Emerging Technologies Washington Update

December 19, 2019

Pardon Our Dust

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This Week: House Energy and Commerce circulates staff draft privacy legislation, Democratic bill would direct HHS to study Section 230 carveout, Canada to move ahead with digital services tax as U.S. proposes safe harbor, House passes bills to improve broadband mapping, bipartisan House members write to NIST on guidelines for artificial intelligence, the IoT is here and so is the regulation.

Week in Review

Appropriations Committee leaders reached a deal early this week to fund the government through FY20 and unveiled two packages of spending bills. One combines the Defense, Homeland Security, Commerce-Justice-Science, and Financial Services measures; the second including the Agriculture-FDA, Labor-HHS-Education, Energy-Water, Interior-Environment, State-Foreign Operations, Transportation-HUD, Military Construction-VA, and Legislative Branch measures. The House passed the packages on Tuesday 280-138 and 297-120, respectively. The Senate is expected to follow suit on Thursday and send the bills to the President to sign, which he is expected to do.

On Wednesday night, the House of Representatives voted to impeach President Trump for abuse of power (230-197) and obstruction of Congress (229-198). The vote split almost entirely down party lines–with only two Democrats, Reps. Collin Peterson (D-MN) and Jeff Van Drew (D-NJ), voting against the articles and Rep. Tulsi Gabbard (D-HI), who is running for president, voting present. Rep. Jared Golden (D-ME) split his votes on the articles, which will now be sent to the Senate for a trial and final vote. Speaker Pelosi has left open the idea of withholding the articles, thus delaying the process.

On Thursday, the House voted (227-197) to raise the cap from $10,000 to $20,000 on the state and local (SALT) deduction that was set by President Trump’s 2017 tax bill. The deduction is for individuals living in high-tax states and has become a sticking point for Democrats and Republicans debating tax policy. The bill is not expected to get a vote in the Senate, and President Trump has threatened to veto it.

The House passed the United States Mexico Canada Agreement (USMCA) (385-41) with strong bipartisan support on Thursday. Now, the Senate must vote to ratify it, and then Canada and Mexico will both need to vote as well. Leader McConnell has said he will conduct and finish President Trump’s Senate impeachment trial before addressing USMCA, so its approval may not come until well into the new year.

The Senate voted 86-8 Tuesday to approve the FY2020 National Defense Authorization Act (NDAA). The bill increases defense spending to $738 billion from $716 billion in 2019, but is still below the $750 billion the White House requested. Most notably, the NDAA provides $72 million dollars for the creation of the new sixth division of the military, the Space Force. The House has already approved the bill, and President Trump is expected to sign it into law.

On Monday, the President hosted a roundtable discussion with governors as part of the Governors’ Initiative on Regulatory Innovation. The President and Vice President delivered remarks on the Administration’s efforts related to deregulation, taxes, and trade agreements. On Tuesday, President Trump hosted Guatemalan President Jimmy Morales at the White House for a bilateral meeting.

Acting head of the National Telecommunications and Information Administration (NTIA) Diane Rinaldo is stepping down from her post, which she assumed in May. Rinaldo took over for David Redl, who lead the entity from 2017 to 2019 and for whom a permanent replacement has not yet been found. Elsewhere, Federal Trade Commission (FTC) Chairman Joseph Simons announced this week that Deputy Director of the Bureau of Competition Marian Bruno will retire at the end of the year. Subject to FTC approval, Ian Connor will become the Bureau’s director and Daniel Francis will serve alongside Gail Levine as Deputy Director.

On December 17, the White House Office of Science and Technology Policy (OSTP) updated a November request for public comment on how federal agencies can work together with academic, philanthropic, and non-profit organizations to improve the quality and effectiveness of the American research environment. The comment period, which was scheduled to close on December 23, has been extended and will now end on January 28, 2020. Specific emphasis has been placed on making the community more inclusive, efficient, safe, and ethical.

Looking Ahead

The House is poised to pass the USMCA today while Senate Majority Leader Mitch McConnell has said the Senate will not consider it until next January following the presidential impeachment trial. Congress is adjourning for the holiday break and will return January 7.  

