Legislature(2021 - 2022)ADAMS 519

05/13/2021 01:30 PM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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Heard & Held
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-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved SB 55 Out of Committee
<Companion Bill to HB 75>
                  HOUSE FINANCE COMMITTEE                                                                                       
                       May 13, 2021                                                                                             
                         3:15 p.m.                                                                                              
3:15:13 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Merrick called the  House Finance Committee meeting                                                                    
to order at 3:15 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Kelly Merrick, Co-Chair                                                                                          
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Bryce Edgmon                                                                                                     
Representative DeLena Johnson                                                                                                   
Representative Andy Josephson                                                                                                   
Representative Bart LeBon                                                                                                       
Representative Sara Rasmussen                                                                                                   
Representative Steve Thompson                                                                                                   
Representative Adam Wool                                                                                                        
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative  Adam Wool,  Sponsor; Ashley  Carrick, Staff,                                                                    
Representative  Wool; Neil  Steininger, Director,  Office of                                                                    
Management and Budget, Office of the Governor.                                                                                  
PRESENT VIA TELECONFERENCE                                                                                                    
Rose Feliciano, Internet  Association, Seattle, WA; Benjamin                                                                    
Palmer,  Enterprise  Holdings,  California; Mark  Ha,  Self,                                                                    
Anchorage;  Sean  Vinck,  Senior  Counsel,  Turo  Inc.,  San                                                                    
Francisco, California;  Carl Szabo, NET  Choice, Washington,                                                                    
DC;   Nicole  Reynolds,   Deputy  Director,   Tax  Division,                                                                    
Department  of  Revenue;  Jeffrey  Schmitz,  Director,  DMV,                                                                    
HB 90     VEHICLE RENTALS & VEHICLE RENTAL NETWORKS                                                                             
          HB 90 was HEARD and HELD in committee for further                                                                     
SB 55     EMPLOYER CONTRIBUTIONS TO PERS                                                                                        
          SB 55 was REPORTED out of committee with a "do                                                                        
          pass" recommendation and with                                                                                         
Co-Chair Merrick reviewed the agenda for the meeting.                                                                           
HOUSE BILL NO. 90                                                                                                             
     "An  Act  relating  to  rental  vehicles;  relating  to                                                                    
     vehicle  rental  networks;  relating to  liability  for                                                                    
     vehicle rental  taxes; and  providing for  an effective                                                                    
3:15:58 PM                                                                                                                    
REPRESENTATIVE ADAM  WOOL, SPONSOR, introduced the  bill. He                                                                    
reported  that  the  bill  endeavored   to  apply  the  same                                                                    
statewide  vehicle rental  tax that  was currently  in place                                                                    
for rental cars and apply it  to peer to peer vehicle rental                                                                    
networks.  Turo was  only one  of many  peer to  peer rental                                                                    
companies. He  explained how a  peer to peer  rental worked.                                                                    
When  a  private individual  wished  to  rent their  car  to                                                                    
another  individual the  person used  a technology  platform                                                                    
that listed your car on the  internet via an app. The renter                                                                    
paid through the app and  the vehicle owner received a share                                                                    
of the rental  charge from the app  company. The legislation                                                                    
added a  tax to  the rental charge.  The person  renting the                                                                    
car paid the tax. He described  it as  a level playing field                                                                    
bill   that  treated  all rental  companies  the  same.  The                                                                    
Municipality  of  Anchorage  recently passed  a  law  adding                                                                    
vehicle  rental  network  tax   to  its  existing  municipal                                                                    
vehicle rental  tax of  8 percent. He  added that  the state                                                                    
rental tax  was 10  percent. The bill  would apply  the same                                                                    
tax for the  state. He indicated that the  tax structure was                                                                    
like Airbnb.  The Airbnb owner had  to pay a bed  tax to the                                                                    
municipality and the person renting  the room had to pay the                                                                    
tax. He noted  that there was no statewide  bed tax. Someone                                                                    
ride sharing  through Uber  had to  pay municipal  sales tax                                                                    
that was  passed on to the  rider, the same as  via taxicab.                                                                    
He reported  that 29 states  taxed vehicle  rental networks.                                                                    
He emphasized  that Turo or  other networks did not  pay the                                                                    
tax,  the person  who rented  the vehicle  paid the  tax. He                                                                    
spoke  of  friends  he  knew   in  Fairbanks  who  purchased                                                                    
multiple cars in  order to rent them  privately through Turo                                                                    
or other  entities. The individuals  were operating  a small                                                                    
car  rental  outfit  and   making  significant  profits.  He                                                                    
relayed that currently  there was a rental  car shortage and                                                                    
over half of  the 14 Turo listings he  observed in Anchorage                                                                    
were from owners listing multiple  cars. He considered those                                                                    
scenarios  businesses  and  believed that  taxes  should  be                                                                    
paid. He  emphasized that  HB 90  created equity;  since the                                                                    
state  had a  vehicle rental  tax  the state  should have  a                                                                    
statewide peer to peer rental tax.                                                                                              
3:21:59 PM                                                                                                                    
Representative  Josephson noted  Representative Wool  stated                                                                    
there were 14 cars listed  on Turo in Anchorage. He wondered                                                                    
how the state vehicle rental tax  would increase by 10 to 30                                                                    
percent   with  such   a   small   selection  of   vehicles.                                                                    
Representative Wool  indicated his statistics were  based on                                                                    
a one day snapshot; a  more thorough analysis was necessary.                                                                    
He elaborated that  there had been a  previous testifier who                                                                    
thought  there  were hundreds  of  cars  listed on  Turo  in                                                                    
Alaska. Representative Josephson cited  Anchorage's tax of 8                                                                    
percent for  vehicle rentals and  the bill added  10 percent                                                                    
that  made the  total  tax 18  percent. Representative  Wool                                                                    
responded that  currently the state  vehicle rental  tax was                                                                    
