WORK PLAN SUBCOMMITTEE CONFERENCE CALL MEETING

Arlington, Virginia

Friday, August 6, 1999

P R O C E E D I N G S

(1:00 p.m.)

GOVERNOR GILMORE: I want to welcome everybody to the meeting of the Work Plan Subcommittee. This subcommittee was created by the Commission in Williamsburg pursuant to Operating Rule Number 6. Let me just restate the members of the subcommittee -- although we have many numerous additional people on the line as well -- and they are Dean Andal, Mike Armstrong, myself, Joe Guttentag, Mayor Kirk, Gene Lebrun, Governor Locke, Grover Norquist, Bob Pittman, Dave Pottruck, Stan Sokul, and Ted Waite; and of course we agreed pretty much I think anybody could be a part of this.

Only members of the subcommittee themselves may participate in the meeting. We certainly welcome the representatives to be on the phone to listen in and report, but we should hold our votes -- hello? Everybody there, right?

Okay. Only members of the subcommittee should actually vote. For members unable to attend, a staff representative as designated by the absent member may participate. We've invited other commissioners and staff to listen in, but we would remind you that they shouldn't participate in the subcommittee's decisions. This is not a meeting of the Commission.

The Commission has referred to this subcommittee the task of formulating a work plan for the commission. The subcommittee's going to make a recommendation in that regard for the full commission at the Commission's next meeting, which is scheduled for September 14 in New York City. The subcommittee's role is to make a recommendation, and then it's up to the Commission to adopt the formal work plan in New York.

So without further ado, without objection, it's been recommended that today's deliberations should be made as widely available as possible to everyone. A transcript should be posted on the Commission's Web site by the end of the close of business today. Since we're having this transcribed, please state your name before making comments. This will help the transcriber, who is also on the line, in accurately capturing the name and information as you make a statement or some sort of comment.

Now, before we do any more of this, as chairman of the Commission, I don't want to hold the role of committee chairman. Enough's enough so to speak. So without objection, I have asked members if they would consider taking on the chairmanship so that we can spread this out a little bit, and I'm pleased to say that David Pottruck of Charles Schwab has agreed to be the chair of the subcommittee. If there is not objection to that, then I would like to turn this over to David Pottruck to chair the committee and continue the conference call.

David, is that all right with you?

MR. POTTRUCK: Y es.

GOVERNOR GILMORE: If anybody has any objection, state your cause now, but otherwise I would like David Pottruck to take over. David, go ahead.

MR. POTTRUCK: Thank you very much. Let me just perhaps state the obvious, that if you have a mute button on your phone, it might be great to turn it on until you have something to say so we can have the clearest signal here possible.

Let me offer the following as an outline: I have a point of view about our subcommittee and our entire commission, and that point of view is that, with the limited resources and time that we have, that we might be able to do our work best if we can take the best of government and the best of business, in terms of process, and try to merge them together of the work plan approach to what we want to do.

So let me explain what I mean by that. What I mean by that is that we have an absolutely terrific commission in terms of the quality and breadth of representation that we have on our Commission. We don't have every single interest group of course represented, but we have a broad diversity of interest groups represented.

I would recommend, as an approach, that we try to focus our work as a discussion among the members and that the vast majority of our time and effort be in dialogue around a group of issues that we would try to begin identifying today and that we would have very limited, but a few, presentations by a select group. Maybe let's say somewhere in the realm of four or five groups would come and make presentations representing important points of view. We would not limit people's ability to submit their point of view in writing. We would ask that it always be preceded by a two-page executive summary intended to present the most important issues up front so that we don't have to wade through thousands of pages of testimony and facts and get mired in the details and lose the big important picture.

I think the key is that our Commission was established to give guidance to Congress on the key policy issues regarding E-Commerce, particularly in the area of taxation. With the limited number of meetings we have, it's going to be crucial that we have a strong focus. We want to identify, in very plain English, what the essential issues are and discuss them. We have terrific representation among our committee and the opportunity to hear everybody and in the end formulate a consensus, not a unanimous point of view certainly, but a consensus that we can present to Congress.

So as a broad outline, what I would hope we could do is between today and perhaps one more conference call, we could come up with a list of key issues that we could present and discuss at our New York meeting. We would try to hone in, on the morning of that New York meeting, on the key issues and gain consensus around that. Everybody would have in advance the list of the key issues and an opportunity to submit other key issues that they think have been left off. So we try to have good preparation in advance using the Commission staff and have everyone come to each meeting as adept as possible.

And then in New York we would spend time in the morning agreeing to the issues, maybe late morning, early afternoon, beginning the process of discussion. In our subsequent meetings, we would continue the process of discussion and begin the process of presentation of points of view and try to have some debate around those points of view. So New York would be a discussion of work process and some key issues; at our next meeting in San Francisco, we would continue discussion and start to debate a consensus viewpoint; and then, finally in Dallas, we would try to see if we can hone in on some consensus point of view to formulate a recommendation to Congress.

