socastcmsRssStartBy Cole Lauterbach | Illinois News NetworksocastcmsRssEnd
Illinois lawmakers, encouraged by car rental companies facing competition from startups, are gathering the needed votes to override Gov. Bruce Rauner’s veto of a bill that would tax and regulate the emerging peer-to-peer car sharing industry.
Startups say their established rivals are using the legislation to crush competition.
Peer-to-peer car rental companies allow individuals to rent their car out in a similar manner to AirBnB owners renting out living spaces. Currently, there are more than 6,100 car owners in Illinois who rent their vehicles out to others.
Lawmakers want to override Rauner’s veto to <a href="http://www.ilga.gov/legislation/100/SB/10000SB2641ham001.htm">Senate Bill 2641</a> in the coming days, inscribing into law requirements for companies like Turo and their members to provide detailed cost estimates, abide by more strict vehicle recall requirements, and pay an additional 5 percent state tax with the possibility of additional local taxes.
“Why should car sharing companies get a special deal?” asked Rep. Art Turner, D-Chicago, during a news conference Tuesday before session.
The 5 percent rental car tax brought in around $40 million in 2016 with another $40 million going to local governments via an 1 percent optional tax.
Lobbyists for rental companies said this money goes to infrastructure and that rideshare companies should have to pay the same tax. However, rental companies are exempt from paying sales tax on the vehicles they buy, a break worth an estimated $200 million a year.
“Until that loophole is addressed, we can’t even begin to talk about fairness and level playing fields,” said Lou Bertuca, governmental relations manager for Turo. “Enterprise has tried nationwide to limit peer-to-peer car sharing because they’re scared of a competitor coming on the scene.”
The tax carveout allows rental companies to buy cars at a discount and resell them at retail, Bertuca said.
The battle between rideshare startups and traditional rental companies like Hertz and Enterprise Rent-a-Car has been fought in multiple states, said Michelle Peacock, Turo’s vice president.
“By upholding this bill and overriding the veto, the state of Illinois is saying it is hostile to innovation,” Peacock said.
Turo ride sharers pay state income tax on their profits, which are funneled to local governments via the Local Government Distributive Fund. Along with taxes on their vehicles and the added rental tax that rental companies pay, Peacock says the service is being “triple taxed.”
Lawmakers in support of the legislation said ridesharing companies are putting their customers at risk, but Peacock says the company has policies in place that forbid the sharing of cars with open recall notices.
Turo and others criticized lawmakers for changing a different existing bill to only include this language. This practice, known as “gut-and-replace” is commonplace. Pension reforms, tax increases, even entire state budgets start out as what’s known as shell bills that allow lawmakers to quickly get around constitutional time and hearing requirements.