2009-2010 Policies for the Jurisdiction of the Communications, Financial Services & Interstate Commerce Committee
Banking Regulation
The National Conference of State Legislatures is committed to the preservation of the dual banking system. Dual banking refers to the unique system of separate state and federal chartering and regulation of banks and thrifts. States and the federal government act independently to charter, supervise and regulate financial institutions for their citizens’ benefit. A key feature of the dual banking system is the ability of a bank, whether a commercial or savings bank, to choose between a state or national charter. In doing so, a bank chooses as its primary regulator—a state banking department or the federal Office of the Comptroller of the Currency (OCC) or Office of Thrift Supervision (OTS).
The Federal Deposit Insurance Corporation (FDIC), as the deposit insurer, holds back-up regulatory authority over both state and national banks to safeguard against banks taking unnecessary risks with insured deposits. The Federal Reserve, as the central bank, ensures the free flow of funds through the banking system. The FDIC has federal oversight of state chartered banks that are not members of the Federal Reserve.
The Unique American System
The dual banking system is critical to the strength and vitality of the U.S. economy. Unlike Canada, Europe and other developed countries, the unique American system has promoted the development of a decentralized banking market where banks of widely different sizes efficiently distribute credit to all sectors of the U.S. economy and serve the diverse needs of local, regional, and national markets. Where banking markets outside the United States are dominated by a handful of national banks, America is home to more than 8,000 banks and thrifts—the great majority of which are state chartered.
The dual system enables state governments to apply laws and regulations to banks and thrifts that serve the needs of local economies and that respond to the values and concerns of local citizens. The dual system encourages diversity and innovation. Many of the successful innovations in bank services have occurred first at the state level, including interstate banking, Negotiable Order of Withdrawal (NOW) accounts, electronic fund transfers, check hold limits, and improved disclosure of credit card fees, rates, and terms as well as community reinvestment standards and basic banking availability. Most recently, states have been at the forefront of protecting consumers in enacting new laws relating to predatory lending, data security and the licensing of mortgage loan originators. Regulatory decentralization is especially important to the strength of community banking, which helps disperse decision-making vital to small business lending and job creation across America rather than concentrate it in the nation’s financial capitals.
The nation as a whole is weakened by preemptive federal actions to limit the flexibility of state legislatures to deal with local economic problems, such as the capacity to make choices about the financing of housing, small business lending and community development. In recognition of the advantages of the dual system to the public and to the health of the financial services industry, NCSL opposes any efforts by the federal government to restrict state authority to charter, supervise, or regulate the powers of state chartered banks and thrifts. Nonetheless, NCSL recognizes that the states have a duty to use their powers responsibly and in a way that does not endanger the deposit insurance system and thereby the nation's financial stability.
THE FUTURE OF STATE BANKING
As state legislators, we are concerned about the financial viability of our state banking systems. If present trends continue, states policymakers will need to evaluate the sustainability of our state banking regulatory system in terms of the overall state budget needs. NCSL is well aware of the enormous contribution that state banks have made to the economic vitality of our states and seeks to ensure the preservation and integrity of the dual banking system. However, NCSL acknowledges the uncertain future for state chartered banks in the era of financial services modernization, interstate bank branching, bank consolidations, and mergers and technological advances such as the Internet and online banking services. We also acknowledge that one of the strengths of the dual banking system, the ability of state legislatures and regulators to be the “laboratories” of financial innovation, is jeopardized as the need for more uniform regulatory systems to meet the demand of global competition is advocated by many within our nation’s financial services industry.
At present, there are nearly 6,000 state chartered banks representing 72 percent of the nation’s total banks and holding 30 percent of total bank assets. State banks have $3.6 trillion in total assets and safeguard $2.6 trillion in total deposits. Most state banks are small community banks, while some are among the nation’s largest financial institutions. State chartered banks have well-served our nation’s cities and rural areas and have been the economic backbone of our country for over 100 years.
The state system continues to be the charter of choice for community banks with 84% of the new charters going to the state system. However since the OCC’s sweeping preemption of state laws in 2003, the state system has declined from holding almost half of the total bank assets to under 30 percent today. If this trend continues, and all of the nation’s top 100 banks chose a Federal charter the state system would be left with less than 20 percent of the assets under state supervision.
NCSL calls upon state legislators, governors and state banking regulators to convene a national summit on the future of state financial services regulation. State policymakers must address the question of the future viability of state banking system, as well as the states’ role in other financial services in the age of global markets. NCSL urges Congress to hold hearings on the future of a dual banking system and the role the OCC has played in the recent downward spiral of the state banking assets.
If state legislators are committed to having a state voice in the regulation of financial services, state legislators will need to hold their congressional delegations accountable for federal actions that only serve to weaken the dual banking system.
FEDERAL PREEMPTION
NCSL strongly believes that a high burden of proof such as a national economic crisis, must be established before federal preemption of state banking authority is ever justified and that only Congress—and not federal regulatory agencies—can preempt the actions of elected state leaders.
Federal lawmakers always have intended to apply state laws generally to national banks unless expressly preempted by Congress. This approach was reaffirmed in the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which states that the “laws of the host State regarding community reinvestment, consumer protection, fair lending, and establishment of intrastate branches shall apply to any branch… of an out-of-State national bank” unless it is preempted by federal law or ruled discriminatory with respect to state banks [12 USC §36(f)].
NCSL supports the “prevent or significantly interfere with” standard established by the Supreme Court to govern federal preemption of state laws as they apply to national banks. In the 1997 decision, Barnett Bank of Marrion County, N.A. v. Nelson, the Supreme Court held that a state may not “forbid, or impair significantly, the exercise of a power explicitly granted” by Congress to a national bank. Congress recognized the “prevent or significantly interfere with” language in the Gramm-Leach-Bliley Financial Modernization Act of 1999 as “the legal standard for preemption” established by the Supreme Court [15 USC §6701(d)(2)(A)].
NCSL opposes any effort by the OCC to assert its regulatory authority to weaken the standard of preemption or shield national banks and their operating subsidiaries from state consumer protection laws and enforcement. Moreover, NCSL would encourage Congress to eliminate the judicial deference given to the OCC by federal courts in challenges to state financial services laws and to rein-in OCC abuse of its regulatory authority to preempt state laws.
NCSL, along with the National Governors Association, the National Association of Attorneys General and the state financial regulators opposed the OCC’s regulations that were adopted in 2003, that swept aside state consumer protection laws as they apply to national banks and their operating subsidiaries. We are disappointed that the Supreme Court in Watters v. Wachovia ruled that wholly owned operating subsidiaries of national banks are provided the same ability as the national bank to ignore state consumer protections statutes and regulations. NCSL believes that it is now more important then ever for Congress to reassert itself in the debate and clarify the role of the states in the protection of our citizens. Congress needs to make it clear that some level of accountability exists at the state level for federally chartered institutions. States need to be able to enforce both state and federal laws when a financial institution's primary federal regulator is not protecting the citizens of the state. State legislators and Attorneys General need a clear statement of their roles in protecting the citizens of their states. NCSL urges Congress to review the provisions of Riegle-Neal that define applicable law for both state and federal institutions and encourages federal and state coordination to develop consistent interpretation and enforcement of applicable state laws.
FUNCTIONAL REGULATION
In 1999, Congress enacted the Gramm-Leach-Bliley Financial Services Modernization Act, which tore down the firewalls between banking and other financial services. NCSL did not oppose congressional repeal of the Glass-Steagall Act, which established those separations in 1934 in response to the Great Depression. However, NCSL consistently and strongly advocated for functional regulation of financial services and opposed provisions in the Gramm-Leach-Bliley Act that preempt state laws and regulations with regard to the business of insurance.
Even before the enactment of the Gramm-Leach-Bliley Act, state legislatures were concerned about regulatory encroachment by the OCC of state authority, especially with regard to the regulation of insurance. Since the enactment of the Gramm-Leach-Bliley Act, the OCC has challenged a number of state laws with regard to the regulation of banks selling insurance. NCSL will continue to oppose this overreach by federal regulatory agencies. NCSL strongly advocates that banks involved in the business of insurance must be regulated for this purpose by the appropriate state insurance supervisory agency, regardless if they are a state or national chartered bank. A consumer in a state must be able to expect that protections granted under state law and regulation will be the same irrespective of the financial institution from which the insurance product is obtained.
In mortgage lending, state regulated entities like mortgage brokers and mortgage companies, continue to play a larger role in mortgage originations. However, federally regulated institutions play their own role, providing capital for brokers and state-based lenders. Federal regulators are often interested in their regulatory scope and need to work with state regulators to root out abusive or fraudulent conduct. Federal regulators should be looking for innovative ways to share and leverage their state chartered counterparts’ resources. NCSL opposes any effort by federal regulators to restrict state based lending institutions.
INTERSTATE BANK BRANCHING
The 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act expressly permits state and national banks to open a bank branch in a new state only if the state permits de novo interstate branching. The Riegle-Neal Act also permits states to adopt "age" laws, which allow out-of-state bank holding companies to acquire a bank branch only after it has existed for a certain number of years. NCSL opposes congressional efforts to preempt state authority to opt out of de novo interstate branching and maintain "age" requirements.
FEDERAL REGULATORY CONSOLIDATION
NCSL recognizes the need for the federal government to reduce federal regulatory burden that can impede the economic vitality of our nation's financial services industries. In consolidating the federal banking regulators, Congress must ensure that any consolidation does not invalidate the regulatory independence of the dual banking system.
NCSL will oppose any federal regulatory consolidation plan that would:
- Preempt, limit or interfere with the rights of states to regulate state chartered banks;
- Require federal reporting requirements and examinations that duplicate state efforts;
- Place state chartered banks at a competitive disadvantage with national banks or federal thrifts; and
- Give oversight authority for state chartered banks to the OCC, the regulator of national banks.
NCSL supports the continued federal oversight by the FDIC and the Federal Reserve of state chartered banks. It would be detrimental to the well-being of the dual banking system for Congress to tamper with present oversight cooperation between state banking departments, the FDIC and the Federal Reserve.
STATE BANK FEES
Although NCSL appreciates the efforts of the federal government to take appropriate action to reduce budget deficits, state chartered institutions should not be forced to bear the burden of such efforts. NCSL opposes any proposal by the federal government that mandates the FDIC and the Federal Reserve charge and collect from state chartered banks a fee for their yearly examinations. It has been estimated that such a tax on state chartered banks would cost more than $1 billion over five years and place state banks at a competitive disadvantage to national banks. At present, FDIC examinations are covered by deposit insurance that state banks already pay to the FDIC. Federal Reserve examinations are currently paid for by earnings from the Federal Reserve's monetary policy activities.
NCSL acknowledges that, when an Administration’s annual budget submission to Congress has included provisions to tax state banks for duplicative federal oversight. Congress has removed those provisions from the federal budget. NCSL appreciates the support of Congress in ensuring that state banks are not double-taxed for the same service.
CONSUMER PROTECTION
With the rapidly changing technological advances in the financial services industries, both state legislatures and Congress must periodically consider legislation to ensure consumer access to basic banking services; to protect the privacy of financial consumers and the security of their personal financial information; to provide protection for consumers from abusive lending practices; to ensure disclosure of information about credit terms, interest rates, fees, and balances; to regulate branch closing; and to otherwise protect the consuming public. In recognition that this is an area of overlapping federal and state jurisdiction, NCSL will ordinarily not oppose such federal consumer protection measures, provided that there is no preemption of complementary state consumer protection legislation. Federal legislation should not prohibit state legislatures and state regulators from providing additional protections for consumers of financial services.
Furthermore, as online banking continues to grow, clear rules must be established as to which jurisdiction's consumer protections apply to a given transaction. NCSL believes that any such rules should be crafted through a partnership between state and federal regulators and should not place state chartered banks at a disadvantage in their ability to provide services over the Internet.
FINANCIAL SERVICES AND ECONOMIC DEVELOPMENT
Adequate investment by banks and thrifts is crucial to the maintenance and growth of state and local economies. Rural communities with agricultural economic bases, suburban communities, and urban neighborhoods must continue to get the banking services that meet their particular economic development needs.
NCSL recognizes that racial, ethnic, or gender discrimination by financial services institutions may have an impact on the ability of residents in distressed communities to obtain financial assistance. State legislators also recognize the need for financial institutions to make safe, sound and profitable investments. NCSL, recognizing the responsibilities that states have for financial institution regulation and solvency and for providing for fair lending to its constituents, believes that it is the responsibility of each state legislature to address the unique needs of its state. Likewise, the federal government as regulator of national banks must make the same determinations and act accordingly. However, Congress must not mandate federal guidelines that impede the states' abilities to regulate financial services.
