Legislature(2013 - 2014)HOUSE FINANCE 519
04/16/2014 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB178 | |
| SB169 | |
| SB138 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 178 | TELECONFERENCED | |
| += | SB 169 | TELECONFERENCED | |
| += | SB 138 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 191 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 178(FIN)
"An Act relating to the passenger and recreational
vehicle rental taxes; and providing for an effective
date."
8:38:21 AM
BRITTANY HUTCHINSON, STAFF, SENATOR BISHOP, offered a brief
overview of the bill.
8:40:59 AM
Co-Chair Stoltze asked where the bulk of the rental tax
monies had been spent to date.
Ms. Hutchinson replied that she did not know.
8:41:14 AM
Co-Chair Stoltze asserted that the funds was one that had
been preyed upon by many interests.
Co-Chair Austerman discussed Page 1, line 5:
Sec. 43.52.010. Levy of passenger and recreational
vehicle rental tax.
Co-Chair Austerman understood that a person could fly to
Anchorage and rent a recreation vehicle for 30 days without
being subject to the rental tax.
Ms. Hutchinson replied in the affirmative.
Co-Chair Austerman surmised that the objective of the bill
was to exempt recreational vehicles from the tax.
Ms. Hutchinson replied that the main objective had been to
exempt passenger vehicles but that drafters had thought
that in order to better organize the statute recreational
vehicles should be included.
Co-Chair Austerman asserted that the addition of the
recreational vehicles created a stumbling block and muddied
the intent.
8:43:27 AM
Representative Wilson expressed her concern that the bill
would result in a loss of revenue.
Ms. Hutchinson responded that the Department of Revenue
(DOR), which had prepared the fiscal note, had noted a
minimal loss of revenue.
Co-Chair Stoltze asked for a projection of the range of
revenue loss.
Representative Wilson noted that the regulation had just
been changed, which had seemed to have cleared up any
misinterpretation of the statute. She maintained her
concern that if the bill passed the revenue loss to the
state would be significant.
8:45:35 AM
AT EASE
8:45:55 AM
RECONVENED
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON, thought
that the committee would have a greater understanding as to
why the bill existed if they listened to some public and
invited testimony. She said that she had worked for months
with the department in trying to craft and agreeable bill.
Co-Chair Stoltze agreed.
Co-Chair Stoltze OPENED public testimony.
8:48:12 AM
SAM ROBERT BRICE, BRICE COMPANIES, FAIRBANKS (via
teleconference), testified in support of the bill. He
stated that most of his company's vehicle rental use was on
the North Slope by producers and support companies on
private roads. He said that his facility was on a public
road at the end of the Dalton Highway, but 99 percent of
the rental activity of the vehicles was on the private oil
field roads. He relayed that often the length of the rental
term was unknown. He said that his company's liability went
back to 2010, the first year of light vehicle rental, they
paid $31,000 as not to incur further penalties. He believed
that the bill helped clarify the intent of the statue. He
thought that there was more work to be done with DOR so
that all parties were clear as to what was applicable to
the rental tax.
8:50:47 AM
Co-Chair Austerman asked whether the testifier's company
rented recreational vehicles. Mr. Brice replied no. Co-
Chair Austerman asked whether he had an opinion on
recreational vehicles being added to the bill. Mr. Brice
shared that his company mainly rented half-ton pick-ups
that were used on private roads.
8:51:26 AM
Co-Chair Stoltze asked if the recreational vehicles had
been added because they are one of two types of vehicles
taxed under current law.
Ms. Pierson replied yes. She noted that the recreational
vehicle rental fee was 3 percent.
Representative Costello asked how much back taxes were owed
to the state by Mr. Brice.
Mr. Brice replied that the amount was not disclosed. All
light vehicle rentals rented for less than 90 days would be
applicable. He stated that he went back and researched his
record in order to come up with the $31,000 of liability,
which the company had not collected because they had been
unaware that they were expected to collect the tax.
8:52:57 AM
Representative Gara asked whether Mr. Brice's business
would be effected if the exemption taxed rentals longer
than a 40 day period.
Mr. Brice replied that the days of rental were not as
important as was the interpretation concerning what kind of
vehicles met the requirement for vehicles that fell under
the tax. He reiterated that often the duration of the
vehicle rental was unknown until it was returned to the
business.
8:54:10 AM
RYAN PETERKIN, MAGTEC ALASKA, KENAI (via teleconference),
testified in support of the bill. He noted that he first
learned about the tax in 2013 when a criminal investigator
from DOR, accompanied by an armed enforcement officer,
arrived at his place of business at Prudhoe Bay and
informed him that he had been committing an enforceable,
criminal crime by not charging the vehicle rental tax. He
asserted that the department had not contacted him prior
about the tax and that, to that point, he had never known
of the tax. He stated if any of the vehicle rental
businesses on the slope had been charging the tax it would
have major competition between rental companies, which was
not the case. He said that he contacted the department in
an effort to correctly understand the tax code in order to
immediately implement the collection of the tax. He opined
that going through the process he found it difficult to
deal with the vagueness and lack of clarification from DOR
on the exemptions on the tax statute and regulations. He
listed several exemptions that needed clarification.
