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Federal Update: House Acts on Highway Trust Fund and Internet Tax Freedom Act; Senate Introduces Combined Internet Tax Freedom Extension and Marketplace Fairness Act

July 18, 2014
The League has been monitoring several federal issues and provides member updates as they become available.
The Highway Trust Fund (HTF) and Marketplace and Internet Tax Fairness Act (MITFA) are two of the latest federal legislative updates.

Highway Trust Fund
On a bipartisan vote, the U.S. House of Representatives this week approved a temporary solution to fund the nearly insolvent Highway Trust Fund (HTF). The measure, H.R. 5021, outlines $10.9 billion in solutions to shore up the HTF and continue funding and contract authority for vital national highway and transit projects through May 2015. The House proposal receives a majority of funding, $6.4 billion, by deferring employer contributions to employee pension plans, thus raising corporate taxable income and federal revenues. Remaining funds will be backfilled by customs user fees and a $1 billion transfer from the Leaking Underground Storage Tank Trust Fund.  
Now that a House proposal has passed, national attention will turn to the Senate as they possibly consider the House proposal as early as next week to fund the HTF through May 2015, which could include an amendment by Senator Barbara Boxer (D-CA) to limit contract authority to December 19, 2014. Senator Barbara Boxer, Chair of the Environment and Public Works Committee, would like to see the shorter extension for contracting authority in order to keep pressure on Congress to pass a long-term fix.
President Barack Obama has signaled support for the House version.  The President, along with the U.S. Department of Transportation and transportation advocates, have been calling on Congress to act before the HTF becomes insolvent early next month and enact a multi-year proposal that provides more funding stability. 
Marketplace Fairness Act and Internet Tax Fairness Act
The House also acted this week to pass a permanent extension of the Internet Tax Freedom Act (ITFA).  Originally enacted in 1998, this legislation would place a permanent moratorium on taxes imposed on access to the internet.  While there is no city in California that imposes such a tax, the League has raised concerns regarding the evolving nature of the internet and how a permanent moratorium will impact city revenues.  For example, city utility user tax revenues are being eroded as consumers migrate from traditional phone lines to broadband-based telecommunications services.  The League has asked Congress to consider a short-term extension, instead of the permanent extension, to provide Congress an opportunity to revisit the policy in regular intervals.
In the Senate, a hybrid Marketplace Fairness Act and ITFA was introduced this week.  The bipartisan Marketplace and Internet Tax Fairness Act (MITFA), S. 2609, combines the Marketplace Fairness Act (MFA), which had previously stalled in Congress, with a 10-year extension of the ITFA.  
The Marketplace Fairness Act is designed to address the long-standing issue of leveling the playing field between traditional “brick-and-mortar” establishments and Internet sellers, and ensuring the proper collection of state and local taxes. For more background on the MFA, see the March 22, 2013 issue of CA Cities Advocate article “League Supports Federal Marketplace Fairness Act and Amendment into Senate Budget Resolution.”
The League is supportive of the measure in its current form, and sent a letter earlier this week to California Sens. Dianne Feinstein and Barbara Boxer urging their support.

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