So that's the broad outline, and I thought perhaps we would talk about that and see how you all feel about that as a broad approach.

MR. VRADENBURG: David, this is George Vradenburg for Bob Pittman. I could not agree more with sort of the action orientation of your approach. I would suggest even further that there be a much more structured approach to assure that by the time we get to ƒƒƒƒ that we have a draft of a final report that reflects the outcome of the discussions. So that I would recommend, along your lines, a discussion of the issues in New York, perhaps even an afternoon discussion of any proposals that individual commissioners might have, the actual charge to this committee to come up with a potential drafting team for the final report, perhaps working groups assigned to each of the issues with draft reports in San Francisco, and an actual discussion of some drafts in front of us in San Francisco so that we can direct a drafting team towards the final report.

I think with absence of structure to the next three meetings, we are in danger of not having a final report on schedule and ready for submission to Congress.

MR. POTTRUCK: That's good, George. Other comments?

MR. ANDAL: David, this is Dean Andal. I like your approach, and I especially like the idea of having competing panels that represent the various interest groups, you know, with different philosophical points of view. I welcome the ability to view conflicting ideas and to scope the debate. I think one of the problems we have, if we approach it on a fact-gathering basis, is that we'll never get ƒƒƒƒ, and so I like it and I'm with it.

MR. LEBRUN: This is Gene Lebrun, David. I agree. I think it's important we are very selective on who we would have make my presentation. The enabling legislation identifies local government, retailers, consumers, or whatever. I think we have to be very selective then to make sure that who we select in fact represents the groups that are identified in the enabling legislation.

MR. POTTRUCK: Okay. Perhaps in the minutes of our call today we can indicate that we are now open to e-mails from groups that would like to present and that between now and our next conference call we will have surfaced those groups that want to present, and I will make a recommendation of who we might select. It would be a very limited group. They would come in for no more than 10 minutes. I'm imagining we would have maybe three or four presentations. Governor Gilmore, of course, would probably be the one to actually make that recommendation. As I think about it, it would be more appropriate for him to make that recommendation. And the idea is to make sure that we have credibility from the point of view of having heard the key constituents. Of course, anyone can submit what they want in writing, so there's no limit to opportunities to make submissions. But if we have all kinds of testimony, I think we all recognize we'll never get through it.

MR. NORQUIST: I like the proposal. I would ask that when we ask people to submit written testimony in advance that they include an executive summary so that we don't end up with 40-page essays without the ability to look at -- you know, have one or two pages that outline the meat of their positions.

MR. POTTRUCK: I'm sorry, Grover. I must have not been clear before. I couldn't agree more. It's a mandate. You have to provide a two-page executive summary or we're not going to bother looking at it.

MR. GUTTENTAG: David, I also support your proposal. Let me note a logistic issue, which we may want to focus on. We would like, I believe, the presenters in September to be focussed on the issues which we decide should be included in our work plan. As you know, there is a whole range of issues. We have limited time, and limited resources to cover them. We looked at the materials, which Heather gave us. It showed the list of all of these issues which the Commission is authorized to address.

I gathered, from your presentation, that you thought we ought to be focusing on certain ones. I think it's important we figure out -- since this is a subcommittee, we of course can't approve a work plan. All we can do is make suggestions to the Commission. But we would like the people at this meeting in September to be focusing on those issues that we think will be the work plan, and we have to figure out a way to do that.

MR. POTTRUCK: Well, let me make a suggestion. Governor Gilmore, I would suggest that, depending on how far we get today, we have perhaps one more meeting of this subcommittee over the phone, a conference call; it's very efficient. We would then actually also, I think perhaps, try to schedule rather soon a one-hour conference call and see if in that one hour of the entire committee, of the Commission -- an official virtual meeting of the Commission, to see if prior to New York we can key up the key issues that will be discussed in New York.

I think if we can come to New York, arrive there, and rather than spend the morning debating what we discuss, but have our topics already firmly committed, I think that our meeting in New York would be far more productive, and we could also begin the process of discussing in New York the formation as well of some subcommittees that would further the dialogue and begin the process of drafting and proposing some very specific consensus viewpoints for consideration by the entire Commission.

Does that sound like a possibility to you?

GOVERNOR GILMORE: You're speaking to me, David, I believe, and I think, just to recap, you proposed basically two additional meetings by phone: One more of the subcommittee, in order to define what they're going to present; and then a second one, since that's a recommendation only by the full Commission, so that we can narrow that down before we get to New York. I'm certainly on board with all of that. I think that works just fine. In fact, I agree totally with your approach.

I think we should begin to -- of course the statute begins to define some of those issues for us that we must do. I believe that we can, however, get all of the interest groups that have a stake in this issue and give them a chance to have their say. I happen to agree that we ought to have a short presentation followed by plenty of time for back and forth. I suspect you want each of your points of view to get a few minutes, maybe more than ten, but also some time for some discussion back and forth. So I agree with all this. I don't object to this approach in the slightest. In fact, I favor it.

