HB 56-PASSENGER VEHICLE RENTAL TAX  1:20:43 PM CHAIR P. WILSON announced that the next order of business would be HOUSE BILL NO. 56, "An Act excluding motorcycles and motor- driven cycles from the passenger vehicle rental tax; and providing for an effective date." 1:20:54 PM REPRESENTATIVE LINDSEY HOLMES, Alaska State Legislature, joint prime sponsor of HB 56, stated she introduced this bill to support some local businesses. In 2003, the legislature passed a bill to impose a motor vehicle rental tax (MVRT) and the committee discussion related to rental cars, but did not include any discussion about recreational vehicles. The bill passed the legislature. At the time, it appears the legislature did not realize that the definition included recreational vehicles (RV) and later amended the statutes to lower the tax rate. Several years ago, the state's tax division realized that motorcycles were also included in the definition and began implementing this tax. However, similar to RVs, motorcycles are expensive to rent, the season is limited, and motorcycles must be stored the remaining eight to ten months of the year. The burden of the same rental rate as motor vehicles makes it expensive and uneconomical for people to rent motorcycles. The travelers who rent motorcycles tend to stay in hotels, eat at restaurants, and enhance the local economy of communities in Alaska. She concluded that motorcycle rentals should be encouraged. This bill would remove the tax on motorcycle rentals from the law. She offered her belief that this tax was never contemplated to be included in the statute to affect motorcycles. 1:23:09 PM JAMES WALDO, Staff, Representative Lindsey Holmes, Alaska State Legislature, on behalf of Representative Holmes, joint prime sponsor of HB 56, said that the chief concern is the size of the rental tax since renting a motorcycle for five to ten days could add several hundred in taxes to the rental. He suggested that removing the rental tax on motorcycles would help foster these small tourism-related businesses. Historically, the language in this bill has been before the legislature last year. He said the language is the same language as the prior bill before the legislature. 1:24:23 PM REPRESENTATIVE ISAACSON referred to subparagraph (H), which lists motorcycle. He asked whether the statute referenced also includes snowmachines. MR. WALDO answered that all-terrain vehicles (ATVs) are dealt with in current law. He did not believe ATV rentals are taxed as motor vehicles. REPRESENTATIVE ISAACSON asked how extensive that is when all other vehicles seem to be covered and whether the source of revenue from ATVs should be considered in order for it to be equitable. MR. WALDO said he was not certain about numbers of ATVs and offered to supply the information. This wasn't an area that was researched. REPRESENTATIVE ISAACSON said he wasn't suggesting covering ATVs, but he did not wish to penalize one industry and the sponsor was seeking equity. 1:26:13 PM REPRESENTATIVE GATTIS said she is an avid snowmachine and ATV user. She asked whether this is an on-the-road vehicle program. She suggested that vehicles that use roads would be assessed the MVRT, whereas snowmachines and ATVs are not on-the-road vehicles and would not be subject to the tax. In response to Chair Wilson, she responded that she owns her off-road vehicles, but she knows some people also rent snowmachines; however, they do not ride snowmachines on the road. She recalled she pays a snowmachine tax and obtains a sticker for use in state parks. CHAIR P. WILSON recalled that road use by snowmachines varies since in certain areas in her community snowmachines use roads. REPRESENTATIVE GATTIS remarked that snowmachines and ATVs do not legally use the roads in her area. REPRESENTATIVE ISAACSON reported he attended a safety conference at DOT&PF and some communities have been authorized exceptions, especially in rural areas. 1:28:08 PM MR. WALDO drew attention to a handout in members' packets, [entitled, "Chapter 43.52. TRANSPORTATION TAXES."] He then referred to "AS 43.52.099, Definitions." The definition under AS 43.52.099 (2) for "passenger vehicle" which read, "means a motor vehicle as defined in AS 28.90.990 that is driven or moved on a highway or other public right-of-way in the state, but does not include ...." He said this lists what is not included so he agreed the statute refers to vehicles licensed to drive on highways and does not include ATVs or snowmachines. 1:29:21 PM JOHANNA BALES, Deputy Director, Tax Division, Anchorage Office, Department of Revenue (DOR), stated the purpose of the MVRT was to collect tax on vehicles that were driven and licensed for use on public highways. It does not encompass snowmachines or recreational vehicles (RVs), but after some detailed review of the law - also reviewed by the Department of Law (DOL) - motorcycles are currently included and are taxed. In response to Chair Wilson she agreed this bill would remove motorcycle from the definition of a passenger vehicle. 1:30:23 PM NANCY HULL, Owner, Alaska Motorcycle Adventure (AMV), said her business has rented motorcycles since 1994 or for 20 years. She offered her support for HB 56 to exclude motorcycles from the 10 percent MVRT. Rental companies and Alaska's tourism businesses have been impacted by the unintended consequence of the tax. She explained that her customers must choose to rent motorcycles for fewer days or they completely pass on coming to Alaska, which hurts Alaska's tourism. She related the motorcycle tourism is a limited season with less than 90 days and rentals average $200 per day per motorcycle. For example, a customer who rents 10 days would pay $20 per day or a total tax of $200. She has found people back away from rentals due to the onerous tax. Typically, a couple or a father and son would rent two motorcycles and pay $400 in taxes; however, since no tax cap exists, the rental taxes continue to accrue at $20 per day. MS. HULL reported that her customers ride and drive, which enables them to go to remote parts of the state. People regularly go to Wiseman, Circle, Deadhorse, Chicken, McCarthy, Valdez, and Deadhorse so remote businesses in these areas benefit from meals, hotels, and other tourism expenditures. Additionally, these motorcycle riders pass through the urban areas, such as Anchorage, the Matanuska-Susitna valley, and Fairbanks, spending time and money in those areas. She asked the committee to help her business grow by passing HB 56 this session. In 2003, when the tax was initiated, motorcycles were omitted from the discussion. She described the process these four tiny motorcycle businesses have taken to fix this as being a long and time-consuming process. She concluded by asking members for their support and to consider sponsoring or cosponsoring HB 56. 1:34:23 PM CHAIR P. WILSON asked for the number of motorcycles she had when she started her business. MS. HULL said she started with two motorcycles and this season she will likely rent 30 motorcycles CHAIR P. WILSON remarked it adds up. MS. HULL said the company is seasonal. Last year she computed the MVRT based on the complete tax. She recalled the total tax collected was $8.5 million, but the total MVRT for the four motorcycle companies amounted to $15,000 to $20,000, or less than one tenth of one percent of the total tax. CHAIR P. WILSON, after first determining no one else wished to testify, closed public testimony on HB 56. 1:36:01 PM REPRESENTATIVE ISAACSON moved to report HB 56 out of committee with individual recommendations and the accompanying fiscal note. There being no objection, HB 56 was reported from the House Transportation Standing Committee. The committee took an at-ease from 1:36 p.m. to 1:39 p.m.