House Energy and Commerce Circulates Staff Draft Privacy Legislation

As the Senate continues to wrangle with its own privacy negotiations, on Wednesday the House Energy and Commerce Committee unveiled its own highly anticipated draft privacy bill. The draft, on which they are currently seeking stakeholder input, allows online users to access, dispute and delete personal information that companies have collected about them.  It strengthens the FTC’s power over companies that have violated users’ privacy and would also create a new bureau dedicated to privacy within the FTC. The draft dodges two decisive issues, one regarding whether federal law will override incoming state privacy laws and the other whether individuals should be allowed to sue for violations of privacy.

Democratic Bill Would Direct HHS to Study Section 230 Carveout

On Tuesday, Democratic lawmakers put out a new proposal called the SAFE SEX Workers Study Act that would study the health and safety of sex workers and whether last year’s FOSTA/SESTA anti-trafficking bill has had unintended ramifications. That legislation amended Section 230 of the Communications Decency Act to make websites and social media platforms accountable if third parties post ads for sex work. Critics have questioned whether the law is actually fulfilling its intent to protect victims from abuse.

Canada to Move Ahead with Digital Services Tax as US Proposes Safe Harbor

Last week, Canada announced its intention to levy taxes on large, international digital companies with a unilateral digital services tax (DST) effective April 1, 2020. A 3% tax would be applied to revenue generated through the sale of online ads and user data and would apply to companies with more than $759 million U.S. in world revenue and Canadian revenue of more than $30 million U.S. United States business groups criticized the DST for countering the spirit of commitments made on digital free trade in the USMCA even before the agreement has been ratified.

The new policy results in a tax similar to the one adopted by France on multinational internet companies last July, which the U.S. Trade Representative (USTR) found to unfairly discriminate against big U.S. tech companies. In response, USTR proposed $2.4 billion in retaliatory tariffs and will hold a public hearing on January 7 to consider moving forward.

On December 3, in a letter to the Organization for Economic Cooperation and Development (OECD), which is in the midst of the biggest rewrite of international tax rules dating from the 1920s, Secretary of Treasury Mnuchin voiced strong opposition to the implementation of such taxes on the digital economy, calling them a departure from deep rooted pillars of the international tax system. Mnuchin suggested the first part of the OECD’s plan, Pillar One, instead be treated as a safe harbor.

House Passes Bills to Improve Broadband Mapping

On Monday the House passed two bipartisan bills impacting the FCC’s broadband data collection efforts. The Broadband Deployment Accuracy and Technological Availability Act, or Broadband DATA Act, was introduced by Representatives Loebsack (D-IA) and Latta (R-OH) and requires the FCC to collect granular data on where in the US high-speed broadband internet is available. This would help update the FCC’s current broadband maps, which critics often label  inaccurate. It will also give states and localities the ability to challenge the accuracy of FCC maps by submitting their own data.

The other bill, the Mapping Accuracy Promotes Services Act or MAPS Act, was introduced by Representatives Long (R-MO) and McEachin (D-VA). The MAPS Act makes it illegal for individuals to “willfully, knowingly, or recklessly” submit inaccurate broadband coverage data to the FCC. The bills have a companion in the Senate, S.1822, which has been reported to the full Senate by the Commerce Committee.

Bipartisan House Members Write to NIST on Guidelines for Artificial Intelligence

On December 12, four House members wrote a letter to Walter Copan, Director of the National Institute of Standards and Technology (NIST), urging him to draft voluntary guidelines for organizations on avoiding bias and discrimination when employing artificial intelligence (AI). The bipartisan letter, signed by Representatives Olson (R-TX), DelBene (D-WA), Gonzalez (R-OH), and Soto (D-FL), illustrates Congress’ growing interest in AI and highlights the potential regulatory gaps that exist in the federal government’s approach to the space. Olson is co-chair the House AI Caucus, which he co-founded in 2017, and DelBene and Soto are members; Senators Portman (R-OH) and Heinrich (D-NM) founded a Senate counterpart, the Senate AI Caucus, in March.

The IoT Is Here and So Is the Regulation

Effective Jan. 1, 2020, California will begin regulating the security of “Internet of Things” devices sold in the state — meaning any device that connects to the internet, directly or indirectly.

Read about key requirements of the state law and how companies can prepare for this next wave of cybersecurity regulation from McGuireWoods LLP associate, Clare Lewis.