MINUTES OF THE

SENATE Committee on Transportation

 

Seventy-First Session

June 1, 2001

 

 

The Senate Committee on Transportationwas called to order by Chairman William R. O'Donnell, at 7:09 p.m., on Friday, June 1, 2001, in Room 2149 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Attendance Roster.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

COMMITTEE MEMBERS PRESENT:

 

Senator William R. O'Donnell, Chairman

Senator Mark Amodei, Vice Chairman

Senator Lawrence E. Jacobsen

Senator Maurice Washington

Senator Terry Care

Senator Maggie Carlton

 

COMMITTEE MEMBERS ABSENT:

 

Senator Raymond C. Shaffer (Excused)

 

GUEST LEGISLATORS PRESENT:

 

Assemblyman David R. Parks, Clark County Assembly District No. 41

 

STAFF MEMBERS PRESENT:

 

Donald O. Williams, Committee Policy Analyst

Judy Jacobs, Committee Secretary

 

OTHERS PRESENT:

 

Robert A. Ostrovsky, Lobbyist, The Hertz Corporation

Edward Allison, Lobbyist, Avis Rental Car, Alamo Rental Car, and National Rental Car

Bill Gregory, Lobbyist, Nevada Car Rental Association

 

Chairman O’Donnell:

I will open the hearing on Assembly Bill (A.B.) 460.

 

ASSEMBLY BILL 460:  Revises provisions governing remittance of fees collected by short-term lessors of passenger cars to department of taxation. (BDR 43-589)

 

Assemblyman David R. Parks, Clark County Assembly District No. 41:

Assembly Bill 460 modifies the way the Department of Taxation collects rental car fees.  Currently, the rental fee is 6 percent and is collected from January 1 through December 31 by all rental car agencies.  It is then reported to the Department of Taxation no later than January 31 of the following year.  This means the rental car companies collect the 6 percent fee all year long and earn interest on the funds for as long as 13 months. 

 

Currently, rental car companies are required to remit only 2 percent of the 6 percent to the State of Nevada.  They are allowed to deduct all costs they incur to title, register, and transfer their fleet of vehicles from the remaining 4 percent.  If the total expended is less than 4 percent, the difference must be remitted to the state.  Currently, about one-fourth of 1 percent (of the 4 percent) is remitted to the state; therefore, the state gets approximately 2¼ percent and rental car companies retain the other 3¾ percent. 

 

The third revision to A.B. 460 calls for rental car companies to remit the entire 6 percent to the state on a quarterly basis; however, the rental car companies are allowed to retain as much as $100,000 to offset the cost of title and registration for their vehicles.  By reporting and remitting quarterly, the state would generate additional interest income.  There are, however, additional expenses such as mailing forms quarterly, rather than annually, and recording deposit receipts.  A reconciliation would still be performed once a year. 

 

Chairman O’Donnell:

Let me read from subsection 3 of A.B. 460, “A short-term lessor may deduct and withhold from the total fees otherwise due from him an amount equal to the total amount of the vehicle licensing fees and taxes paid by the short-term lessor during the immediately preceding calendar quarter . . . except that the total amount deducted and withheld by a single short-term lessor each calendar year must not exceed $100,000.“  What is the $100,000 threshold?

 

Assemblyman Parks:

Currently, there are approximately 55 rental car companies that collect the 6 percent charge.  Of those, all but 10 are small enough that their gross amount of registrations is less than the $100,000 fee. 

 

This bill was initially adopted in 1993.  The intent was to fall back on the follow up of the 1991 tax shift, which created the additional 1 percent motor vehicle privilege tax for Clark County.  It was intended to give some relief to the small rental car companies; but what was adopted in 1993 was extended to all rental car companies, not just the smaller companies, as was initially intended.  

 

ASSEMBLY BILL 323 OF THE SIXTY-SEVENTH SESSION:  Imposes fee on short-term rental of passenger car.  (BDR 43-1186)

 

Assemblyman Parks:

I have brought a handout entitled “A.B. 460” (Exhibit C) which contains a page from the Nevada Taxpayers Association Handbook; information on revenues from the rental car tax for Fiscal Years 1997 through 2003; examples of forms rental car companies use; examples of rental car company transactions reflecting where and how the 6 percent revenue is shown; pages from the Business Travel News that demonstrate costs for rental cars in major cities across the country. 

 

Chairman O’Donnell:

I am not sure the bill, as written, accomplishes your goal.  Are you saying you want the 4 percent, presently used for the registration of vehicles, to be rebated back to the state? 

 

Assemblyman Parks:

Yes, along with the 2 percent that already comes to the state.

 

Chairman O’Donnell:

Also, section 3 of A.B. 460 states, “A short-term lessor may deduct and withhold from the total fees otherwise due from him an amount equal to the total amount of vehicle licensing fees and taxes paid by the short-term lessor during the immediately preceding calendar quarter . . .”  As I read it, if the 3¾ percent was used to pay for taxes, registration, and licensing fees with rental car companies only remitting one-quarter percent, this bill accomplishes about the same thing as the old law.

 

Assemblyman Parks:

For the majority of the rental car companies, A.B. 460 would achieve a result similar to the current practice.  Smaller rental car companies, since they do not incur registration costs in excess of $100,000, would have the same provisions as the current law.

 

Chairman O’Donnell:

Basically, rental car companies would continue the same procedures they have in place now; however, they could only exempt up to $100,000 in taxes and licensing fees.  Is that correct?  Would you explain the effective date?

 

Assemblyman Parks:

That is correct.  The best effective date would be January 1, 2002.  This was determined in consultation with the Legislative Council Bureau staff.