In the materials that were presented prior to this telephone call, on the last page, we had made an attempt to define what we thought were some of the issues or interest groups that probably ought to be included. Shall we just agree that we're going to present by e-mail the different topics and then settle on it in the next conference call? Was that your approach?

MR. POTTRUCK: Yes, Governor. I thought we would try to see if we could get a lot of that stuff done via work offline with the Commission staff. We could come up today with a list of what the key issues are, have the work committee offer their point of view, gather the consensus of the work committee, send out an e-mail to all of us saying these seem to be where everyone agrees are the greatest points of view.

We would come back together in a phone call and confirm what we have gathered via e-mail for a recommendation to the Commission, send that out via e-mail to the entire Commission, try to find out where the Commission's sensitivities are, and then hold a conference call with the Commission and get a buy-in on the work plan, and then come to New York with the work that's been set out for us.

MR. ANDAL: David, this is Dean Andal. So before our next work plan subcommittee call, we would then have in written form, either e-mail or hard copy, we would have an actual draft work plan so that we could say yes or no to it on the next call?

MR. POTTRUCK: That's right. We would list the key issues that we want to explore as a Commission, and we would gather individual points of view. Basically, people would kind of vote, yes or no, I think this should be in or out. We would get the essence of the subcommittee's perspective and form a recommendation to the entire Commission that would then be circulated in advance; the Commission would have a chance to talk about that. And I would like to see the Commission actually let us know where they stand in advance of the meeting so we know where the consensus is and we can move quickly on the consensus and we know where the debate is, and we can have the debate where it needs to be had and then, hopefully within an hour or so on a conference call, get ourselves nailed down to a work plan.

Then that would become the end of my reign as chairman, and I would turn it back over to the Governor, and off we go.

GOVERNOR GILMORE: In other words, you have an exit strategy?

MR. POTTRUCK: I have an exit strategy. That's important.

MR. VRADENBURG: This is George Vradenburg for Bob Pittman again. I would agree with your approach, David, but I would continue to press the proposition that we ought to be thinking not just about the September meeting but about a path to getting to a final report in our Texas meeting and thus that we ought to be thinking of the work plan in part in terms of issues, obviously sort of the critical first starting point, but then on a work plan of working groups dealing with those issues, with drafts that would be presented in December and discussed and with a plan in mind about how we're going to draft a consensus final report. So that we think of the next three meetings as a whole and not just be thinking of our September meeting in terms of how presentations are to be made.

MR. NORQUIST: This is Grover Norquist. I unfortunately have to leave in a moment, but during the first set of presentations in Williamsburg, I was a little disappointed that a lot of people came and gave presentations on their theories of taxation and nobody ever suggested low or less as desirable ways of looking at taxation. We heard fair and equitable and even-handed, but we never heard low or less. And I would hope that in the presentations in New York that we do have that discussion, but also that we look at existing -- and if the staff could take a look at this as well, from looking at some of the members we have -- what taxes are now levied on telecommunications at the state, federal, and local level.

Because when we talk about taxation, I sometimes hear a lot of discussions about new and interesting taxes people would like to put on it. I think we are also called on to look at the present levels of taxation to see whether we might want to reduce or eliminate taxes.

MR. VRADENBURG: I think this is an idea which obviously ought to look for comment for the work plan subcommittee meeting. I think one could have a session ƒƒƒƒ in which the issues ƒƒƒƒ but virtually no presentation ƒƒƒƒ at a presentation based upon written submission. This afternoon ought to include opportunities for Commissioners like yourself to actually make a presentation on a ƒƒƒƒ proposal and approach so that we can maximize the opportunity of the Commissioners both to ask questions on issues but also to make proposals about approaches or attitudes that we ought to be taking ƒƒƒƒ. We don't listen a lot ƒƒƒƒ lot more presentations.

MR. ANDAL: George, this is Dean Andal, and I have a question for David as well. Is it my impression that when you were going to put these various panels together that it's conceivable that commissioners could serve on those panels?

MR. POTTRUCK: Yeah, absolutely. What I would imagine is we will spend our time focusing in on the key issues to be discussed, and which we'll get to in a minute here, and then we will form -- as George said, we will form subcommittees, and the subcommittees would have either ourselves or our representatives on those subcommittees so that a lot of work ƒƒƒƒ.

MR. LEBRUN: This is Gene Lebrun speaking. I would suggest that the two main categories as set forth in the memo Heather sent out is state and local on the one side and then the international on the other. It seems to me that those are enough different that they would be a ƒƒƒƒ for these two panels: One would be the international issue, and one would be the state and local government issues.

MR. POTTRUCK: Anyone else want to weigh in?

MR. ANDAL: I guess I agree with Gene to a point. I think those two broad categories are fine, but I think within those two categories then you have multiple panels representing the different points of view.

MR. LEBRUN: I agree with that. I'm just saying there are really two separate issues: One is international and one is the state and local governments.

