protection Act of 1998''.
SEC. 402. DEFINITIONS.
In this title:
(1) Child.--The term ``child'' means an individual under the age of 13.
(2) Operator.--The term ``operator''--
(A) means any person who operates a website located on the Internet or an online
service and who collects or maintains personal information from or about the users of or
visitors to such website or online service, or on whose behalf such information is
collected or maintained, where such website or online service is operated for commercial
purposes, including any person offering products or services for sale through that website
or online service, involving commerce--
(i) among the several States or with 1 or more foreign nations;
(ii) in any territory of the United States or in the District of Columbia, or between
any such territory and--
(I) another such territory; or
(II) any State or foreign nation; or
(iii) between the District of Columbia and any State, territory, or foreign nation; but
(B) does not include any nonprofit entity that would otherwise be exempt from coverage
under section 5 of the Federal Trade Commission Act (15 U.S.C. 45).
(3) Commission.--The term ``Commission'' means the Federal Trade Commission.
(4) Disclosure.--The term ``disclosure'' means, with respect to personal information--
(A) the release of personal information collected from a child in identifiable form by
an operator for any purpose, except where such information is provided to a person other
than the operator who provides support for the internal operations of the website and does
not disclose or use that information for any other purpose; and
(B) making personal information collected from a child by a website or online service
directed to children or with actual knowledge that such information was collected from a
child, publicly available in identifiable form, by any means including by a public
posting, through the Internet, or through--
(i) a home page of a website;
(ii) a pen pal service;
(iii) an electronic mail service;
(iv) a message board; or
(v) a chat room.
(5) Federal agency.--The term ``Federal agency'' means an agency, as that term is
defined in section 551(1) of title 5, United States Code.
(6) Internet.--The term ``Internet'' means collectively the myriad of computer and
telecommunications facilities, including equipment and operating software, which comprise
the interconnected world-wide network of networks that employ the Transmission Control
Protocol/Internet Protocol, or any predecessor or successor protocols to such protocol, to
communicate information of all kinds by wire or radio.
(7) Parent.--The term ``parent'' includes a legal guardian.
(8) Personal information.--The term ``personal information'' means individually
identifiable information about an individual collected online, including--
(A) a first and last name;
(B) a home or other physical address including street name and name of a city or town;
(C) an e-mail address;
(D) a telephone number;
(E) a Social Security number;
(F) any other identifier that the Commission determines permits the physical or online
contacting of a specific individual; or
(G) information concerning the child or the parents of that child that the website
collects online from the child and combines with an identifier described in this
paragraph.
(9) Verifiable parental consent.--The term ``verifiable parental consent'' means any
reasonable effort (taking into consideration available technology), including a request
for authorization for future collection, use, and disclosure described in the notice, to
ensure that a parent of a child receives notice of the operator's personal information
collection, use, and disclosure practices, and authorizes the collection, use, and
disclosure, as applicable, of personal information and the subsequent use of that
information before that information is collected from that child.
(10) Website or online service directed to children.--
(A) In general.--The term ``website or online service directed to children'' means--
(i) a commercial website or online service that is targeted to children; or
(ii) that portion of a commercial website or online service that is targeted to
children.
(B) Limitation.--A commercial website or online service, or a portion of a commercial
website or online service, shall not be deemed directed to children solely for referring
or linking to a commercial website or online service directed to children by using
information location tools, including a directory, index, reference, pointer, or hypertext
link.
(11) Person.--The term ``person'' means any individual, partnership, corporation,
trust, estate, cooperative, association, or other entity.
(12) Online contact information.--The term ``online contact information'' means an
e-mail address or another substantially similar identifier that permits direct contact
with a person online.
SEC. 403. REGULATION OF UNFAIR AND DECEPTIVE ACTS AND PRACTICES IN CONNECTION
WITH THE COLLECTION AND USE OF PERSONAL INFORMATION FROM AND ABOUT CHILDREN ON THE
INTERNET.
(a) Acts Prohibited.--
(1) In general.--It is unlawful for an operator of a website or online service directed
to children, or any operator that has actual knowledge that it is collecting personal
information from a child, to collect personal information from a child in a manner that
violates the regulations prescribed under subsection (b).
