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/7.A- STATE AND LOCAL TAXES AT RISK WITH KEY Bill IN HOUSE JUDICIARY COMMII-rEE: LETTERS AND PHONE CAI I NEEDED!" State and local revenues could fall by a minimum of $9 Legislatures expressed "grave concerns.,.about the premature billion a year if the business activity tax (BAT) p~oposals in H.R. consideration of this legislation and the negative impact that it 2526 make it into law, according to the Mu~tistate Tax Commis- will have on current state fiscal conditions." The letter went on sion. to say that it "would be a direct assault on sovereign state taxing authority, and would cost state and local governments The House Judiciary Subcomm~ea on Commercial and billions of dollars each year." Administrative Law hurriedly marked up H.R. 2526 last week with less than the required 24 hours notice. Before it was City Action Needed! amended in the mark up, the bill would have made permanent H,R. 2526 will probably be taken up by the House Judiciary the moratorium on taxation on Intemet access and collection Committee next week, Cities are urged to contactym/r of sales and use taxes on transactions that occur over the re~tives in Ihe House and urge ~hat they oppose Intemet. Asuccessful amendment eliminated these provisions H.R, 2526. A sample letter will be available on tbe NLC Wd~ but approved provisions that would place new federal limits on site at www.nlc.oro. state nexus standards for collection of business activity taxes. The name of the bill wes also amended and is now the "Business If your representative is on the House Judiciary Committee Activity Tax Modernization Act." The bill could come up late (Representatives Elton Gallegly, Darrell fssa, Howard Berman, next week for full mark up in the House Judiciary Committee. Zee Lofgren, Maxine Waters, and Adam Schif0 pl__~__ contact ~em immediately and let them know you oppose any According to the Multistate Tax Commission, if enacted, consideration of H. R, 2526at~histirne. For questions H.R. 2526 "would overturn current constitutional standards regarding H.R. 2526, please contact League Staff, Jennifer goveming when states can impose income taxes on businesses. Lewis, (916) 658-8254. It would allow companies that operate electronically, especially via the Intemet, to escape taxes they are already paying by sheltering much of their income in tax havens. Under current law, both in-state and out-of-state businesses that are doing business in a state pay BAT on the income earned in that state." WATER BOARD RESPONDS TO "FREQUENTLY ASKED QUESTIONS" The National League of Cities (NLC) and League of California POSED BY THE LEAGUE Cities oppose the provisions in the bill that would establish a bright line test eliminating existing nexus standards and setting A new information resource regarding storm water new stanoards for business based on a "substantial physical and waste water issues is now available on the Water presence." We also expressed opposition to the nexus carve- issues page of the League's website. The document out to industry, which would drastically reduce the amount of includes information provided by the California State local revenues for municipal services to both business and Water Resources Control Board in response to a list of citizens, at a time when all levels of govemmant are experienc- "Frequently Asked Questions" submitted to the Board lng severe budget constraints, by the League, The League prepared the questions after hearing from numerous cities about the regula- The Supreme Court has established a "substantial nexus" tion of water quality by the State and Regional Boards. standard that must be met before a business can be taxed by a it includes questions related to public participation at state. However, subcommittee chairman, Representative Bob State and Regional Board meetings, current topics Bart (R-Ga.), offered as his rationale for redefining the existing surrounding about storm water permits, as welt as key nexus standard concern for the great,uncertainty for busi- issues related to waste water permits, nesses participating in interstate commerce, particularly small The League thanks the Board for working coopera- businesses, in fact, if the new standard becomes law, it would bar states from imposing income taxes on businesses that do tively with the L~'~gue to provide responses to these not have a "substantial physical presence" in a state. In a letter questions. to the subcommittee, the National Conference of State Visit the League's Official Web Site--www.cacities.org PRIORITY FOCUS/PAGE 5