Communications Taxation '19
Pre-Conference USF Workshop - May 13, 2019
"Understanding USF"
This in-depth pre-conference session explores Universal Service Fund (USF) issues that have long been a popular topic at the TeleStrategies Communications Taxation Conference. The speakers will discuss basic principles and current issues impacting the determination of carrier contributions to the USF. The session will include a review of: the basic principles involved in determining the appropriate revenue base upon which to base the USF contribution; issues involved in classifying services and related revenues as telecommunications versus information services; methodologies used to determine telecommunications revenues by jurisdiction; the Form 499 and related instructions, highlighting key compliance areas; the USF audit process and common issues; USF-related issues to consider in connection with merger & acquisitions; and USF policy updates. This session is vital for both experienced telecommunications tax personnel involved with USF regulatory compliance activities, as well as new entrants that offer telecommunications services as part of their overall service package and are new to regulatory compliance requirements.
Presented by:
Steve Augustino, Kelley Drye
Danielle Frappier, Davis Wright Tremaine
Doug Jarrett, Keller & Heckman
Brita Strandberg, Harris Wiltshire Grannis
Carl R. Geppert, KPMG
Agenda:
Introduction and Basic Principles
- USF applies to (1) domestic and international (2) end user (3) telecommunications service and iVoIP (and some “telecommunications”) revenues. Each of these three requirements must be present for the revenue to be assessable.
- “End user” revenues – distinguishing end user revenues v. wholesale revenues
- “Domestic” and “International” revenues – determining the jurisdiction of revenues – Interstate, Intrastate, International
- Clarifications
- Basic rule—end points of customer’s communications not extent of service provider’s facilities
- Physically intrastate private lines/special access services
- Internet access service
- Treatment of USF-support (High Cost, Lifeline, E-Rate, Rural Healthcare)
- “Telecommunications Service revenues” -- Classification of services
- Telecommunications Services, Telecommunications, iVoIP, Information Services
- Challenges
- 2012 FNPRM issues identified, not resolved
- Conference Call Decisions
- MPLS/”Enterprise Services”
- Text messaging
- Recurring issues
- Wholesale v. Retail Services (Wholesale certifications)
- Classifying private line service provided over intrastate private lines
- Unique issues with international services and foreign carriers
- Bundled Services vs. Integrated Services (Cisco WebEx)
“Guided Tour” of Form 499 (Form and Instructions)
- Quarterly Reports and Annual Reports
- Reporting entity
- Filing of Form 499 amendments and waivers
- Calculating “USF-assessable” revenues
- Actual data, traffic studies, safe harbors
- Bundled Services
- Reporting methodologies
- USAC reporting to other funds (TRS, etc.)
USF Audit Process and Appeals
- Frequency
- Targets/Candidates
- What records does USAC review
- Billing reports and financial data
- Common audit issues
- Best practices for preparing for an audit
- Process
Recovery of Regulatory Fees and Certain State Taxes
- Current practices and USAC treatment as revenue
- Identification of regulatory costs and appropriate revenue/customer base
- Ongoing monitoring
USF/Regulatory Considerations in Mergers & Acquisitions
- Important element of due diligence
- Historical treatment of revenues (classification, jurisdiction) by the acquired company
- Asset transfers – how to handle revenues for the year in which the closing occurs
- Identification of USF reporting risks, review prior audit results
- Identification of USF-related opportunities
USF Policy Updates/Contribution Reform
- 2017 WCB Intrastate Private Line Decision
- 2017 WCB Wholesale/Retail Decision
- 2018 FCC Texting/Messaging Order
- 2016 Restoring Internet Freedom Order (BIAS classification and contributions)
- Status of Contribution Reform proposals
Federal vs. State USF Assessment Methodologies
Overview of states following non-revenue based contribution methodologies
Schedule:
12 - 4pm: Workshop Session
Dress is business casual.