(2) Disclosure to parent protected.--Notwithstanding paragraph (1), neither an operator
of such a website or online service nor the operator's agent shall be held to be liable
under any Federal or State law for any disclosure made in good faith and following
reasonable procedures in responding to a request for disclosure of personal information
under subsection (b)(1)(B)(iii) to the parent of a child.
(b) Regulations.--
(1) In general.--Not later than 1 year after the date of the enactment of this Act, the
Commission shall promulgate under section 553 of title 5, United States Code, regulations
that--
(A) require the operator of any website or online service directed to children that
collects personal information from children or the operator of a website or online service
that has actual knowledge that it is collecting personal information from a child--
(i) to provide notice on the website of what information is collected from children by
the operator, how the operator uses such information, and the operator's disclosure
practices for such information; and
(ii) to obtain verifiable parental consent for the collection, use, or disclosure of
personal information from children;
(B) require the operator to provide, upon request of a parent under this subparagraph
whose child has provided personal information to that website or online service, upon
proper identification of that parent, to such parent--
(i) a description of the specific types of personal information collected from the
child by that operator;
(ii) the opportunity at any time to refuse to permit the operator's further use or
maintenance in retrievable form, or future online collection, of personal information from
that child; and
(iii) notwithstanding any other provision of law, a means that is reasonable under the
circumstances for the parent to obtain any personal information collected from that child;
(C) prohibit conditioning a child's participation in a game, the offering of a prize,
or another activity on the child disclosing more personal information than is reasonably
necessary to participate in such activity; and
(D) require the operator of such a website or online service to establish and maintain
reasonable procedures to protect the confidentiality, security, and integrity of personal
information collected from children.
(2) When consent not required.--The regulations shall provide that verifiable parental
consent under paragraph (1)(A)(ii) is not required in the case of--
(A) online contact information collected from a child that is used only to respond
directly on a one- time basis to a specific request from the child and is not used to
recontact the child and is not maintained in retrievable form by the operator;
(B) a request for the name or online contact information of a parent or child that is
used for the sole purpose of obtaining parental consent or providing notice under this
section and where such information is not maintained in retrievable form by the operator
if parental consent is not obtained after a reasonable time;
(C) online contact information collected from a child that is used only to respond more
than once directly to a specific request from the child and is not used to recontact the
child beyond the scope of that request--
(i) if, before any additional response after the initial response to the child, the
operator uses reasonable efforts to provide a parent notice of the online contact
information collected from the child, the purposes for which it is to be used, and an
opportunity for the parent to request that the operator make no further use of the
information and that it not be maintained in retrievable form; or
(ii) without notice to the parent in such circumstances as the Commission may determine
are appropriate, taking into consideration the benefits to the child of access to
information and services, and risks to the security and privacy of the child, in
regulations promulgated under this subsection;
(D) the name of the child and online contact information (to the extent reasonably
necessary to protect the safety of a child participant on the site)--
(i) used only for the purpose of protecting such safety;
(ii) not used to recontact the child or for any other purpose; and
(iii) not disclosed on the site, if the operator uses reasonable efforts to provide a
parent notice of the name and online contact information collected from the child, the
purposes for which it is to be used, and an opportunity for the parent to request that the
operator make no further use of the information and that it not be maintained in
retrievable form; or
(E) the collection, use, or dissemination of such information by the operator of such a
website or online service necessary--
(i) to protect the security or integrity of its website;
(ii) to take precautions against liability;
(iii) to respond to judicial process; or
(iv) to the extent permitted under other provisions of law, to provide information to
law enforcement agencies or for an investigation on a matter related to public safety.
(3) Termination of service.--The regulations shall permit the operator of a website or
an online service to terminate service provided to a child whose parent has refused, under
the regulations prescribed under paragraph (1)(B)(ii), to permit the operator's further
use or maintenance in retrievable form, or future online collection, of personal
information from that child.