10 percent and Anchorages was  8 percent. He calculated that                                                                    
currently a  person who rented  from a company such  as Avis                                                                    
in  the city  of Anchorage  was  paying 18  percent in  tax.                                                                    
However, the same individual currently  renting from Turo in                                                                    
Anchorage only  paid the 8  percent municipal tax.  He noted                                                                    
that Wasilla had no vehicle  rental tax, therefore, no taxes                                                                    
were paid.                                                                                                                      
3:24:26 PM                                                                                                                    
Representative Josephson  stated that  he  was in  the happy                                                                    
position  of being  totally  indifferent  to the  industry.                                                                     
However, he wondered what effect  the bill would have on the                                                                    
network  business  model. Representative  Wool  hypothesized                                                                    
that if a  vehicle was rented for $100 HB  90 added $10, the                                                                    
bill to the  customer was $110. He reiterated  that the bill                                                                    
places  private  vehicle rentals  on  a  more level  playing                                                                    
fields as  traditional vehicle rentals. Ultimately,  it made                                                                    
the  rental rate  equal. Representative  Josephson indicated                                                                    
he  used Airbnb  to save  money. He  thought the  bill could                                                                    
discourage   someone  from   renting  from   vehicle  rental                                                                    
networks.  Representative Wool  argued  that  the Turo  cars                                                                    
were  likely rented  at market  rates, and  he doubted  that                                                                    
Turo  cars were  necessarily less  expensive. He  added that                                                                    
the  model did  not employ  people  and there  were not  the                                                                    
added  expenses such  as the  traditional  brick and  mortar                                                                    
business.  He guessed  that the  vehicle network  user could                                                                    
absorb the  10 percent tax  and lower the rate  slightly. He                                                                    
supposed it was  similar to Airbnb where  some listings were                                                                    
cheaper than  hotels and  some were  more expensive.  He had                                                                    
not done a full analysis of the industry.                                                                                       
Co-Chair Merrick  noted Representative LeBon had  joined the                                                                    
3:27:33 PM                                                                                                                    
Representative  Rasmussen  shared information  she  received                                                                    
from  a vehicle  rental  network company.  She relayed  that                                                                    
 individual  residents of  Alaska choose  to make  their car                                                                    
available  through  a  platform  and  these  hosts  pay  all                                                                    
associated costs  for the maintenance of  their vehicle, the                                                                    
platform does  provide liability  when the vehicle  is being                                                                    
shared.   She  thought  that the  big  difference  was  that                                                                    
individual Alaskans  were not AVIS  or Hertz. She  had heard                                                                    
from a constituent  who used the platform that  $10 made all                                                                    
the difference  in terms  of buying  diapers and  baby food.                                                                    
She  believed that   taking 10  percent  made  a difference.                                                                    
She determined  that the business  model was  different from                                                                    
that   of   rental   car  companies.   Representative   Wool                                                                    
reiterated  that the  customer  paid the  tax,  not the  mom                                                                    
purchasing  diapers. He  stressed that  many people  renting                                                                    
vehicles  through the  Turo app  had  multiple vehicles  and                                                                    
were not mom  and pop scenarios that used it  to pay housing                                                                    
costs. In  fact, in  order to  be on Turo,  a person  had to                                                                    
have  a  nice  car,  in   good  condition  and  many  people                                                                    
purchased cars solely  to lease through Turo.  The tax would                                                                    
be  the onus  of the  renter rather  than the  owner of  the                                                                    
vehicle.   He   reminded   Representative   Rasmussen   that                                                                    
Anchorage  had  already  implemented  an 8  percent  tax  on                                                                    
network  rentals.  Representative Rasmussen  understood  the                                                                    
renter  ultimately paid  the tax.  She deemed  that for  the                                                                    
private  folks to  compete, it  may  mean that  they had  to                                                                    
lower the price  due to the additional tax.  She argued that                                                                    
it would be unfortunate if  the legislature did not consider                                                                    
the unintended consequences.                                                                                                    
Representative Wool  voiced that several questions  would be                                                                    
answered by  the presentation. He suggested  that a business                                                                    
model of  a privately  owned vehicle  was less  onerous than                                                                    
the  business  model of  an  established  company with  many                                                                    
3:31:55 PM                                                                                                                    
Representative  Thompson  had  some  of  the  same  concerns                                                                    
presented  by  Representative  Rasmussen.  He  had  received                                                                    
several  calls concluding  that  the bill  was  a poor  idea                                                                    
during the period of recovery  [from the COVID 19 pandemic].                                                                    
He thought  the bill  would presently  hurt the  economy and                                                                    
suggested  it would  be  better to  consider  the bill  next                                                                    
Representative Carpenter  understood the  fairness argument.                                                                    
He thought the  traditional vehicle rental car  tax could be                                                                    
adjusted to the same rate as the network tax.                                                                                   
3:33:16 PM                                                                                                                    
ASHLEY CARRICK,  STAFF, REPRESENTATIVE WOOL,  introduced the                                                                    
PowerPoint  presentation:  "HB 90:  Private  Vehicle  Rental                                                                    
Networks."  She  suggested that  some  of  the slides  would                                                                    
clarify some  of the  points brought  up in  the discussion.                                                                    
She began with slide 2: "Definitions:"                                                                                          
     Vehicle Rental Business:                                                                                                   
          Traditional car rental OR Peer-to-Peer Rental                                                                         
          Examples: Alamo, Enterprise, Turo, Getaround,                                                                         
     Vehicle Rental Business:                                                                                                   
          Digital   network   including  the   applications,                                                                    
          software, or  system offered  by a  vehicle rental                                                                    
          business Examples:  The app  used to  rent through                                                                    
3:34:14 PM                                                                                                                    
Ms. Carrick reviewed  slide 3 titled  States  Where DOR Have                                                                    