MR. ANDAL: So each of the panels would present a broad recommendation presentation on their view of state and local tax or international tax, depending on the subject?

MR. HEUBUSCH: This is John Heubusch representing Ted Waite at Gateway. I might just note it seems a little odd for us to be determining at this point what the various panel makeup would be and, you know, what issues they take on before we have even determined what the key issues are for the Commission to be taking up at its first meeting. I mean, there's a possibility theoretically that once you take a, quote, unquote, vote of the various Commission members that international taxes are not on the agenda. So why begin developing a panel presentation before we even know that?

MR. POTTRUCK: I appreciate that. I was suggesting -- I don't think we should go that route. I think that right now, if there's no more discussions about taxes -- we seem to have some consensus on taxes -- that we try to begin with absolutely the substance of agreeing on what the key issues are, starting perhaps with the list at the end of the Commission memo that was sent out titled, "Proposed Agenda Topics for Meeting in New York," that we look at that list of eight items, and then I would propose a few of them and see if we can have some agreement here, and then take offline the e-mails, an actual polling of all the subcommittee members.

Does that sound all right with you?

GOVERNOR GILMORE: David, this is Governor Gilmore. I absolutely do concur with that, and we have one round through e-mail and then a second conversation to determine what topics to talk about of the eight items in the materials. We have state and local associations and administrators and administration issues. Almost the first three could be a local and state type of approach. Next two electronic sellers, direct markets, and consumer advocates, and low tax advocates, one or two more, service providers is yet another, and telecommunications and cable and broadband could be another.

So I think you're beginning to work yourself down to four or five. Not to say that that's exclusive of other issues that you may wish to raise.

MR. ANDAL: Governor, before we get off the interest groups that I think we should hear from, I agree with the list that was sent out in the package -- this is Dean Andal. I agree with the list of interest groups that were in the packet. I think they're all important to hear from. There was one notable absence that I think we should hear from, and that's the financial services industry. Obviously, banking and insurance and stock brokerages have a huge comment to make on electronic commerce and the tax thereof, and I think we ought to hear from that group collectively.

MR. POTTRUCK: So, Dean, what you're saying is that we've already got the ƒƒƒƒ and electronic retailers on this list, and financial services are not represented. Are there any other service industries that would also be big important players on the Internet that might be grouped in with just the financial services industry?

MR. VRADENBURG: Well, virtually all segments of the economy, like the healthcare services and pharmaceuticals, I mean, if you begin to segment --

MR. POTTRUCK: The industry point of view starts to become rather --

MR. ANDAL: Maybe I can help distinguish between the two. Retailers are selling tangible products. For instance pharmaceutical companies are selling drugs. Financial services are mostly not tangible products; they're services. And I think that they have perhaps different issues involved and might have a different point of view.

MR. POTTRUCK: How about if we include it under what was previously item number 4, electronic sellers and basically say electronic sellers of tangible or intangible products?

MR. ANDAL: That would satisfy me.

MR. GUTTENTAG: This is Joe Guttentag. Just a couple of comments on this. One, we may find our problem resolved when we advertise for presenters at this meeting, and we should ask them to provide a summary briefly of the issues they intend to raise and from what perspective. That may give us a different set of allocations of these, because there may be other people that we, even with all of us here, have not thought of.

One group that I think should be considered and was considered in the makeup of this Commission are the Main Street businesses, and I don't see them listed on here, and I think we should give them an opportunity to participate.

MR. ANDAL: Yeah, I agree with that as well.

MR. VRADENBURG: I just think that we will maximize the number of people who can be there and get their point of view across and minimize the amount of time in presentation if we at least consider the prospect that we'll take written submissions with the executive summary that David has outlined but actually have the panel presentations be simply questions and answers. Because that will permit us to get more people there, more points of view, and at the same time maximize the interchange among the Commissioners and of the Commissioners with people who represent these broad diverse perspectives.

MR. ANDAL: This is Dean Andal, and I couldn't agree more. As a guy who sits through about 3,000 tax appeals every year, I rarely learn anything from the oral presentation that I haven't seen in the brief before, and I think we ought to be able to have a proposal and then go right to the questions by the Commissioners on the proposal when they have the panel time.

MR. LEBRUN: This is Gene Lebrun. On the service providers, I think we should make sure that service providers that are subject to either sales tax or use tax -- healthcare normally is not subject to sales tax, use tax in any state that I'm aware of.

MR. GUTTENTAG: Again, I think we're going to have an overlap of some of these people, and we'll just have to be able to cut through that and deal with it. But let me raise a point that we are going to be focusing on certain issues, and the question is, I think we should invite comment and presentations on any issue which the Commission has the authority to address and to help inform us as to those issues and why we should be focusing on those issues. We are going to be making our decisions as to the ones we ought to focus on.

For the presentations, are we going to be welcoming presentations, at this very brief meeting that we have, on issues for example that we may have decided that is not going to be a focus of the Commission's work?