NCSL believes that true economic revitalization will happen only when government, in partnership with the private sector, provides the tools for empowering those Americans within distressed communities to become part of this nation's economic mainstream.
Expires August 2010
Corporate Formations
A corporation is defined as a legal entity or structure created under the authority of a state's laws, consisting of a person or group of persons who become shareholders. The entity's existence is considered separate and distinct from that of its members. A corporation can enter into contracts, sue and be sued, pay taxes separately from its owners, and do the other things necessary to conduct business.
The ability to regulate and set standards for incorporation law had long resided within the individual states. Many states rely on the revenue generated by incorporation fees, corporate taxes and other fees as a way to fund many of their public needs. States determine what the articles of incorporation need to involve and have the ability to both tighten and lift barriers for corporate formation.
One of the key reasons for forming a corporation is the limited liability protection provided to its owners. Because a corporation is considered a separate legal entity, the shareholders have limited liability for the corporation's debts. The personal assets of shareholders are not at risk for satisfying corporate debts or liabilities.
In 2001, after the terrorist attack on the United States, the U.S. Treasury Department was tasked with tracking the funding of terrorists cells and groups. One of the findings of these early studies was the concern that state corporate formation statutes may have allowed terrorists and other criminals in laundering money and hiding assets. In 2002, a number of states were identified by the Treasury Department as having insufficient requirements for the identification of members, managers or the beneficial owners of the corporation or other limited liability entities.
In 2006, the General Accounting Office (GAO) and the Money Laundering Threat Assessment Working Group of the U.S. Treasury Department released studies regarding what they considered the lax corporate formation requirements by states. Almost every state was cited by the GAO report for inadequate corporate formation information requirements.
In late 2006, the Permanent Subcommittee on Investigations of the United States Senate Homeland Security and Governmental Affairs held a hearing on the reports and what the Subcommittee claimed was the states failure to respond. In February 2007, some in Congress served noticed that if the states failed to address the findings of the studies, then Congress would set a national standard for corporate formation and registration. In doing so, Congress would preempt most states’ corporate formation statutes and seriously impact the revenues of many states.
A special Task Force was established by the Executive Committee of the National Conference of State Legislatures to study the federal reports, and the congressional hearing and to determine if the concerns were valid. After a year of meetings and hearings, the NCSL Task Force has found that while some state statutes may lack some of the transparency demanded by the federal agencies, the wholesale preemption of state corporate formation statutes is unwarranted and unnecessary. However, NCSL is committed to working with the National Association of Secretaries of State, American Bar Association, and the National Conference of Commissioners of Uniform State Laws to enhance the transparency of current state corporate formation laws.
Therefore, the National Conference of State Legislatures will oppose any unwarranted effort at the federal level to preempt state incorporation laws without proper justification that such laws have led to criminal or terror activities.
Expires August 2011
Cradle to Grave Electronics Management
NCSL has long recognized that technology and technology equipment are important and essential to US participation in the global economy. NCSL has long recognized the need to manage solid waste in an environmentally, economically, and politically acceptable manner. As outlined in its Solid Waste Management policy, NCSL believes that source reduction and recycling offer the most economically and environmentally sound methods for dealing with a significant percentage of the solid waste stream.
An ever growing segment of the solid waste stream is comprised of discarded electronic equipment. Such electronic waste or e-waste is entering the national waste stream at an increasing rate due to a number of contributing factors. These include the expanding pervasiveness of electronics, rapid technological advances and the subsequently shorter lifespan of electronics technologies and a large inventory of obsolete electronics.
The exponential growth of this segment of the waste stream has brought a new urgency to the discussion of electronics life-cycle management. According to the International Association of Electronics Recyclers (IAER) approximately 3 billion units will be scrapped during the rest of this decade. However, only a small percentage of the scrapped units are being recycled according to recent studies. The Environmental Protection Agency (EPA) has estimated that in 2003 alone, about 50 million existing computers became obsolete; of these, one source estimates, only a small percentage were recycled. Also urgent, is the need to take steps expeditiously to limit the effect of hazardous substances on public health.
NCSL supports efforts to increase the amount of electronic material that is removed from the waste stream and diverted from landfills. The disincentives for reuse and recycling of such electronics scrap or e-scrap must be examined and mitigated by all relevant stakeholders. NCSL encourages the full cooperation and assistance of the federal government in state efforts to promote responsible product stewardship and encourage the development of an infrastructure necessary to support the widespread recovery of a broad range of electronic equipment. Any legislative or regulatory action taken at the federal level must recognize the importance of a state-federal partnership in managing the current stream of end-of-life electronics and promote future product stewardship of electronic equipment.
Expires August 2012
Dual Chartering of Credit Unions
Credit unions are member owned, not-for-profit cooperative financial institutions formed to permit those in their field of membership to pool their savings, lend to one another, and own the organization where they save, borrow, and obtain related financial services.
As with the dual banking system, credit unions have a choice to operate as a federal charter or a state charter. State credit union regulators charter and supervise state-chartered credit unions. Federal-chartered credit unions are chartered and supervised by the National Credit Union Administration (NCUA). The NCUA also administers the National Credit Union Share Insurance Fund (NCUSIF), which insures all federal credit unions and approximately 95 percent of state chartered credit unions. Therefore, NCUA is responsible for the safety and soundness of the NCUSIF and, to that extent, has interest and oversight over state chartered, federally insured credit unions. At present, there are approximately 3,200 state chartered, federally insured credit unions and 4,800 federally chartered credit unions in the United States.
The historic recognition of the value of maintaining a viable dual chartering system has contributed to today's strong and successful credit union movement. The choice of a credit union charter and regulation plays an important role in creating an innovative operating environment in which all credit unions benefit. However, new challenges to the vitality of the dual chartering system exist in today's environment.
As state legislators, we are well aware of the enormous contribution that state chartered credit unions have made to the economic vitality of our states and we seek to ensure the preservation of the dual chartering system. We acknowledge that one of the strengths of the dual chartering system, the ability of state legislatures and regulators to be the “laboratories” of financial innovation, is in jeopardy as the need for more uniform regulatory systems to meet the demand of global competition is advocated by many within our nation’s financial services industry. It is critical, as these challenges arise in today's marketplace, that federal regulatory agencies refrain from adopting policies without regard for state regulatory authority and at the expense of innovative state credit union laws.
Credit unions' dual chartering system has benefited by the competitive interplay and "balance of power" between NCUA and state regulators to provide the best system of examination, supervision and regulation. The continuation of this competitive interplay and "balance of power" is essential to the future of the dual chartering system. Additionally, it is crucial state legislatures maintain the primary authority to enact consumer protection statutes for residents in their states and to promulgate and enforce state consumer protection regulations, without the threat of federal preemption.
The National Conference of State Legislatures believes that state credit union supervisors have the primary responsibility for assuring the safety and soundness of credit unions chartered by and operating under state law and regulation. NCSL also acknowledges that states have a responsibility to provide a credible regulatory environment where powers can be exercised in a way that does not endanger the financial solvency of NCUSIF. NCSL additionally acknowledges that federal deposit insurance agencies, like the NCUA, have a legitimate role to play if state authorized powers lead to unreasonable risks for NCUSIF. However, NCUA regulations and policies should be crafted in a way that minimizes the preemption of state authority. Any preemption of state credit union laws or regulatory authority must be justified only by a clear and certain threat to the credit unions' share insurance fund by those credit unions that are federally insured.
About half the states authorize their credit union regulators to determine whether state chartered credit unions should be allowed an alternative to federal share insurance. In nine of those states, the regulator has determined that a private share insurance option is acceptable. NCSL supports the authority of state governments to determine how state financial institutions must be insured and opposes any efforts by the federal government to preempt states’ authority to govern state deposit insurance requirements.
The dual chartering system has benefited consumers, credit union innovation and our states' economies. NCSL will oppose any effort by the Administration and Congress to preempt state credit union laws and regulations, unless to oppose such efforts would adversely impact the financial well-being of state chartered credit unions.
Expires August 2012
Equal Access to FBI Criminal History Records
State insurance regulators are responsible for protecting the rights of consumers by monitoring the management of insurers and their agents. Administering a national Federal Bureau of Investigation’s (FBI) criminal history check on people who seek a license to sell insurance products to the public is a key step to weed out wrongdoers before they can commit fraud or other criminal acts. State regulators should have efficient access to the FBI’s Criminal Justice Information System (CJIS) in order to establish dependable procedures for licensing officers, directors, and agents of insurance companies across the United States.
The National Conference of State Legislatures (NCSL) calls on Congress to give state insurance regulators statutory access to FBI fingerprint files. This information is currently available to federal and state banking and securities regulators. Access will help safeguard insurance consumers from the unnecessary risk of having known fraud artists or violent offenders engaged in the insurance business.
Expires August 2011
Financial Information Security
Americans place great value on the right to privacy, and general support for privacy and confidentiality protections has increased as the ability of individuals to seclude personal matters from the sight, presence and intrusion of others has diminished. In the Information Age—where vast quantities of information drive economic activity—familiar and unfamiliar entities continuously gather, solicit, manage and share personally identifiable data, which commonly includes financial records, medical histories, and information on routine consumer transactions. Although much of this information has long been available in pieces, its conversion into electronic form and concentration into massive, centralized information systems has significantly eroded an individual’s ability to condition or control his or her personal information. It also threatens the confidentiality of information by heightening the likelihood that data—if not one’s identity—will be improperly disclosed, stolen or misused with potentially significant economic harm to the individual.
Protecting personal information traditionally has been a state responsibility. All states have laws to safeguard the security of financial information, and state legislatures continue to consider and enact legislation annually to improve and strengthen financial information security. Congress also has enacted laws to protect financial privacy and confidentiality and to ensure the accuracy of financial information. Federal interest and activity in this area has increased with the onset of the Information Age.
Fair Credit Reporting Act (FCRA)
Personal financial information was protected exclusively at the state level until 1970 when Congress enacted the Fair Credit Reporting Act (FCRA). FCRA established minimum federal standards to ensure that consumers could access information about themselves that lenders, insurers, and others obtain from credit bureaus and use to make decisions about providing credit and other services. Amendments to FCRA, enacted in 1996, imposed new responsibilities on credit bureaus and those who use their information to promote increased accuracy and confidentiality of credit reports. The 1996 Amendments also temporarily preempted, with a limited number of grandfathered exceptions, stronger state laws in seven areas. These included prescreening of consumer reports; the timeframe for handling accuracy disputes; duties of persons who take adverse actions and who use consumer reports in connection with credit or insurance transactions initiated by a consumer; information contained in consumer reports; duties of furnishers of information to consumer reporting agencies; and the sharing of information among affiliates.
Congress reauthorized and made permanent the seven areas of state preemption prior to their expiration with the Fair and Accurate Credit Transactions (FACT) Act of 2003 while further enhancing the accuracy of credit reports, providing consumers one free credit report annually, restricting the use of sensitive information from affiliates to market financial products, and establishing several uniform consumer protections to combat identity theft. Although virtually all the federal anti-identity theft protections in the FACT Act were based on state laws, the measure also preempts state laws in each of the areas where it established federal protection.
In addition to FCRA, Congress passed significant financial privacy protections with the Gramm-Leach-Bliley Financial Modernization Act (GLBA) of 1999 that applied to a wide range of financial institutions. GLBA required financial institutions to provide notice to its customers on its privacy policies, including how information is disclosed to affiliates and nonaffiliated third parties, and to offer consumers the opportunity to “opt out” of having nonpublic personal information shared with nonaffiliated third parties. Although FCRA continues to preempt state laws that would restrict information sharing among affiliates, GLBA expressly permits states to exceed the federal standards for nonaffiliated third parties. GLBA also required states to establish minimum privacy protections for the insurance consumers—a requirement that states promptly met.
Financial Information Security
The National Conference of State Legislatures (NCSL) believes that states should continue to play a vital role in protecting the privacy, confidentiality and security of sensitive nonpublic personal financial information. States long have sought to balance the economic value of information sharing with reasonable safeguards against the unnecessary disclosure and inappropriate acquisition of sensitive nonpublic personal financial information, such as credit information, account numbers, account balances, and Social Security numbers. Understanding local and regional economic situations and the unique needs of consumers within these markets, states consistently have ensured the protection of sensitive non-public personal financial information.
State legislatures recognize that financial information security is an area of overlapping federal and state jurisdiction. Therefore, NCSL does not oppose federal baseline standards for the protection of financial information, provided that these standards generally do not preempt complementary state laws. NCSL believes that states should have the authority and flexibility to adopt standards for the acquisition, retention, disclosure and sharing of financial information by and among financial institutions and nonaffiliated third parties that address local concerns or respond in a timely way to incidences of neglect or abuse that may be local or regional in nature. NCSL specifically believes that Congress should preserve state authority to exceed federal baseline standards for information sharing among nonaffiliated third parties.