Determined  Vehicle  Rental  Networks to  Be  Taxable.   She                                                                    
delineated that  the map portrayed  the 16  States including                                                                    
Alaska  that   had  a  Department   of  Revenue   which  had                                                                    
determined Vehicle  Rental Network businesses  were taxable.                                                                    
The   Walker  Administration   had   a  position   statement                                                                    
regarding  the topic,  but the  Dunleavy Administration  did                                                                    
not. The  sponsor requested a  legal opinion on  whether the                                                                    
states   current  vehicle rental  tax  could  be applied  to                                                                    
rental networks.  She relayed that  the opinion  stated that                                                                    
the  current statute  was broad  enough to  apply to  rental                                                                    
networks. However,  the sponsor felt that  the bill provided                                                                    
a more  definitive statute. She  reported that  an ordinance                                                                    
in Anchorage had  applied a tax on peer to  peer car rentals                                                                    
that    was   8    percent   on    both   vehicle    rentals                                                                    
and  network  rentals  and  added a  new  definition  for  a                                                                    
 hosting platform.                                                                                                              
3:35:51 PM                                                                                                                    
Ms.  Carrick  continued  to slide  4  titled   States  Where                                                                    
Vehicle  Rental  Networks  are   Collecting  Tax.   The  map                                                                    
depicted the  29 states currently  applying rental  taxes to                                                                    
vehicle  rental  networks.   She  reiterated  that  Alaskas                                                                     
current tax rates were 10  percent for vehicle rentals and 3                                                                    
percent  for   Recreational  Vehicles   (RV).  Historically,                                                                    
vehicle rental  tax revenue  was approximately  $10 million,                                                                    
which  could increase  10  percent to  30  percent with  the                                                                    
addition of vehicle rental networks.  She explained that the                                                                    
10 to 30 percent estimate was  a rough estimate based on the                                                                    
number of  network platform  vehicle rentals  available. She                                                                    
revealed  that  in 2018,  the  Department  of Revenue  (DOR)                                                                    
under  the Walker  Administration, filed  a lawsuit  against                                                                    
Turo  because   it  refused   to  provide   any  information                                                                    
regarding the amount  of business it conducted  in the state                                                                    
or the  vehicle owners who  used to platform to  collect the                                                                    
tax. Therefore,  the tax estimate  was rough. The  state did                                                                    
not  currently know  how many  people  were renting  through                                                                    
platforms and how much income they made in the state.                                                                           
3:37:48 PM                                                                                                                    
Co-Chair Merrick noted Representative  Edgmon had joined the                                                                    
Ms.  Carrick spoke  to Slide  5 titled   Different Standards                                                                    
for The  Same Model.  She  pointed out that  traditional car                                                                    
rental  and peer  to  peer networks  had  the same  business                                                                    
model with  different tax burdens and  were not contributing                                                                    
to  Alaskas   economy  similarly. She  noted  that  networks                                                                    
rented  vehicles  and  provided insurance  protection.  They                                                                    
sold  ancillary products  such as  GPS and  child seats  and                                                                    
both had app  based technology. She reiterated  that the tax                                                                    
applied  to the  person  renting the  vehicle. The  business                                                                    
model  aligned  with  other  app-based  industries  such  as                                                                    
Airbnb and Uber. All app-based  companies employed a similar                                                                    
argument when  voicing opposition  to being  taxed. However,                                                                    
peer  to  peer  (P2P)  networks were  clearly  operating  in                                                                    
Alaska,  despite having  headquarters  in  other states  and                                                                    
were profiting  off Alaskans.  Additionally, she  obtained a                                                                    
legal opinion stating  that the networks were  liable to pay                                                                    
a vehicle rental tax.                                                                                                           
3:40:00 PM                                                                                                                    
Representative LeBon offered  a hypothetical situation where                                                                    
someone leased a vehicle to a  bed and breakfast owner for a                                                                    
daily  flat-rate.  He  asked  if  any  tax  applied  to  the                                                                    
3:41:00 PM                                                                                                                    
Representative  Wool stated  that he  was not  a lawyer.  He                                                                    
noted that  state law  indicated that if  a person  rented a                                                                    
vehicle for  any reason,  they were liable  for the  tax. He                                                                    
suggested that  if a  person was  making money  from someone                                                                    
else using  a person's car  it would be considered  a rental                                                                    
business.  He  elucidated  that  the  state  had  a  similar                                                                    
problem with Uber;  technically the users were  liable for a                                                                    
tax,  but it  was difficult  to  find the  users. The  state                                                                    
requested  the information  from Uber  who declined,  so the                                                                    
only way  to collect the tax  was to tax Uber.  He discussed                                                                    
the fairness issue.  He reported that Airbnb  was not exempt                                                                    
and paid a bed tax.  Airbnbs  were still less expensive than                                                                    
hotels and  the Airbnb  rental owners were  able to  pay the                                                                    
tax and remain  solvent. He shared that he  had many friends                                                                    
that rented out  their home or cabin in  Fairbanks, paid the                                                                    
bed  tax  and were  still  profitable.  He added  that  many                                                                    
communities were taxing online  sales and it  saved  several                                                                    
communities during  the pandemic. Online  shopping increased                                                                    
with people staying at home  and the revenue gained with the                                                                    
online sales  tax helped many  local economies.  He compared                                                                    
the  vehicle network  tax to  the examples  he provided  and                                                                    
asserted that the tax was   not punishing anyone.  He argued                                                                    
that whoever  was renting  their car  and applied  the state                                                                    
sales tax could remain in business.                                                                                             
Representative LeBon supposed that  if the Bed and Breakfast                                                                    
included  the vehicle  use built  into  the business  model,                                                                    
then tax would  be collected indirectly through  the bed tax                                                                    
on the vehicle.                                                                                                                 