MR. POTTRUCK: I would say that our best work would probably be, as we think about it from the government perspective, that we certainly allow people to submit whatever they want to submit, but that we not allow agenda to become distracted from what we consider to be the agenda that we agreed to. Of course, we can always reevaluate our agenda based upon a consensus of the group. We don't want to spend endless debate on that topic, but I think some degree of flexibility makes sense.

While I have all of your attention, let me see if I can put on the table here a listing of what I think are the focal points of our dialogue and discussion and fact finding. From what I'm hearing so far, I think we have about four or five. One is the whole issue of state and local taxation, the structure of state and local taxation, the complexities of the sales and use tax issues, all the issues that I'm speaking of here tax administration, so that's topic number one.

MR. LEBRUN: David, this is Gene Lebrun. Limited to the whole sales issue, whether over the Internet or catalog sales, I don't think we need to get into other issues involving state and local sales taxes and use taxes.

MR. ANDAL: This is Dean Andal. That's where I would disagree with you. I think that we ought to -- the key issues, as far as I'm concerned, on the state and local issues in the are of controversy is nexus and that involves more than sales tax.

MR. LEBRUN: I'm sorry. I meant to say we should not get into issues that do not involve what I would generically call remote sales, remote transactions, over the Internet or such as catalog sales.

MR. POTTRUCK: I'm not sure I agree, because I think the difference between a catalog sale done over a telephone and an Internet order is very much an important part of our issue, but I don't think we should go back to the beginning and discuss whether we think sales tax is a good way to raise income versus income taxes. That's not what we're going to do. We're going to say we have a sales tax system; it is what it is.

Let's not begin our process of trying to debate that but given that we have that, how should we view the Internet? Now, some might say the Internet should be exempt from that process, some might say it should be simply subject to it, and some might say there should be a middle ground. So that would be where I would see us having our debate and discussions.

MR. VRADENBURG: This is George Vradenburg. I concur with that, David. Although, we ought to include in the kind of taxes that are subject to that discussion that you just articulated, state income taxes. Because obviously business is not, as we go down this path, one necessarily to expand or contract or perhaps clarify the nexus requirements for state income taxes.

MR. POTTRUCK: I think the nexus issue would start with sales taxes. If that pulls into other issues, then I think that would be reasonable, but I would look to Governor Gilmore to try to provide a discipline around the debate. And basically I think the entire Commission has to give the Governor, as part of his mandate as our chair, responsibility to provide some degree and focus to our debate.

MR. ANDAL: This is Dean Andal. It sounded like your original category wasn't too bad, which is just the general purpose heading of state and local tax issues involving the Internet, and underneath that we could get into nexus, we could get into uniform rate, we could get into all the issues that both sides want to debate.

MR. POTTRUCK: So that's topic number one. Topic number two -- these are not necessarily in order. Topic number two is hearing from electronic sellers of tangible or intangible products as well as the direct marketing associations and their points of view on this. And I think it would be useful to include in that discussion as well thinking about the interplay between the electronic sellers and physical retailers. So we would all think about and represent in those discussions in the issue of fairness and competition. I think you almost can't talk about the electronic sellers without thinking about the implications of physical retailers.

So we would have a debate and discussion and a working group looking at the interplay, the ease of competition, the fair playing field, and the reasonableness of overhead between the electronic sellers of tangible and intangible products to direct marketers and the physical retailers. So that would be a topic.

MR. ANDAL: Fair enough for me.

MR. POTTRUCK: Next would be a topic of consumer advocates and low tax advocates and people who want to come in and represent or discuss and make sure that we're thinking about this from a consumer protection point of view as well as those who want to protect low taxes and the other side of the equation, if you will, from the state and local taxing authorities who of course have a vested interest in raising some degree of taxation. I think we probably would be well-informed to think about a debate of those issues. So that's number three.

Number four is Internet service providers' access fees, telecommunications. I actually feel that they're interrelated ISPs, telecom, all those providers all have some viewpoints. There are some issues there. There are some existing taxes there. There are proposals of new taxes to be applied to all of that. There's a convergence. So in a sense, drawing a line between Internet service providers and cable providers ƒƒƒƒ believe wireless and hard wired. So putting those together would make some sense. So that becomes topic number four.

And then, finally, topic number five, which is a very complicated topic and one that may or may not fall inside or our purview simply because of the broad basis of the issue of international taxation, and I think we would certainly ƒƒƒƒ feel that we had not quite completed our job if we did not have some debate and discussion and informing ourselves and Congress on the issue of international taxation. But I think that I worry about that because it's such a broad topic. We can open that issue up and never get it closed.

MR. ANDAL: This is Dean Andal. Could I offer a suggestion on that? I've been listening carefully to Gene Lebrun and some of the others and even the administration representatives. That subject might be narrowed, and we might find broad agreement among the Commissioners if we limited the subject to the subject of international tariffs on electronic transmission rather than the whole range of possibilities. And that might salve the concerns of some and also make it a more effective subject for a panel.

