Legislature(2023 - 2024)SENATE FINANCE 532
03/12/2024 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB236 | |
| SB127 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 236 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 127 | TELECONFERENCED | |
SENATE BILL NO. 127
"An Act relating to vehicle rental taxes; relating to
the issuance of subpoenas related to tax records; and
providing for an effective date."
9:36:12 AM
Co-Chair Olson relayed that the committee heard SB 127 had
been heard twice in committee in January. Amendments from
the committee had been incorporated into a Committee
Substitute (CS).
Senator Bishop MOVED to ADOPT proposed committee substitute
for SB 127, Work Draft 33-LS0635\R (2/21/24, Nauman).
Co-Chair Olson OBJECTED for discussion.
9:36:56 AM
KEN ALPER, STAFF TO CO-CHAIR OLSON, discussed the changes
to the bill. He relayed that the CS made two changes from
the prior bill, Version U. The first change would bifurcate
the tax section (AS 40.352.020) and created a separate tax
rate of 8 percent for passenger vehicle rentals through a
network platform, as opposed to the 10 percent tax that
remained in place on traditional vehicle rentals. The
second change was in the uncodified section and prevent the
authorization of the Department of Revenue to go back in
time and look for rentals before the effective date of the
bill. He explained that on rental platforms there was no
window to try to collect back taxes before the effective
date. The original version of the bill gave a six-month
window for looking back at potential past tax obligations.
Co-Chair Olson WITHDREW his OBJECTION. There being NO
further OBJECTION, it was so ordered.
9:38:58 AM
SENATOR MATT CLAMAN, SPONSOR, explained that he fully
supported the CS, which represented a fairly detailed and
complex negotiations between Turo and the brick and
mortar car rental companies including Avis and Enterprise.
He relayed that representatives from Avis and Turo were
available for questions.
Co-Chair Olson asked about whether Avis supported the CS.
9:40:13 AM
CARRIGAN GRIGSBY, EXECUTIVE VICE PRESIDENT, AVIS ALASKA
(via teleconference), reiterated that there had been
ongoing discussion. He relayed that Avis Alaska was in
support of the CS.
9:40:46 AM
SEAN VINCK, ASSOCIATE GENERAL COUNSEL, TURO, INC. (via
teleconference), echoed earlier comments and relayed that
Turo was in support of the CS, which reflected detailed and
lengthy negotiations between the respective parties. He
thanked the sponsor and stakeholder for work on the bill.
9:41:33 AM
Co-Chair Stedman MOVED Amendment 1.
Co-Chair Olson OBJECTED for discussion.
Co-Chair Stedman spoke to Amendment 1, which dealt with the
unprecedented geographical dispersion of residents around
the state. The amendment also took into consideration the
coastal communities that would be facing difficult economic
times due to hardships in the fishing industry. The
amendment proposed to suspend the vehicle rental tax from
October 1 through March 31. He shared that initially the
intent was to suspend the tax for Alaskans during the given
time period, but that had not been possible. He noted that
the intent of the amendment was to recognize that many
Alaskans had to travel through metropolitan areas and had
to rent cars.
Co-Chair Stedman discussed reasons for residents to travel
to Anchorage, Fairbanks, and Juneau. He mentioned large
gatherings such as the Alaska Federation of Natives, and
the Alaska Municipal League. He expressed concern about
significant costs to the people of rural Alaska. He
understood that the amendment would decrease the earnings
of the vehicle rental tax by about 25 percent, but did not
think it would turn the economics of the state upside-down.
9:44:37 AM
DAVID SCOTT, STAFF TO CO-CHAIR STEDMAN, relayed that he was
present to answer questions on the mechanics of the
amendment. He acknowledged that he knew a lot of people
from rural areas that travelled to Juneau, Anchorage, and
Fairbanks. The amendment aimed to make the travel a little
easier.
Co-Chair Olson asked if Mr. Scott's family was involved in
air transportation in Ketchikan.
Mr. Scott answered affirmatively and noted his family had
been involved in air transportation for a long time but no
longer was.
9:45:30 AM
Senator Wilson wondered how the tax would be implemented.
He referenced Section 4, and asked if people with less than
200 transactions would not pay tax. He wondered if the tax
would affect larger businesses.
Mr. Scott noted that the CS discussed the "rate" of the
vehicle rental tax, the amendment discussed the levy. Under
the amendment, there would no longer be a levy from October
1 to March 1.
Senator Wilson thought the underlying issue of the bill was
to try and get some of the used car sales businesses that
were renting out fleets of cars to be able to pay a fair
share of tax like their competitors. He wanted to ensure
that the smaller mom and pop type businesses were not
adversely affected. He shared concern that there could be
an unfair advantage given to larger companies.