3:44:17 PM                                                                                                                    
Representative Thompson  was aware that the  states  current                                                                    
car rental tax was adopted  in the late 1980s  and contained                                                                    
a  provision that  the  revenues would  be  used to  promote                                                                    
tourism.  He wondered  if the  current legislation  would do                                                                    
the  same.   Representative  Wool  responded  that   such  a                                                                    
provision would be decided by the committee.                                                                                    
3:45:23 PM                                                                                                                    
Representative  Josephson asked  if DOR  took a  position on                                                                    
whether  the vehicle  rental networks  should be  taxed. Ms.                                                                    
Carrick  answered that  the current  administration did  not                                                                    
hold a  position regarding  taxing vehicle  rental networks.                                                                    
She  reiterated  that  the  prior  administration  held  the                                                                    
position that the  networks should be taxed.  She noted that                                                                    
the legislative  legal opinion  did indicate  that companies                                                                    
like  Turo   should  hold   an  Alaskan   business  license.                                                                    
Representative Josephson  deduced that  under the  bill  the                                                                    
networks would have to essentially  play ball  and  could no                                                                    
longer declare not knowing who  their subscribers were.  Ms.                                                                    
Carrick  offered  that HB  90  added  clarity or   teeth  to                                                                    
statute that  already existed  that vehicle  rental networks                                                                    
were obligated to pay the tax.                                                                                                  
3:47:10 PM                                                                                                                    
Co-Chair Merrick OPENED public testimony.                                                                                       
ROSE  FELICIANO,  INTERNET  ASSOCIATION,  SEATTLE,  WA  (via                                                                    
teleconference),  opposed   HB  90.  She  shared   that  she                                                                    
represented  over  40  of  worlds   leading  internet  based                                                                    
companies. She  voiced that peer  to peer car sharing  was a                                                                    
different  business model  from  rental  car companies.  The                                                                    
platform did  not own the  vehicles and the cars  were owned                                                                    
by   individuals  who   used   the   platform.  There   were                                                                    
individuals who were  able to purchase two  cars to generate                                                                    
income. She  was unsure why  Representative Wool  would want                                                                    
to impose a  tax on a service that   bolstered tourism.  She                                                                    
hoped peer to peer car rentals  would help fill the gap left                                                                    
by  the current  car rental  shortage. She  opined that  the                                                                    
bill would make it impossible  for  hosts  to offer cars and                                                                    
would    hurt  tourism.    She   questioned   some  of   the                                                                    
information in the sponsors   presentation. She relayed that                                                                    
if  a state  had  a sales  tax, the  peer  to peer  platform                                                                    
charged  a   sales  tax  on  every   transaction.  She  felt                                                                    
disappointed that  the peer  to peer  companies had  not had                                                                    
the chance to provide input on the legislation.                                                                                 
Co-Chair Merrick  deduced that if  all the rental  cars were                                                                    
taken, Turo  would be a  good second  choice and due  to the                                                                    
lack  of  rental  cars  the business  would  go  to  vehicle                                                                    
network rentals.  Ms. Feliciano  agreed with  the statement.                                                                    
She added that traditional  vehicle rentals had restrictions                                                                    
on use and peer to peer rentals did not.                                                                                        
3:51:28 PM                                                                                                                    
BENJAMIN  PALMER,   ENTERPRISE  HOLDINGS,   CALIFORNIA  (via                                                                    
teleconference),  spoke in  support of  the bill.  He shared                                                                    
that the company  was a privately held  family owned company                                                                    
with the  Enterprise/Alamo national  brands and  operated in                                                                    
Alaska  since 1989.  He  voiced that  HB  90 clarified  that                                                                    
Alaskas   rental car  tax applied  to rentals  regardless of                                                                    
how they  were rented. The  tax was  paid by the  renter and                                                                    
was  something all  customers in  Alaska should  expect when                                                                    
renting  a  car. The  legislation  created  a level  playing                                                                    
field and  ensured that the  states  general fund  would not                                                                    
loose income from network transactions.                                                                                         
3:52:37 PM                                                                                                                    
MARK  HA, SELF,  ANCHORAGE  (via teleconference),  testified                                                                    
against  the bill.  He was  in the  Airbnb business  but was                                                                    
speaking  on behalf  of  his friend  who  rented their  cars                                                                    
privately through  Turo to earn  extra income.  He suggested                                                                    
that rental  companies had other opportunities  to lower the                                                                    
costs of doing business including  tax breaks. He viewed the                                                                    
bill as  an opportunity for  industry to take a  few dollars                                                                    
 from a guy's back pocket.                                                                                                      
3:54:37 PM                                                                                                                    
SEAN  VINCK,  SENIOR  COUNSEL,  TURO  INC.,  SAN  FRANCISCO,                                                                    
CALIFORNIA (via  teleconference), spoke in opposition  to HB
90. He listed 9 states  that enacted statutes governing peer                                                                    
to peer  car sharing but did  not tax them. He  relayed that                                                                    
there  were states  that applied  a separate  and lower  tax                                                                    
rate for  peer to  peer car  sharing versus  traditional car                                                                    
rentals. He emphasized they were  2 separate industries with                                                                    
 dramatically  different business  models.  He  also pointed                                                                    
out  that  the need  for  the  legislation proved  that  the                                                                    
current vehicle rental tax statute  did not apply to peer to                                                                    
peer rentals.  He argued that  rather than  clarify statute,                                                                    
HB 90 promoted ambiguity and  confusion because it failed to                                                                    
address  a basic  question regarding  whether  peer to  peer                                                                    
rentals were  the equivalent of a   multinational rental car                                                                    
company.  He believed  that the bill did  nothing to provide                                                                    
clarification to his point.                                                                                                     
3:57:13 PM                                                                                                                    
Representative  Josephson asked  Mr. Vinck  about the  taxes                                                                    
