03/19/2025 03:15 PM House LABOR & COMMERCE

          HB 123-TAXATION: VEHICLE RENTALS, SUBPOENAS                                                                       
                                                                                                                                
3:17:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HALL  announced that the  first order of  business would                                                               
be HOUSE BILL NO. 123, "An  Act relating to vehicle rental taxes;                                                               
relating to  the issuance  of subpoenas  related to  tax records;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
3:17:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KEVIN  MCCABE, Alaska State Legislature,  as prime                                                               
sponsor, gave  a recap of  HB 123, asserting  that it would  be a                                                               
"much needed fix  to Alaska's broken vehicle  rental tax system."                                                               
He explained  that the bill  was becoming  increasingly important                                                               
due to new  Internal Revenue Service (IRS)  requirements for Turo                                                               
Inc.  hosts.     He  clarified  that  his   primary  purpose  for                                                               
sponsoring HB  123 was to protect  people in Alaska who  could be                                                               
harmed financially from the collection  of retroactive taxes.  He                                                               
stated  that the  percentage tax  decrease in  HB 123  was agreed                                                               
upon  by  members  of  the  industry,  including  Turo  Inc.  and                                                               
Enterprise  Rent-A-Car.   He  noted that  there  were letters  of                                                               
support in committee packets from industry members.                                                                             
                                                                                                                                
REPRESENTATIVE  MCCABE cautioned  committee  members that  Alaska                                                               
could  be subject  to a  lawsuit  should the  vehicle rental  tax                                                               
system  remain unchanged,  and  that a  "big  rental car  company                                                               
could sue  Alaska or quit  paying taxes."  He  reminded committee                                                               
members that a court case, a  judge had already ruled that rental                                                               
platform companies, such  as Turo Inc., and  rental car companies                                                               
were "similarly situated" from a  legal standpoint.  He stated he                                                               
would follow  up with the  committee with  a legal memo  from the                                                               
Department of Law (DOL) asserting  that Alaska would lose against                                                               
a rental car company in court.                                                                                                  
                                                                                                                                
3:21:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS  shared his  concern with  Turo Inc.  hosts owing                                                               
taxes should there  be a lawsuit.  He asked  whether HB 123 would                                                               
obviate this concern.                                                                                                           
                                                                                                                                
3:21:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MCCABE replied yes.   He referenced Alaska Statute                                                               
(AS) stating  that Turo Inc.  should have  been paying a  tax and                                                               
further  stated that  the courts  would put  people in  Alaska at                                                               
risk.   He noted that  there are approximately 1,500  people that                                                               
would  be  affected  by a  potential  lawsuit  and  approximately                                                               
$6,000 that is owed.                                                                                                            
                                                                                                                                
3:23:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS offered his appreciation for HB 123.                                                                            
                                                                                                                                
3:23:16 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HALL  opened  public  testimony   on  HB  123.    After                                                               
ascertaining that  there was  no one who  wished to  testify, she                                                               
closed public testimony.                                                                                                        
                                                                                                                                
3:23:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COULOMBE  noted that  the  fiscal  note showed  a                                                               
revenue change of over $1 million.   She queried whether it was a                                                               
deficit.                                                                                                                        
                                                                                                                                
3:24:24 PM                                                                                                                    
                                                                                                                                
BRANDON  SPANOS, Deputy  Director,  Tax  Division, Department  of                                                               
Revenue  (DOR), answered  that the  fiscal  note for  HB 123  was                                                               
indeterminate.  He explained that  the platforms do not currently                                                               
pay  taxes;  rather,  the  individual  would pay  the  tax.    He                                                               
additionally explained  that retail  rental companies  are paying                                                               
taxes.   He  noted that  the  reduction shown  on page  2 of  the                                                               
fiscal note  is representative of  the proposed rate  change from                                                               
10 percent  to 9 percent.   He further  explained that page  1 of                                                               
the fiscal  note is indeterminate, as  it is unknown how  much of                                                               
an increase would  result from the new 7  percent tax proposition                                                               
on the platforms.                                                                                                               
                                                                                                                                
3:25:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MCCABE noted that DOR  does not know what would be                                                               
collected from Turo Inc., as  the company is not currently taxed.                                                               
He  further noted  that  DOR is  uncertain  whether the  proposed                                                               
legislation  would  bring  a  revenue   increase  or  be  revenue                                                               
neutral.   He  offered  his  belief that  it  would  not bring  a                                                               
decrease  in revenue.   He  suggested that  after passage  of the                                                               
legislation,  the State  of Alaska  could look  at adjusting  the                                                               
taxes.   He reminded committee  members that the  money collected                                                               
would  go  towards  the Department  of  Transportation  &  Public                                                               
Facilities (DOT&PF) and the state parks system.                                                                                 
                                                                                                                                