8:59:32 AM
Co-Chair Austerman asked if he rented recreational
vehicles.
Mr. Peterkin replied no.
9:00:08 AM
RUDI VONIMHOF, PRESIDENT, DELTA LEASING, ANCHORAGE,
testified in support of the legislation. The primary office
was located in Prudhoe Bay. He discussed communications
with DOR in 2010, which consisted of two letters explaining
that he did not feel that the tax applied to his customers
for various reasons. He stated that he sent the letters,
along with his leases, to the department and received no
reply. He relayed that the following interaction with DOR
included a raid by armed enforcement agents who confiscated
70 cases of paper files and company computers. He stated
that his company remained under investigation for
nonpayment of the vehicle rental tax. He stated that his
company cooperated with the department. He paid all back-
taxes even though they were never collected. He asserted
that no other equipment vendors on the slope had collected
the tax and he wished to clarify the issue with the
department. He believed that there was a disagreement on
whether Prudhoe Bay roads were considered public right-of-
way. He pointed out the negative impact on his business and
thought that the language in the bill would clarify the
exemptions.
9:09:59 AM
Co-Chair Austerman asked if he rented recreation vehicles.
Mr. Vonimhof replied no.
Representative Costello asked the amount he owed in back
taxes.
Mr. Vonimhof replied no. She stated that he wrote a check
in December 2012 for $13 thousand for three years of
pervious taxes that could potentially be applicable.
9:12:27 AM
DOUG JOHNSON, CFO, TYLER RENTAL (via teleconference),
testified in support of the bill. He stated that the rental
contracts were exempt from the current law because the
vehicles were never driven on the state highway. He
asserted that he had never received notice of the tax. He
shared that he had paid the tax with a protest. He hoped
that when the department responded back the issue would
simply be an audit issue. He did not believe that the
department should go after private companies. He thought
that the 28 days should remain in the legislation. He
relayed that he did not advertise to the tourist trade and
did not rent recreational vehicles.
9:16:08 AM
Co-Chair Stoltze CLOSED public testimony.
ANGELA RODELL, COMMISSIONER, DEPARTMENT OF REVENUE,
believed the bill recognized that taxes were to be applied
fairly and equitably and without discrimination. She said
that discussing the tax meant talking about the definitions
of: what is a passenger vehicle rental, what is a truck (if
done by weight), what is a sports utility vehicle (if done
by mileage) how will rentals in small communities be
effected, rental terms, and private roads versus public.
She believed that the current version of the bill was the
fairest and most complete that had been drafted. She
relayed that the department was unsure of the impact the
legislation would have on the state, but felt it would be
minimal.
9:19:36 AM
MICHAEL BARBER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, commented on the first two sentences of the letter of
intent drafted by the sponsor:
It is the intent of the Senate Finance Committee that
the passenger vehicle rental tax described in SB 178,
including the original law and the changes made by the
committee substitute, should not be applied to Alaskan
businesses doing business with other Alaskan
businesses.
The Department of Revenue (DOR) should not apply the
tax retroactively to businesses it determines should
be, or should have been, collecting the tax. However,
if DOR is able to determine a business collected the
tax but did not remit the tax to DOR, then DOR should
charge back taxes, penalties and/or interest on those
unpaid taxes.
Mr. Barber explained that the first sentence suggested that
Alaskan businesses in general were exempt from the tax,
which was not the case. He clarified that there was not
express exemption in current statute for Alaskan
businesses, and while Alaskan businesses were the primary
beneficiaries of the changes proposed in the bill, the
legislation would not create an exemption for Alaskan
businesses. He stated that if the intent was to exempt all
Alaskan businesses then it needed to be written into the
bill; however, he expressed serious concern that such an
action would violate the Dormant Commerce Clause of the
United States Constitution.
Co-Chair Stoltze asked whether the letter had been adopted
by the Senate. He noted that it appeared informal as it was
not on letterhead, which was unusual.
Mr. Barber understood that the letter had been attached to
the bill that was moved out of the Senate.
Representative Holmes asked whether the letter of intent
was attached to the bill that had passed on the Senate
Floor.
Mr. Barber replied in the affirmative.
Co-Chair Stoltze requested the record and the journal
minutes pertaining to the meeting where the bill was
passed.