that did apply to peer to  peer rentals in other states. Mr.                                                                    
Vinck  maintained that  the  mentioned  states enacted  laws                                                                    
that exempted  vehicle networks from rental  taxes. However,                                                                    
many of the states applied sales  and use taxes, but the tax                                                                    
under   discussion  was   an  industry   specific  tax.   He                                                                    
characterized it as  a  rental car excise  tax.  He stressed                                                                    
that  his point  was  the  states listed  found  it was  not                                                                    
appropriate   public  policy   to  apply   the  exact   same                                                                    
transactional tax as traditional car rentals.                                                                                   
3:58:09 PM                                                                                                                    
Representative Josephson  commented that he cited  the slide                                                                    
that stated  that 29 states  currently had a tax  on vehicle                                                                    
rental networks.                                                                                                                
3:58:29 PM                                                                                                                    
Representative  Wool  asked  whether   Turo  had  an  active                                                                    
corporate  business  license  in Alaska  assuming  Turo  had                                                                    
clients in  the state. Mr.  Vinck answered in  the negative.                                                                    
He added that Turo did not  have  clients  but did have both                                                                    
 guest    and   hosts     that   utilized    the   platform.                                                                    
Representative   Wool   acknowledged   the   difference   in                                                                    
semantics and offered that what  Turo called  sharing  a car                                                                    
was considered  renting   a car.  He pointed  out that  if a                                                                    
person came to Alaska and found  a car through the Turo App,                                                                    
paid  money to  rent the  car, the  car owner  received some                                                                    
funds  and   Turo  corporation   received  funds   from  the                                                                    
transaction that  happened in Alaska. He  reasoned that Turo                                                                    
should hold  a business  license in the  state where  it was                                                                    
making money. He asked if  Mr. Vinck thought Turo should not                                                                    
have a  business license in  the state where it  was earning                                                                    
revenue. Mr. Vinck replied that  the issue he was addressing                                                                    
was vehicle rental tax and did not answer the question.                                                                         
4:00:21 PM                                                                                                                    
CARL    SZABO,    NET    CHOICE,   WASHINGTON,    DC    (via                                                                    
teleconference),  spoke in  opposition of  HB 90.  He argued                                                                    
that people  were hurting because  of Covid-19  and believed                                                                    
that  it was  not the right time for any  consideration of a                                                                    
new  tax on  the people  of Anchorage.   He stated  that the                                                                    
state  had  a budget  surplus.  He  offered that  the  slide                                                                    
stating 29  states had a  tax on car sharing  platforms like                                                                    
Turo was   not entirely accurate.   He related that  most of                                                                    
the  states were  applying an  excise tax  and not  a rental                                                                    
tax. He  stated that no  state applied exactly the  same tax                                                                    
to peer  to peer car  rentals as vehicle rentals.  He voiced                                                                    
that rental car companies were  not the same as car sharing.                                                                    
He  indicated that  Enterprise and  Hertz owned  hundreds of                                                                    
cars in  many locations  in the  state and  vehicle networks                                                                    
did not  own any cars.  He reiterated that the  state earned                                                                    
$10  million  annually  from rental  cars.  He  stated  that                                                                    
rental  car  companies  enjoyed  a  $1.9  million   windfall                                                                    
payback   on  line  26  [page   3]  of  the  bill,  "vehicle                                                                    
licensing cost  recovery fee". He indicated  the fee applied                                                                    
to car rental companies but  not to citizens when they share                                                                    
their cars.  He wondered  whether the  tax would  be applied                                                                    
retroactively  if the  bill was  merely  a clarification  of                                                                    
statute. He opined  that it was a new tax  and believed that                                                                    
at present it was wildly inappropriate.                                                                                         
Co-Chair  Merrick  clarified  that   a  budget  surplus  was                                                                    
calculated before a Permanent  Fund Dividend (PFD) was paid.                                                                    
Therefore, if the state paid  a dividend in the current year                                                                    
the state would incur a deficit.                                                                                                
Representative  Josephson was  troubled  when  he heard  Mr.                                                                    
Szabo state  that "it was not  the right time for  a tax. He                                                                    
asked if  Mr. Szabo had  ever testified  in favor of  a tax.                                                                    
Mr. Szabo replied that typically he  was not in favor of new                                                                    
taxes.  He thought  if the  state was  going to  apply taxes                                                                    
fairly  and equally  it should  not apply  the same  vehicle                                                                    
rental tax to  peer to peer rentals. He did  not believe the                                                                    
tax was fair.                                                                                                                   
4:04:58 PM                                                                                                                    
Co-Chair Merrick CLOSED public testimony.                                                                                       
Co-Chair Merrick  indicated the  committee would  review the                                                                    
fiscal notes associated with the bill.                                                                                          
4:05:25 PM                                                                                                                    
NICOLE REYNOLDS,  DEPUTY DIRECTOR, TAX  DIVISION, DEPARTMENT                                                                    
OF   REVENUE   (via   teleconference),  relayed   that   the                                                                    
Department of  Revenue (DOR)  fiscal note  [FN 2  (REV)] was                                                                    
indeterminate. She  relayed that the division  lacked enough                                                                    
reliable data  to estimate the  revenue impact  of expanding                                                                    
the  taxpayer  base. The  division  expected  that the  bill                                                                    
would have a positive effect on revenue.                                                                                        
Co-Chair Merrick inquired whether  the reason for not having                                                                    
enough information was due to  the peer to peer vehicles not                                                                    
disclosing the  information. Ms.  Reynolds responded  in the                                                                    
4:06:31 PM                                                                                                                    
JEFFREY    SCHMITZ,    DIRECTOR,   DMV,    ANCHORAGE    (via                                                                    
teleconference),    relayed   that    the   Department    of                                                                    
Administration  (DOA)  zero  fiscal note  had  no  financial                                                                    
impact for the Division of Motor Vehicles.                                                                                      
