04/27/2024 01:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB127 | |
| HB233 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | SB 127 | TELECONFERENCED | |
| += | HB 233 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
April 27, 2024
1:02 p.m.
MEMBERS PRESENT
Representative Kevin McCabe, Chair
Representative Sarah Vance, Vice Chair
Representative Tom McKay
Representative Craig Johnson
Representative Jesse Sumner
Representative Louise Stutes
Representative Genevieve Mina
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 127(FIN)
"An Act relating to vehicle rental taxes; relating to the
issuance of subpoenas related to tax records; and providing for
an effective date."
- MOVED CSSB 127(FIN) OUT OF COMMITTEE
HOUSE BILL NO. 233
"An Act relating to rates and time allowances for motor vehicle
warranty work."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 127
SHORT TITLE: TAXATION: VEHICLE RENTALS, SUBPOENAS
SPONSOR(s): SENATOR(s) CLAMAN
04/12/23 (S) READ THE FIRST TIME - REFERRALS
04/12/23 (S) TRA, FIN
04/20/23 (S) TRA AT 1:30 PM BUTROVICH 205
04/20/23 (S) Heard & Held
04/20/23 (S) MINUTE(TRA)
05/02/23 (S) TRA AT 1:30 PM BUTROVICH 205
05/02/23 (S) Moved CSSB 127(TRA) Out of Committee
05/02/23 (S) MINUTE(TRA)
05/03/23 (S) TRA RPT CS 2NR 1AM SAME TITLE
05/03/23 (S) NR: KAUFMAN, TOBIN
05/03/23 (S) AM: MYERS
05/04/23 (S) TRA AT 1:30 PM BUTROVICH 205
05/04/23 (S) <Bill Hearing Canceled>
01/24/24 (S) FIN AT 1:30 PM SENATE FINANCE 532
01/24/24 (S) Heard & Held
01/24/24 (S) MINUTE(FIN)
01/29/24 (S) FIN AT 9:00 AM SENATE FINANCE 532
01/29/24 (S) Heard & Held
01/29/24 (S) MINUTE(FIN)
03/12/24 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/12/24 (S) Heard & Held
03/12/24 (S) MINUTE(FIN)
03/12/24 (S) FIN AT 1:30 PM SENATE FINANCE 532
03/12/24 (S) Moved CSSB 127(FIN) Out of Committee
03/12/24 (S) MINUTE(FIN)
03/13/24 (S) FIN RPT CS 1DP 4NR 1AM SAME TITLE
03/13/24 (S) DP: OLSON
03/13/24 (S) NR: STEDMAN, WILSON, MERRICK, BISHOP
03/13/24 (S) AM: KIEHL
03/18/24 (S) TRANSMITTED TO (H)
03/18/24 (S) VERSION: CSSB 127(FIN)
03/20/24 (H) READ THE FIRST TIME - REFERRALS
03/20/24 (H) TRA, FIN
04/11/24 (H) TRA AT 1:00 PM BARNES 124
04/11/24 (H) -- MEETING CANCELED --
04/25/24 (H) TRA AT 1:00 PM BARNES 124
04/25/24 (H) <Bill Hearing Canceled>
04/27/24 (H) TRA AT 1:00 PM BARNES 124
BILL: HB 233
SHORT TITLE: RATES: MOTOR VEHICLE WARRANTY WORK
SPONSOR(s): REPRESENTATIVE(s) TOMASZEWSKI
01/16/24 (H) PREFILE RELEASED 1/8/24
01/16/24 (H) READ THE FIRST TIME - REFERRALS
01/16/24 (H) L&C, JUD
03/06/24 (H) L&C AT 3:15 PM BARNES 124
03/06/24 (H) Heard & Held
03/06/24 (H) MINUTE(L&C)
03/15/24 (H) L&C AT 3:15 PM BARNES 124
03/15/24 (H) -- MEETING CANCELED --
03/22/24 (H) L&C AT 3:15 PM BARNES 124
03/22/24 (H) Heard & Held
03/22/24 (H) MINUTE(L&C)
04/18/24 (H) TRA REPLACES JUD REFERRAL
04/22/24 (H) L&C AT 3:15 PM BARNES 124
04/22/24 (H) Moved HB 233 Out of Committee
04/22/24 (H) MINUTE(L&C)
04/23/24 (H) TRA AT 1:00 PM BARNES 124
04/23/24 (H) <Bill Hearing Canceled>
04/24/24 (H) L&C RPT 2DP 4NR
04/24/24 (H) DP: WRIGHT, CARRICK
04/24/24 (H) NR: FIELDS, PRAX, SADDLER, RUFFRIDGE
04/25/24 (H) TRA AT 1:00 PM BARNES 124
04/25/24 (H) Heard & Held
04/25/24 (H) MINUTE(TRA)
04/27/24 (H) TRA AT 1:00 PM BARNES 124
WITNESS REGISTER
SENATOR MATT CLAMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, presented CSSB 127(FIN).
CARLY DENNIS, Staff
Senator Matt Claman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Gave the sectional analysis for CSSB
127(FIN) on behalf of Senator Claman, prime sponsor.
BRANDON SPANOS, Deputy Director
Tax Division
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on
CSSB 127(FIN).
FADIL LIMANI, Deputy Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on
CSSB 127(FIN).
KYNDELL GAGLIO, Government Relations
Turo
San Francisco, California
POSITION STATEMENT: Gave invited testimony in support of CSSB
127(FIN).