NCSL acknowledges the benefit of a uniform national credit reporting system to the nation's economy. Therefore, NCSL does not oppose the seven limited areas that were subject to federal preemption by the 1996 Amendments of the FCRA and made permanent by the FACT Act. In doing so, NCSL supports the continued exemption of the state laws that were in existence prior to the 1996 Amendments and thus are currently exempted from the preemption provisions.
Data Security Breach Disclosure
Following a series of high-profile financial data security breaches, Congress is considering a range of measures to establish additional federal protections for financial data and to guard against identity theft and account fraud. Federal interest comes on the heels of laws passed in many states that require institutions to notify affected consumers following a data security breach. In fact, many of the reported breaches only came to light following the enactment of a California data breach disclosure law that went into effect in 2003.
Consistent with NCSL’s general policy for safeguarding financial information, NCSL does not oppose baseline federal data security breach notification standards, provided that the requirements do not preempt state authority to adopt standards that provide affected consumers additional protection and notification. NCSL also supports allowing state financial regulators and attorneys general to enforce any new federal data security breach notification standards.
In the event that Congress decides to preempt state law, NCSL urges that the preemption be narrowly construed to preempt only state laws that are inconsistent with the federal standard while preserving state laws that apply to entities that may be excluded from the federal act. Additionally, should Congress decide to preempt state data security breach notification laws, NCSL would support a strong federal law that would require notification of the affected consumers when sensitive personally identifiable information has been, or is reasonably believed to have been, accessed or acquired. In this instance, exceptions should be made only when it is concluded that there is no significant risk that the breach has resulted in, or will result in, harm to the individual whose information has been breached.
Insurance Information Security
In response to the GLBA requirements, state legislatures enacted operationally uniform privacy protections for the nation’s insurance consumers. In their role as the functional regulators of the business of insurance, states have enacted numerous laws and regulations that address the acquisition, retention, disclosure and use of financial information by and among insurance companies. NCSL will oppose any federal effort to preempt these state laws and regulations or to enact federal standards that address the use of financial and credit information in insurance.
Expires August 2011
Insurance Fraud - Federal Criminalization
Insurance fraud presents an ever-increasing burden on the solvency of insurance companies and on the costs of consumers to obtain insurance coverage. The most conservative estimates place the annual cost of insurance fraud in the tens of billions of dollars, which is then passed on to policyholders and even state taxpayers in the event of insurer insolvency.
The kinds of insurance fraud can vary from policyholder filing of exaggerated claims to the setting up of a phony insurance company for the sole intent of stealing insurance premiums. The National Conference of State Legislatures (NCSL) recognizes the toll that policyholder and claimant initiated fraud has on the cost of insurance and the solvency of the insurer. We applaud the action taken in various states to pass laws that make it more difficult to file a false claim, increase the penalties for those who are guilty of fraudulent activities, and expand state insurance department fraud units. In those states that have taken appropriate action to curtail fraud, the rate of illegal activity has decreased.
NCSL believes that the prosecution of policyholder and claimant fraud should and must remain in the jurisdiction of state and local law enforcement officials. However, in cases of internal insurer fraud that may be the result of interstate and international conspiracies to defraud, loot or plunder an insurance company, states and the federal government should cooperate to prosecute such criminal activity.
NCSL joined state insurance regulators, state and local law enforcement officials and the insurance industry in supporting congressional passage of legislation that has made it a federal crime to engage in certain fraudulent activity, such as knowingly file a false report with a state insurance regulator; the embezzlement and theft of insurance company money, assets, funds, premiums, or credits; the falsification of company records with the intent to defraud, loot or plunder a company or its policyholders and creditors; and the criminal obstruction of proceedings before state insurance regulatory authorities.
NCSL's endorsement of federal involvement in the criminal prosecution of certain kinds of insurance fraud does not diminish our support for continued state regulation of the insurance business. Federal criminal sanctions will assist state regulators in their efforts to prevent future insolvencies.
As a result of financial services modernization, the various federal and state financial institutions regulators need to coordinate anti-fraud activities. However, federal legislation to assist the coordination of state and federal anti-fraud activities should not unnecessarily preempt state anti-fraud laws and regulations nor grant audit or subpoena authority to a federal entity over a state agency operating under appropriate state constitutions and laws.
Expires August 2011
Insurance Regulatory Modernization
The National Conference of State Legislatures (NCSL) is committed to state regulation of the business of insurance. Insurance serves as the cornerstone of the economy. It provides economic security for individuals and their families and allows businesses to manage the risks that are inherent in economic activity. Whereas banking and securities are about access to capital and risk-taking, insurance is a guarantee. It is a legal promise—steeped in state tort and contract law—to provide benefits if and when they are due, often years into the future.
For more than 150 years, the states have proven that they can successfully and effectively protect consumers and ensure that promises made by insurers are kept. As a different kind of financial service, insurance requires a different kind of regulation that the states are best suited to provide. State regulation ensures that rates are fair, adequate and not excessive; that policy language is clear and includes what it should; that insurers are financially sound; that claims are paid; that consumers are informed, and that their complaints are investigated and resolved.
State regulation is accessible, accountable and responsive, and operates with greater efficiency than would a vast new federal bureaucracy. Decentralized authority promotes regulatory innovation and safeguards against the imposition of regulatory controls with potential adverse consequences that would be national in scope. Furthermore, state legislatures are uniquely positioned to set policies that accurately reflect local values and concerns, and the nation as a whole benefits from regulation tailored to serve diverse economic, social and cultural needs as well as varying geographic and environmental conditions.
Insurance Regulation for the Modern Economy
Although strongly committed to the preservation of state insurance regulation, NCSL acknowledges the responsibility of states to adjust state systems to meet the needs of the modern economy. The Gramm-Leach-Bliley Financial Modernization Act of 1999 (GLBA) tore down Depression-era barriers and created a comprehensive framework to permit affiliations among banks, insurance companies and securities firms. GLBA also compelled state actions in the areas of producer licensing and insurance information privacy while implicitly calling on states to modernize insurance regulation.
States accepted this challenge with remarkable vigor. State legislatures and commissioners quickly met the specific mandates of GLBA. They continued to develop a shared vision of insurance regulatory reform to meet the needs of the modern marketplace while preserving the advantages of the state system. NCSL recognized the importance of state legislatures taking a proactive role, and therefore established a special task force to streamline and simplify insurance regulation. NCSL worked with insurance commissioners to draft and endorse the Interstate Insurance Product Regulation Compact, which creates a national state-based system to quickly make regulatory decisions on life insurance products according to uniform national standards.
The National Conference of State legislatures has endorsed state participation in the Interstate Insurance Product Regulation Commission and by January 1, 2009, at least 35 states will be participatory members.
NCSL also adopted an insurance regulation statement of principles, which encourages states to consider more competitive systems of product regulation for property and casualty insurance to promote the more efficient introduction of new products into the marketplace while preserving their authority to take action in a noncompetitive market and against rates that are inadequate or unfairly discriminatory. The statement continues to encourage state legislatures to:
- Direct insurance commissioners to simplify and streamline regulatory standards and requirements and eliminate inefficient and redundant regulation;
- Allocate greater insurance department resources to market regulation, anti-fraud and financial solvency efforts;
- Support regulatory efforts to improve market regulation; create more efficient, effective and uniform market conduct examinations; promote the use of technology; and better coordinate with other states; and
- Exercise oversight and investigatory functions to evaluate modernization efforts at the regulatory level and encourage industry participation in improvements to state-based systems.
State-Federal Partnership
Working individually and at the national level, states since the passage of GLBA have worked to modernize insurance regulation. However, state legislatures recognize a legitimate federal role in overseeing and promoting well-functioning insurance markets. Therefore, NCSL is willing to work with Congress to establish a shared state-federal framework to achieve insurance regulatory modernization that focuses on areas where policymakers have reached consensus and that preserve state flexibility and authority to meet the goals of modernization. However, NCSL will oppose any provision of federal legislation that relies on wholesale preemption of state authority; that would compel state compliance with federal standards or those of any non-governmental third party; or that conditions, restricts or redirects state insurance revenues, including insurance premium taxes, fees and fines, either directly or as a condition of a state’s refusal to submit to federal standards or federal efforts to commandeer a state executive branch official to participate in a federal regulatory program.
In recent years, states have enacted a wide range of reforms in critical areas to streamline, simplify and coordinate state systems and to establish uniform regulations and processes, where appropriate. NCSL believes that state efforts to enact significant reforms in critical areas represent tremendous progress and will continue to support further efforts as states move forward to achieve widespread reform in all areas in the years ahead. Some in Congress have criticized states for not moving more rapidly; however, NCSL believes that it is appropriate that modernization efforts be based on deliberate consideration. Reforms must balance legitimate industry needs for efficient, appropriate and transparent regulation with the goals of preserving and enhancing important consumer protections and financial safeguards, which are the hallmarks of the state system. State lawmakers and insurance commissioners must carefully measure these shared priorities as they move forward and should resist efforts from Congress and interested parties to prematurely embrace wholesale reforms in a blind race for uniformity.
Moreover, some in Congress and industry support federal legislation to establish a single federal regulator of insurance or allow for dual federal and state insurance regulation. If enacted by Congress, such proposals would eliminate or diminish state insurance regulation irreparably, bifurcate insurance regulation between the states and the federal government, undermine the state system of consumer protection and financial surveillance, threaten a host of other unintended consequences, and inevitably cause a loss of jobs, taxes, fees and other critical state revenues and resources. Therefore, NCSL opposes any provision of federal legislation that preempts state authority through the creation of a federal insurance official, commission or entity with the authority to regulate insurance, to implement federal standards, to enforce state compliance with federal standards, or to initiate or participate in judicial proceedings to resolve differences between federal standards and state law.
The National Conference of State Legislatures calls upon Congress to review what impact if any the Gramm-Leach-Bliley Financial Modernization Act has had on the current mortgage crisis that has continued to wreak havoc on the American economy. In light of the magnitude of the impact of the mortgage crisis on numerous financial services providers, Congress needs to address the impact of national regulation before it carelessly erodes the strength of a state based insurance regulatory system.
Insurance Company Solvency
The safety and soundness of insurance companies operating in the United States are the prime objectives of state insurance regulation. To ensure that these objectives are met, an effective financial surveillance and regulation system is vital. State legislatures have endeavored to strengthen state insurance departments and to create standards for financial regulation that have improved the solvency of insurance companies.
Although successful and effective, state solvency regulation standards should be reviewed and modified on an ongoing basis in order to meet the changes of a constantly evolving financial services marketplace. In doing so, states are protecting insurance company policyholders and investors. The public depends on solvent insurance companies to provide retirement income, income protection in case of death or disability, health care coverage, protection from catastrophic loss, and safe investment opportunities.
Swift and effective action by state legislatures to reform state solvency regulation proves that states are more capable of adjusting to changes in the marketplace than Congress or federal regulatory agencies. NCSL therefore will oppose any proposal to establish federal standards for state solvency regulation that cedes any authority to federal agencies to regulate financial institutions involved in the business of insurance and congressional ratification of trade agreements that would preempt state regulation of insurance for solvency purposes. Although NCSL continues to support the NAIC Financial Regulation Standards and Accreditation Program, NCSL acknowledges that state legislatures and governors have the responsibility to enact policy, which state regulators enforce. NCSL also recognizes that interstate compact proposals have the potential of addressing binding uniformity and effectiveness in specific areas of regulation.
NCSL also objects to actions taken or contemplated by the Internal Revenue Service or other federal agencies to assert priority claims to the assets of failed insurers. The states should first be allowed to distribute an insolvent company's assets to pensioners, family businesses, other policyholders and others protected by the McCarran-Ferguson Act delegation for the business of insurance to the states.
In the same vein, NCSL is concerned by federal bankruptcy rulings under the federal bankruptcy code that would allow alien insurers and reinsurers to move certain trust fund assets to bankruptcy proceedings in their domicile country. The trust funds established by alien insurers and reinsurers are to serve as collateral for insurance and reinsurance underwriting in the United States and allow such alien insurers and reinsurers to be exempt from state solvency regulation. Federal bankruptcy courts in ruling in favor of alien insurers and reinsurers have placed these collateral trust funds out of the reach of state insurance departments, which are solely responsible for solvency protection. NCSL urges Congress to rectify this situation by amending federal law to eliminate or limit this exemption for alien insurers and reinsurers under the bankruptcy code.