4:07:23 PM                                                                                                                    
Representative Wool understood  the  pushback  from internet                                                                    
companies who  wanted to keep the  transactions cheaper than                                                                    
transactions in brick and mortar  businesses. He shared that                                                                    
he had  previously carried a different  bill regarding Uber.                                                                    
He had received  pushback on different aspects  of the bill,                                                                    
yet it was adopted, and  Uber operated in Alaska. He thought                                                                    
that  taxies and  Uber  were not  that  different, nor  were                                                                    
Airbnb  or  Hotels.  He mentioned  that  the  municipalities                                                                    
could  presently   tax  for  internet   sales  as   well  as                                                                    
traditional  sales.   He  voiced   that  they   all  offered                                                                    
essentially the same services and  the same standards should                                                                    
be  applied. He  felt the  same  way about  rental cars  and                                                                    
vehicle  rental   platforms.  He  reiterated  that   it  was                                                                    
essentially  the same  service.  He  addressed the  question                                                                    
whether it  was a good  time to apply  a tax. He  was unsure                                                                    
but noted that no one  was talking about reducing the cruise                                                                    
ship head tax.  He stated that presently  the vehicle rental                                                                    
networks were liable  for the tax, but the state  had no way                                                                    
to collect it. He believed  the vehicle rental tax should be                                                                    
applied  evenly across  the board.  He thought  the peer  to                                                                    
peer  model was   great   and he  would  happily charge  his                                                                    
customer an extra  10 percent tax for the  state. He thought                                                                    
the revenue generation was beneficial.                                                                                          
Co-Chair Merrick  indicated amendments  were due by  6:00 pm                                                                    
on Saturday, May 15, 2021.                                                                                                      
HB  90  was   HEARD  and  HELD  in   committee  for  further                                                                    
SENATE BILL NO. 55                                                                                                            
     "An  Act  relating  to employer  contributions  to  the                                                                    
     Public  Employees'  Retirement  System of  Alaska;  and                                                                    
     providing for an effective date."                                                                                          
4:11:19 PM                                                                                                                    
NEIL STEININGER, DIRECTOR, OFFICE  OF MANAGEMENT AND BUDGET,                                                                    
OFFICE OF  THE GOVERNOR,  thanked the committee  for hearing                                                                    
the bill. He introduced  the PowerPoint presentation: "SB 55                                                                    
-  Employer  Contributions  to PERS."  began  with  slide  2                                                                    
titled HB75 Employer Contributions to PERS:                                                                                     
     Removes  cap  on   Public  Employee  Retirement  System                                                                    
     (PERS)  payroll  contributions  made by  the  State  of                                                                    
     Alaska as an employer.                                                                                                     
     ?  Continues to  fully fund  the state's  obligation to                                                                    
     the PERS system.                                                                                                           
       Applies only to the  State of Alaska, does not impact                                                                    
     other PERS employers.                                                                                                      
    ? Does not impact Teachers Retirement System (TRS).                                                                         
     ? Does not change retiree or active employee benefits.                                                                     
     ? No change to employee contributions.                                                                                     
     ? Does not reduce employer contributions to PERS.                                                                          
     ? Allows for full cost  share with federal programs and                                                                    
     other  sources used  to  fund  state programs,  thereby                                                                    
     reducing general fund expenditures  by $25.7 million in                                                                    
4:13:17 PM                                                                                                                    
Mr. Steininger provided a background of Alaska's retirement                                                                     
obligations on slide 3 titled HB75 Background: Alaska's                                                                         
Retirement Obligations:                                                                                                         
     ? The PERS unfunded liability  was estimated to be $4.6                                                                    
     billion in FY20.                                                                                                           
     ?  Current  annual  cost  to   pay  down  the  unfunded                                                                    
     liability is  split between employer  contributions and                                                                    
     the state assistance payment, or "on-behalf" payment:                                                                      
          O Employer contributions (22%) on employee                                                                            
          salaries mixed fund sources.                                                                                          
          O On-behalf payments for Municipalities and other                                                                     
          PERS employers 100% UGF.                                                                                              
          O On-behalf payment for State of Alaska as an                                                                         
          employer 100% UGF.                                                                                                    
     ? This  bill addresses the on-behalf  payment for State                                                                    
     of Alaska as an employer.                                                                                                  
4:14:37 PM                                                                                                                    
Mr. Steininger continued to slide 4: "State of Alaska PERS                                                                      
On-Behalf Payments:"                                                                                                            
     In  2008, the  legislature established  a uniform  rate                                                                    
     for payroll contributions for all PERS employers 22%.                                                                      
     The State of  Alaska is required to  pay the difference                                                                    
     between capped  employer payroll contributions  and the                                                                    
     full actuarial liability (30.11% in FY22).                                                                                 
     Called the state assistance or "on-behalf" payment.                                                                        
     For  FY22,  the  total  on-behalf payment  to  PERS  is                                                                    
     $193.5m (UGF).                                                                                                             
     $95.7m of  that amount is  made by the state  on behalf                                                                    
     of itself.                                                                                                                 
     The remaining $97.8m is made on behalf of 153 other                                                                        
     active PERS employers.                                                                                                     
He  explained  that  the   other  active  Public  Employees'                                                                    
Retirement System  (PERS) employers were  municipalities and                                                                    
school districts throughout the state.                                                                                          
4:15:57 PM                                                                                                                    
Mr.  Steininger reviewed  slide 5  titled  HB  75  State  of                                                                    