9:23:12 AM
Representative Wilson asked if by changing the number of
rental days to 28, the original intent of the bill would be
honored.
Commissioner Rodell responded yes.
Representative Wilson asked if the lease went to a month-
to-month, rather than yearly, would the tax problem be
solved.
Commissioner Rodell replied that the bill did not change
the time range of the rentals, but that the department had
begun making changes including extensions of the original
contracts would be included in the time period of the
original contract. She said that the process had stopped
while the bill was in motion because it referenced the 90
days in the original legislation. She said that if the bill
were to pass the regulations would be amended to reflect
that any extensions of an original contract would be
included in the contract period for counting vehicle rental
tax exemptions.
9:25:01 AM
Co-Chair Austerman understood that if a recreational
vehicle was rented for more than 28 days then the tax would
not be implemented. He surmised that the objective of the
bill was to not impose the tax on businesses on the North
Slope that did not frequently use public roads. He
maintained confusion as to why recreational vehicles were
included in the legislation.
Commissioner Rodell believed that the recreation vehicle
exemption already applied to the 90 days, so it was rolled
into the new exemption in order to avoid creating two
separate exemptions. She said that this created an
administrative ease for DOR in terms of application.
Co-Chair Austerman understood that it would apply to a
vehicle rented at an airport that was driven for 28 days.
Commissioner Rodell replied yes.
Co-Chair Austerman said that the issue made it difficult
for him to support the bill.
9:27:28 AM
Representative Gara asked whether Mr. Barber was prepared
to speak to the possibility that the letter of intent could
unconstitutional in discriminating against non-Alaskan
businesses.
Mr. Barber clarified that not all Alaska businesses were
exempt from the tax, but had to meet exemptions currently
in statute. He said that an exemption for Alaskan
businesses would be facially discriminatory against
interstate commerce and would be subject to a high level of
scrutiny. He believed that the letter of intent would not
be applied unconstitutionally.
Representative Gara surmised that passing the letter would
not open the door for the bill to be attacked on
constitutional grounds.
Mr. Barber suggested that clarifying the letter of intent
would be beneficial before the bill's passage.
9:29:48 AM
Representative Munoz discussed the 10 percent charge on
passenger vehicles and the 3 percent charge on recreational
vehicles. She wondered what the overall revenue was for the
two taxes.
Commissioner Rodell replied that the total tax revenue was
approximately $8 million for FY13.
Representative Munoz asked if most of the revenue was from
recreational vehicles.
Commissioner Rodell replied that she did not know.
9:30:30 AM
Representative Munoz asked whether removing references in
the code to the passenger tax had been considered.
Commissioner Rodell replied no. She said that different
ways of more narrowly defining a passenger vehicle had been
discussed, but that the issue quickly became complicated.
Representative Munoz thought that the confusion surrounded
the utility vehicles and those used on the North Slope. She
thought that if reference from the passenger vehicle tax
could be removed in statute it would speak to the original
intent of the tax.
Co-Chair Stoltze thought that the department could look to
the hospitality industry for ways to set clearly demarcated
taxes. He requested further background from the department
concerning the collection of the tax.
9:32:57 AM
Commissioner Rodell replied that the department would
enforce the statutes as drafted. She stated that when the
department received information that individuals or
companies were not in compliance, investigation and
auditing was necessary. She stated that the mission of the
Department of Revenue was to collect taxes. She asserted
that businesses owners were responsible for knowing the
laws that governed the business. She felt that there had
been confusion regarding the tax passed in 2004.
9:35:20 AM
Co-Chair Austerman believed that the intention was to save
businesses money on certain things. He asked about simply
implementing an exemption strictly for oil or gas
development.
Commissioner Rodell replied no. She noted that the
department was relying on rental companies to collect the
tax on behalf of the state; the taxpayer was the individual
or company renting the vehicle. She asserted that it was
important to recognize the impositions that would be placed
on companies to guarantee that the audit was being
collected correctly.
9:36:54 AM
Co-Chair Stoltze asked for emails and notifications letters
that had been sent to companies in 2003 and 2004 for the
public record.
Commissioner Rodell agreed to provide the information.
CSSB 178(FIN) was HEARD and HELD in committee for further
consideration.
9:38:01 AM
AT EASE
9:40:03 AM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 178 Amendment #1 Gara.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 178 |
| SB169 Vax Assess Fund diagram.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 169 |
| SB169PayerPyramid_15Apr2014.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 169 |
| SB169 without it.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 169 |
| Marks SB 138 Gara Response 041514.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 138 |
| SB 138 4.16.14 Presentation HFIN Edgmon Question.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 138 |
| SB 138 4.16.14 Resource Reports Required by Appendix A to Part 380 of FERC Regulations.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 138 |
| SB 138 enalytica - response to Rep Gara.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 138 |