MR. POTTRUCK: How about international sales taxes? Are there such things?

MR. VRADENBURG: Well, we're certainly going to want to make sure that domestic sellers, remote sellers -- domestic distant sellers are not disadvantaged vis-a-vis foreign distance sellers. So I do think that it's not just a tariffs issue or a customs issue. It is a discrimination between national and international sellers.

MR. POTTRUCK: How about if we focussed ourselves in on international tariffs on electronic transmissions and a discussion of discrimination in fair competition between international sellers or domestic sellers related to taxes.

GOVERNOR GILMORE: I think we should be sure that that topic includes the issue of placing ourself at a competitive disadvantage to other potential taxing regimes around the world. We don't yet have a world ƒƒƒƒ make it consistent around the world so we need to be focussed on the implications whatever we decide vis-a-vis national competitiveness for the United States.

MR. GUTTENTAG: This is Joe Guttentag, and I've noticed here that what we have down here -- I've mentioned this, you know, before at the Commission meeting. I certainly agree these are some of the more most complex issues and, as opposed to many of the other issues, these are not issues which we have either the authority or the ability to decide or that the Congress has the right to decide.

Because these are ones that require international agreement and I think we would agree we now have agencies representing the U.S. and participating also is the business community, the consumers participating in this project going on internationally, and our approach was to get a report as to what positions are being taken by U.S. business and by the Administration in these international fora, and are they consistent with the important concepts which you've just enunciated of nondiscrimination, fairness, competitiveness, and so forth.

MR. POTTRUCK: This is Dave Pottruck. What I would recommend -- obviously from the beginning I suggested that the entire international area is of very, very large bread box. But I think it would be terrific if we can gain some agreement and have a working subcommittee that would at least try to outline the broad issues, even if we can't get some very specific recommendations. I think to have a complete report that would address some of this and have some debate and dialogue around it would I think be very, very useful.

So I would suggest that we present to ourselves an opportunity to discuss off line via e-mail these five topics, that we will send this out via e-mail today. Heather will summarize all this; get it out to us today. Each of you will put some meat on the bones just very briefly around what the focal point of discussion in these areas are, what you think some of the key questions are.

We'll gather that together. We'll try to create a good clear concise summary, maybe no more than about -- let's say try to limit ourselves to maybe a half a page per topic, for each of these five topics, and get that out to us and then have each of us respond about the clarity of that again via e-mail. And have that all done in preparation for another conference call of about an hour's duration, which is what this one is, that will happen sometime in early September about -- well, maybe actually late August if we can put it together. Let's see what it looks like. Late August I think would be better.

If we can gain our good tight consensus in that discussion, we could then have a recommendation for the entire Commission, and I would suggest that we begin now the process of scheduling both that second conference call and a conference call of the entire Commission which would happen about a week before the meeting. So let's say around December 7, 8, 9, something in that time frame, we would try to find a good availability that everybody could have a conference call and try to get these conference calls started and over in an hour.

MR. GUTTENTAG: David, I agree with you as far as with respect to identifying the topics. We have mentioned from time to time here in this discussion, not only identifying the topics but setting up work groups based on each one of these topics. I would prefer if we could hold that issue of how we're going to assign those, because based -- I have had experience both domestically and internationally in discussing all of these kinds of issues.

And very often we find there's an overlap, that having separate subgroups for some of these subjects may not be the best way to address them. We may want to combine them, but I'm not sure we have to make that decision at this time. We just have to identify the issues we want to discuss.

MR. POTTRUCK: Thank you. Let's see if we can get as much consensus about the issues and some of the meat on the bones of the issues as we can, and then in our next conference call we can have more dialogue around the process. But I agree with George that we need to have a clear view of what the process looks like so that we can really debate that and discuss it and be pretty firm on it. Particularly, when we get to New York, we can start to spend our time in the meetings when we're together face to face debating and discussing these issues in addition to the work done off line by the subcommittees.

MR. LOCKE: David, this is Gary Locke from Washington. I've been listening in for about the last half hour. I was just wondering. I like the five issues you've outlined in asking us to provide some focus and comments on those. I'm just wondering, where does kind of the issue of tax simplification fall into the five? Is that more under the state and local taxation issue, or is that the hearing from the sellers of tangible versus intangible products?

MR. POTTRUCK: I would say topic number three is consumer tax advocates and low tax advocates, those who would like to see less taxes and would argue for some form of tax simplification. It could also find itself under the state and local tax discussion, so I think in either place.

GOVERNOR GILMORE: This is Governor Gilmore. Gary, good to hear from you. I would agree that it can be concluded in several of the topics. Primarily, I would see the state and local government associations and the tax administrators absolutely going to the heart of that question as well. So I think that it's fully covered at least in topic one if not others.

I would also say that substantively on the topic of international issues, I think that I agree absolutely with David Pottruck about that. We have to recognize that the whole issue is being discussed in an international regime that America as a sovereign entity does not have total control over. So I think that it's correct to see whether our policy-making is still applicable in an international total world, globe environment.

