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Car-Sharing Supporters Say New Regulations Would Triple Tax Users

A bill to tax people who list their cars on car-sharing services is being debated in Springfield.

A Car2Go car parked on Honore in Wicker Park. The street is not zoned for parking but spaces are often difficult to find.
Alisa Hauser/Block Club Chicago
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SPRINGFIELD — Sponsors and proponents of a bill to regulate peer-to-peer car sharing companies like San Francisco-based Turo said Tuesday they have the votes to override Gov. Bruce Rauner’s amendatory veto of the legislation, which would require Turo and competitors to pay state and local taxes on rental transactions and would mandate more safety regulations.

Advocates for the bill are likely to call it for a vote Wednesday in the Senate, and eventually the House if the legislation is passed with the necessary three-fifths majority in the upper chamber. The bill, SB 2641, passed in late May with 34 votes in the Senate and 78 votes in the House. 

But opponents of the bill, including representatives of Turo, accuse supporters of the bill of rushing through regulations otherwise unpalatable to the business community during the General Assembly’s fall veto session. 

Lou Bertuca, a senior manager for governmental relations at Turo, told reporters Tuesday that the late May bill process was unfair to those who rent out their cars on the platform, who company officials refer to as hosts.

“Our hosts are making money off of this new, innovative platform,” Bertuca said. “They deserve a fair hearing. They deserve to have all the information out there. This is no way to create a law, to wait until the end of session, to gut and amend a bill, not have any transparency on it and try to force it down people’s throats. This is no way to run a railroad.”

In addition, opponents of the bill said it would “triple tax” those who rent out their cars using Turo and other peer-to-peer car-sharing services like Getaround. Car owners paid a 6.25 percent sales tax when they bought the car, as well as 4.95 percent in income taxes on any money they earn renting it out on Turo or Getaround. 

Rental car companies, meanwhile, are exempt from sales taxes when they purchase their fleets of vehicles, opponents of the measure said. That exemption that costs the state nearly $200 million in lost tax revenue every year, firm representatives said.

The bill would impose a 5 percent tax on every Turo or Getaround transaction, payable to to the state, and would allow cities and towns to collect a 1 percent sales tax.

Joseph Schwieterman, the director of the Chaddick Institute for Metropolitan Development at DePaul University in Chicago, urged lawmakers in May to reject the bill because his calculations show that “peer-to peer car sharing in metropolitan Chicago would be taxed at a rate far above most other metropolitan regions (around 20%) if this legislation is passed.”

“This extremely high sales tax rate would greatly hurt the development of the sector,” Schwieterman wrote in a letter provided to reporters. 

Nearly 10,000 Illinois residents list their car on Turo and Getaround, and earn an average of $625 a month. Of those car owners, 96 percent have two or fewer cars on the platform, firm representatives said.

“Opponents of the bill have repeatedly misrepresented the intention of this legislation, claiming it would stifle an emerging industry and raise taxes on individuals trying to make ends meet by renting out their cars,” sponsor Sen. Antonio Munoz (D-Chicago) told reporters at a Tuesday press conference. “These arguments simply aren’t true. The effort is about closing loopholes that allow peer-to-peer companies to operate largely unregulated, which puts drivers at risk and allows these companies to get out of paying their fair share of taxes.”

Rauner vetoed the bill in late August, and included 41 pages of suggested changes to the bill in his amendatory veto message. The governor objected to the “sweeping” nature of the legislation, and contained dozens of specific recommendations for change in order to let car-sharing businesses like Turo thrive in Illinois.

Traditional car rental companies like Enterprise and Hertz have pushed for the bill and others like it not just in Illinois but nationwide where Turo and similar apps have taken off.

Illinois and municipalities with a local sales tax collected $80 million from car rental taxes in 2016. Airports also collect taxes from car rental companies, though those contracts are considered proprietary information as they are usually negotiated between the parties. 

But bill sponsors and other advocates said the bill is also designed to improve safety. The National Transportation Security Board estimates that 25 percent of cars on the road are driving around with parts that have been recalled. 

Turo, however, says it does not allow cars to be rented on its site with open safety recalls that have not been addressed. And if a car receives a safety recall after being listed on the site, Bertuca said Turo has a mechanism to catch those — through a third-party firm that tracks safety recalls on cars. 

“They get it from the National Highway Trust and Safety and they have all the safety recalls,” Bertuca told reporters. “Then that third party then in real time gets that information. Remember, Turo doesn’t own any cars. So when a safety recall comes, it comes to the owner, it does not come to us. So that nuance needs to be taken into place like it was in Maryland to make sure we’re actually able to comply with any law that were to pass.”

But advocates of the bill said they are skeptical of Turo’s safety process, and said it would be more effective to manage car-sharing companies like traditional rental companies when it comes to vehicle inspections and recalls. 

Republican sponsors like State Sen. Sue Rezin (R-Morris) and State Rep. Grant Wehrli (R-Naperville) said Tuesday that the bill would “level the playing field” for rental companies and also provide rate transparency for consumers using peer-to-peer car sharing platforms.