CARRIGAN GRIGSBY, Executive Vice President
Avis Alaska
Anchorage, Alaska
POSITION STATEMENT: Gave invited testimony in support of CSSB
127(FIN).
CLAIRE HOLLAND, representing self
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 127.
DAVID GOFF, Staff
Representative Frank Tomaszewski
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions on behalf of
Representative Tomaszewski, prime sponsor, during the hearing on
HB 233.
LESTER NICHOLS, Board Member
Alaska Automobile Dealer's Association
Fairbanks, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
233.
ANDREW STRITZ, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 233.
JADE KINCAIDE, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 233.
WILLIAM SIMMONS, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 233.
PHILIP GINTER, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 233.
LUCAS KINCAIDE, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 233.
CARRIGAN GRIGSBY, Executive Vice President
Avis Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 233.
DAVID BRIGHT, Staff Franchise Attorney
Alliance for Automotive Innovation
Washington, DC
POSITION STATEMENT: Testified in opposition to HB 233.
DAN CARTER, Manager
Labor Time Activity
General Motors
Fenton, Michigan
POSITION STATEMENT: Testified in opposition to HB 233.
CHRIS GILKER, Technical Quality Manager
Volkswagen of America
Voorheesville, New York
POSITION STATEMENT: Testified in opposition to HB 233.
JEFFERY HARBAUGH, Manager
Regional Customer Service Operations
Toyota Motor Sales
Portland, Oregon
POSITION STATEMENT: Testified during the hearing on HB 233.
THOMAS LAWSON, Government Affairs Regional Manager
Ford Motor Company
Sacramento, California
POSITION STATEMENT: Testified in opposition to HB 233.
NICOLINA HERNANDEZ, Regional Director of State Government
Affairs
Toyota Motors North America
Sacramento, California
POSITION STATEMENT: Testified during the hearing on HB 233.
ACTION NARRATIVE
1:02:26 PM
CHAIR KEVIN MCCABE called the House Transportation Standing
Committee meeting to order at 1:02 p.m. Representatives McCabe,
Vance, McKay, C. Johnson, Sumner, and Stutes were present at the
call to order. Representative Mina arrived as the meeting was
in progress.
SB 127-TAXATION: VEHICLE RENTALS, SUBPOENAS
1:04:16 PM
CHAIR MCCABE announced that the first order of business would be
CS FOR SENATE BILL NO. 127(FIN), "An Act relating to vehicle
rental taxes; relating to the issuance of subpoenas related to
tax records; and providing for an effective date."
1:04:32 PM
SENATOR MATT CLAMAN, Alaska State Legislature, as prime sponsor,
presented CSSB 127(FIN) and paraphrased the sponsor statement
[included in the committee packet], which read as follows
[original punctuation provided]:
Senate Bill 127 requires vehicle rental platform
companies, such as Turo and Getaround, to collect the
existing state vehicle rental tax and remit the tax to
the Department of Revenue on behalf of the vehicle
owners. Additionally, Senate Bill 127 revises the
subpoena provisions that relate to Department of
Revenue tax collections.
Under current law, there is uncertainty about whether
the vehicle rental platform companies owe the existing
excise tax or whether only the vehicle owner owes the
excise tax. At least one prior lawsuit did not resolve
this question. Senate Bill 127 resolves the question
by requiring the vehicle rental platform companies to
collect the excise tax from the vehicle renter and
remit the excise tax to the Department of Revenue on
behalf of the vehicle owner.
Senate Bill 127 was introduced at the request of the
Department of Revenue. The Department informed our
office that vehicle owners owe the vehicle rental
excise tax under existing law, but the law requires a
new section to specify that the vehicle rental
platform companies are responsible for collecting and
remitting the excise tax on behalf of the vehicle
owners.
Senate Bill 127 is not meant to affect Alaskans that
use other means to advertise their rental cars, such
as Craigslist and Facebook Marketplace, because those
websites do not collect any funds from the renter or
coordinate details about the rental. Vehicle owners
who use websites such as Craigslist and Facebook
Marketplace to advertise their vehicles owe the
existing excise tax on such rentals, and websites such
as Craigslist and Facebook Marketplace would not have
a duty to collect the excise tax under the current
structure of those websites.
Under the most current version of this bill, the
vehicle rental tax is lowered to 8% for vehicle rental
platforms such as Turo. The tax remains at 10% for
traditional rental car operations. Version R also
prevents any retroactive tax collection from vehicle
rental platform users.
1:07:25 PM
CARLY DENNIS, Staff, Senator Matt Claman, Alaska State
Legislature, gave the sectional analysis for CSSB 127(FIN) on
behalf of Senator Claman, prime sponsor, which read as follows
[original punctuation provided]:
Section 1
AS 43.05.040. Inspection of records or premises and
issuance of subpoenas. Amends AS 43.05.040(c) by
removing unnecessary language regarding the issuance
of out-ofstate subpoenas related to tax records.
Section 2
AS 43.52.020. Rate of Passenger Vehicle Rental Tax.
Establishes a separate tax rate of 8% for passenger
vehicles rented through a vehicle rental platform. The
tax rate of 10% remains for other rentals.
Section 3
AS 43.52.050. Liability for payment of vehicle rental
taxes. Amends AS 43.52.050(a) by adding language
clarifying that vehicle rental platform companies and
other companies that arrange vehicle rentals and
leases shall collect the existing state vehicle rental
tax and remit the tax to the Department of Revenue.
Adds language requiring vehicle rental platforms
collecting the vehicle rental tax to pay the tax
quarterly.
Section 4
AS 43.52.050. Liability for payment of vehicle rental
taxes. Amends AS 43.52.050 by:
• Creating a new subsection (c) requiring a vehicle
rental platform that arranged or executed more than
200 transactions in the state in the preceding
calendar year to collect and pay to the department the
taxes imposed under AS 43.52.010 43.52.099;
• Creating a new subsection (d) clarifying that a
vehicle rental platform company is not liable for
failing to collect or pay the vehicle rental tax if
they were provided with incorrect or insufficient
information. The company must demonstrate that a
reasonable effort was made to obtain the correct or
sufficient information from the person; and
• Adding a new section (e) defining "motor vehicle,"
"vehicle rental platform," and "vehicle rental
platform company."
Section 5
Uncodified law assessment and collection limitation
The Department of Revenue may not, on or after the
effective date of this Act, assess and collect vehicle
rental taxes that were imposed before the effective
date of this Act on a transaction arranged or executed
through a vehicle rental platform. If the tax is not
assessed and collected before the effective date of
this Act, proceedings may not be instituted in court
for the assessment or collection of the tax.
Section 6
Effective Date This Act takes effect immediately.
1:09:17 PM
CHAIR MCCABE invited questions from committee members.
1:09:30 PM
REPRESENTATIVE C. JOHNSON asked whether providers for private
individuals have paid taxes and, if so, whether they received a
rebate on those taxes.
SENATOR CLAMAN responded that individuals online could best
speak to the question.
1:11:02 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue, answered questions during the hearing on CSSB 127(FIN).
He stated that under current statute, tax is owed as soon as a
vehicle is rented on any platform whether corporate or
individual. He briefly spoke to outstanding assessments in the
system for certain of those taxpayers. He said that the way he
read the bill, it did not allow relief. He noted that he would
check into it.
1:13:00 PM
REPRESENTATIVE STUTES brought up the possibility of an
accommodation for a credit going forward if consumers had paid
previously.
MR. SPANOS said he would prefer that to be in statute and that
he would not want to overstep his authority.
1:13:35 PM
FADIL LIMANI, Deputy Commissioner, Department of Revenue, added
that the way that the law reads, the tax is due and on the
books; therefore, those who fail to submit their tax returns and
file are the ones who are noncompliant. He requested that the
Department of Law (DOL) weigh in.
1:14:34 PM
REPRESENTATIVE SUMNER commented that he read it as having no
provisions for rebates. Those who owe the tax would still owe,
but the department could not take action and collect, he opined.
1:15:05 PM
REPRESENTATIVE STUTES expressed that it made her uncomfortable
treating people differently and maybe the legislation needed to
be amended.
1:15:27 PM
CHAIR MCCABE said he was interested in Section 5 because it
protected Alaskans. He asked how many have followed the law and
done their due diligence. He noted forgiving a group of people
who did not pay their taxes versus those who figured out a way
to pay them and asked, "How much money are we talking about?"
MR. SPANOS replied that an analysis had been done and he would
get back to the committee with the number.
1:18:21 PM
REPRESENTATIVE SUMNER asked whether the department garnished
bank accounts for owed tax.
MR. SPANOS offered his belief that was last year or the year
before when bank accounts were levied.
1:19:07 PM
REPRESENTATIVE VANCE opined that the basic structure of the Turo
platform is that "regular people" make their vehicle available
for rental. She asked about the number of rentals it takes to
have it be referred to as a business enterprise.
MR. LIMANI replied that there would be a slide that would
address the Internal Revenue Service (IRS) requirements.
1:21:44 PM
MR. LIMANI began a PowerPoint, titled "SB 127" [hard copy
included in the committee packet]. He proceeded to slide 3,
titled "SB 127 Objective," where he drew attention to the two
provisions on the bottom of the slide. Slide 3 read as follows
[original punctuation provided]:
• The intent of this legislation is to move the
responsibility for collecting and remitting tax from
the individual owners to the vehicle rental platform
company if the lease or rental was arranged or
executed through a platform.
• The proposed legislation does not impose a new tax.
• The legislation provides for a streamlined process
for the Department of Revenue in collecting the peer-
to-peer rental tax.
AS 43.52.010: "There is imposed an excise tax on the
charge for the lease or rental of a passenger vehicle
in this state if the lease or rental of the passenger
vehicle does not exceed a period of 90 consecutive
days."
AS 43.52.050: taxes "shall be collected and p
MR. LIMANI briefly showed slide 4, titled "SB 127 Bottom
Line," which read as follows [original punctuation provided]:
• The tax burden already exists AS 43.52.010
• This bill compels the vehicle rental platforms to
collect and remit the tax on behalf of vehicle owners
MR. LIMANI expounded on the points on slide 5, titled "SB 127 -
Background," which read as follows [original punctuation
provided]:
• Alaska levies an excise tax on fees and costs
charged for the lease or rental of a passenger or
recreational vehicle if the lease or rental does not
exceed a period of 90 consecutive days.
• The person working for the rental/lease agency that
provides the leased or rental vehicle collects the tax
from the individual renting or leasing the vehicle.
The rental/lease agency in turn remits the tax to the
Department of Revenue's Tax Division.
For passenger vehicles, the rate is 10% of the total
fees and costs for renting or leasing. For
recreational vehicles, the rate is 3% of the total
fees and costs for renting or leasing.
• Vehicle rental/lease agencies file tax returns and
remit taxes quarterly.
1:24:39 PM
MR. LIMANI went over the provisions on slide 6, titled "SB 127 -
Senate Finance Committee Substitute Changes," which read as
follows [original punctuation provided]:
The CS in Senate Finance made two changes to the bill:
• Establishes a separate tax rate of 8% (in place of
the current 10%) for passenger vehicles rented through
a vehicle rental platform.
• Does not allow retroactive assessment and collection
of tax on transactions arranged through a vehicle
rental platform prior to the effective date of the
bill. The prior version of the bill allowed for a six-
month assessment and collection window.
MR. LIMANI continued to slide 7, titled "SB 127 - Legislative
History," which highlighted the history of the vehicle rental
tax from 2003 to 2020.
1:26:49 PM
MR. LIMANI moved to slide 8, titled "SB 127 - Legal Framework,"
which read as follows [original punctuation provided]:
AS 43.52.010: "There is imposed an excise tax on the
charge for the lease or rental of a passenger vehicle
in this state if the lease or rental of the passenger
vehicle does not exceed a period of 90 consecutive
days."
AS 43.52.050: taxes "shall be collected and paid to
the department by the person who provides the leased
or rented vehicle."
AS 44.23.020(b)(2): "The attorney general shall?(2)
bring, prosecute, and defend all necessary and proper
actions in the name of the state for the collection of
revenue."
AS 44.25.020(1) & (2): "The Department of Revenue
shall (1) enforce the tax laws of the state; (2)
collect, account for, have custody of, invest, and
manage all state funds and all revenues of the state
[with certain exceptions like the permanent fund]."
• Dick Fischer Development No. 2 Inc. v. DOA, superior
court case: Neither a commissioner nor any other state
official has the authority to deprive the state
treasury of public monies unless authorized by law.
MR. LIMANI proceeded to slide 9, titled "SB 127 - New IRS
Regulation on 1099-K," which read as follows [original
punctuation provided]:
• As part of the American Rescue Plan Act of 2021, the
threshold for reporting on third party network
transaction (Form 1099-K) was reduced to $600,
regardless of the number of transactions.
• On November 2023, the IRS announced delay in form
1099-K reporting threshold for third party transaction
platforms.
• Phase-in to implementation
• For Tax Year 2024, threshold of $5,000
• For Tax Year 2025, threshold of $600
• In recent years including Tax Year 2023, the
threshold for reporting on third party network
transactions (Form 1099-K) when payments totaled more
than $20,000 and more than 200 transactions.
1:29:46 PM
MR. LIMANI concluded on slide 10, titled "SB 127 - Fiscal
Impacts," which read as follows [original punctuation provided]:
• The Department of Revenue has collected an average
of $10.7 million per year in vehicle rental taxes over
the past four years.
• The proposed legislation would capture unreported
vehicle rentals that are arranged or executed through
a vehicle rental platform and, therefore, would have a
positive effect on revenue.
• The Department of Revenue currently does not have
enough data on peer-to-peer rental information in
Alaska to provide for an estimative revenue impact.
• Currently the Department of Revenue has
approximately $470K in delinquent accounts spread
across 25 taxpayers.
1:31:19 PM
REPRESENTATIVE VANCE inquired how the department reaches
compliance and collects taxes if it does not have an idea of how
many people use these platforms.
MR. LIMANI opined that would be with the passage of the bill.
REPRESENTATIVE VANCE asked whether the platform itself
automatically collects a tax on behalf of the rental owner.
MR. LIMANI replied that with the passage of the bill, yes, the
host would be able to identify and gather that information and
report it to the Department of Revenue (DOR).
1:32:57 PM
SENATOR CLAMAN added that Turo does not own vehicles and, for
example, if someone rented a car in Anchorage there would be a
line for the Anchorage tax but not the state tax. The proposed
law would require Turo to add this to the "invoice" at the time
of rental.
1:34:20 PM
REPRESENTATIVE MCKAY said he supported the bill and opined it
was a good solution; however, if he had paid taxes and someone
else did not, he would be upset. In the name of fairness and
credibility that part of the situation must be addressed.
SENATOR CLAMAN inserted that he felt it was acceptable to hold
the bill for amendment language instead of moving it forward
today.
1:36:29 PM
REPRESENTATIVE SUMNER expressed his uncertainty and that there
may be a horizontal equity issue.
MR. LIMANI explained certain legal implications and that the
state and department would be exposed not only from this program
but from others.
1:38:41 PM
CHAIR MCCABE asked for the committee's indulgence in moving the
bill forward.
REPRESENTATIVE MCKAY said he supported moving the bill forward.
REPRESENTATIVE STUTES commented that the maker of the bill could
help the committee through it and "fine tune" it if it were
moved.
REPRESENTATIVE MINA expressed curiosity about other states'
discrepancies and Turo owners regarding rebates.
1:41:01 PM
SENATOR CLAMAN replied that his staff had not looked into the
question.
1:41:10 PM
REPRESENTATIVE SUMNER offered his belief that another thing to
consider was retroactive rebate language.
CHAIR MCCABE said that he was concerned with secondary effects
and consequences across the board, and perhaps it was best to
find a path forward that protects Alaskans.
1:42:48 PM
SENATOR CLAMAN noted there was a finance referral on the bill.
1:43:08 PM
CHAIR MCCABE addressed Mr. Limani in requesting a "tightly
defined paragraph" on how he thought trying to fix the issue
would affect DOR and the Tax Division in the long term.
MR. LIMANI said he could provide the information to the
committee.
1:43:48 PM
CHAIR MCCABE noted that there are other testifiers.
1:44:08 PM
KYNDELL GAGLIO, Government Relations, Turo, gave invited
testimony in support of CSSB 127(FIN) and stated that Turo's
mission was to put cars to better use and clarified that Turo
owns no vehicles. The "hosts" earn extra income by sharing
vehicles with visitors and locals, and she gave examples of the
communities that participate. She noted 20 percent of Alaska
community members using car shares are military members. She
expressed her encouragement toward the most recent version of
the bill that removed the threat of retroactivity and
established a tax. She thanked the committee for its effort on
a reasonable and fair solution.
1:46:54 PM
CARRIGAN GRIGSBY, Executive Vice President, Avis Alaska, gave
invited testimony in support of CSSB 127(FIN). He gave a
history of Avis Alaska, its current employees and fleet, and
noted it was partially employee-owned. He spoke to the
percentage of tax for car sharing versus rental and that he was
in support of that; however, he wished to address earlier
comments about rebating. He stressed that it would cause a huge
problem and an "administrative nightmare." He thanked Senator
Claman and his staff and said he looked forward to the passage
of CSSB 127(FIN).
1:50:43 PM
CHAIR MCCABE thanked invited testifiers and noted that there may
be room for a separate bill. He opened public testimony on CSSB
127(FIN).
1:51:56 PM
CLAIRE HOLLAND, representing self, noted that she was a member
of the Chugach State Park Citizen Advisory Board, which
previously sent a letter to the House Transportation Standing
Committee outlining its support for SB 127 and wish to increase
the state's vehicle rental tax and thereby increase the
available funding for maintenance and operation of Alaska's
state park system. She opined that SB 127 would make sure that
the state collects all tourism tax dollars to help maintain
Alaska's state park system. Additionally, adequately staffing
state parks and providing funding for basic needs is necessary
for the continued enjoyment of the parks and to grow the state's
tourism.
1:53:56 PM
REPRESENTATIVE VANCE clarified that the use of funds is
traditional because the state cannot have dedicated funds. It
is not a hard and fast law due to this, she said.
1:54:28 PM
CHAIR MCCABE, after ascertaining no one else wished to testify,
closed public testimony on CSSB 127(FIN).
1:54:58 PM
SENATOR CLAMAN gave final comments. He said in light of
comments made, the issue of taxes owed should be addressed with
great caution and as suggested, should be looked at in the
future but not as part of the current bill.
1:56:46 PM
CHAIR MCCABE commented that it was about time to fix the
problem.
1:57:06 PM
REPRESENTATIVE VANCE noted the presence of an attorney, and she
expressed that it gave her more comfort that the bill would go
to the House Finance Committee, which could put some of the
issues to rest.
SENTATOR CLAMAN commented that the discussion about the
challenge of collecting taxes is not easy, nor is finding
someone who wants to take such a case.
1:59:05 PM
REPRESENTATIVE SUMNER pointed out that it was the renter who
paid the tax, and he was opposed to "rebating back."
MR. LIMANI expressed to the committee that the cautionary
measures on being able to put anything in statute could expose
the state to other liabilities and create an opportunity for
rental car companies to sue the state. He advised the committee
to tread lightly on the area of tax liability.
2:00:56 PM
REPRESENTATIVE VANCE stated she wanted the conversation to be
well established such that it was clear the committee did not
want to put the state in any position of liability but to do
what's best for Alaskans and all parties involved.
REPRESENTATIVE MCKAY spoke of his constituents and said that if
the state were put in a precarious situation, it would be a
concern for him.
2:01:36 PM
REPRESENTATIVE VANCE moved to report CSSB 127(FIN) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSSB 127(FIN) was
reported out of the House Transportation Standing Committee.
2:01:58 PM
The committee took an at-ease from 2:01 p.m. to 2:06 p.m.
HB 233-RATES: MOTOR VEHICLE WARRANTY WORK
2:06:55 PM
CHAIR MCCABE announced that the final order of business would be
HOUSE BILL NO. 233, "An Act relating to rates and time
allowances for motor vehicle warranty work."
CHAIR MCCABE moved to adopt Amendment 1 to HB 233, labeled 33-
LS1042\A.2, Gunther, 4/26/24, which read as follows:
Page 1, lines 11 - 13:
Delete "the rates and time allowances in the
schedule of compensation may not be less than the
rates and time allowances that the new motor vehicle
dealer charges retail customers for similar
nonwarranty service work"
Insert "[THE RATES IN] the schedule of
compensation may not contain
(1) rates [MAY NOT BE] less than the rates
that the new motor vehicle dealer charges retail
customers for similar nonwarranty service work; and
(2) time allowances less than time allowances
provided in independent labor time guides"
REPRESENTATIVE VANCE objected for the purpose of discussion.
CHAIR MCCABE explained that Amendment 1 would synchronize the
rates and time allowances for manufacturers and dealers aligning
them with recognized independent labor time guides. He gave
examples of timelines for actual vehicle labor. He further
noted the legislature's involvement in the issue six years ago
and stated that "maybe it is time to fix this."
2:09:17 PM
REPRESENTATIVE MINA asked how the amendment would change what is
currently in the bill.
CHAIR MCCABE explained that the amendment would establish the
use of a non-partisan guide for the amount of time it takes
technicians to do a job.
2:11:24 PM
REPRESENTATIVE STUTES said she liked the amendment and
recognized that six years ago, it was agreed upon by
manufacturers and dealers that they would address the issue if
the legislature had passed the bill.
2:12:03 PM
REPRESENTATIVE MINA requested an opinion from the bill sponsor
on the amendment.
2:12:29 PM
DAVID GOFF, Staff, Representative Frank Tomaszewski, Alaska
State Legislature, on behalf of Representative Tomaszewski,
prime sponsor of HB 233, addressed Representative Mina and
offered his belief that the amendment was positive. He gave an
example of an independent shop setting its own hours, and with
the proposed amendment, there would be a criteria for setting
hours.
CHAIR MCCABE noted the "fluctuations out there" and that he
sought a way to have more discussion on the issue. He
reiterated that the amendment would require the use of an
outside estimator for the time that work takes. He welcomed
more comments on Amendment 1 from committee members.
2:15:16 PM
REPRESENTATIVE MINA asked the bill sponsor about other states
that have passed the law and whether they required reimbursement
based on independent time guides only.
MR. GOFF replied that he had not done research about a set
criteria, but it was a standard to which he was referred.
2:16:17 PM
CHAIR MCCABE gave an example of independent estimating on a
particular job and quoting the customer. He noted that is
industry practice in many businesses, and estimating is "an
art." He opined it was important to have an independent person
doing the estimating.
2:17:18 PM
REPRESENTATIVE MINA acknowledged that there was frustration with
the manufacturer's time guide testing and inquired about the
success rate with an independent time guide.
CHAIR MCCABE responded that he did not know the answer. He
noted that Mr. Nichols was online and could address the
question.
2:18:18 PM
LESTER NICHOLS, Board Member, Alaska Automobile Dealer's
Association, briefly explained how manufacturers compute job
hours. When it came to the independent labor time guide, he
said he did not have a statistic to clearly answer the inquiry
due to there being a wide variety of skill levels in the
industry. He added that they are looking for time guides that
are achievable and compatible with the skill level of the
technician. He opined that the independent time guides are much
more realistic.
2:21:18 PM
REPRESENTATIVE VANCE removed her objection to the motion to
adopt Amendment 1. There being no further objection, Amendment
1 was adopted.
REPRESENTATIVE VANCE moved to adopt Amendment 2 to HB 233,
labeled 33-LS1042\A.1, Gunther, 4/20/24, which read as follows:
Page 2, following line 4:
Insert a new bill section to read:
"* Sec. 4. AS 45.25.300 is amended to read:
Sec. 45.25.300. Unfair practices. A manufacturer
may not
(1) require, coerce, or attempt to coerce a
new motor vehicle dealer to change the location of the
new motor vehicle dealership or to make any
substantial alterations to the new motor vehicle
dealership premises or facilities if the alterations
would be unreasonable or if there is not expected to
be a sufficient supply of new motor vehicles to
justify the change of location or the alterations
because of market and economic conditions; this
paragraph does not apply to alterations that are
necessary to comply with health or safety laws; in
this paragraph, "substantial alterations" does not
include erecting signs subject to the manufacturer's
intellectual property rights, doing interior painting
that is necessary to keep a new motor vehicle dealer
facility in an attractive condition, or performing
routine maintenance;
(2) require a new motor vehicle dealer to
purchase or include in inventory a predetermined
number or percentage of certified pre-owned motor
vehicles or lease return motor vehicles;
(3) except because of reasons beyond the
manufacturer's control, refuse or fail to deliver or
offer for sale in reasonable quantities to a new motor
vehicle dealer holding a franchise for a line make of
new motor vehicles sold or distributed by the
manufacturer a new motor vehicle, part, or accessory,
if the new motor vehicle, part, or accessory is being
delivered to other new motor vehicle dealers; this
paragraph does not apply to limited edition or limited
release vehicle parts or accessories;
(4) require a new motor vehicle dealer to
purchase unreasonable advertising displays or other
materials or an unreasonable number of signs;
(5) require a new motor vehicle dealer to
order or accept delivery of a new motor vehicle, part,
accessory, piece of equipment, promotional material,
display device, display decoration, or other item that
is not otherwise required by law and that the new
motor vehicle dealer does not voluntarily order; this
paragraph does not apply to safety and emissions
recall campaign parts or to a motor vehicle feature,
part, accessory, or other component required by
federal law, the law of this state, or local law;
(6) coerce, attempt to coerce, or require a
new motor vehicle dealer to
(A) join, contribute money to, or affiliate
with an advertising association; or
(B) participate monetarily in an
advertising campaign; [OR]
(7) increase the price of a new motor
vehicle that the new motor vehicle dealer has ordered
from the manufacturer and for which there exists at
the time of the order a bona fide sale to a retail or
fleet purchaser if the dealer submitted the order to
the manufacturer before the manufacturer provided the
new motor vehicle dealer with an official written
price increase notification; or
(8) recover the manufacturer's costs for
compensating a new motor vehicle dealer for warranty
work by reducing the amount due to or imposing a
separate charge, surcharge, administrative fee, or
other similar cost on the new motor vehicle dealer;
this paragraph does not prohibit a manufacturer from
increasing the price of a new motor vehicle or
changing a schedule of compensation in the ordinary
course of business."
