Emerging Technologies Washington Update

September 5, 2019

Pardon Our Dust

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This Week: Senate committee holds field hearing on Wayfair decision and online sales tax; US, France agree on path forward for digital services taxes; White House outlines federal research and development budget priorities for FY21; spectrum pipeline flowing according to NTIA report.

Week in Review

President Trump recently attended the G7 summit Biarritz, France, where he announced a new trade deal with Japan that includes “early consensus” on a number of key provisions, including digital trade. US and Japanese negotiating teams aim to finalize the first stage of the agreement by the end of next month. He also discussed France’s digital services tax (DST) with French President Macron (see below for additional details). As Hurricane Dorian prepared to make landfall, Trump cancelled plans to travel to Warsaw on September 1 to mark the 80th anniversary of the beginning of World War II. Vice President Pence attended in his place and went on to scheduled trips to Ireland, the United Kingdom, and Iceland.

Meanwhile, the President formally nominated Eugene Scalia to serve as Secretary of Labor and issued on August 30 an Executive Order on Establishing the National Quantum Initiative Advisory Committee. The EO coincided with a memo from the White House Offices of Management and Budget (OMB) and Science and Technology Policy (OSTP) to all executive departments and agencies outlining the Administration’s research and development budget priorities for FY21. In general, the priorities fall into five categories: security, leadership in industries of the future, energy and environmental leadership, health and bioeconomic innovation, and space exploration and commercialization (see below for additional details). 

With Congress set to return to Washington next week, the Senate Commerce Subcommittee on Communications, Technology, Innovation, and the Internet holds a field hearing today in Sioux Falls, South Dakota on “Transforming Rural America: A New Era of Innovation” with a focus on expanding access to reliable broadband connectivity in rural America.

Senator Johnny Isakson (R-GA) announced last Wednesday that he will resign at the end of the year citing health challenges, including his battle with Parkinson’s disease. Georgia Governor Brian Kemp (R) will appoint someone to fill the vacant seat until a November 2020 special election. Rep. Bill Flores (R-TX), a member of the Energy and Commerce Committee, House Judiciary Antitrust Subcommittee Chairman Jim Sensenbrenner (R-WI), and Rep. Susan Davis (D-CA), who sits on the House Armed Services and Education and Labor Committees, also announced this week that they will not seek reelection in 2020.

Looking Ahead

Members of the House and Senate will both return to Washington on Monday after spending August in their states and districts.

Next Thursday, the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law will hold the third in its series of hearings on Online Platforms and Market Power, this one focused on “The Role of Data and Privacy in Competition.” On September 17, the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights will hold a hearing on “Oversight of the Enforcement of the Antitrust Laws” during which Federal Trade Commission (FTC) Chairman Joseph Simons and Assistant Attorney General Makan Delrahim will testify. The hearing will focus on the agencies’ recent actions related to the technology sector. The Subcommittee will also hold a hearing on September 24 to examine the impact of recent digital platform mergers.

Senate Minority Leader Chuck Schumer (D-NY) sent a letter to his Democratic colleagues today outlining his priorities for the remainder of 2019, including legislation to address gun violence, election security, the Affordable Care Act, pension benefits, and Hong Kong human rights. Specifically, Schumer said he will continue to push Majority Leader McConnell (R-KY) to bring H.R. 8, the Bipartisan Background Checks Act, to the floor. The bill passed the House in February 240-190 with support from eight Republicans.

With the California legislative session ending next Friday, tomorrow is the last day that bills can be amended on the floor. At this time, efforts to secure major changes to the California Consumer Privacy Act (CCPA), set to go into effect in January 2020, have stalled.

Senate Committee Holds Field Hearing on Wayfair Decision and Online Sales Tax

On August 28, the Senate Small Business and Entrepreneurship Committee held a field hearing in Concord, New Hampshire focused on “Remote Online Sales Taxes: Examining the Impact on Small Businesses of the Supreme Court’s Decision in South Dakota v. Wayfair.” Senators Jeanne Shaheen (D-NH), a member of the Committee, and Maggie Hassan (D-NH) convened four businesses to discuss the 2018 Supreme Court decision and its impact on businesses in the handful of states that, like New Hampshire, do not impose a state sales tax. The decision enables a state to require sellers with no physical presence in that state to collect and remit sales taxes on purchases made within its borders.

