04/01/2014 01:00 PM House TRANSPORTATION

              HB 314-PASSENGER VEHICLE RENTAL TAX                                                                           
                                                                                                                                
1:03:55 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON  announced that the only order  of business would                                                               
be   HOUSE BILL NO. 314,  "An Act relating to  the application of                                                               
the passenger vehicle rental tax;  and providing for an effective                                                               
date."                                                                                                                          
                                                                                                                                
1:04:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ISAACSON moved  to adopt  the proposed  committee                                                               
substitute  (CS) for  HB  314,  labeled 28-LS1479\C,  Strasbaugh,                                                               
3/27/14,  as  the working  document.  [Before  the committee  was                                                               
Version C.]                                                                                                                     
                                                                                                                                
1:05:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STEVE  THOMPSON, Alaska State  Legislature, stated                                                               
that in 2003 the legislature  passed a bill requiring a passenger                                                               
vehicle rental tax  intended to raise revenue  from tourist using                                                               
rental cars on  the state road system.  The  rental car companies                                                               
collect the tax from their  customers and subsequently submit the                                                               
rental  tax to  the  state.   For  the first  nine  years of  the                                                               
vehicle  rental tax,  the  Department of  Revenue  (DOR) did  not                                                               
apply  the tax  to Alaskan  companies  engaged in  the long  term                                                               
leasing of  heavy vehicles to  other Alaska businesses.   In 2010                                                               
the DOR began  an attempt to collect the vehicle  rental tax from                                                               
Alaskan  businesses  who  may  not be  involved  in  the  visitor                                                               
industry and do  not rent to tourists.  Some  companies had long-                                                               
term  leases, mostly  consisting  of heavier  vehicles that  they                                                               
rented from  other Alaska  businesses.  In  order to  clarify the                                                               
intent of  the original  vehicle rental tax,  HB 314  would amend                                                               
the  statute to  clarify that  the passenger  vehicle rental  tax                                                               
does not apply to Alaskan  businesses making long term rentals to                                                               
other  Alaska businesses.    The  proposed committee  substitute,                                                               
(CS) for HB  314, Version C, would reduce the  term of the rental                                                               
tax from 90 days to 28 days as  exempt from the tax.  This period                                                               
represents  the  typical rental  time  period  for many  vehicles                                                               
operated  on the  North Slope.   Additionally,  this bill  better                                                               
organizes the statutes by consolidating  the term "passenger" and                                                               
"recreational" into the same section.                                                                                           
                                                                                                                                
1:07:02 PM                                                                                                                    
                                                                                                                                
JANE PIERSON, Staff, Representative  Steve Thompson, Alaska State                                                               
Legislature, on  behalf of the  prime sponsor,  explained Version                                                               
C.   She stated that Section  1 is a housekeeping  provision that                                                               
consolidates  the   two  existing  sections  for   passenger  and                                                               
recreational vehicles into one group.   Section 2 would amend the                                                               
90-day leasing  period exemption  to 28 days  or more  since many                                                               
commercial  leases  run for  28  days.   Additionally,  the  bill                                                               
incorporated   language   from   the  Department   of   Revenue's                                                               
regulations  regarding  extensions.   Thus,  the  vehicle  rental                                                               
contract would be exempt if the  vehicle rental is for 28 days or                                                               
more, is  in a written contract,  so long as the  rental contract                                                               
is not terminated prior to the  expiration of the 28-day lease or                                                               
rental period.   An  extension of  the lease  is exempt  from the                                                               
vehicle rental tax so long as  there is not any break between the                                                               
initial period and the period  of extension, and the extension is                                                               
agreed  upon before  the 28-day  lease  or rental  period.   This                                                               
would bring it more in line with the 28-day leases, she said.                                                                   
                                                                                                                                
1:08:45 PM                                                                                                                    
                                                                                                                                
MS. PIERSON stated that proposed  Section 3 is a consolidation of                                                               
the terms  "passenger" and "recreational" to  better organize the                                                               
statute.   This  section clearly  states that  passenger vehicles                                                               
are taxed  at a  rate of 10  percent while  recreational vehicles                                                               
are taxed at the rate of 3  percent.  In fact, this provision was                                                               
in  the current  statute  so this  language  doesn't represent  a                                                               
change, but simply  reorganizes the statute.   Proposed Section 4                                                               
repeals AS  43.52.030 and AS  43.52.040 because  these provisions                                                               
are  no  longer  needed  due  to  the  consolidation.    Finally,                                                               
proposed  Section 5  provides for  an  immediate effective  date.                                                               
Again, the  intent of  Version C  of HB 314  is to  clarify which                                                               
rental vehicles  are to be taxed  and which are not.   The intent                                                               
of the  tax is  that it  be limited to  passenger rental  cars as                                                               
described in AS 43.52.                                                                                                          
                                                                                                                                
1:09:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTIS  asked  for clarification  on  the  28-day                                                               
leasing period.                                                                                                                 
                                                                                                                                
MS.  PIERSON  explained  that  in  talking  to  equipment  rental                                                               
companies  that  rent vehicles  in  long  term leases,  that  the                                                               
shortest term  spans 28  days.   This bill  would apply  to those                                                               
leases.   A tourist who  rents a car  typically will not  rent it                                                               
for  28  days,   and  if  so,  the  tourist   would  be  spending                                                               
significant funds in  Alaska.  This describes the  logic used and                                                               
draws "the line in the sand"  to exempt long-term leases from the                                                               
vehicle rental tax.                                                                                                             
                                                                                                                                
1:10:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTIS  asked for further clarification  on the 28                                                               
days period versus 30 days.                                                                                                     
                                                                                                                                
MS. PIERSON indicated that 28  days represents a four-week lease.                                                               
Additionally, in  reviewing other statutes, such  as hotel taxes,                                                               
once the  person has established  residency for 30 days  the room                                                               
is  no  longer  taxed.     This  represents  the  logic  used  in                                                               
considering   the  length   of  time   for  vehicle   rental  tax                                                               
exemptions.   Originally the sponsor  considered 30 days  but the                                                               
companies advised the sponsor that  the lease terms are typically                                                               
28 days.                                                                                                                        
                                                                                                                                
REPRESENTATIVE GATTIS  related her understanding that  the leases                                                               
are for a four week timeframe.                                                                                                  
                                                                                                                                
1:11:29 PM                                                                                                                    
                                                                                                                                
CHAIR  P.  WILSON  opened  public  testimony on  HB  314.    [The                                                               
committee treated  it as  not being  opened as  no one  wished to                                                               
testify.]                                                                                                                       
                                                                                                                                
1:11:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTIS commented that  the sponsor cleaned up some                                                               
areas and did  a good job.   She said she would like  the bill to                                                               
move from committee; that it is a good bill.                                                                                    
                                                                                                                                
1:12:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ISAACSON  moved  to   report  Version  C  out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal notes.   There being  no objection, the CSHB  314(TRA) was                                                               
reported from the House Transportation Standing Committee.                                                                      
                                                                                                                                
REPRESENTATIVE ISAACSON  indicated a  fiscal note  is forthcoming                                                               
for Version C.                                                                                                                  
                                                                                                                                
CHAIR P. WILSON  mentioned that there is currently  a zero fiscal                                                               
note but  she anticipated a  forthcoming fiscal note  for Version                                                               
C.