 

Robert A. Ostrovsky, Lobbyist, The Hertz Corporation:

By removing the smaller rental car companies, the bill diverts the current revenues of about 13 rental car companies.  Under this proposed bill, those revenues would amount to $14 million per year.

 

Chairman O’Donnell:

I do not think the intent of the bill is to remove the smaller companies.  The intent of the bill is to allow each and every company, on an equal basis, a $100,000 exemption for rental car vehicles.

 

Mr. Ostrovsky:

As it is written, you are correct.  The Hertz Corporation would pay an additional $2.7 million per year in taxes under this proposal.

 

The industry believes there is an equity issue relative to the increase in fees.  A new amendment will be proposed entitled, “Amendment to A.B. 460, Third Reprint,” proposed by the Rental Car Industry (Exhibit D).  The amendment would add a section to say:  “A short-term lessor shall collect from its customers a separate charge for the actual vehicle licensing fees and taxes paid by the short-term lessor in the preceding year.”  I believe the funds would go to support schools.

 

Chairman O’Donnell:

Yes, the funds would go to the distributive school fund for education.

 

Edward Allison, Lobbyist, Avis Rental Car, National Rental Car, and Alamo Rental Car:

I would like to note that the existing proposal, which states the rental car companies retain the first $100,000 collected per annum, with the balance to be remitted to the state, will result in litigation.  There is no doubt this violates the equal protection clause.

 

Chairman O’Donnell:

As I understand it, this law was established in 1993 (A.B. 323 of the Sixty-Seventh Session) to balance the budget.  It was predicated on the fact that vehicle registration fees in Nevada put rental car agencies at a disadvantage with the rest of the nation.  This state has a higher than normal vehicle registration fee for vehicles because we do not have a state income tax or other taxes that many other states have; however, this does put rental car agencies at a disadvantage.  At the time the law was established, the argument was that rental car agencies could just raise rental car fees to accommodate the higher registration fees.  Can you address this issue? 

 

Mr. Ostrovsky:

At the time this law was put into effect, the industry promised it would maintain low competitive rates in this state.  That promise has been kept as indicated in Exhibit C.  Currently, the industry is concerned about not being able to compete in the national marketplace.  It is very hard for national car rental companies to change the rate structure to meet the needs of only one state. 

 

Approximately 28 states have some system of allowing companies to recover vehicle registration fees from customers (the drivers of the rental cars).  This means the customer is actually paying the tax, as was the intention of the original 6 percent tax; the customer was to pay the privilege tax.  It is very hard to maintain a competitive position nationally and yet keep rates low enough to attract tourists to Nevada.

 

Mr. Allison:

Mr. Ostrovsky’s observation is correct.  The larger car rental companies, for example the Avis Rental Car Company, spend millions of dollars promoting Nevada, particularly southern Nevada and the Reno-Tahoe area.  Those commitments and contracts are long-term.  We could add this as the market allows and still maintain some of the lowest rates in the country.

 

Bill Gregory, Lobbyist, Nevada Car Rental Association:

The Nevada Car Rental Association supports Mr. Ostrovsky’s amendment (Exhibit D).  I see this as a win-win situation where the state would gain the 6 percent but the industry would still recoup fees paid on taxes and registrations.

 

Chairman O’Donnell:

Assemblyman Parks, have you seen Exhibit D?  Do you agree with this amendment?

 

Assemblyman Parks:

No.  This amendment was not presented to the Nevada Assembly.  I do not concur with the amendment because it would increase what is now approximately a 23 percent tax rate on each rental vehicle to a 27 to 28 percent rate over and above the base rental cost of the vehicle.

 

Senator Care:

How does the earlier legislation, coupled with this bill, affect the consumer? 

 

Mr. Ostrovsky:

The Governor signed a bill (Senate Bill 118) allowing car rental companies to increase the collision waiver damage from $10 to $15 effective July 1, 2001.

 

SENATE BILL 118:  Revises certain provisions governing fees charged by short-term lessors of passenger cars. (BDR 43-708)

 

My understanding is The Hertz Company will raise rates on some vehicles, but vary the rates depending on the type of vehicle, so the higher amount would be paid when an expensive vehicle is rented.  The effect of A.B. 460 would be to raise fees from 23 percent to 26 or 27 percent, which is not high nationally; however, there is always a risk that there is a price point at which the customer will say, “No, I will not rent that vehicle.”  In Las Vegas, The Hertz Company does over 80 percent of its business from people who arrive in Nevada by air and they are usually willing to pay the price. 

 

Chairman O’Donnell:

How do you envision the development of the licensing fee or tax by the Department of Taxation?

 

Mr. Ostrovsky:

The Hertz Corporation estimates their annual business within 1 percent in Nevada.  Once the business is established, and registration and fee records are presented to the Department of Taxation, they would provide a regulation to say, “You may collect up to X, but no more.”  It is very late in the session.  To devise a scheme or mechanism which could be added to the statute, at this time, does not seem to be realistic; however, we would be happy to work with the Department of Taxation on this matter.

 

Chairman O’Donnell:

I will close the hearing on A.B. 460.  We will reschedule the hearing on A.B. 21.

 

ASSEMBLY BILL 21:  Requires court to order person convicted of second offense of driving under influence of intoxicating liquor or controlled substance within 7 years to attend program of treatment for abuse of alcohol or drugs. (BDR 43-868)

 

Chairman O’Donnell:

The meeting is adjourned at 7:38 p.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

Alice Nevin,

Committee Secretary

 

APPROVED BY:

 

 

 

                       

Senator William R. O'Donnell, Chairman

 

 

DATE: