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