CS FOR SENATE BILL NO. 19(FIN) "An Act specifying the vehicle rental tax for motorcycles and motor-driven cycles; and providing for an effective date." 5:33:31 PM Vice-Chair Fairclough MOVED to ADOPT the proposed committee substitute for CSSB 19, Work Draft 27-LS0157\B (Luckhaupt, 4/10/12) as a working document. Co-Chair Stoltze OBJECTED for the purpose of discussion. JOE MICHEL, STAFF, REPRESENTATIVE BILL STOLTZE, remarked on two major changes in the House CS that incorporated SB 26 into the legislation. Section 1 was added to the CS; Section 1 continued to page 2, line 21. On page 3, line 31, Section 7 was added. On page 4, Sections 8 and 9 were added. Co-Chair Stoltze WITHDREW his OBJECTION. There being NO further OBJECTION, Work Draft 27-LS0157\B was ADOPTED. KRISTEN PETERSON, STAFF, SENATOR HOLLIS FRENCH, extended the sponsor's apologies for being unable to attend in person. She explained that motorcycles and motor driven cycles were currently subject to the Passenger Vehicle Rental Tax, which was 10 percent of the total fees and costs that were charged for the rental of a passenger vehicle; the tax was found in AS 43.52.010 and 43.52.020. The CS for SB 19 would reduce the tax on motorcycles and motor driven cycles to 3 percent, bringing it in line with the tax on recreation vehicles, motorhomes, and campers that was located in AS 43.53.030 and 43.53.040. She offered that in 2003, the Alaska Legislature had passed the Vehicle Rental Tax on passenger vehicles without having discussion on the motorcycle rental businesses. She observed that making an exception for a seasonal rental business had already been done when the Vehicle Rental Tax was first imposed, as motorhomes were given a lower rate of 3 percent. In 2008, the Department of Revenue (DOR) discovered the existence of motorcycle rental businesses in Alaska and notified the businesses that the 10 percent rental tax would be collected. She related that with Alaska's short summers and the cost of winter storage, the businesses in question had found it more difficult to make a profit when a 10 percent tax was added to the total. She concluded that the bill was designed to help small Alaskan businesses that had clients who were independent travelers, which visited other small businesses in Alaska. The bill had an immediate effective date to coincide with the upcoming summer tourist season. GENEVIEVE WOJTUSIK, STAFF, SENATOR LESIL MCGUIRE, noted that the Senator's office was hoping to combine SB 26 with SB 19. She explained that Section 1 of the new CS set special registration fees for alternative fuel vehicles; the legislation would impose a $20 biannual registration fee for electric, alternative fuel, or compressed natural gas (CNG) vehicles, rather than requiring the normal registration fees. The sunset date of the SB 26 portion of the new CS was in 2015 and was found in Section 7 of the legislation. She concluded that the legislation represented a trial program and that although the state did not have many electric vehicles, the sponsor wanted to reward the businesses that did have them. 5:39:14 PM Representative Doogan inquired if both the sponsors of the new CS were happy with the changes to the legislation. Ms. Peterson responded in the affirmative. Vice-Chair Fairclough discussed a fiscal note from DOR and a fiscal note from the Department of Administration. She pointed to the DOR fiscal note and mentioned that the note's "change in revenues" section showed an expected decrease of $8,400 each year from FY 13 through FY 18 NANCY HULL, OWNER, ALASKA MOTORCYCLE ADVENTURES, PALMER (via teleconference), supported the bill and related that her company was in its 19th summer of renting motorcycles in Alaska. She indicated that there were unintended consequences to the present tax and that her business had a very limited operating season of about 90 days. She stated that her average rental rate was $200 per day, per motorcycle and that a customer renting for 10 days resulted in a tax of $200. She explained that the current tax became very punitive when a couple or a father and son rented two motorcycles and were taxed $400 for 10 days of rental; furthermore, there was no cap on the amount that could be taxed. She stated that in order offset the high vehicle rental taxes, her customers were choosing to rent for fewer days or travel to different locations outside of Alaska. She shared that her customers were able to get to the very remote locations of Alaska because the vehicles that her business used were capable of getting there. She offered that because her customers were not in an RV, they required services such as hotel rooms, meals, etc. She indicated a preference to eliminate the tax altogether, rather than reducing it to 3 percent and stated that the tax collected from the state's four existing rental businesses would only represent about $15,000 per year and was a very small amount.["Four existing rental businesses" was made in reference to seasonal rental businesses that rented motorcycles.] She mentioned that the Harley Davidson rental business in Anchorage was not expected rent after 2012 and that Alaska would only have three seasonal motorcycles businesses 2013. She questioned whether it was worth the state's effort for DOR to track three or four businesses, given the small amount of taxes that would be collected; she reiterated that she would like the tax repealed. Co-Chair Stoltze CLOSED public testimony. 5:46:17 PM AT EASE 5:47:03 PM RECONVENED Co-Chair Stoltze communicated that the intent of the committee was to repeal the 3 percent tax that was in the bill. Representative Costello offered a Conceptual Amendment on behalf of the House Finance Committee to repeal the 3 percent rental tax that was mentioned in the bill. Representative Gara clarified that the Conceptual Amendment was repealing the 3 percent tax on motorcycles, not recreational vehicles. Co-Chair Stoltze stated that the committee's intent was to repeal the 3 percent rental tax on motorcycles, but that the bill would be brought back at a later date in order to make sure the changes were done appropriately. Ms. Peterson commented that the original version bill, which excluded the motor cycle rental businesses, would amend AS 43.52.099; she pointed out that this statute housed the exceptions to the Alaska Vehicle Rental Tax. Co- Chair Stoltze responded that intent of the committee was made clear and that the changes would be done right. 5:49:29 PM CSSB 19(FIN) was HEARD and HELD in committee for further consideration. 5:49:33 PM AT EASE 5:50:40 PM RECONVENED