Alaska as  an Employer Retirement Obligation   Current Law.                                                                     
He explained  that currently the state  payroll contribution                                                                    
was  22  percent of  payroll  totaling  $246.3 million.  The                                                                    
state  made   the  $95.8  million  on-behalf   payment  with                                                                    
unrestricted  general  funds  (UGF). The  slide  showed  the                                                                    
breakdown in  types of  funding; Undesignated  General Funds                                                                    
(UGF),  Designated General  Fund (DGF),  Other, and  Federal                                                                    
Receipts. He noted that the  total retirement obligation was                                                                    
$342.2  million,  which  $202  million  or  59  percent  was                                                                    
comprised of UGF.  He examined slide 6 titled  "HB 75  State                                                                    
of Alaska  as an  Employer Retirement Obligation    Proposed                                                                    
Law." He  elucidated that  by uncapping  the 22  percent and                                                                    
allowing  the full  30.11  percent to  be  charged to  state                                                                    
payroll,  the state  still paid  the full  contribution, but                                                                    
the state  could apply the  30.11 percent to the  other fund                                                                    
sources.    Consequently,   eliminating    the   commiserate                                                                    
increases in  UGF that was  apparent on the prior  slide. He                                                                    
pointed out  that under the  proposed law the total  UGF was                                                                    
$176.4 million  or roughly  50 percent  of the  total $349.8                                                                    
million cost, which was a  net reduction of $25.7 million in                                                                    
UGF costs  to meet  the same  obligation. He  qualified that                                                                    
the  $25.7 million  was  only the  savings  realized in  the                                                                    
first  year.  Savings  would  grow   over  time  because  as                                                                    
indirect charges were charged  to federal programs the state                                                                    
had to  provide justifications for the  costs. The different                                                                    
programs  were  on  different schedules  for  providing  the                                                                    
information to  the federal  agencies on  the way  the state                                                                    
charged indirect costs  to the programs. He  added that some                                                                    
federal agencies  would allow the  change in the  first year                                                                    
and  some would  take up  to  three years  to implement  the                                                                    
changes  due  to  the  way the  state  interacted  with  the                                                                    
federal  agencies  to  justify  the  programs   costs.  Some                                                                    
programs  capped  the  amount  charged  to  the  grants  and                                                                    
savings could  not be  realized in  those cases.  He relayed                                                                    
that OMB  analyzed various federal  programs that  the state                                                                    
charged for  payroll and found  that the state  could offset                                                                    
the costs  with UGF to  ensure the programs were  not harmed                                                                    
and still  realized the $25.7  million in savings.  Over the                                                                    
next several  years as state agencies  renegotiated the cost                                                                    
allocation  agreements with  federal  partners, the  savings                                                                    
number will increase in the outyears.                                                                                           
4:19:47 PM                                                                                                                    
Representative  Josephson wanted  to  make sure  that if  an                                                                    
agency received $100 million in  federal matching funds, the                                                                    
service  would  not  be   diminished  because  whatever  the                                                                    
service was  would become  part of  the PERS  liability. Mr.                                                                    
Steininger replied that it was  something that OMB worked on                                                                    
in the production  of the fiscal note. He  explained that if                                                                    
the fixed  grant amount, such  as the $100  million example,                                                                    
could not be adjusted for changes  in costs such as for PERS                                                                    
than  the state  would  not be  able  to collect  additional                                                                    
money  from the  federal  grant. He  furthered  that as  OMB                                                                    
calculated the  fiscal note, it identified  federal programs                                                                    
that had  a fixed dollar  value to  ensure that OMB  was not                                                                    
hampering the ability  to perform the work  under the grant.                                                                    
He delineated  that as  departments identified  fixed dollar                                                                    
programs  OMB  adjusted the  fiscal  note  down because  the                                                                    
federal  receipts could  not  be  collected. Currently,  the                                                                    
full amount  of the costs was  covered by UGF, so  where the                                                                    
costs  could not  be  covered  UGF was  used.  The bill  was                                                                    
necessary to  capture additional federal revenues  on grants                                                                    
that could be increased as costs increased.                                                                                     
4:22:31 PM                                                                                                                    
Representative Josephson  ascertained that there had  been a                                                                    
lost opportunity over  the years and the bill  was trying to                                                                    
capture the opportunity and benefit  from it. Mr. Steininger                                                                    
agreed with the statement.                                                                                                      
4:22:57 PM                                                                                                                    
Mr.  Steininger  continued to  the  spreadsheet  on slide  7                                                                    
titled  HB75: FY 2022 Budget  Impact.  He explained that the                                                                    
provisions shifted  the $100 million cost  from the language                                                                    
section of the operating budget  and moved it into the state                                                                    
personal  services line.  It would  appear as  a $1  million                                                                    
increase in all  funds to state agency  payroll. He conveyed                                                                    
that it was  not an actual increase, it  was simply shifting                                                                    
a cost  from one part  of the  budget to another.  The slide                                                                    
depicted  where the  cost  would apply  in  each agency.  He                                                                    
could  provide   further  detail  by  budget   component  or                                                                    
program.  He  provided  a  handout in  the  bill  file  that                                                                    
provided  more  information  regarding the  offsets  [titled                                                                    
 HB75 FY 2022 Budget Impact Handout A (copy on file)].                                                                          
4:24:46 PM                                                                                                                    
Representative   Josephson  looked   at  slide   7  on   the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED)  line. He  inquired  whether professional  licensing                                                                    
fees would  increase. Mr. Steininger  responded that  it was                                                                    
an  area  in which  fees  would  have  to be  revisited  and                                                                    
possibly recalculated.  It was one area  that the department                                                                    
looked at to determine if  the current fee collections could                                                                    
cover the  related costs of  the program  without adjustment                                                                    
