Once shutdown ends, Congress to take up several critical bills for technology startups


The NSA spying scandal has made it harder for some technology firms to expand their business overseas. Members of the House and Senate are currently working on bills that could help those companies regain some credibility when it comes to privacy and security.
October 10, 2013

While Congress is largely preoccupied with finding a way to end the government shutdown and avoid hitting the debt ceiling, some lawmakers are working behind the scenes on several other bills that could have a direct impact on technology start-ups.

“Right now, there are numerous things going on in Congress that could end up affecting your business,” Laurent Crenshaw, legislative director for House Oversight and Government Reform Committee Chairman Rep. Darrell Issa (R-Calif.), told a group of entrepreneurs in Washington on Tuesday.

Crenshaw was part of a panel of policy experts and entrepreneurs who spoke at an event as part of DC Entrepreneurship Week, an annual series of events meant to connect and educate business people. During the discussion, the panelists identified several bills that await lawmakers once they strike a bargain to end the government shutdown, including two in particular that technology entrepreneurs should keep a close eye on:

Marketplace Fairness Act

The Senate earlier this year approved the Marketplace Fairness Act, which would require Internet retailers to start charging sales tax on purchases made by customers anywhere in the country. It was initially cast aside in the opposite chamber. But House Judiciary Committee Chairman Bob Goodlatte (R-Va.) last month reignited conversation around the idea by releasing an outline of principles for online sales tax legislation.

States already have the authority to collect online sales tax, but tracking sales and enforcing compliance have been next to impossible, allowing consumers to pay less for the same goods online than they do from brick-and-mortar retailers. The bill is intended to level the playing field for retailers and get more tax revenue into the hands of state and local governments, but critics say collecting the money could be a nightmare for some online sellers.

“If I’m a large company, like an Amazon.com, I may have software in place already or the resources to effectively do that without any burden,” Crenshaw said, noting that sellers would be required to collect the correct rate for any number of the nation’s thousands of taxing jurisdictions. “But if you’re a team of three, four or five people, and you just happen to be growing at a rapid rate, like most start-ups are . . . it could be incredibly burdensome.”

In the Senate bill, lawmakers exempted online merchants with less than $1 million in annual sales. Goodlatte has insisted that any bill be simple enough to implement that there would be no need for a small-business exemption.

USA Freedom Act

One of the authors of the Patriot Act, Rep. Jim Sensenbrenner (R-Wisc.), has released a draft of a bill that would limit some of the powers the law gave to the National Security Agency, responding to public outcry over news this summer that the agency has been widely collecting phone records and other private communications.

Called the USA Freedom Act, the bill would stop the agency’s bulk collection of certain information and require the government to share more details with the public about the way it gathers intelligence. Crenshaw says the bill could help U.S. companies regain some privacy and security-related credibility overseas.

“If you have an Internet business or a cloud-based business, basically anything that operates on the Web, and if you’re trying to compete abroad, this is affecting your business,” he said of the fallout from the NSA scandal. “If you have a European competitor, at this point they are going to say that your customers’ information is safer in a European cloud than it is in an American cloud because of the NSA.”

One entrepreneur on the panel said her company has already felt some backlash from the NSA revelations.

“We’re a cloud company, and I just spent last year in London opening our operations in Europe,” said Leah Belsky, senior vice president at Kaltura, a New York-based software company. Her company is hoping to sell its services to large university consortiums across the continent.

“They are starting to pull back, starting to ask us where our data centers are located, and they are in the U.S.,” she said, adding that the company has been forced to consider opening a new data center overseas to appease clients in Europe.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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