UPDATE May 25, 2022: Earlier this week, the bill passed the House and Senate. This morning, Governor Walz signed the bill into law! Effective July 1, 2022, Evie and HOURCAR trips will no longer include the 9.2% Car Rental Tax.
Minnesota State Senator Scott Dibble and Representative Athena Hollins have proposed a bill to support growth of carshare services in diverse and low-income neighborhoods. Known as the Disadvantaged Communities Carshare Act (SF 671), the bill has passed the Senate Transportation Committee and , on April 13, the Taxes Committee. It is now headed to the Senate floor.
What's The Story?
Under current state law, trips in rented vehicles are subject to car rental taxes and fees. As a nonprofit carshare service, HOURCAR is exempt from the 5% state rental car fee. However, HOURCAR trips are subject to the 9.2% state rental car tax, as well as state sales tax and local taxes and fees. This means HOURCAR members pay over 17% in taxes on top of trip costs when using carshare to run basic errands like getting groceries, going to medical appointments, and commuting to work. This tax rate makes it harder for people to live car-free and/or car-light, and reduces affordable vehicle access for low-income members of our community.
So Evie Isn't a Car Rental Service?
Most rental car companies are large out-of-state corporations. Renters are required to pay for their own fuel and insurance, and usually need to book a vehicle for a minimum of 24 hours.
The use case of carsharing is quite different from that of the traditional daily rental car model. Carshare vehicles are available 24/7, can be booked within minutes, and are accessible near where people live and work. The carshare provider covers the cost of fuel, insurance, and parking as part of the membership model. Carshare serves as a multimodal connector, enabling people to trip chain, making more rapid connections to transit and supplementing biking and walking. The benefits that local nonprofit carsharing provides to the community in terms of emissions reductions and transportation cost savings, especially for low-income people, warrants an exemption from the rental car fee. Locally-based carshare companies keep their communities sustainable, reduce personal vehicle ownership, and base their services on community feedback.
Proposed Removal of 9.2% Car Rental Tax for Local, Nonprofit Carshare Services
This bill proposes that local, nonprofit carsharing be exempted from the 9.2% car rental tax, mirroring the language of the current exemption for local, nonprofit carsharing in the car rental fee. The 9.2% tax increases the cost of carshare, making it less affordable to households that can’t afford car ownership. HOURCAR’s 2020 Community Engagement Report documented ‘high cost’ as a barrier to accessing our service. The removal of the 9.2% Car Rental Tax on carshare trips would reduce the current 17% total tax rate to at or under 8%.
Development of Disadvantaged Communities Carshare Grant Account
The Disadvantaged Communities Carshare Grant Account is being proposed to provide funding for carshare services in low-income and BIPOC communities throughout the State. This account will provide dedicated funding for nonprofit and locally based carshare services to encourage and subsidize growth in disadvantaged communities.
What Can I Do?
Please contact your government representative to voice your support. It’s important that your elected officials understand the large impact this can have on our communities. This bill reduces taxes on carshare users and sets aside dedicated funding to support growth of carshare in disadvantaged communities.
HOURCAR continues to focus on increasing access and equity in its services. This bill supports these goals and helps Minnesota develop more sustainable transportation modes for its residents.