I absolutely agree with George Vradenburg that it makes sense to have a comprehensive approach to get to a final conclusion as of Dallas, Texas. I would point out that the international issues are dramatic, and I had hoped that we could spend some time with it in San Francisco, but I do not object in any way to it being an equal part of a subcommittee for some presentation.

I just think, David, we need to be cautious about the fact that five subcommittees -- we'll have to be very careful about how much time we allot for this extensive group, but I agree with you.

MR. LEBRUN: This is Gene Lebrun. I've got a question regarding the e-mail. Heather, have you set up or can you set up a closed list serve, so that we don't have -- you know, each time we get in there, put everybody's e-mail address -- if you have a closed list serve, that really works well.

MS. ROSENKER: I'll work on that, Gene. Absolutely. I've already investigated it, but I'll work on it.

MR. LEBRUN: That would make the communication among the Commissioners easier.

MR. POTTRUCK: Heather, when you send out an e-mail to all of us, can't anyone just hit reply to all? Doesn't everyone's e-mail system have a reply to all button? In which case you automatically send it back to everyone on the distribution list?

MS. ROSENKER: That is correct, David. That's normally the way it works.

MR. LEBRUN: The problem on that is that you repeat everything all the time. Everything gets cumulative on that one e-mail. Whereas, if you do a list serve, you don't do that.

MR. POTTRUCK: Okay. You also can erase everything at the bottom of that e-mail.

MR. VRADENBURG: I do think that if we do that, that we ought to have a working rule that only one person per Commissioner can speak to it. Otherwise, those list serves can get very detailed and very, you know, down in the weeds.

MR. POTTRUCK: Anything else for this morning?

MR. SOKUL: This is Stan Sokul. I have one thing to say. You know, I know we've gone a long way here, but I have a concern in that the issues we identified, the five issues, seem to me to be more people we want to hear from as opposed to issues.

MR. POTTRUCK: And I think we're trying to come up with the broad categories.

MR. SOKUL: Well, my suggestion is that as we put out a call for testimony to outside groups we just take the issues that are in the statute that Congress gave to us as the initial round of -- I mean, to see what we get from, ƒƒƒƒ and I say that for a couple reasons. First is because it's our legal mandate; and, second, is because we had an eight-month delay on this Commission because the statute wasn't followed in the appointment process. And I think we need to do what we can do to show that we're following the statute, particularly when we're going to Congress to ask for money and are in the middle of that process. I don't simply want to veer off and create the impression that we're ignoring what they asked us to do.

I would suggest that in the topics we put out, when we put out a call for testimony, we mold the press release or whatever we're going to put out around our statutory tasks.

GOVERNOR GILMORE: Let me suggest, Stan, that I think that your concerns can be accommodated within the context of the discussions that we have had. The Tax Freedom Act has some areas that shall be considered, and then it has a long listing of issues that should be considered. I don't see anything contradictory as to going to David's suggested topics and then including the array of other topics in our call for information. And then when we get all that back we can cull out what we want to hear and what we don't. I think that all can be made very consistent.

MR. SOKUL: First of all, we had an eight-month delay because of a perception or maybe a reality that we weren't -- appointment process didn't follow the statute. We had a lot of discussion at the first meeting and a lot of debate over appearances, not wanting to create the appearances that we're doing something improper. And I'm not saying that what is being suggested in terms of the way we go in our first meeting -- our next meeting is improper. I'm just saying when we put out the public call for testimony, that we do that in a way that tracks the statutory duties.

MR. POTTRUCK: I think that's a good recommendation.

MR. GUTTENTAG: I agree with Stan. We should give everybody the opportunity to talk on anything which is within the Commission's mandate. I think we have to, as a practical matter, distinguish people we may give time to and those who are invited to send in comments on any issue they believe is relevant.

MR. SOKUL: My concern is also that as we're asking Congress for $2 million, it would be nice to have something in hand, look, we're doing what you asked us to do.

MR. POTTRUCK: I think what we talked about this morning in terms of our topics and in terms of our process is right within the bill exactly as outlined in the memo sent out by Heather of what we shall do and what we may do. I don't see the conflict.

Governor, I think we're at the close of this call. Is there anybody else who has anything?

MR. SOKUL: I have one more. What is your suggestion on the timing of the next calls? Because I thought I heard the final call might be one week before the New York meeting. And does that give us time to get testimony and give notice to the people who are going to testify, in other words? Do you know what I mean?

MR. POTTRUCK: I don't actually see a lot of testimony, and I would suspect that we're going to have to be as practical as we can here so there may only be notice that if anyone can't testify at the second meeting, then they'll testify in the San Francisco meeting, and there's going to be a relatively limited number. Most of the presentations will be done via written presentation, and I think we will be able to gather most of what we need to know in writing. Testimony will be much less testimony and much more question and answer.

