SENATE BILL NO. 174 An Act excluding certain trucks from the definition of 'passenger vehicle' for purposes of the passenger vehicle rental tax; and providing for an effective date. SENATOR CHARLIE HUGGINS, SPONSOR, noted that SB 174 had been introduced to correct an unintended consequence of legislation passed in 2003. At that time, the Legislature passed HB 271 as a tourism-based tax on passenger rental cars and recreational vehicles. The purpose was to tax visitors using the road system, not local citizens. HB 271 has negatively impacted: * Alaska citizens needing to move, * Local independent outlets, and * Cnsumer truck rental business. Senator Huggins added that the Department of Revenue has assessed the tourism-based tax on all rental vehicles, including trucks less than 26,000 pounds. Interpretation of the law has resulted in a 10% tax applied to businesses and citizens renting trucks. The 10% State tax, along with the local municipal and city taxes, add considerably to the total rental fee. In 2004, HB 347 was introduced to correct the unintended consequence created by HB 271. It provided an exemption for taxicabs. That corrective legislation was signed into law. SB 174 ensures that the tax applies more specifically to the intended target of visitors renting passenger vehicles and recreational vehicles, rather than the unintended target of Alaska businesses and citizens who rely on truck rentals for the continued flow of commerce and movement of household goods. 2:37:41 PM Representative Weyhrauch commented that the intent was not to assess a tax charge on commercial vehicles. He questioned if it would reign-in the Department's interpretation of the tax. Senator Huggins explained there was no ill intended approach on the Department of Revenue. The target of HB 271 was a not "self-move" type vehicle and that SB 174 would correct it. Representative Hawker commented on passage of the previous legislation and the impact SB 174 would have. Co-Chair Meyer agreed with the assessment made by Representative Hawker and that the original intent was not to tax U-Haul trucks. 2:40:08 PM JOHN NORRIS, PRESIDENT, U-HAUL COMPANY OF ALASKA, ANCHORAGE, spoke in support of the proposed legislation. He pointed out that HB 271 has impacted Alaska citizens needing to move. The consumer does have other options for moving that are not taxed. He reiterated the history and the impacts of the previous legislation. He acknowledged that SB 174 provides relief for trucks that has been given to taxicabs. Mr. Norris pointed out that the Alaska Trucking Industry supports the legislation. 2:44:55 PM SYDNI SWENSON, (TESTIFIED VIA TELECONFERENCE), U-HAUL, NORTH POLE, voiced support for SB 174. 2:46:39 PM Representative Hawker MOVED to ADOPT Amendment #1. Co-Chair Meyer OBJECTED. Representative Hawker explained that Amendment #1 was offered on behalf of the House sponsor of the companion Senate bill. The amendment provides an additional exemption; "vehicles provided by automobile dealers as replacement transportation during warranty or service contract repairs". He acknowledged that the amendment involves a title change but that it would not endanger the substance of SB 174. 2:51:10 PM Co-Chair Meyer inquired the impact the amendment would have on the Department of Revenue. JOANNA BALES, (TESTIFIED VIA TELECONFERENCE), PROGRAM MANAGER, VEHICLE REVENUE TAX DIVISION, DEPARTMENT OF REVENUE, ANCHORAGE, indicated that they do not have the data necessary to determine the amount. 2:52:40 PM Co-Chair Meyer requested the amount anticipated collected. Ms. Bales said it would be small. There are only six other states that have their own vehicle rental tax and it appears it is a 50/50 exemption. Co-Chair Meyer knew that the City of Anchorage has a car rental tax; he asked how they dealt with such situations. Ms. Bales replied that they do exempt U-Haul vehicles. 2:53:53 PM Co-Chair Chenault asked about the replacement transportation service contracts and if they would include rentals from a dealer during the time of repairs. Representative Hawker understood that was not accommodated. 2:54:59 PM Co-Chair Meyer asked if Senator Huggins supported the amendment. Senator Huggins responded that he hoped it was "friendly" and that he would support it. 2:57:09 PM Representative Holm asked if Amendment #1 would generate an indeterminate fiscal note. Co-Chair Meyer thought it would be slightly higher than the one provided. 2:57:47 PM Representative Hawker pointed out that Ms. Bales had indicated that the information was not immediately forthcoming. Ms. Bales explained it would be a minimal impact on the rental tax and that the existing note should be sufficient. 2:59:37 PM Vice-Chair Stoltze inquired if the language was broad enough to cover recall. Representative Hawker thought a recall activity would be part of the warranty process. 3:00:53 PM Representative Weyhrauch stated that there are no guarantees with the proposed language. A service contract does not necessarily include a recall. Representative Hawker suggested amending the amendment by adding, "recall". 3:01:32 PM Vice-Chair Stoltze MOVED the friendly amendment proposed by Representative Hawker. There being NO OBJECTION, it was amended. 3:02:12 PM Co-Chair Meyer WITHDREW his OBJECTION. There being NO further OBJECTION, amended Amendment #1 was adopted. Representative Kelly MOVED to REPORT HCS SB 174 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HCS SB 174 (FIN) was reported out of Committee with a "do pass" recommendation, with fiscal note #1 by the Department of Revenue and a House Concurrent Resolution to address the title change. 3:03:51 PM