to the fee  or what amount could be  accommodated over time.                                                                    
He assured that  the implementation of the  change would not                                                                    
result in excessive changes to fees.                                                                                            
4:26:14 PM                                                                                                                    
Mr.  Steininger advanced  to  the graph  on  slide 8  titled                                                                    
"Historical PERS Contribution  Rates." The slide illustrated                                                                    
the on-behalf payment or actuarial  rate of the state's PERS                                                                    
contribution. He  elaborated that the on-behalf  portion was                                                                    
the difference between  the blue line at 22  percent and the                                                                    
orange line  representing the actuarial  rate. The  bill was                                                                    
trying to address  the difference between the  two lines. He                                                                    
noted the variability  in the rates and pointed  out that at                                                                    
its peak  the actuarial  rate was  38.4 percent  compared to                                                                    
the  current 30.1  percent. The  on-behalf payment  rose and                                                                    
fell  with  the actuarial  rate  each  year.  If SB  55  was                                                                    
enacted, some  of the  variable amount  would be  moved into                                                                    
the  personal service  line of  the  state agency  operating                                                                    
budget. He  alerted the committee  that in future  years the                                                                    
committee would  encounter salary adjustment  change records                                                                    
to  accommodate the  variability. It  would simply  shift to                                                                    
agency  operations  versus  the   language  section  of  the                                                                    
operating budget.                                                                                                               
4:28:08 PM                                                                                                                    
Representative Wool  asked about the on-behalf  payment made                                                                    
by the state.  He wondered if the bill  would alter anything                                                                    
for  the  municipalities.  Mr. Steininger  answered  in  the                                                                    
negative. He  indicated that  OMB limited  the focus  of the                                                                    
bill  to  where  there  was  a  benefit  to  the  state.  He                                                                    
clarified that there  was a benefit to the state  but not to                                                                    
the   municipalities.   Representative  Wool   thanked   Mr.                                                                    
Steininger for the clarification.                                                                                               
4:29:28 PM                                                                                                                    
Co-Chair Merrick OPENED public testimony.                                                                                       
4:29:36 PM                                                                                                                    
Co-Chair Merrick CLOSED public testimony.                                                                                       
Co-Chair Merrick asked Mr. Steininger  to address the fiscal                                                                    
Mr.   Steininger   indicated    that   the   Department   of                                                                    
Administration fiscal note [FN 5  (ADM)] was prepared by the                                                                    
Division  of  Retirement  and Benefits.  He  explained  that                                                                    
since the bill impacted the  PERS system it was an actuarial                                                                    
fiscal  note. He  pointed to  the  additional $200  thousand                                                                    
cost.  He  noted  that  in the  current  system,  the  state                                                                    
assistance payment was  made in a lump sum  at the beginning                                                                    
of the fiscal year. Moving  it to the personal services line                                                                    
meant the  payments would be  made monthly with  payroll. He                                                                    
expounded that there was a  little bit of an investment loss                                                                    
by not  having a lump  sum payment applied at  the beginning                                                                    
of the year; thus, the  pension system earned slightly less.                                                                    
The $200,000 cost  was significantly less than  the state GF                                                                    
4:30:55 PM                                                                                                                    
Mr.  Steininger  reported that  fiscal  note  4 [FN4  (State                                                                    
Retirement  Payments)]   FN  4  was  prepared   by  OMB.  He                                                                    
explained  that  it  reflected  the  consolidation  of  many                                                                    
budget transactions in  every place where there  was a state                                                                    
employee in  the budget.  It was  the aggregate  of applying                                                                    
the 8.11 percent to get to  the 30.11 percent costs for PERS                                                                    
contributions to  state employee  payroll. He noted  the mix                                                                    
of fund  sources and  the distribution  of the  roughly $100                                                                    
million in costs in FY 2022.                                                                                                    
4:31:44 PM                                                                                                                    
Mr. Steininger indicated  that the fiscal note  [FN 3 (State                                                                    
Retirement Payments)] was prepared  by OMB and reflected the                                                                    
reduction to  the language section  of the  operating budget                                                                    
where the state assistance payment was made and was added                                                                       
back in fiscal note 4.                                                                                                          
4:32:14 PM                                                                                                                    
Co-Chair Merrick thanked Mr. Steininger for finding the                                                                         
cost savings.                                                                                                                   
4:32:32 PM                                                                                                                    
AT EASE                                                                                                                         
4:32:56 PM                                                                                                                    
Representative Rasmussen MOVED to report SB 55 out of                                                                           
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
There being NO OBJECTION, it was so ordered.                                                                                    
SB 55 was REPORTED out of committee with a "do pass"                                                                            
recommendation and with                                                                                                         
Co-Chair Merrick reviewed the agenda for the following day.                                                                     
4:33:44 PM                                                                                                                    
The meeting was adjourned at 4:33 p.m.                                                                                          

Document Name Date/Time Subjects
HB 75 - Sectional Analysis & Reference Statutes.pdf HFIN 5/13/2021 1:30:00 PM
HB 75
HB 75 01.19.21 PERS TL.pdf HFIN 5/13/2021 1:30:00 PM
HB 75
HB 90 Backup Anchorage Ordinance PVRN.pdf HFIN 5/13/2021 1:30:00 PM
HB 90
HB 90 Map States DOR - P2P Tax Info 041421.pdf HFIN 5/13/2021 1:30:00 PM
HB 90
HB 90 Backup Revenue Stream Chart.pdf HFIN 5/13/2021 1:30:00 PM
HB 90
HB 90 Sectional.pdf HFIN 5/13/2021 1:30:00 PM
HB 90
HB 90 Sponsor.pdf HFIN 5/13/2021 1:30:00 PM
HB 90
HB75 - Retirement Contribution Examples Handout C.pdf HFIN 5/13/2021 1:30:00 PM
HB 75
HB75 FY22 Estimated Additional State Contribution PERS Handout D.pdf HFIN 5/13/2021 1:30:00 PM
HB 75
HB75 FY2022 Budget Impact Handout A.pdf HFIN 5/13/2021 1:30:00 PM
HB 75
HB75 FY2022 Fund Source Summary Handout B.pdf HFIN 5/13/2021 1:30:00 PM
HB 75
HB75 HFIN PERS 5.13.2021 Presentation.pdf HFIN 5/13/2021 1:30:00 PM
HB 75
HB 90 Backup Intro Presentation .pdf HFIN 5/13/2021 1:30:00 PM
HB 90
HB 110 Amendment 6 051221.pdf HFIN 5/13/2021 1:30:00 PM
HB 110
HB 110 Amendments 1 - 5 051221.pdf HFIN 5/13/2021 1:30:00 PM
HB 110
HB 90 Public Testimony by 051321.pdf HFIN 5/13/2021 1:30:00 PM
HB 90
HB 90 Public Testimony by 051421.pdf HFIN 5/13/2021 1:30:00 PM
HB 90