In fact, I would propose that the entire thing be question and answer and no speeches and no prepared remarks. Because if they can't put it in their memo, I don't know why it can't be included there. I think efficiency is the name of the game here.

MR. VRADENBURG: There is one practical way to address Stan's problem, and that is simply to, in the next week or so, issue a notice of the meeting in New York and a call for papers on any of the subjects that are within the either mandatory or permissive scope of our work with, you know, either a no-page limit on long but some executive summary and then closer in begin to categorize how the actual September 14 day is going to work.

MR. POTTRUCK: Okay. I think that's fine. We could certainly put out a notice giving people the opportunity to submit their testimony with executive summaries. I think in fact, Heather, we should ask people to send us -- I know this sounds enormous, but my recommendation is that our Commission's taken on the enormous task of having to duplicate all this stuff that we require people to send us 25 copies of anything they want to submit or some number of that. We would gather all their stuff up and what seems on point what seems not on point. We leave that to the commission staff to determine.

Does that seem okay?

MS. ROSENKER: I can certainly do that. That's no problem at all.

MR. POTTRUCK: It doesn't make a lot of sense to me that you all take on the enormous task of copying and duplication. Let people who feel that motivated send us enough copies. You guys figure out how many that is. I think whoever suggested that we put out a notice saying that we're willing to accept testimony in the form a two-page executive summary and points of view they have and address the way they should be sent including the outline as you put it scope and our statutory charge and that we are going to be very, very committed to that statutory charge. Anything outside that charge will not even be consider or distributed.

GOVERNOR GILMORE: Let me make sure I clarify. I agree with this entire process. I did understand that each of the five working groups would have some time to make some statement prior to moving to Q&A so that we lay the topic out orally on that day. That's my understanding. Does everybody understand that? Is that correct, David?

MR. POTTRUCK: Well, I'm imaging, Governor, that there would be discussion of the topic among the commissioners. I don't know who we would have come in to represent the topic other than ourselves. I think we have on the panel literally people on every one of these topics we already have the topics represented. We could have others if we need them, but I think the whole point is that between the 19 of us we have a diverse opinion on all these issues.

MR. SOKUL: This is Stan again. I guess I'm first understanding what you have in mind for the next meeting and I think it's a good idea. You're just saying that the Commission, as the day go on, move itself to different topics and beforehand we, in the intervening period between now and then, solicit view from the outside world?

MR. POTTRUCK: That's correct.

MR. LEBRUN: This is Gene Lebrun. On getting views from the outside world, one suggestion I would make, our names and addresses are available on the Web site, and as far as interest groups, there's no reason why they can't themselves send the members of the Commission whatever documentation they want. I don't see any reason why Heather and her staff should have to do that mailing. The uniform laws require that. If an observer wants to make something available to the commissioners, they send it out themselves.

MR. POTTRUCK: That would certainly simplify the process. And, Heather, maybe what you could do is keep a listing of the stuff that's communicated and if you and Governor Gilmore come to the conclusion that something is sort of ridiculous off point, you can send out a very quick e-mail suggesting we don't bother with it.

MS. ROSENKER: Yeah. If I just might offer just one suggestion. Gene, I appreciate your interest to make our lives easier, but in terms of control of knowing what documents have gone out and making certain that we keep a proper library here, I might suggest that it's okay with us. I don't mind doing mailings out to you as commissioners. I'd rather not, even though perhaps your addresses may be on our Web site, I'd rather not suggest to folks that they mail to you arbitrarily.

MR. VRADENBURG: I agree to that. I think there's a certain formality even though this is not subject to appellate review we have some record of the commission.

GOVERNOR GILMORE: That will present the commissioners from getting blind side and all of a sudden we're in the soup in New York trying to figure that out. So I think some complete revelation probably makes sense.

MR. POTTRUCK: Okay. Let's all agree on that. That sounds very compelling. So, governor Gilmore, with your permission, can I bring this conference call to a close? I think we have a process for going forward. We understand what we need to do. And Heather will take it upon herself to schedule as quickly as she can here the next few conference calls to happen in a two to three week time frame and then the conference call of the entire Commission to happen in early September in --

GOVERNOR GILMORE: Very good. I think we've comes miles and miles. I appreciate your leadership of the subcommittee and we will now close the conference call.

GOVERNOR LOCKE: As we set these dates for these conference calls, can we really try to minimize changing them just so that you know maybe we can survey people as to the best dates and times available but once we kind of set it, then that's it?

GOVERNOR GILMORE: Sounds good to me. I think the goal there is to get staff to coordinate as many people as possible so that we as individual commission members don't have to be concerned about that but I would agree with that.

MR. POTTRUCK: And I would add one more thing. I think from the point of view of allowing staff to listen in so that people who can't make the call can be represented, I think has been a good process on these calls. I think that's been very helpful for a lot of people.

(Whereupon, at 2:15 p.m., the

PROCEEDINGS were adjourned.)

* * * * *