Expires August 2011
The Internet and Electronic Commerce
The Internet has fundamentally changed the way we communicate, research and learn, conduct business, transact financial services, obtain medical advice and care and are entertained. Every day the nature of the Internet changes through, increased content, improved software, and faster access. The explosive growth of the Internet, while dependent on investment affected by economic cycles, will continue to be a leading economic force projecting our states, nation, and indeed our world into a new, borderless society.
As the Internet empowers citizens and democratizes societies, it also is challenging traditional business and economic rules. The Internet provides consumers with access to products and services never before possible. In 2005, electronic commerce business to consumer sales was over $189 billion representing a 19 percent increase over 2004.
Geographic borders cannot contain the Internet. Its ability to transcend state and national borders makes some existing laws and regulations of states and nations obsolete. At the same time, the Internet defies detailed one-size-fits-all approach to public policy and regulation. America's federal and state lawmakers, as well as policy makers from other countries should be guided by principles that foster the Internet's development while protecting the security and privacy of individual users.
The National Conference of State Legislatures supports the following principles in formulating laws and regulations that impact the Internet and electronic commerce:
Privacy and Security - Every American should be empowered to protecttheir privacy and personal information from intrusion or piracy. Advanced technologies, including encryption, that enable people to protect themselves, should be available in the marketplace without onerous government controls, restrictions or technical mandates. As with every industry there are those who would seek to misuse for criminal or other purposes information obtained through fraud or hacking into computer systems of financial institutions, hospitals, educational institutions, and governmental agencies. More recently, Americans have had to face possible threats to their personal ID information by carelessness on the part of some of those companies and governmental agencies with which they do their business. While it is generally accepted that businesses may collect information on customers and that such information is considered an asset of the company, Americans must be able to trust these establishments and their government will not recklessly put their personal information at risk.
While NCSL recognizes that there is a need for Congress to act to establish a national policy to protect the personal information of Americans, state legislatures, in the absence of any action by Congress and the federal government, have moved to fill the void. At least 35 state have enacted legislation requiring companies and/or government agencies to disclose security breaches involving personal information; at least 17 states have enacted legislation to protect consumers against Phishing (a scam where fraudsters send spam or popup messages to lure personal or financial information from unsuspecting victims); and, at least 15 states have enacted legislation relating to the use of spyware.
The National Conference of State Legislatures calls upon the Congress to enact federal Internet privacy legislation that ensures the security of Americans’ personal information with the least amount of government regulation as possible. However, NCSL will oppose federal legislation that seeks to preempt existing state statutes and regulations governing privacy protections and security for non-Internet based transactions.
Free Speech - The Internet allows people to communicate and share ideas with others with an ease never before possible. Federal government policy should rigorously protect freedom of speech and expression on the Internet but not restrict states or local governments from such oversight. New technologies should adequately enable individuals, families and schools to protect themselves and students from communications and materials they deem offensive or inappropriate. State law enforcement must be able to enforce criminal statutes against predators who use the Internet to harm or abuse children, with federal assistance and resources.
Self-governance - The exponential growth of the Internet has flourished as a result of both the government’s ‘hand’s off’ approach, ever increasing competition, as well as high consumer demand. Over regulation of the Internet may interfere with future investment and innovations benefiting the health and well-being of its end user customers. Internet users should be given a choice when it comes to selecting a broadband connection that will meet their current and future needs for speed, reliability, quality of service, and capabilities not yet envisioned.
Broadband connections, services, and applications should continue to become more affordable and accessible to all consumers. However, companies that invest in broadband and broadband-related applications should be afforded the flexibility to explore fair and competitive business models and pricing plans for their products and services.
As more and more Americans are using the Internet for increasingly sophisticated and bandwidth-intensive applications such as video, it is critical that broadband providers maintain the flexibility to manage this surge in traffic through a variety of means, including adding more capacity and employing network management capabilities without government mandates.
NCSL calls upon the Congress to maintain the current regulatory approach that allows the competitive marketplace to drive broadband and broadband-related applications development and deployment. Congress should avoid adopting new mandates and limit such action to providing the FCC with authority to oversee, but not proactively intervene in, the broadband Internet marketplace by adopting principles that focus on assessing whether the market continues to ensure that consumers can:
(1) receive meaningful information regarding their broadband service plans;
(2) have access to their choice of legal Internet content, subject to the limits on bandwidth and quality of service of their service plan;
(3) run applications of their choice, subject to the needs of law enforcement and the limits on bandwidth limits and quality of service of their service plans, as long as they do not harm the provider’s network or interfere with other consumers’ use of the broadband service; and
(4) be permitted to attach any devices they choose to their broadband connection at the consumer’s premise, so long as they operate within the limits on bandwidth and quality of service of their service plans and do not harm the provider’s network, interfere with other consumers’ use of the broadband service, or enable theft of services.
Consumer Protection – Industry self-regulation has made an important contribution to the development of electronic commerce. The industry is working to address the eradication of deceptive and unwanted e-mail (spam) as well as new practices such as key logging; the surreptitious surveillance of consumers’ web surfing habits; web site hijacking; and software that inhibits termination. Industry technologies and best practices, combined with the enactment of strong state laws which outlaw deceptive practices and fraudulent online behavior, are essential elements in promoting electronic commerce and enhancing consumer protection. Privacy and consumer protection continue to be priority issues in state legislatures.
NCSL supports the efforts of state legislatures to develop new policy initiatives to protect consumers online, especially when the federal government fails to respond to consumers’ concerns. NCSL also recognizes that because of the global nature of the Internet that states must seek cooperative federal action to further enhance consumer protection, privacy and information security. Federal legislation must ensure the authority of state Attorneys General to enforce federal statutes protecting consumers. However, NCSL will oppose any attempt by Congress to restrict the states’ ability to impose criminal and/or civil penalties for illegal activity that may occur over the Internet.
Growth - The Internet's continued expansion depends on continuing growth in its capacity and the use of more traditional business models to manage resources. Public policies must be designed to foster ongoing expansion of useful and affordable bandwidth, encourage development of innovative technologies and promote broad universal access. Federal and state governments must work together to ensure that all Americans, regardless of where they live, have access to high-speed broadband technologies either through cable, digital subscriber lines (DSL), wireless, fixed wireless, satellite or other developing technologies. Government must work to guarantee open and competitive markets for broadband services.
Information Technology - Information technology (IT) is a global industry. A strong American IT industry will enhance and strengthen the economic well being of our states and nation.
States and the federal government must work together to ensure a climate that allows America’s IT companies to continue to perform research and technology development, to generate innovative new products and services and to solve customer problems. Government at all levels has become one of the major consumers of information and communications technology. Continually developing and innovating information and communications technology has allowed governments to provide more efficient, cost effective and enhanced services around the clock to all Americans. Constituents no longer are bound by the 9:00 am to 5:00 PM, Monday through Friday workweek to obtain and benefit from government services.
As states have so often been the laboratories of democracy, so today states once again are at the forefront of using IT to provide more and efficient delivery of services at lower costs to state taxpayers. States must have the unfettered ability to continue to seek ways to use IT to better the lives of its residents. Therefore, NCSL will oppose any attempt by the federal government to restrict or penalize states efforts to utilize information technology services and products that allow states to provide more efficient government services to residents at lower costs to taxpayers.
Internet Gambling
Under the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), U.S. financial institutions may not process payment instruments for Internet gambling that is otherwise prohibited under state law. Presently, eleven states prohibit online gambling. While the regulations to enforce the UIGEA have yet to be published, Congress is considering repeal of the 2006 Act.
In reviewing the UIGEA, Congress must respect the sovereignty of states to allow or to prohibit gambling by its residents. Should Congress seek to repeal the provisions of UIGEA, Congress must ensure that any technology solution will protect those states that choose not to allow online gambling.
Electronic Commerce and Taxation - Electronic commerce promises to become an increasingly vital component of our states' and national economies. Government policies should create a workable infrastructure in which electronic commerce can flourish. Policy makers must resist any temptation to apply tax policy to the Internet in a discriminatory or multiple manner that hinders growth. Government tax systems should treat transactions, including telecommunications and electronic commerce, in a competitively neutral and non-discriminatory manner. The federal government and America’s industries should work with state legislatures in ensuring equal tax treatment of all forms of commerce and should encourage state efforts to achieve simplification and uniformity through the streamlining of state and local sales and telecommunications tax systems.
The National Conference of State Legislatures calls upon Congress and the Administration to support federal legislation granting to those states that fully comply with the Streamlined Sales and Use Tax Agreement mandatory collection authority for all out of state sellers that do not qualify for the small business exception.
Almost ten years ago, Congress approved and President Clinton signed the first moratorium on state and local taxation of Internet access. While state legislatures generally did not target Internet access for taxation, some aggressive tax departments extended existing tax statutes to include this new service. At that time at least thirteen states were grandfathered to continue collecting a tax on access. At present only nine states continue to collect such a tax.
As the moratorium on state and local tax on Internet access was originally imposed by Congress to protect what in 1998 was a fledgling industry, few today could make that argument. Rather, the concern today is that state and local governments would likely impose on Internet access the current discriminatory tax regime imposed on communications services. NCSL supports the reform of the discriminatory taxation of communications services and believes that if state and local governments were to take such action, the need for the federal moratorium on Internet access would cease to exist.
Since 2003 NCSL has maintained a neutral position on the extension of the moratorium and will continue to do so. However, should the moratorium be extended, it is consistent with NCSL policy that the moratorium be competitively neutral and apply equally to all medium used to access the Internet.
Our nation's state legislatures are well aware of the impact that access to the Internet and electronic commerce will have on the economic vitality of our states and communities. State legislatures also recognize that the marketplace for electronic commerce is not just in the United States, but present in the vast global market. State legislatures share the concern of many of our colleagues in Congress that ill-conceived over regulation and taxation of the Internet and electronic commerce services could harm our nation's ability to compete globally. However, state legislatures also recognize that they have an obligation to act, when and if necessary, to protect the general welfare of their constituents. As the use of the Internet continues to expand, any future or existing regulations must be balanced against market forces in a competitive and technology neutral manner, as government must not choose the winners or losers of the digital age.
Nothing in this policy statement is to be construed as limiting or affecting the right of any state to regulate alcohol according to its local norms and standards pursuant to the 21st Amendment.
The National Conference of State Legislatures will oppose unnecessary or unwarranted federal legislation or regulation that would impede efforts by states to promote access to the Internet, enhance competition or increased consumer choice or ensure the security of personal information of consumers conducting electronic commerce transactions.
Expires August 2010
NCSL Opposes the State Video Tax Fairness Act of 2009 H.R. 1019 (Action Resolution)
WHEREAS, Section 602 Telecommunications Act of 1996 prohibits political subdivisions of state governments from imposing and collecting taxes and fees on direct broadcasting satellite services (DBS); and
WHEREAS, Section 602 also preserves the authority of the states to impose and collect such taxes and fees on DBS and to remit some or all the proceeds of such taxes and fees to its political subdivisions; and
WHEREAS, the Congress prohibited such taxation by the states’ political subdivisions not to provide the DBS industry with a tax advantage over other providers of video services but to spare the DBS industry, at that time a fledgling industry, from the administrative burden of collecting and remitting taxes to over 7,500 taxing jurisdictions; and
WHEREAS, some states have recognized that DBS’ exemption from the administrative burden of local taxation has created a competitive advantage for DBS over other multichannel video service providers and have achieved tax parity by enacting statutes that impose a state tax rate on DBS that appropriately takes into account all the state and local taxes and fees paid such other providers; and
WHEREAS, some states have remitted some or all of the proceeds from such taxes to local jurisdictions as permitted by Section 602; and
WHEREAS, the State Video Tax Fairness Act of 2009 (H.R. 1019) would label such tax arrangements as discriminatory taxation; and
WHEREAS, the State Video Tax Fairness Act would interfere with state tax authority over multichannel video programming services, including digital broadcasting satellite services and reverse state action upheld by state and federal courts to ensure the parity in the tax treatment of multichannel video service providers; and
WHEREAS, the State Video Tax Fairness Act would freeze into place the preferential treatment that DBS providers currently have over other multichannel video providers and prevent states from fairly equalizing the total tax burden imposed on these services;
NOW, THEREFORE BE IT RESOLVED, that the National Conference of State Legislatures opposes the State Video Tax Fairness Act of 2009 (H.R. 1019) and;
BE IT FURTHER RESOLVED, that NCSL calls upon the Congress to resist this unjustified interference into state efforts to create a tax neutral choice for consumers; and
BE IT FURTHER RESOLVED, that a copy of this resolution be sent to all members of the 111th Congress and the President of the United States.