3:26:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COULOMBE   clarified  that   the  state   is  not                                                               
necessarily losing revenue.  She  referenced HB 123, stating that                                                               
at face  value, it does  appear to be a  loss of revenue,  but in                                                               
actuality, the fiscal impact is unknown.                                                                                        
                                                                                                                                
3:27:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CARRICK  moved to adopt  Amendment [1] to  HB 123,                                                               
labeled 34-LS0551\I.2, Nauman, 3/14/25, which read as follows:                                                                  
                                                                                                                                
     Page 2, line 1:                                                                                                            
          Delete "(1)"                                                                                                      
                                                                                                                                
     Page 2, lines 2 - 5:                                                                                                       
          Delete "not arranged through a vehicle rental                                                                     
     platform; or                                                                                                           
               (2)  seven percent of the total"                                                                             
          Insert ", including"                                                                                              
                                                                                                                                
3:27:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS objected.                                                                                                       
                                                                                                                                
3:27:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CARRICK explained that  Amendment [1] would remove                                                               
the tiered  tax structure in  HB 123  and would add  the peer-to-                                                               
peer car  sharing platforms, and  their own definition, at  a tax                                                               
of 9 percent and would  continue the reduction in traditional car                                                               
rentals at  9 percent.   She shared her understanding  that Turo,                                                               
Inc. and  Enterprise Rent-A-Car had  come to "some sort  of grand                                                               
bargain agreement."   She shared her concern  about the potential                                                               
drop in revenue  from traditional car rentals  and the subsequent                                                               
decrease in  state parks funding.   She  opined that it  would be                                                               
reasonable for  all rentals in  Alaska to pay an  equivalent tax.                                                               
She noted  that ultimately it  is the  end consumer who  pays the                                                               
tax,  not the  person  or  company who  owns  the  vehicle.   She                                                               
further noted  that Turo, Inc.  had testified previously  that it                                                               
"shares" cars, it  does not "rent" cars   which  she asserted was                                                               
a  misnomer.    She  noted   that  both  traditional  car  rental                                                               
companies  and  Turo,  Inc.  car   owners  have  unique  business                                                               
expenses.    She  asserted  that  Amendment  [1]  would  preserve                                                               
revenue while maintaining an overall  tax reduction.  She offered                                                               
her desire to ensure equivalent rates for the end consumer.                                                                     
                                                                                                                                
3:30:56 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS  concurred  with  Representative  Carrick.    He                                                               
stated that parity would be  ideal without question, but that the                                                               
committee must  acknowledge the reality  of what  the legislature                                                               
could do  in the face of  serious legal implications.   He stated                                                               
that although  the amendment was  his preferred policy,  he would                                                               
vote against it in the interest of advancing the bill.                                                                          
                                                                                                                                
3:31:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COULOMBE  offered  her  agreement  with  Co-Chair                                                               
Fields.   She reiterated that there  would be a good  chance that                                                               
there would be no loss of revenue.   She stated that she would be                                                               
voting against the amendment.                                                                                                   
                                                                                                                                
3:32:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MCCABE noted that there  was currently a 3 percent                                                               
tax levied  on motorhomes.   He noted that  Enterprise Rent-A-Car                                                               
does not depend on airport services.                                                                                            
                                                                                                                                
3:33:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CARRICK   stated  that  she  would   support  the                                                               
proposed legislation in either case  but that she would prefer to                                                               
discuss it with  transparency.  She opined  that policy decisions                                                               
should be  made with respect  to the  end consumer, not  based on                                                               
any  particular  company.    She  offered  appreciation  for  the                                                               
companies  that had  contributed to  the making  of the  proposed                                                               
legislation.                                                                                                                    
                                                                                                                                
3:33:54 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS maintained  his objection to Amendment  [1] to HB
.                                                                                                                            
                                                                                                                                
A  roll call  vote was  taken.   Representative Carrick  voted in                                                               
favor  of   the  motion   to  adopt  Amendment   1  to   HB  123.                                                               
Representatives  Saddler, Burke,  Nelson,  Coulombe, Fields,  and                                                               
Hall  voted against  it.   Therefore,  Amendment 1  failed to  be                                                               
adopted by a vote of 1-6.                                                                                                       
                                                                                                                                
3:34:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MCCABE  thanked the committee for  the opportunity                                                               
to present  HB 123  and offered his  strong belief  in protecting                                                               
the people of Alaska.                                                                                                           
                                                                                                                                
3:35:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  offered  his support  for  the  proposed                                                               
legislation.                                                                                                                    
                                                                                                                                
3:35:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NELSON  thanked the bill sponsor  for the proposed                                                               
legislation.                                                                                                                    
                                                                                                                                
CO-CHAIR HALL entertained a motion.                                                                                             
                                                                                                                                
3:36:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS moved  to report  HB 123  out of  committee with                                                               
individual  recommendations and  the  accompanying fiscal  notes.                                                               
There being  no objection, HB 123  was reported out of  the House                                                               
Labor and Commerce Standing Committee.