Renumber the following bill section accordingly.
CHAIR MCCABE objected for the purpose of discussion.
REPRESENTATIVE VANCE pointed out the bolded lines on page 2 and
noted that the legislature's first duty is to protect Alaskans,
and that she did not want to see any punitive fees imposed. She
requested that Mr. Goff further explain the impacts.
2:22:42 PM
MR. GOFF noted other states that have put in this addition to
their law because of the rise in prices for that particular
state. Increasing prices or changing schedules in the ordinary
course of business is fine, he said, but not singling out the
state of Alaska for additional charges. Putting this language
in the bill would eliminate that.
2:23:50 PM
CHAIR MCCABE removed his objection.
REPRESENTATIVE SUMNER objected.
A roll call vote was taken. Representatives Mina, C. Johnson,
McKay, Vance, Stutes, and McCabe voted in favor of Amendment 2
to HB 233. Representative Sumner voted against it. Therefore,
Amendment 2 to HB 233 was adopted by a vote of 6-1.
2:25:10 PM
REPRESENTATIVE SUMNER offered his belief that the adopted
Amendment 1 was an improvement but inquired about the selection
process of the independent time guide.
CHAIR MCCABE said he suspected that the manufacturers and
dealers would have to come to an agreement on which time guide
they would use. He noted he could have put a descriptor in the
bill but did not want to make it overly complicated; therefore,
it would be left to the industry to decide.
REPRESENTATIVE SUMNER noted that he had no objections or
concerns for other amendments.
2:26:41 PM
REPRESENTATIVE C. JOHNSON mentioned testimony being one-sided
and that there was not much heard from manufacturers. He added
that he was concerned to not hear both sides of the story and
why the manufacturers have not been more active regarding the
issue.
CHAIR MCCABE explained that there are individuals waiting online
for public testimony and most are manufacturers.
2:27:53 PM
REPRESENTATIVE STUTES reiterated that six years ago, the
manufacturers asked the legislature to get involved.
2:28:34 PM
REPRESENTATIVE SUMNER noted hearing substantial testimony from
manufacturers in the House Labor and Commerce Standing
Committee.
2:28:47 PM
CHAIR MCCABE opened public testimony on HB 233.
2:29:29 PM
ANDREW STRITZ, representing self, testified during the hearing
on HB 233 and spoke to technician retention and how the bill
would help. He noted that technicians come and go, which
affects service advisors and negatively impacts their paychecks
as well. He pointed out that third party contracts use the same
exact labor guides that he would use to approve for repairs.
2:31:42 PM
JADE KINCAIDE, representing self, testified in support of HB 233
and shared that she was new in her career as a technician. She
stressed that the difference between warranty times and third-
party times was discouraging to her, and the difficulty getting
close to the warranty times given by the manufacturer is
physically taxing, she said. She opined that the passage of HB
233 would afford her as a technician to further progress in the
field and have a better quality of life by compensating
technicians fairly.
2:32:50 PM
WILLIAM SIMMONS, representing self, testified in support of HB
233. He said he is a flat rate technician, and he shared how
his hours and pay were calculated. With the manufacture pay
scale, he explained, he hit the times "zero percent" of the
time, but with third party contracts and labor guides he was at
80 to 90 percent. He noted it was taxing on his motivation to
continue in a dealer setting, and he asked for proper
compensation.
2:33:58 PM
PHILIP GINTER, representing self, testified in support of HB
233. He shared that he is a lead technician, and he opined that
the bill would have positive effects on coworkers and customers.
He related that staff did not want to be sent out to
manufacturer training to perform warranty repairs, as they know
they can receive better pay performing the same repairs on
vehicles out of warranty. He emphasized that intensive repairs
should not be rushed to keep up with the cost.
2:35:48 PM
LUCAS KINCAIDE, representing self, testified in support of HB
233. He noted that he is a master technician, and he explained
they have been operating on two sets of rules for too long. The
playing field should be operating fairly and there should be an
agreement that the manufacturer can pay the same as the Alaska
consumer pays, he said. He gave an example of an engine job and
the times allotted by the manufacturer being unrealistic. He
thanked the committee for its time and support.
2:38:17 PM
CARRIGAN GRIGSBY, Executive Vice President, Avis Alaska, offered
an anecdote from a fleet owner and offered his belief that the
bill would help get cars back on the road faster. He gave
examples of labor and hours paid for particular repair jobs and
all the logistics involved in "messing with the operation" and
actual pricing of rental cars.
2:40:36 PM
DAVID BRIGHT, Staff Franchise Attorney, Alliance for Automotive
Innovation, testified in opposition to HB 233 and stated that he
was confident that the guides and the processes work. He said
compromises are drafted to put into Alaska franchise law, to
which he provided examples. He opined that the bill would
require payment for hours that are not worked and require
payment under a flat rate guide. He noted that technicians
would not be getting more compensation, and he asked the
committee to hold the bill.
