The Maryland Communications Tax Reform Commission held its last meeting prior to the start of the General Assembly session to continue its discussion of the communications tax and fee structure in Maryland. The Commission plans to resume meeting in May to develop its final report and recommendations, which are due by June 30, 2013.

During the December 5 meeting, members were briefed on the “The Changing Face of Communications” by a representative from AT&T, heard from the satellite industry on cable franchise fees, and heard from certain members on policy proposals they would like the Commission to consider.

With respect to cable franchise fees, the satellite industry noted that there is a distinct difference between these fees and communication taxes.  They indicated that franchise fees are a cost of doing business, not a tax, and therefore, should not be a part of the Commission’s discussion.  As an equal approach, they suggested imposing a sales tax on all video services.

The wireless industry proposed two options for communications tax reform: 1) Comprehensive state-local communications tax reform; and 2) Reform of discriminatory telecommunications taxes.  Both proposals have negative consequences for local governments. Other communication carriers did not present policy proposals.

Instead of a policy proposal, representatives from MACo and the Maryland Municipal League (MML) offered a set of principles to be considered as the Commission evaluates policy options.  The key three principles are listed below.

1.      Local Government Revenue Not Be Negatively Affected – Reform of the communications tax structure should protect current local government revenues and recognize that the necessity of   providing services to the community will continue to grow.  Tax statutes should be robust enough to capture economic changes and shifts in use of technology over time without requiring additional statutory amendments.

2.      Flexible Local Government Taxation Authority – Under the current communications tax structure, some local governments have pursued the authority to impose and collect taxes on certain services while others have not.  Reform of the communications tax structure should maintain this local flexibility.

• Local option to not impose local communications taxes.
• Local option to establish local communications taxes and rates subject to common state definitions.
• Local collection of communications taxes.
• Local audit authority.

3.      Preserve Local Franchising and Rights-of-Way Management – Preservation of local franchising and rights-of-way management is both consistent with existing constitutional mandates and implementing legislation in the state, and recognizes the critical distinction between taxes which support general government activities, and user fees which pay for special government privileges.  Local governments should maintain their right to franchise, manage use of, and require fees for use of, public right-of-ways

An interim report, which is due by the end of December, will be drafted and distributed to members for review and comment prior to its release.

As previously reported, this Commission has been charged with assessing the “feasibility and fiscal implications for the State and local governments of a modernized, competitively neutral communications tax and fee system that eliminates disparate treatment of similar communications service providers” and the “efficacy of tax and other incentives to encourage investment in broadband networks and emerging technologies.”