(c) Enforcement.--Subject to sections 404 and 406, a violation of a regulation
prescribed under subsection (a) shall be treated as a violation of a rule defining an
unfair or deceptive act or practice prescribed under section 18(a)(1)(B) of the Federal
Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).
(d) Inconsistent State Law.--No State or local government may impose any liability for
commercial activities or actions by operators in interstate or foreign commerce in
connection with an activity or action described in this title that is inconsistent with
the treatment of those activities or actions under this section.
SEC. 404. SAFE HARBORS.
(a) Guidelines.--An operator may satisfy the requirements of regulations issued under
section 403(b) by following a set of self- regulatory guidelines, issued by
representatives of the marketing or online industries, or by other persons, approved under
subsection (b).
(b) Incentives.--
(1) Self-regulatory incentives.--In prescribing regulations under section 403, the
Commission shall provide incentives for self-regulation by operators to implement the
protections afforded children under the regulatory requirements described in subsection
(b) of that section.
(2) Deemed compliance.--Such incentives shall include provisions for ensuring that a
person will be deemed to be in compliance with the requirements of the regulations under
section 403 if that person complies with guidelines that, after notice and comment, are
approved by the Commission upon making a determination that the guidelines meet the
requirements of the regulations issued under section 403.
(3) Expedited response to requests.--The Commission shall act upon requests for safe
harbor treatment within 180 days of the filing of the request, and shall set forth in
writing its conclusions with regard to such requests.
(c) Appeals.--Final action by the Commission on a request for approval of guidelines,
or the failure to act within 180 days on a request for approval of guidelines, submitted
under subsection (b) may be appealed to a district court of the United States of
appropriate jurisdiction as provided for in section 706 of title 5, United States Code.
SEC. 405. ACTIONS BY STATES.
(a) In General.--
(1) Civil actions.--In any case in which the attorney general of a State has reason to
believe that an interest of the residents of that State has been or is threatened or
adversely affected by the engagement of any person in a practice that violates any
regulation of the Commission prescribed under section 403(b), the State, as parens
patriae, may bring a civil action on behalf of the residents of the State in a district
court of the United States of appropriate jurisdiction to--
(A) enjoin that practice;
(B) enforce compliance with the regulation;
(C) obtain damage, restitution, or other compensation on behalf of residents of the
State; or
(D) obtain such other relief as the court may consider to be appropriate.
(2) Notice.--
(A) In general.--Before filing an action under paragraph (1), the attorney general of
the State involved shall provide to the Commission--
(i) written notice of that action; and
(ii) a copy of the complaint for that action.
(B) Exemption.--
(i) In general.--Subparagraph (A) shall not apply with respect to the filing of an
action by an attorney general of a State under this subsection, if the attorney general
determines that it is not feasible to provide the notice described in that subparagraph
before the filing of the action.
(ii) Notification.--In an action described in clause (i), the attorney general of a
State shall provide notice and a copy of the complaint to the Commission at the same time
as the attorney general files the action.
(b) Intervention.--
(1) In general.--On receiving notice under subsection (a)(2), the Commission shall have
the right to intervene in the action that is the subject of the notice.
(2) Effect of intervention.--If the Commission intervenes in an action under subsection
(a), it shall have the right--
(A) to be heard with respect to any matter that arises in that action; and
(B) to file a petition for appeal.
(3) Amicus curiae.--Upon application to the court, a person whose self-regulatory
guidelines have been approved by the Commission and are relied upon as a defense by any
defendant to a proceeding under this section may file amicus curiae in that proceeding.
(c) Construction.--For purposes of bringing any civil action under subsection (a),
nothing in this title shall be construed to prevent an attorney general of a State from
exercising the powers conferred on the attorney general by the laws of that State to--
(1) conduct investigations;
(2) administer oaths or affirmations; or
(3) compel the attendance of witnesses or the production of documentary and other
evidence.
(d) Actions by the Commission.--In any case in which an action is instituted by or on
behalf of the Commission for violation of any regulation prescribed under section 403, no
State may, during the pendency of that action, institute an action under subsection (a)
against any defendant named in the complaint in that action for violation of that
regulation.