2:44:16 PM
CHAIR MCCABE highlighted a line from Section 2 of HB 233,
beginning on line 10, and he remarked that it opened the door
for conversation. The language read as follows:
(c) Unless otherwise agreed to by the manufacturer and
the new motor vehicle dealer, the rates and time
allowances in the schedule of compensation may not be
less than the rates and time allowances that the new
motor vehicle dealer charges retail customers for
similar nonwarranty service work.
2:44:49 PM
DAN CARTER, Manager, Labor Time Activity, General Motors,
testified in opposition to HB 233. He offered examples on how
labor times were developed by General Motors as well as the
third-party estimating companies and their impact. He opined
that third party companies do not perform studies to the depth
that manufacturers do, and that they are partisan. The practice
of adding time is driving the industry to expect to bill more
hours to customers than time spent actually repairing the car,
he said. He questioned what the Alaska consumer gets and
whether the "Alaska Automobile Repair Act" was being followed.
2:48:20 PM
REPRESENTATIVE MINA asked for more explanation to Mr. Carter's
statement that allowances were included for real world factors.
MR. CARTER explained the percentages involved in factoring in
variations to repair jobs.
REPRESENTATIVE MINA pointed out that the majority of testimony
expressed concern about factors that are specific to Alaska,
such as the cold weather impact on cars. She asked whether any
of these factors are integrated in Mr. Carter's real-world
factors.
MR. CARTER acknowledged that there are a lot of factors specific
to regions but said there is nothing specific to Alaska.
2:50:12 PM
CHRIS GILKER, Technical Quality Manager, Volkswagen of America,
related that he was a technician for years; therefore, he could
speak to the topic and wished to state for the record that he
rarely lost time performing Volkswagen warranty repairs. He
said he averaged 120 percent efficiency on warranty work, and he
noted the differences in tools used by dealer technicians that
can speed up a repair. He opined that the bottom line is that
the Alaska consumer would be hurt.
2:53:03 PM
REPRESENTATIVE SUMNER asked whether there were franchise fees or
advertising spending requirements. He offered his opinion that
the adopted Amendment 2 may interfere with some of that.
MR. GILKER responded that that was outside his area of
expertise.
CHAIR MCCABE pointed out that Alaska consumers are already being
hurt, as there are dealers closing down rapidly because they
can't keep mechanics or make enough money.
2:54:36 PM
JEFFERY HARBAUGH, Manager, Regional Customer Service Operations,
Toyota Motor Sales, said he worked with Toyota for over 40 years
and was a technician but now oversees warranty administration,
policy, and procedures in addition to other areas. He
recognized that dealers were concerned about the fairness of
warranty reimbursement allowance but said it varies from
manufacturer to manufacturer. He gave examples of Toyota's
practices and said that when "push came to shove" and problems
cannot be addressed at a high level, then he gets involved, and
many times the additional pay that dealerships requested was
approved by Toyota. He further noted his support for dealers
and that they keep customers coming back for service and
generate revenue for the dealerships.
2:58:24 PM
THOMAS LAWSON, Government Affairs Regional Manager, Ford Motor
Company, testified in opposition to HB 233 on behalf of Ford
Motor Company. He noted after-market labor time guides not
being relevant and he underscored that there is nothing in the
bill that would guarantee higher wages for technicians. He gave
Ford-specific examples of labor time guides. He noted he would
take time to review the amendments [adopted] earlier and
reiterated that his company was opposed to HB 233. He thanked
the committee for its time and offered to answer questions.
3:00:56 PM
REPRESENTATIVE STUTES asked whether Ford's time guide was
available publicly.
MR. LAWSON replied that he was not sure the time guide was
public, but he noted a publicly available video that highlighted
how Ford developed its time.
REPRESENTATIVE STUTES asked whether there was a reason the time
guide was not publicly available.
MR. LAWSON said he would follow up.
3:02:02 PM
NICOLINA HERNANDEZ, Regional Director of State Government
Affairs, Toyota Motors North America, echoed former comments
given by other manufacturers and added that there have been deep
dives into data that she could share. The data showed that
dealers are beating their time guides in Alaska and similarly
situated states. Dealers can request adjustments to their time
guides, and she noted that it was not common. She stated she
wished for dealers in Alaska to be successful and that she was
sympathetic to the work force challenges. She recognized that
at the end of the day, there would not be a guarantee that
compensation would be increased due to the change.
3:03:48 PM
REPRESENTATIVE STUTES asked Ms. Hernandez whether the time guide
was publicly available.
MS. HERNANDEZ said she could provide an answer at a later date.
3:04:27 PM
CHAIR MCCABE, after ascertaining no one else wished to testify,
closed public testimony on HB 233, as amended.
CHAIR MCCABE asked for the will of the committee.
3:05:15 PM
REPRESENTATIVE SUMNER wished to hold the bill as he had concerns
surrounding Amendment 2.
3:05:30 PM
CHAIR MCCABE thanked everyone for attending and stressed that a
resolution needed to be found.
[HB 233, as amended, was held over.]
3:06:00 PM
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 3:06
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 127 Version R 3.13.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Sponsor Statement Version R 3.14.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Sectional Analysis Version R 3.14.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Supporting Document - Frequently Asked Questions 3.21.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Explanation of Changes Version U to R 3.12.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB127. Ver R Fiscal Note DOR. 4.25.24.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Testimony - Received as of 3.14.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 124 DOR Presentation to H.TRA - Vehicle Rental Platform 4.27.24.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 124 |