Expires August 2010
NCSL Opposes Federal Contactless Technology Mandates For State Issued Identification Documents (Action Resolution)
Whereas, the federal government is taking a more active role in influencing and determining the technological standards for state issued identification documents such as drivers licenses. The federal government is attempting to influence or mandate the technological standards of sovereign state issued identification documents through the direct acts of Congress, the rule-making processes of the Departments of State and Homeland Security, or through both official or informal agreements with international organizations or initiatives such as the American Association of Motor Vehicle Administrators (AAMVA), the Security and Prosperity Partnership (SPP), and the United Nation’s agency known as the International Civil Aviation Organization (ICAO).
Whereas, an example contrary to the tenets of federalism, the initial version of the federal REAL ID Act as introduced would have required the states to enter into the AAMVA compact known as the Driver’s License Agreement (DLA). This compact as drafted would put the non-governmental 501c3 AAMVA, which has foreign voting members, in charge of making the technology decisions for a state’s sovereign drivers licenses. Such federal decisions would allow for AAMVA, and not the States, to determine whether or not bar code or contactless technology must be employed, whether or not such data could be encrypted, what biometrics would need to be encoded, and whether or not the data could be shared with foreign governments.
Whereas, an example contrary to the tenets of federalism, the final rules for both REAL ID and the Western Hemisphere Travel Initiative (WHTI) were published in 2008, and mandated standards onto states’ driver’s licenses for them to be acceptable for certain uses. The Department of Homeland Security is currently requiring states to embed unencrypted contactless technology into a state’s drivers licenses in order for citizens to be able to use them to get back into the United States at international ground crossings. This places specific technological choices as having equal importance over the roles of identification and proof of citizenship, while leaving states with no flexibility or options in this area if they want to pursue an Enhanced Drivers License (EDL) that does not use contactless technology, wishes to employ encrypted contactless technology, or wishes to employ shorter range contactless technology than what is being mandated. The goal of WHTI deals simply with providing proof of citizenship, not dictating the technology by which that proof must be conveyed.
Whereas, an example contrary to the tenets of federalism, the final rules for REAL ID, page 86, make clear that the federal government is not satisfied with a one time mandate and wishes to have this control in perpetuity going forward: “Moreover, in the future, DHS, in consultation with the States and DOT, may consider technology alternatives to the PDF417 2D bar code that provide greater privacy protections after providing for public comment”. The “final rules” are therefore not really final, and it is unacceptable that such technological decisions could be made by requiring only non-binding consultation with States, especially when there is debate between the States and the federal government as to what really constitutes optimal privacy and security options for their driver’s licenses.
Whereas, a driver’s license is a sovereign state document, and whether or not bar code or contactless technology must be employed, should remain a State decision. The federal government should not use the WHTI, a policy of its own devising, as an economic cudgel to coerce states into accepting such technological standards onto their sovereign driver’s licenses.
Therefore, let it be resolved, that the NCSL will urge the President, Congress, and the Departments of State, Transportation, and Homeland Security to not pass law, allow for federal policy, use international organizations, or enter into international agreements that mandate or attempt to indirectly influence the use of contactless technology in state or local identity documents.
Expires August 2010
NCSL Supports Federal VoIP Communications Sourcing Act
WHEREAS, State and local transaction taxes and fees imposed on communications services should be applied uniformly and in a competitively neutral manner upon all providers of communication services; and
WHEREAS, the Mobile Telecommunications Sourcing Act (P.L. 106-252) established uniformity of sourcing mobile telecommunications for state and local tax purposes; and
WHEREAS, NCSL worked with other state and local organizations as well as the wireless industry in developing the Mobile Telecommunications Sourcing Act: and
WHEREAS, NCSL supported the enactment of the Mobile Telecommunications Sourcing Act and assisted states in complying with the federal legislation; and
WHEREAS, Interconnected Voice over Internet Protocol (VoIP) services, as defined by the Federal Communications Commission are not uniformly sourced for tax purposes and may unnecessarily subject consumers, businesses and others engaged in interstate commerce to multiple, confusing and burdensome state and local taxes; and
WHEREAS, the general rule of the Mobile Telecommunications Sourcing Act sources the tax on wireless services to the “customer’s place of primary use, regardless of where the services originate, terminate, or pass through, and no other taxing jurisdiction may impose taxes, charges, or fees on charges for such services”; and
WHEREAS, such a sourcing rule should also apply to Interconnected VoIP services;
NOW, THEREFORE BE IT RESOLVED THAT, the National Conference of State Legislatures supports federal legislation that would require sourcing for purposes of state and local taxation of Interconnected VoIP services to be the same as the sourcing rule for state and local taxation of wireless services as contained in the Mobile Telecommunications Sourcing Act and
BE IT FURTHER RESOLVED THAT, a copy of this resolution be sent to the President of the United States and all members of the 111th Congress.
Expires August 2010
NCSL Supports and Urges Enactment of Federal Legislation That Grants States Sales Tax Collection Authority (Action Resolution)
WHEREAS, the 1967 Bellas Hess and the 1992 Quill Supreme Court decisions denied states the authority to require the collection of sales and use taxes by out-of-state sellers that have no physical presence in the taxing state; and
WHEREAS, the combined weight of the inability to collect sales and use taxes due on remote sales through traditional carriers and the tax erosion from electronic commerce threatens the future viability of the sales tax as a stable revenue source for state and local governments; and
WHEREAS, the Streamlined Sales and Use Tax Agreement substantially simplifies state and local sales tax systems, removes burdens to interstate commerce, protects state sovereignty; and justifies overturning the Bellas Hess and Quill decisions; and
WHEREAS, on October 1, 2005, as a result of at least 10 states representing at least 20 percent of the population having fully complied with the Agreement, the streamlined sales tax system became operational and effective; and
WHEREAS, as of July 1, 2009, twenty-three states were certified as being compliant with the Streamlined Sales and Use Tax Agreement; and
WHEREAS, the Streamlined Sales and Use Tax Agreement includes over 1,100 volunteer sellers and now accounts for over $360 million in new revenues for states;
NOW, THEREFORE BE IT RESOLVED THAT, the National Conference of State Legislatures supports federal legislation that grants states that comply with the Agreement the authority to require all sellers, regardless of nexus, not meeting the small business exemption to collect those states’ sales and use taxes; and
BE IT FURTHER RESOLVED THAT, NCSL calls upon the members of Congress to join as co-sponsors of the federal legislation that grants states collection authority and specifically requests that the members of the congressional delegations from Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming honor the decisions made by their state legislatures and governor by supporting and sponsoring this legislation; and
BE IT FURTHER RESOLVED THAT, the National Conference of State Legislatures calls upon the Congress to move swiftly to consider and approve federal legislation that grants states collection authority ; and
BE IT FURTHER RESOLVED THAT, the National Conference of State Legislatures urges the President to sign federal legislation that grants states collection authority into law, upon its passage by the Congress; and
BE IT FURTHER RESOLVED THAT, a copy of this resolution be sent to the President of the United States and to all the members of Congress.
Expires August 2010
Preserving State Sovereignty of Financial Services When Addressing Systemic Risk (Action Resolution)
The erosion of the financial system has left Americans and lawmakers to contemplate restructuring financial services regulation. The downfall of a handful of financial companies, through their capacity to be leveraged and develop a vast scale of interconnectedness, has led Congressional inquiries on how to best quell the ability of one institution to have an adverse affect on the broader financial market. This discourse has led to a much larger discussion on the overall regulatory configuration of capital markets, including the manner in which states regulate financial sectors.
NCSL understands the need for Congress and the federal government to review the current financial services regulatory structure. The oversight lapses in federal governing and regulation of financial services products has helped fuel the economic downturn Americans are facing from Wall Street to Main Street. NCSL agrees that an examination of the current regulatory framework is important to address these issues. However, NCSL is committed to maintain states as the sole regulator of the business of insurance and will consistently oppose any proposal to cede authority to establish either a federal or dual-chartering system. Any changes made must not alter the existing state-federal partnership which enhances, not fragments, the ability of regulators to provide consumer protections and offer prudential standards.
With this in mind, NCSL believes that in addressing systemic risk a federal stability regulator must:
- Value the rights of states and not displace state-based regulation
- States have displayed through years of experience that they are best suited to maintain day-to-day regulatory operations. Despite the current economic downturn, states have continued to maintain consumer safeguards and foster supervision tailored to the size and complexity of each financial institution.
- Require input from state regulators and build on the strength of state oversight
- As the primary regulators for financial services, states offer expertise and experience unmatched at the federal level. The discussion of a systemic risk regulator has consequences on many levels, and thus a horizontal, collaborative effort is needed to properly identify the role an "overseer" may have. A federal regulator of systemic risk must collaborate and share information with states and develop best practices for systemic risk management.
- Recognize the necessity of state sovereignty in financial service regulation
- NCSL has consistently and strongly opposed federal preemption of state legislative and regulatory authority in financial services. State and local regulatory agencies have continued to appropriately monitor state-regulated industries with due diligence and proper restraint. NCSL will oppose any referendum by the federal government which limits the authority of state regulation of insurance and securities and dual chartering of banking and credit unions.
Expires August 2010
Resolution Favoring Continued State-Based Insurance Consumer Protection (Action Resolution)
WHEREAS, the states have sole regulatory authority for the regulation of the business of insurance as provided under the McCarran-Ferguson Act, and affirmed most recently by the Gramm-Leach-Bliley Act; and
WHEREAS, state insurance regulation has been successful and effective for over 150 years, continuously adapting to address an ever-changing marketplace; and
WHEREAS, the National Conference of State Legislators (NCSL)supports the continued state regulation of the business of insurance, and opposes proposals to create a federal insurance regulator or an optional federal charter (OFC); and
WHEREAS, state unfair trade practice and other laws, as well as guaranty funds, provide protections for insurance consumers, individually and collectively; and
WHEREAS, state taxpayer-supported insurance departments currently provide services to aid and educate consumers on insurance; and
WHEREAS, the National Association of Insurance Commissioners (NAIC) maintains a Consumer Information Source (CIS) for consumers to use before purchasing insurance, providing access to key information about insurance companies, including: closed insurance complaints, licensing information, and financial data, as well as a means to file written complaints with the relevant state insurance department, and similar capabilities exist on many individual state insurance department web sites; and
WHEREAS, state insurance commissioners and department personnel are more familiar with their own state laws, judicial rulings, and local market issues; and
WHEREAS, state insurance departments conduct market conduct exams far more frequently than their federal banking counterparts; and
WHEREAS, state insurance commissioners are either elected or directly accountable to an elected Governor and Legislature, and are thus generally more responsive than a larger federal bureaucracy; and
WHEREAS, there is no need for an extra federal taxpayer-supported bureaucratic layer of redundant regulation; and
WHEREAS, the Financial Product Safety Commission Act of 2009 was introduced this spring as companion legislation—S. 566 in the U.S. Senate by Senators Richard Durbin (D-IL), Edward Kennedy (D-MA), and Charles Schumer (D-NY),and as H.R. 1705 in the U.S. House of Representatives by Congressmen William Delahunt (D-MA) and Brad Miller (D-NC); and
WHEREAS, House Financial Services Committee Chairman Barney Frank (D-MA) introduced H.R. 3126, the Consumer Financial Protection Agency Act, a recommendation by President Barack Obama, on July 8; and
WHEREAS, S. 566/H.R. 1705 and H.R. 3126 would establish a federal Financial Product Safety Commission and a Consumer Financial Protection Agency, respectively, with authority over consumer financial products; and
WHEREAS, while intending to address predatory consumer financial products, S. 566 and H.R. 1705 include a definition of “Consumer Financial Product,” and other provisions, that could be interpreted to extend the scope of the Financial Product Safety Commission over insurance products; and
WHEREAS, while H.R. 1705 contains a provision that reaffirms the McCarran-
Ferguson Act, and, thus, state regulation over the business of insurance, S. 566 omits such language; and
WHEREAS, H.R. 3126 exempts the business of insurance – except for credit, mortgage, and title insurance – from its definition of “Financial Activity;” and
THEREFORE, BE IT RESOLVED that NCSL believes that the protection of insurance consumers should continue to be based exclusively at the state level; and
BE IT FURTHER RESOLVED that any Financial Product Safety Commission, Consumer Financial Protection Agency, or similar new or existing federal agency should not have direct or indirect jurisdiction over insurance products - including credit, mortgage, and title insurance - and/or insurance-related matters; and
BE IT FURTHER RESOLVED that NCSL believes that S. 566 /H.R. 1705 and H.R. 3126 should be amended to explicitly exclude all insurance products and insurance-related matters from the scopes of the Financial Product Safety Commission and the Consumer Financial Protection Agency, respectively; and
BE IT FINALLY RESOLVED that a copy of this resolution shall be sent to state legislative leaders, Congressional sponsors of S. 566, H.R. 1705 and H.R. 3126, and Members of the U.S. House Committee on Financial Services and the U.S. Senate Committee on Banking, Housing, and Urban Affairs.