Shaheen and Hassan support the Online Sales Simplicity and Small Business Relief Act, which would delay collection until 2021, prohibit retroactive taxation, and establish a $10 million sales threshold under which businesses are exempt from tax collection requirements. During the hearing, Shaheen argued that the Wayfair decision creates an unfair burden on small businesses, especially in states that do not have a sales tax. Witnesses described the costs associated with compliance and navigating different requirements posed by different states and localities.

US, France Agree on Path Forward for Digital Services Taxes

As the G7 summit in Biarritz, France, came to a close, President Trump and French President Emmanuel Macron held a joint press conference on Monday during which they announced an agreement on France’s new digital services tax (DST). Macron signed legislation last month that imposes a 3% tax on companies that earn more than €25 million in France or €750 million worldwide from digital businesses. Trump and members of Congress on both sides of the aisle allege that the tax unfairly and disproportionately impacts large US-based technology companies and the Office of the US Trade Representative (USTR) opened a Section 301 investigation to determine if the new tax constitutes an unfair trade practice (for more on last week’s USTR hearing, click here).

The United States and companies that stand to be subject to the tax argue that individual countries should not move forward with their own DSTs while negotiations within the Organization for Economic Cooperation and Development (OECD) seek international consensus on a path forward. The goal is to reach an agreement by the end of 2020. In the meantime, Macron said Monday that France will proceed with its DST until a new mechanism agreed upon with the OECD is in place, at which point it will end its national tax and reimburse companies the difference between the French DST and the OECD rate.

Senate Finance Committee Chairman Ron Wyden (D-OR) criticized the agreement, saying “if Donald Trump gives France a pass now, then it will be open season for foreign governments to go after major American employers.”

White House Outlines Federal Research and Development Budget Priorities for FY21

The White House Offices of Management and Budget (OMB) and Science and Technology Policy (OSTP) sent a memo on August 30 to all executive departments and agencies outlining the Administration’s research and development (R&D) budget priorities for Fiscal Year 2021. Generally, the priorities fall into five categories: security, leadership in industries of the future, energy and environmental leadership, health and bioeconomic innovation, and space exploration and commercialization.

Within the industries of the future portfolio, the Administration directs departments and agencies to focus artificial intelligence (AI), quantum information science, and computing; advanced communications networks and autonomy; and advanced manufacturing. In particular, they are directed to prioritize R&D that will “lower barriers to the deployment of surface, air, and marine autonomous vehicles with a focus on developing operating standards, integration approaches, traffic management systems, and defense/security operations.” The memo places specific emphasis on electric vertical-takeoff-and-landing (EVTOL) and civil supersonic aircraft.

The memo also details the following priority crosscutting actions: build and leverage a diverse, highly skilled American workforce; create and support research environments that reflect American values; support transformative research of high risk and potentially high reward; leverage the power of data; and build, strengthen, and expand strategic multisector partnerships. 

Spectrum Pipeline Flowing According to NTIA Report

On September 3, the Department of Commerce, through the National Telecommunications and Information Administration (NTIA), released the first annual Report on the Status of Spectrum Repurposing. The report provides a historical perspective on efforts to fill the spectrum “pipeline” through repurposing of federal spectrum for commercial use, as well as an outline of ongoing and near-term spectrum repurposing initiatives. As detailed in the report, 7,250 MHz of spectrum is actively under consideration for potential licensed use and approximately 14,690 MHz of spectrum is under consideration for unlicensed wireless usage. Consistent with Congressional directives codified in the MOBILE NOW Act and Spectrum Pipeline Act, the report details the broad range of usage regimes that have been utilized over the last decade to advance innovation and opportunity for wireless connectivity, including enhanced sharing opportunities for non-federal users to access federal spectrum and bi-directional sharing under which federal users can access non-federal spectrum.

Underscoring the report’s analysis of the breadth of spectrum opportunities under consideration, Federal Communications Commission Chairman Pai noted in a blog on September 4 the Commission has “already completed two spectrum auctions this year and will begin a third on December 10” and it will vote on an item at its upcoming September Public Meeting to seek comment on “draft procedures for an auction of 70 MHz of spectrum in the 3.5 GHz band to begin on June 25, 2020.”