Mr. Scott noted that the tax would not be levied during the
winter months. The rate agreed upon in the CS would all be
suspended from October 1 to March 31.
Senator Kiehl pondered that the areas where there was
significant winter tourism. He mentioned high-wealth
individuals visiting Haines for heliskiing. He had heard
that Fairbanks hotels had the same pricing in the winter as
in the summer, and mentioned international travelers that
came to see the northern lights. He asked whether the
winter visitors would not pay any rental car tax.
Mr. Scott affirmed that the amendment proposed that
individuals would not pay car rental tax from October
through March. He pointed out that during the six months
proposed in the bill, the tax collected comprised 25
percent of the total, while the summer months collected 75
percent of the total.
Co-Chair Stedman thought that another way to think of the
proposed amendment was as an economic stimulus to attract
people to the state in the winter.
Senator Kiehl considered the budgetary implications and
mentioned there was a lot of support for the underlying
bill, including from the state parks. He thought about half
the states Division of Parks and Outdoor Recreations
budget came from the vehicle rental tax. He asked if there
was a plan to replace the funds if the vehicle rental tax
was reduced by about 25 percent.
Co-Chair Stedman relayed that when there were revenue
shortfalls, it fell to the General Fund. He pointed out
that that the vehicle rental tax was just a fund source for
the budget, and the state did not have dedicated taxes. The
funds were targeted as a revenue source but for all
practical purposes the money was fungible and could go
anywhere.
Senator Kiehl appreciated Co-Chair Stedman's responses. He
considered that the committee worked of the committee as if
the state could use additional revenue sources rather than
fewer. He mentioned that another way the state funded state
parks was through receipts, and noted that the biggest part
was commercial users. He noted that half the commercial
users of parks was in Ketchikan. He prosed that if the
amendment diluted the rental tax, it would just shift the
revenue burden elsewhere. He appreciated the intent of the
amendment, but did not know if he could support it.
Co-Chair Stedman pondered the current vehicle rental tax
versus what the collection would be with the proposed
amendment.
9:50:49 AM
FADIL LIMANI, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE
(via teleconference), relayed that the department had not
had an opportunity to closely look at the amendment. He
relayed that he could speak to the vehicle tax revenues
being collected for the current year and the projected
revenues from the fall forecast. He noted that the baseline
vehicle rental tax ranged from about $15.1 million for FY
24 to $18.9 million for FY 33. He estimated that assuming a
status quo with collections from April through September,
the revenue to the state would be about $11.2 million to
$14 million. He estimated that the impact of suspending
collection for half the year from October through March
negative $3.9 million for FY 24 and negative $4.9 million
for FY 33.
Co-Chair Olson understood that the state would losing money
if the amendment were to pass.
Mr. Limani answered affirmatively. He added that there
would be an additional administrative burden associated
with a seasonal tax. He mentioned an uptick in tourism in
certain parts of the state, including the Fairbanks area.
He thought the larger share of the revenues came from out
of state visitors.
Co-Chair Stedman asserted that it was not possible to lose
revenue that was never collected. He asked about a book
with a list of all the state taxes collected. He asked
about the revenue for the last fiscal year for the Vehicle
Rental Tax.
Mr. Limani relayed that for FY 23, the total amount
collected was $15.1 million.
Co-Chair Stedman asked about the estimated amount collected
under the CS with the adopted amendment.
Mr. Limani relayed that assuming for FY 23, the estimated
tax that would be collected if the amendment were passed
would have been $11.3 million.
Co-Chair Stedman asked about the projected revenues for FY
24 if the amendment were to pass.
Mr. Limani relayed that the department estimated a forecast
amount for FY 24 of $15.1 million. If the amendment was in
place, the amount collected would be $11.2 million.
Co-Chair Stedman thought the FY 23 amount collected was $15
million. He asked why the bill was being adopted if the
amount would be the same after its passage.
Mr. Limani asked Co-Chair Stedman to clarify his question.
Co-Chair Stedman understood that the state collected $15
million in vehicle rental taxes the previous fiscal year
and thought that Mr. Limani indicated the state would
collect the same amount after the passage of the bill. He
asked why the legislature would adopt the bill if it was
looking at collecting the same amount of revenue.
Mr. Limani relayed that the department had not contemplated
the CS into the revenue projections. Based on the status
quo of the existing vehicle rental tax, DOR expected $15.1
million for FY 24. He continued that assuming there was a
suspension of the tax from October through March as
proposed in the amendment, the revenue was estimated to
$11.2 million.
9:56:58 AM
AT EASE
9:57:19 AM
RECONVENED
Co-Chair Olson relayed that the committee would continue
consideration of the amendment in the afternoon committee
meeting.
SB 127 was HEARD and HELD in committee for further
consideration.