Expires August 2010
Resolution In Opposition to the Administrations's Proposed Plans For a Federal Office of National Insurance (Action Resolution)
WHEREAS, the Administration’s Financial Regulatory Reform Report states, “For over 135 years, insurance has primarily been regulated by the states, which has led to a lack of uniformity and reduced competition across state and international boundaries, resulting in inefficiency, reduced product innovations, and higher costs to consumers;” and,
WHEREAS, the Administration Report states, “Given the importance of a healthy insurance industry to the well functioning of our economy, it is important that we establish a federal office of National Insurance (ONI) within the Treasury, and that we develop a modern regulatory framework for insurance;” and
WHEREAS, the Administration's proposal would grant the ONI the ability to monitor all aspects of the insurance industry, including gathering information, identifying insurance-related regulatory gaps, and have the authority to enter into international agreements and increase international cooperation in regards to insurance regulation; and
WHEREAS, the Administration further recommends increased national uniformity through either a federal charter or effective action by states, "as our current insurance regulatory system is highly fragmented, inconsistent, and inefficient;” and
WHEREAS, the Administration Report fails to provide any evidence showing that state regulation of the business of insurance has led to or even contributed to the current financial crisis; and
WHEREAS, the Administration Report proposes that the ONI would have the authority to negotiate foreign agreements concerning insurance without any assurance that state insurance laws and regulations would be maintained;
WHEREAS, the National Conference of State Legislatures (NCSL) has consistently supported the state regulation of the business of insurance; and
WHEREAS, NCSL acknowledges the responsibility of states to adjust state systems to meet the needs of the modern economy; however, any changes to the current framework must preserve state flexibility and authority to meet the goals of modernization.
THEREFORE BE IT RESOLVED, that NCSL opposes the Administration's proposal to establish a federal Office of National Insurance within the Treasury Department.
Expires August 2010
Resolution in Opposition to H.R. 1880 - The National Insurance Consumer Protection Act (Action Resolution)
WHEREAS, insurance regulation, oversight, and consumer protection have traditionally and historically been powers reserved to state governments under the McCarran-Ferguson Act of 1945; and
WHEREAS, state legislatures are more responsive to the needs of their constituents and the need for insurance products and regulation to meet their state’s unique market demands; and
WHEREAS, many states have recently enacted and amended state insurance laws to modernize market regulation and provide insurers with greater ability to respond to changes in market conditions; and
WHEREAS, state legislatures, NCSL, the National Conference of Insurance Legislators (NCOIL), and the National Association of Insurance Commissioners (NAIC) continue to address uniformity issues between states by the adoption of model laws that address market conduct, product approval, agent and company licensing, and rate deregulation; and
WHEREAS, initiatives are being contemplated by certain members of the United States Congress that would destroy the state system of insurance regulation and create an expensive, unwieldy and inaccessible federal bureaucracy—all without consumer demand; and
WHEREAS, such initiatives include H.R. 1880 the National Insurance Consumer Protection Act—proposed optional federal charter legislation that would bifurcate insurance regulation; and
WHEREAS, H.R. 1880 would result in a quagmire of federal and state directives that would promote ambiguity and confusion; and
WHEREAS, H.R. 1880 would allow companies to opt out of state oversight and evade important state consumer protections; and
WHEREAS, the mechanism set up under H.R. 1880 does not, and cannot by its very nature, respond, as state regulation does, to states’ individual and unique insurance markets and constituent concerns; and
WHEREAS, H.R. 1880 would compromise state guaranty fund coverage, and employers could end up absorbing losses otherwise covered by these safety nets for businesses affected by insolvencies; and
WHEREAS, many state governments derive general revenue dollars from the regulation of the business of insurance, including over $14 billion in premium taxes generated in 2006; and
WHEREAS, H.R. 1880 would eventually draw premium tax revenue from the states; and
WHEREAS, H.R. 1880 would ultimately impose the costs of a needless federal bureaucracy upon businesses and the public;
NOW, THEREFORE BE IT RESOLVED that the National Conference of State Legislatures opposes H.R. 1880 and any other such federal legislation in successive Congresses that would threaten the power of state legislatures, governors, insurance commissioners, and attorneys general to oversee, regulate, and investigate the business of insurance, and to protect consumers; and
BE IT FURTHER RESOLVED that a copy of this resolution be made available in model form to each state legislature for its consideration; and
BE IT FURTHER RESOLVED that a copy of this resolution be printed and forwarded to members of the United States Senate Committee on Banking, Housing and Urban Affairs and the United States House of Representatives Committee on Financial Services.
Expires August 2010
Spectrum Management
The National Conference of State Legislatures recognizes the electromagnetic spectrum, as managed by the federal government, to be a vital national resource for public, as well as private sector radio frequency needs.
The National Conference of State Legislatures supports an examination of current and future radio frequency spectrum needs and uses. In view of the limitations of the radio frequency spectrum, management reforms should be instituted to improve the current allocation and assignment process. Access needs to be provided to all users of the spectrum.
Spectrum resources as utilized at the state and local level provides a reliable means of communication in matters of public safety and interest. State law enforcement operations, emergency responders, and public utilities have made substantial investment in facilities and equipment necessary for accessing the allocated frequency assigned to them. These investments have been made in recognition of the limitations in alternative methods of transmission for public purposes.
Proposals allowing developing technologies to share the same bandwidth presently utilized by state and local governments and public utilities should not be adopted until such time as transmission can sufficiently be assured to avoid signal interference with public users.
The National Conference of State Legislatures opposes any effort to provide additional frequency by means of reallocating what is currently allocated for state, local, public utility uses and transportation direction and safety purposes until the aforementioned concerns are adequately addressed.
In the Omnibus Budget Reconciliation Act of 1997, the Congress provided that additional analog spectrum would be available to state and local governments for public safety purposes at such time that the broadcasting industry successfully completed the transformation to high definition television or digital television. Congress stipulated that the transfer from analog to digital should occur no later than 2006. However, at the request of the broadcasting industry Congress made the transfer of the industry’s analog spectrum to state and local governments contingent on 85 percent of the viewing public having access to digital television. Under the Digital Television Transition and Public Safety Act of 2005, Congress determined that broadcasters could reasonably make the transition from analog-to-digital broadcasts and required broadcasters to terminate all full-power analog television broadcast transmissions by February 17, 2009 (or the DTV Transition).
As a result, the DTV Transition will create an additional 108 MHz of spectrum for public safety agencies and private sector for emergency response and deployment of additional wireless and broadband technologies. Of the 108 MHz available under the analog-to-digital transition, 24 MHz is allocated for public safety agencies, 36 MHz is allocated to the private sector, while the remaining available spectrum must be auctioned off by January of 2008.
NCSL opposes any effort to delay the analog-to-digital transition or change the February 17, 2009 deadline as state and local public safety agencies urgently need this valuable spectrum in order to protect their constituents and respond to the next natural disaster or terrorist attack.
DTV Transition
The availability of this valuable spectrum is crucial for the future of both public and private communication services and for the investment in the national communications infrastructure. The January 2008 auction will create additional investment opportunities for the private sector, to the benefit of every consumer through increased competition and technological development in the areas of wireless services and broadband deployment. The auction will also provide additional financial resources for state and local public safety agencies to further develop emergency response networks through a variety of interoperable communications systems.
NCSL calls upon the Federal Communications Commission to guarantee that the spectrum promised by Congress to state and local governments to respond to the next natural disaster or terrorist attack is not diluted by companies seeking special access outside of the auction process. NCSL calls upon Congress to preserve resources and dedicated grant funds allocated to state and local public safety agencies under the Digital Television Transition and Public Safety Act for the development and purchase of interoperable communications systems and equipment, and provide sustained, dedicated grant funds to the states for interoperability communication programs.
The Federal Communications Commission should not subsidize the business models of certain start-up companies by transferring spectrum to these private enterprise at the expense of state and local public safety agencies or commercial innovation and competition. State and local public safety agencies should not be subject to excessive fees or charges in order to access emergency networks. State and local governments should be exempt from any competitive bidding process. The FCC must also ensure that the auction of spectrum made available by the transition to digital television and not allocated to state and local governments for public safety needs takes place no later than January 28, 2008.
Digital-to-Analog Converter Box Coupon Program
According to the National Association of Broadcasters, the analog-to-digital transition may affect 70 million analog televisions in U.S. households and the approximately 20 million households that rely solely on an analog broadcast for their television service.
Under the Digital Television Transition and Public Safety Act, Congress created the Analog-to-digital Converter Box Coupon Program to assist consumers with the DTV Transition. The Program, administered by the National Telecommunications and Information Administration (NTIA), would allow eligible households to apply for up to two forty dollar coupons for the purchase an analog-to-digital converter box to ensure that their analog television will continue to function after the February 17, 2009 deadline.
However, a recent study indicates that the majority of America is unaware or does not understand the DTV Transition. NCSL calls upon NTIA, the Federal Communications Commission, the Administration and Congress to fund a program that may adequately engage the public in the DTV Transition and provide state legislators the resources to educate their constituents regarding the DTV Transition. NCSL further calls upon the federal government to ensure the Digital-to-Analog Converter Box Coupon Program is adequately funded to meet the demand by the households that may be impacted by the DTV Transition.
Expires August 2010
State Sovereignty in Financial Services
The sovereignty of states in financial services regulation has never been more in jeopardy. With the enactment of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999, which brought down the firewalls between banking and other financial services and commercial interests, the continuing consolidation and merger of financial services institutions, technological advances such as the Internet and online financial services, the recent U.S. Supreme Court decision in Watters v. Wachovia and the competition from foreign markets, some of America’s largest financial institutions are advocating a uniform national system of regulation and the preemption of some state laws and regulation which seek to protect the financial well-being of the consumer. NCSL is concerned that Congress, the federal banking regulators, and the federal courts have sought to nationalize control of financial services in Washington, D.C.
The National Conference of State Legislatures has consistently and strongly advocated for state sovereignty in financial service regulation. NCSL has opposed any federal preemption of state legislative or regulatory authority in financial services. A high burden of proof that federal action is necessary, such as a national financial crisis, should be met before any preemption of state financial services laws and regulations is warranted.
PRESERVATION OF DUAL BANKING
NCSL opposes any federal attempts to further erode the dual banking system, to tax state banks for federal oversight services already performed by the appropriate state banking agencies and departments or to damage the dual, competitive system of banking regulation that has effectively served consumers and the industry. NCSL calls upon Congress and the Office of the Comptroller of Currency to cease and desist its efforts to destroy the viability of a dual banking system. The only loser in such an effort will be the American consumer.
Congress should evidence its support for the dual baking system by approving legislation to overturn the Supreme Court’s decision in Watters v. Wachovia.
STATE REGULATION OF INSURANCE
The National Conference of State Legislatures is committed to maintaining the states as the sole regulators of the business of insurance as provided under the McCarran-Ferguson Act. NCSL supports the efforts of states to streamline and simplify insurance regulation. NCSL will oppose any proposal to establish either a federal or a dual system of regulation of insurance, to cede any state authority to regulate financial institutions involved in the business of insurance or to obtain Congressional ratification of trade agreements that preempt state regulation of insurance.
SECURITIES REGULATION
Corporate governance, securities regulation and enforcement of securities laws are areas where the federal government and the states traditionally share regulatory authority. NCSL recognizes that the federal government has an interest in efficient and fair capital markets. NCSL also acknowledges that the states’ securities agencies are indispensable partners with their federal counterparts engaging in the pursuit of fair and efficient capital markets by protecting local investors, workers, and communities by ensuring compliance with securities laws.
NCSL is concerned that the preemption of state securities laws and regulations will serve only to erode investor trust in the capital markets by further weakening a system designed to protect investors and putting the financial well-being of hard- working Americans at risk. NCSL will oppose such federal preemption.
DUAL CHARTERING OF CREDIT UNIONS
The dual chartering of credit unions has benefited consumers, credit union innovation and our states’ economies. NCSL will oppose any effort by the Administration and Congress to erode the dual chartering system for credit unions by preempting state credit union laws and regulations which do not adversely impact the financial well-being of state chartered credit unions and thus the National Credit Union Share Insurance Fund.