(e) Venue; Service of Process.--
(1) Venue.--Any action brought under subsection (a) may be brought in the district
court of the United States that meets applicable requirements relating to venue under
section 1391 of title 28, United States Code.
(2) Service of process.--In an action brought under subsection (a), process may be
served in any district in which the defendant--
(A) is an inhabitant; or
(B) may be found.
SEC. 406. ADMINISTRATION AND APPLICABILITY OF ACT.
(a) In General.--Except as otherwise provided, this title shall be enforced by the
Commission under the Federal Trade Commission Act (15 U.S.C. 41 et seq.).
(b) Provisions.--Compliance with the requirements imposed under this title shall be
enforced under--
(1) section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818), in the case of--
(A) national banks, and Federal branches and Federal agencies of foreign banks, by the
Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than national banks), branches
and agencies of foreign banks (other than Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial lending companies owned or controlled by
foreign banks, and organizations operating under section 25 or 25(a) of the Federal
Reserve Act (12 U.S.C. 601 et seq. and 611 et. seq.), by the Board; and
(C) banks insured by the Federal Deposit Insurance Corporation (other than members of
the Federal Reserve System) and insured State branches of foreign banks, by the Board of
Directors of the Federal Deposit Insurance Corporation;
(2) section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818), by the Director of
the Office of Thrift Supervision, in the case of a savings association the deposits of
which are insured by the Federal Deposit Insurance Corporation;
(3) the Federal Credit Union Act (12 U.S.C. 1751 et seq.) by the National Credit Union
Administration Board with respect to any Federal credit union;
(4) part A of subtitle VII of title 49, United States Code, by the Secretary of
Transportation with respect to any air carrier or foreign air carrier subject to that
part;
(5) the Packers and Stockyards Act, 1921 (7 U.S.C. 181 et. seq.) (except as provided in
section 406 of that Act (7 U.S.C. 226, 227)), by the Secretary of Agriculture with respect
to any activities subject to that Act; and
(6) the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) by the Farm Credit
Administration with respect to any Federal land bank, Federal land bank association,
Federal intermediate credit bank, or production credit association.
(c) Exercise of Certain Powers.--For the purpose of the exercise by any agency referred
to in subsection (a) of its powers under any Act referred to in that subsection, a
violation of any requirement imposed under this title shall be deemed to be a violation of
a requirement imposed under that Act. In addition to its powers under any provision of law
specifically referred to in subsection (a), each of the agencies referred to in that
subsection may exercise, for the purpose of enforcing compliance with any requirement
imposed under this title, any other authority conferred on it by law.
(d) Actions by the Commission.--The Commission shall prevent any person from violating
a rule of the Commission under section 403 in the same manner, by the same means, and with
the same jurisdiction, powers, and duties as though all applicable terms and provisions of
the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a
part of this title. Any entity that violates such rule shall be subject to the penalties
and entitled to the privileges and immunities provided in the Federal Trade Commission Act
in the same manner, by the same means, and with the same jurisdiction, power, and duties
as though all applicable terms and provisions of the Federal Trade Commission Act were
incorporated into and made a part of this title.
(e) Effect on Other Laws.--Nothing contained in the Act shall be construed to limit the
authority of the Commission under any other provisions of law.
SEC. 407. REVIEW.
Not later than 5 years after the effective date of the regulations initially issued
under section 403, the Commission shall--
(1) review the implementation of this title, including the effect of the implementation
of this title on practices relating to the collection and disclosure of information
relating to children, children's ability to obtain access to information of their choice
online, and on the availability of websites directed to children; and
(2) prepare and submit to Congress a report on the results of the review under
paragraph (1).
SEC. 408. EFFECTIVE DATE.
Sections 403(a), 405, and 406 of this title take effect on the later of--
(1) the date that is 18 months after the date of enactment of this Act; or
(2) the date on which the Commission rules on the first application filed for safe
harbor treatment under section 404 if the Commission does not rule on the first such
application within one year after the date of enactment of this Act, but in no case later
than the date that is 30 months after the date of enactment of this Act.
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