MORTGAGE INDUSTRY
Currently states regulate a significant portion of mortgage lending. The states presently license and regulate more then 300,000 mortgage professionals. As a result of the current subprime lending failures, Congress is considering the establishment of a new Federal regulatory system for the mortgage origination industry. Federalizing this area of supervision will displace the 50-state regulatory system that is rapidly evolving and could erode, or even eliminate, the current authority the states have to approve, supervise and bar mortgage professionals. The local nature of real estate and consumer protection necessitates direct state authority.
Since 2004, the states, through the Conference of State Bank Supervisors (CSBS) and the American Association or Mortgage Regulators (AARMR), have been developing the Nationwide Mortgage Licensing System to improve and coordinate mortgage supervision. This new state system will enhance consumer protection and streamline the licensing process for regulators and the industry. The states have directly invested significant financial and human resources to restructure their licensing processes and systems to move to the new national system. The Nationwide Mortgage Licensing System will be operational on January 2, 2008.
NCSL supports the Nationwide Mortgage Licensing System and encourages the United States Congress to recognize the states’ Nationwide Mortgage Licensing System and encourage a more coordinated system of state and Federal supervision.
Expires August 2010
Terrorism Risk Insurance
The insurance industry has repeatedly encountered new, unexpected, and severe risks but has always, given reasonable time and experience, been able to develop creative ways to price its product. However, losses from the terrorist acts of September 11, 2001, and the threat of future terrorist attacks with chaotic frequency and unknown costs challenge the capacity and risk models of the property and casualty insurance and group life insurance industries to provide coverage for such exposure. The Terrorism Risk Insurance Act (TRIA) of 2002 provided a temporary federal “backstop” to ensure the widespread availability and affordability of property and casualty insurance for terrorism while preserving state insurance regulation and consumer protection. A key aim of TRIA was to provide a transitional period for markets to stabilize, to develop effective terrorism pricing models, and to build private sector capacity to afford future losses.
TRIA was set to expire on December 31, 2005 and was extended by Congress for an additional two years. In December 2007, TRIA was reauthorized for an additional seven years, now set to expire in 2014. This extension will have provided the insurance industry 12 years to develop the necessary solutions to insure against the risk of terrorism.
The National Conference of State Legislatures (NCSL) calls on Congress to work with state insurance regulators to ensure that in the next seven years while TRIA is in place that the property and casualty insurance and group life insurance industries develop the products to protect Americans from financial losses associated with terrorism and to ensure an available and affordable insurance market for American consumers and businesses.
NCSL continues to believe that any reauthorization should recognize the temporary nature of the program, and therefore encourages efforts to further promote development of the private insurance markets. Any federal plan for a temporary and limited federal backstop for terrorism insurance coverage must not adversely impact a state’s ability to levy premium taxes, regulate the business of insurance and set solvency standards for property and casualty and group life insurers.
Expires August 2011
Twenty-First Century Communications
At the start of the Twenty-first Century, advanced communications services and information technology are the economic forces that are ensuring the continued financial health and stability of our country and our states. The information age is no longer merely a segment of economic growth but must be addressed as the underpinning of the entire marketplace. There is hardly an industry or trade that does not depend in some way on communications services and the infrastructure that provides vital information at the push of a button or the command of the voice.
THE STATE OF COMMUNICATIONS
Innovation and convergence of existing technologies are radically expanding communications services, blurring distinction between telephone and Internet services; between cable, wireless and satellite; between long distance and local service; and between telephone and other forms of communications.
The primary goal of the federal Telecommunications Act of 1996 was to open telecommunications markets to competition. Eleven years later competition exists because of many factors, including increased innovation and consumer access to wireless services and the ability of consumers to communicate over the Internet through Instant Messaging, e-Mail, Voice over Internet Protocol (VOIP), Internet Protocol Television (IPTV) and satellite communications. The 1996 Act along with similar efforts at the state level allowed for much industry self-regulation that has fostered these competitive forces while providing consumers with communications choices.
In 2007, according to the Federal Communications Commission (FCC), 111 million households had telephone service; this represents 94.6 percent of the total households in the United States. The FCC also reported that incumbent local exchange carriers (ILECs) accounted for 142.2 million access lines compared to 29.8 million access lines provided by competitive local exchange carriers (CLECs). At the same time there were over 233 million wireless telephone subscribers, surpassing the total of all wireline access lines. Add to this overview of competition, estimates from Bernstein Research that in 2007, 75 percent of households in America had internet access enabling alternative communications such as e-Mail and Instant Messaging.
Many of these new technologies are capable of delivering communications services but do not fit within the definitions of the traditional regulatory framework for telecommunications. As a result similar services can be delivered via networks that are regulated and taxed differently, and for a growing number of technologies, these services are free of regulation and even taxation. This uneven governmental treatment, while not intentional, has led to competitive barriers, discouraged investment in infrastructure development, and delayed the roll out of advanced communications services by existing regulated telecommunications providers.
To ensure that government regulation of communications services, when such regulation is necessary to ensure competition, protect the interests of consumers and the needs of law enforcement agencies, is based on an even playing field between competitors of similar services, though possibly delivered by different technologies, the National Conference of State Legislatures calls upon the Congress and the Federal Communications Commission, in consultation with state legislatures and the providers of communications services, to review the current definitions of telecommunications and information services as defined in the Communications Act of 1934 and the Telecommunications Act of 1996 to ensure that all providers of communications services are treated similarly for purposes of government regulation and taxation.
The need to review and possibly re-define telecommunications and information services has been made more urgent by numerous federal court rulings since 1996, which have added confusion to what are telecommunications services by delivering several contradictory decisions. The definition of telecommunications and information services should not be decided in the courtroom but rather by the elected representatives of the people working cooperatively with regulators, industry providers and consumer groups.
NCSL would have concerns about a piecemeal approach by Congress in addressing regulatory and taxation issues with regard to a particular developing technology and not similar issues faced by other providers of communications. NCSL supports reconsideration of the 1996 Telecommunications Act to eliminate remaining barriers to competition, modernize outdated regulations that distort the market or results in government favoring one technology over another, and ensure a level playing field for all providers of communications services, while maintaining the basic right of interconnection that is fundamental to a competitive market.
COMMUNICATIONS INFRASTRUCTURE
The United States communications infrastructure is the combined product of a wide range of service providers, including historically regulated common carriers, new entrants and operators of private networks. With proper attention given to infrastructure development, communications and information technology present boundless opportunities for America to lead the world throughout the 21st century. Communications services will achieve its fullest potential only if it allows every American, regardless of geographic location and economic status, the opportunity to realize the full benefits of the information age. Government policies that promote competition and reduce outdated layers of regulation, where markets are competitive are the key to reaching this full potential.
Government and industry, working cooperatively, must continue to provide our citizens, businesses and governments with the best communications infrastructure in the world. Our goal is the creation of affordable, easily accessible communications and information networks serving the societal needs of a broad range of users and industries. To that end, government and industry should strive for a communications policy framework that promotes and ensures fair and open competition, removes obsolete barriers that result from outdated burdensome regulation and requirements, ensures similar government regulation for all technologies that provide similar services in markets that are competitive, encourages innovation and investment, and allows consumers and the marketplace to determine winners and losers not government regulation. As competitive markets alone may not be able to provide an advanced communications infrastructure to all citizens, institutions, and businesses, government should continue to encourage the availability of such an infrastructure to all.
While investments in communications infrastructure have received considerable national attention, the federal government must recognize that states have unique priorities that require state and regional specific solutions.
UNIVERSAL SERVICE FUND
Since its inception, the federal Universal Service Fund (USF) has sought to increase access to telecommunications services to historically underserved populations through contributions by all telecommunications providers. These contributions are typically passed onto telecommunications consumers through a monthly fee on their billing statement.
Of the almost $7 billion annual budget of the federal USF, 64.1 percent goes to the High Cost Fund, which finances telecommunications facilities in rural areas; 14 percent goes to the Low Income Fund, which finances carriers for customers who are in a means tested public assistance program; 21.6 percent goes to Schools and Libraries Fund (E-Rate Program) which funds services to public schools and libraries; and, about 0.3 percent goes to Rural Health Care Fund. In addition many states have established state Universal Service Funds, providing universal access solutions that remain unique to their respective states and constituents.
With well over two-thirds of the federal USF supporting access to basic telephony, and assessments on providers being raised almost every year by the Universal Service Administrative Company, concerns in Congress are growing about the future of the federal USF. In reforming the federal USF, NCSL would remind Congress that the USF is funded primarily by customers of telecommunications services and therefore the Congress needs to evaluate the ever growing burden these increasing fees are becoming to all Americans.
Congress, the Federal Communications Commission, state legislatures and state regulators should review and address the requirements and goals for universal service by adopting policies that promote universal mobility and universal competition.
Any reform of the federal Universal Service Fund should not impact or hinder innovation at the state level or interfere with the administration of state Universal Service Funds.
ADVANCED COMMUNICATION SERVICES
According to the Federal Communications Commission, the number of high-speed lines connecting to the Internet (exceeding 200 kilobits per second in one direction) increased by 52 percent between June of 2005 and June of 2006, resulting in a total of 64 million lines in service in the United States. In addition, the FCC reported an increase in the number of advanced service lines connecting to the Internet (exceeding 200 kilobits per second in both directions) increased by 35 percent between June of 2005 and June of 2006, resulting in a total of 50 million lines in service in the United States.
The future expansion of access to advanced communications and broadband services will depend upon additional private investment and minimal government regulation. Any regulation of communications and broadband services must be minimal and should not discriminate between communication providers or the technology used in delivering such services.
NCSL urges Congress to work with states in developing an integrated broadband strategy to ensure universal deployment and affordable access to every constituent, regardless of geography or economic status. NCSL supports the creation of a national advisory board, including state, federal and local policymakers, as well consumer and industry representatives, to develop principles to facilitate deployment of advanced broadband communications services.
NCSL urges the Federal Communications Commission, in conjunction with state, federal and local policymakers, to reevaluate the distinction between telecommunication and information services and gather additional information on the state of advanced broadband and communications services in the United States in light of the technological achievements made within the last decade.
MUNICIPAL BROADBAND NETWORKS
As states seek to expand access to broadband and work with the federal government to enhance deployment of broadband, Congress and the FCC must recognize and account for the principles of federalism and numerous decisions by the United States Supreme Court with regard to the relationship between the state and its political subdivisions. Most recently, in 2004, by a vote of 8-1 in Nixon v. Missouri Municipal League, the United States Supreme Court upheld the decision by the Missouri legislature forbidding the state’s political subdivisions from offering telecommunications or Internet services.
Legislation has been introduced in Congress to preempt any state statute, rule or regulation that seeks to regulate, limit or prohibit the ability of municipalities and state created public agencies with regard to funding or establishing high speed Internet networks, broadband and wireless technology known as WiFi. Such congressional action would violate the states’ sovereignty over its own political subdivisions.
NCSL will oppose any effort to authorize or prohibit the establishment of municipal or state created public agencies broadband networks through congressional or federal regulatory action. Should Congress or the federal government take such action, NCSL will challenge the constitutionality of such action.
WIRELESS COMMUNICATIONS
According to the Trends in Telephone Service Report, released by the FCC, the number of mobile telephone subscribers in the United States rose to 217.4 million by June 2006. The CTIA- The Wireless Association estimated that by December 2006, the number of subscribers had risen to 233 million.
The FCC reported that Americans increased their average monthly “minutes of use” by 27 percent, from 584 minutes per subscriber in 2004, to 740 minutes per subscriber in 2005. CTIA reports that by December 2006, the total wireless minutes of use exceed 850 billion. Text messaging, according to the FCC almost doubled between 2004 and 2005, going from 24.7 billion messages to 48.7 billion messages.
This unprecedented growth in the wireless industry is a tribute to the innovation by the private sector in the delivery and development of wireless communication services, and the minimal regulation imposed upon wireless service providers by government.
Since 1993, for the most part the regulation of the wireless industry has been the domain of the Federal Communications Commission. Efforts by a few states to impose some form of economic regulation have not survived court challenges. States, however, continue to have authority to monitor wireless providers with regard to consumer protection issues.
In 2004, the Federal Communications Commission received over 29,000 complaints relating to wireless telecommunications services, including billing issues, early terminations fees and advertising issues.
As a result, the majority of the wireless industry has taken significant strides in addressing these concerns, in part by adopting a wireless Consumer Code, which includes:
- Disclose Rates and Terms of Service to Consumers;
- Make Available Maps Showing Where Service is Generally Available;
- Provide Contract Terms to Customers and Confirm Changes in Service ;
- Allow a Trial Period for New Service;
- Provide Specific Disclosure in Advertising;
- Separately Identify Carrier Charges from Taxes on Billing Statements;
- Provide Customers the Right to Terminate Service for Changes to Contract Terms;
- Provide Ready Access to Customer Service;
- Promptly Respond to Consumer Inquires and Complaints Received from Government Agencies; and
- Abide by Policies for Protection of Customer Privacy
In 2006, the Federal Communications Commission received over 17,000 complaints relating to wireless telecommunications services, including billing issues, early terminations fees and advertising issues. This amounted to almost 11 out of every 1 million wireless customers or 0.00001 percent of all wireless subscribers. While the wireless industry through self-regulation has been successful in significantly reducing the number of consumer complaints, NCSL continues to support the ability of state government to protect the interests of wireless consumers. However, in carrying out its consumer protection functions government must acknowledge the interstate nature of the wireless industry. Specifically targeted government requirements such as type size, language or formats of billing statements that may differ from jurisdiction to jurisdiction while may be well meaning, will hinder the seamless provision of these services, resulting in confusion and increased costs for all customers especially for those that are not residents of the state that has taken such action.
NCSL urges state and federal policy makers to work together to ensure that industry targeted consumer protections can be applied within a national framework that ensures the continued ability of the state attorneys general to enforce such consumer protections.
While states recognize the need for prepaid wireless phones, especially to those who may not be able to afford the costs of a wireless service contract, state legislatures and law enforcement agencies are concerned that such phones may also be used for illegal purposes. NCSL would encourage the wireless industry to work with state and local law enforcement agencies to ensure that prepaid wireless phones do not become a means to criminal or terrorist activity.
STREAMLINING AND COLLOCATION OF WIRELESS FACILITIES SITES
American consumers are depending more and more on wireless services and are demanding better reception and service. As wireless broadband becomes more accessible, consumers are becoming accustomed to using their laptops and handheld computers wherever they go. Americans want to be connected at all times.
This continually growing demand for access to wireless devices and services requires sufficient infrastructure. As the FCC’s Eleventh Annual Report to Congress on the status of competition in the wireless industry stated:
“By increasing network coverage and call handling capacity and improving network performance and capabilities, carriers’ investments in network deployment and upgrades have the potential to result in service quality improvements that are perceptible to consumers, such as better voice quality, higher call-completion rates, fewer dropped calls and deadzones, additional calling features, more rapid data transmission, and advanced data applications. As noted in the Ninth Report, one of the principal ways carriers have improved network coverage and quality is by increasing the number of cell sites.”
Increasing the number of cell sites for increased service capabilities can also mean opposition from the very same people that demand better cell reception. The refrain “not in my back yard,” is often heard and some localities have used the siting process to make it very difficult to site new towers or even to co-locate antenna at existing wireless facility sites.
The federal Communications Act respects the authority of state and local governments over zoning and land use decisions for personal wireless facilities, but limits that authority to ensure that such local decision making does not become a barrier to entry for wireless providers. While the FCC, state and localities have worked cooperatively in the past, efforts to increase wireless facilities sites or to co-locate on existing sites are facing growing roadblocks by some localities.
Local jurisdictions are the creation of either state constitutions or law. Zoning and land use powers that these political subdivisions of the state exercise were granted to them over time by state legislatures. Therefore, any attempt by Congress to preempt current local zoning and rights-of-way authority is a preemption of state sovereignty.
To avoid federal preemption, state legislatures, such as California and Florida, have begun to enact legislation to streamline the siting process and to enhance the use of collocation on existing wireless facilities. While NCSL rarely advocates the enactment of legislation in state legislatures, NCSL has at times, when states are facing a serious threat of federal preemption, urged state legislatures to take action.
The National Conference of State Legislatures, in order to preserve the states’ sovereignty, endorses state action to enhance the use of collocation of cell antenna and the streamlining of the current tower siting process. Collocation of antenna should not be subject to additional zoning, land-use or regulatory approval process above and beyond the initial process for siting the wireless facility. NCSL also believes that government should not levy discriminatory fees for the siting of wireless facilities or the application for collocation. Application fees levied on the siting as well as taxes on the wireless facility must not be higher than fees or taxes applied to other general business.
STATE FEDERAL PARTNERSHIP IN TELECOMMUNICATIONS COMPETITION
State legislatures and state regulators have been at the forefront of deregulation of the telecommunications industry, removing barriers to competition in local markets and advocating the infrastructure for the delivery of advanced telecommunications. State legislators recognize that deregulation and competition are among the means to reach the goals of advanced infrastructure development, universal service, expanded consumer choice, availability of services and cost effectiveness for our constituents.
The National Conference of State Legislatures through its policy process has supported the sovereign rights and responsibilities of states to regulate intrastate telecommunications. This principle has guided NCSL’s position with regard to Congressional action to deregulate and provide for competition in telecommunications.
In enacting the Telecommunications Act of 1996, NCSL believes that the Congress and the President acknowledged the rights and responsibilities of states to regulate intrastate telecommunications, using any and all of the local market entry mechanisms envisioned by Congress in the 1996 Act, including the resale of legacy networks, providing that states use such authority in a competitively neutral manner. We believe that states and the federal government should continue their joint partnership in sharing regulatory responsibilities which will serve to protect consumers by ensuring the broadest possible consumer choice in each geographic and service market, provide for the appropriate level of universal service, promote effective competition in telecommunications by ensuring similar and minimal regulation for all providers in competitive markets, foster the development of a national infrastructure policy that encourages a positive impact on our nation’s economic future.
While NCSL acknowledges the historic role of states as the primary regulator of intrastate telecommunications, state legislators also recognize that the historic distinctions between intrastate and interstate communications is fast becoming irrelevant in today’s global marketplace. Some new services, such as Voice over Internet Protocol, involve integrated functionalities that cannot even be characterized as jurisdictional. As has been stated previously in this policy statement, NCSL calls upon the Congress and the FCC to partner with states in a national framework for communications policy that ensures minimal regulation but guarantees all Americans with a choice of mediums and service providers.
TAXATION OF COMMUNICATIONS SERVICES
With the blurring of boundaries and increased convergence and competition in telecommunications and other related services, the National Conference of State Legislatures supports the review, simplification and reform of communications tax policies at all levels of government in order to ensure a level playing field between telecommunications service providers, to enhance economic development, to avoid discrimination between new and existing providers and to relive the higher burden that discriminatory communications taxes have on low income Americans.
Taxation of communications services developed for a monopoly that no longer exists has adverse consequences on competition, the nation’s communications infrastructure and the overall economic development ability of the state. For states to be competitive in the global economy, taxation of communications must be in line with general business taxation at all levels of government.
The taxation of communications services at rates substantially above those imposed upon general business taxes not only harms competition in the marketplace, but also negatively impacts low-income consumers.
Transactional taxes on communications services are regressive. The higher the tax, the more significant the burden on low-income households. As a result, the ability of low-income families to purchase additional services, such as high-speed broadband and access to premium service packages becomes even more out of reach, thus serving to expand the digital divide.
Transaction taxes and fees imposed on communications services should be simplified and modernized to minimize confusion, remove distortion and eliminate discrimination regarding the taxability of telecommunications services. The National Conference of State Legislatures encourages elected policymakers at all levels of government to work together to simplify, reform and modernize communications taxes based upon the following principles:
Tax Efficiency: taxes and fees imposed on communications services should be substantially simplified and modernized to minimize confusion and ease the burden of administration on taxpayers and governments.
Competitive Neutrality: transaction taxes and fees imposed on communications services should be applied uniformly and in a competitively neutral manner upon all providers of communications and similar services, without regard to the historic classification or regulatory treatment of the entity.
Tax Equity: Under a uniform, competitively neutral system, industry-specific communications taxes are no longer justified, except for fees needed for communications services such as 911 and universal service.
State Sovereignty: Other than the prohibition of taxes on internet access, NCSL will continue to oppose any federal action or oversight role which preempts the sovereign and Constitutional right of the states to determine their own tax policies in all areas, including communications services.
Unanimously passed the NCSL Communications, Financial Services and Interstate Commerce Committee Business Meeting, November 28, 2007.
Passed on voice vote during the full NCSL Business Meeting, November 30, 2007.
Passed on voice vote during the NCSL Annual Business Meeting, July 25, 2008.
Expires August 2011
Video Franchise Reform - State Administration
Innovation and convergence of existing technologies are radically expanding communications and information services, blurring distinctions between telephone, Internet services, cable, wireless and satellite. These rapid changes often outpace abilities of federal, state and local regulatory regimes to adapt. It is important that video regulatory policy assure that like services are treated alike, investment is encouraged, and shall extend such services in a non-discriminatory manner.
Current Competition in Video Markets
Today, we enjoy a competitive marketplace for telecommunications services; consumers have various options from the traditional landline phone to wireless and voice over Internet protocol. Telecommunications services are provided not only by the existing incumbent local carriers but by competitive local exchange carriers, wireless companies, Internet providers, cable systems and others. The multichannel video marketplace also enjoys vibrant competition, with consumers able to choose between cable companies, direct broadcast satellite (DBS) providers, traditional telephone companies and other newly competitive facilities-based video entrants. Prior to 2005, those providers wishing to deliver facilities-based multichannel video services generally were required to negotiate with a patchwork of hundreds of municipalities to obtain a local franchise agreements to obtain the right of way to offer such services. Since 2005, a majority of states have considered, and 20 states have enacted, video franchise reform legislation, establishing a streamlined state-level modification of the video franchise process that reduced the burden of seeking franchises. Other states have declined to modify the video franchise process at the state level. The result is that telephone companies have entered the video market in numerous states and customers have benefited from the robust video competition.
Threat of Federal Preemption
In 2006, some members of Congress and some video providers sought relief from the burdensome process of franchise approval by seeking pre-emption of state and local franchise authority. Committee leadership in both Houses of Congress had made known their intent to address video franchise reform in a re-write of the Telecommunications Act of 1996. This effort to preempt the states led the National Conference of State Legislatures to urge states to undertake video franchise reform at the state level. As a result of state actions, the momentum in Congress to preempt the state video franchise sovereignty dissipated.
State Action
In 2005, the Texas Legislature approved the establishment of statewide video franchising. Since 2006, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Missouri, Nevada, New Jersey, North Carolina, Ohio, South Carolina, Tennessee, Virginia and Wisconsin have enacted legislation modifying in some respect the state’s video franchise process. A number of other states considered, but did not eventually modify their traditional, often local, franchise process. As the “laboratories of democracy,” states once again are in the forefront of advancing the benefits of technology and opening markets to competition
State Administration Will Preserve State Authority
While the federal government through the Federal Communications Commission regulates to some extent the pricing of video services, many other aspects regarding the provision of such services is under the domain of the state.
Local jurisdictions are the creation of either state constitutions or law. The powers that these political subdivisions of the state exercise were granted to them over time by state legislatures. Those local jurisdictions that have franchise authority have it as a result of state legislation or the state constitution. Therefore, any attempt by Congress to preempt current local franchise authority is a preemption of state sovereignty.
Numerous court decisions, including decisions by the United States Supreme Court, have reaffirmed that the powers and authorities enjoyed by local governments are at the discretion of the state. For example, in Hunter v. City of Pittsburgh in 1907, the United States Supreme Court stated:
“Municipal corporations are political subdivisions of the State, created as convenient agencies for exercising such of the governmental powers of the State as may be entrusted to them. …The number, nature and duration of the powers conferred upon these corporations and the territory over which they shall be exercised rests in the absolute direction of the State. The State, therefore, at its pleasure may modify or withdraw all such powers, may take without compensation such property, hold it itself, or vest it in other agencies, expand or contract the territorial area, unite the whole or a part of it with another municipality, repeal the charter and destroy the corporation…In all these respects the State is supreme, and its legislative body, conforming its action to the state constitution, may do as it will, unrestrained by any provision of the Constitution of the United States.”
While NCSL rarely advocates the consideration of legislation in state legislatures, NCSL has at times, when states are facing a crisis or a serious threat of federal preemption, urged state legislatures to take action. The National Conference of State Legislatures endorses efforts that will remove barriers to entry for or inequity of regulation among video competitors and foster additional consumer choices in the video marketplace and ultimately ensure competitive neutrality.
Government should encourage competition and consumer choices for broadband and video services and promote the deployment of broadband services and technologies.
Fees and Taxation of Video Providers
Franchise fees today are levied, imposed or collected as a percentage of gross revenues, used for general revenue purposes and not based on the actual direct and identifiable costs of any benefit to the entity that pays the fee. To the extent such fees are intended as payment for use of public rights-of-way, that fee should be limited to the actual, direct and identifiable cost of such use, and that portion of the fee should be applied only to those who use the rights-of-way. Franchise fees should be collected and administered by one central agency per state.
Expires August 2012
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