BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 348|
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THIRD READING
Bill No: SB 348
Author: Cogdill (R)
Amended: 5/28/09
Vote: 27 - Urgency
SENATE JUDICIARY COMMITTEE : 5-0, 5/12/09
AYES: Corbett, Harman, Florez, Leno, Walters
SUBJECT : Rental car companies: increased vehicle
license fee
SOURCE : Author
DIGEST : The 2009 Budget Act temporarily increased the
vehicle license fee (VLF) from the current rate of 0.65
percent to a rate of 1.15 percent. This bill permits a
rental car company to recover the actual costs incurred by
the company for the payment of that increased VLF from
rental car customers. This bill revises how this fee is
calculated, as specified. This bill specifies the manner
in which a rental company calculates the increased vehicle
license recovery fee.
Senate Floor Amendments of 5/28/09 provide that the
authority of a rental company to recover the increased VLF
ceases to become operative 12 months after the restoration
of the VLF. The amendments also add an urgency clause.
ANALYSIS : Existing law requires rental car companies to
"bundle," or include, the VLF paid in any rental rate that
CONTINUED
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is advertised, quoted, and charged to rental car customers.
Certain other specified fees, such as taxes, customer
facility charges, or mileage charges are permitted to be
unbundled and advertised, quoted, and charged separately.
(Section 1936(n)(1) of the Civil Code)
Existing law temporarily increases the VLF from the current
rate of 0.65 percent to a rate of 1.15 percent. (Sections
10752 and 10752.2 of the Revenue and Taxation Code)
Existing law, beginning May 21, 2009, permits rental car
companies to separately advertise, quote, and charge the
higher cost of this increased VLF which shall be pro-rated
at 1/365th of the fee increase in the annual VLF actually
paid on the particular vehicle being rented for each full
or partial 24-hour rental day that the vehicle is rented.
The total amount of all increased VLF fees charged to
renters may not exceed the fee increase in the annual VLF
actually paid for the particular vehicle rented. (Section
1936.015 of the Civil Code)
Existing law requires a rental car company, if it imposes
customer facility charges, airport concession fees, or
tourism commission assessments to provide, at the time of a
quote, a good faith estimate of the rental rate, taxes, the
increased VLF, customer facility charge, if any, airport
concession fee, if any, and tourism commission assessment,
if any as well as the total charges for the entire rental.
(Section 1936.015(b)(3)(A) of the Civil Code)
Existing law requires a rental car company, at the time and
place of the rental, to clearly and conspicuously disclose
in the rental contract the total of the rental rate, taxes,
the increased VLF, customer facility charge, if any,
airport concession fee, if any, and tourism commission
assessment, if any, for the entire rental, exclusive of
charges that cannot be determined at the time the rental
commences. (Section 1936.015(b)(3)(B) of the Civil Code)
Existing law provides that Section 1936.015 of the Civil
Code shall only become operative if the VLF is increased
above 0.65 percent of the value of the vehicle and will
cease to become operative upon restoration of the VLF to no
more than 0.65 percent of such value. (Section
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1936.015(e)(1) of the Civil Code)
This bill defines "increased vehicle license recovery fee"
as a charge that seeks to recover the amount of increased
VLFs actually paid by a rental company for the particular
class of vehicle being rented.
This bill deletes existing law which provides that the
amount that could be charged to a rental car customer for
the increased VLF be pro-rated for a particular rental car
at a rate of 1/365th of the increased VLF for each full or
partial 24-hour rental day and would instead provide that
the amount of the fee shall represent the company's good
faith estimate of the company's daily charge calculated to
recover its actual total increased VLF. This amount must
be separately and clearly stated.
This bill provides that a rental company shall calculate
the amount of the increased vehicle license recovery fee in
the following manner:
1. The initial calculation required by this section shall
be made as of August 21, 2009, and shall include the
three-month period of May 21, 2009, to August 21, 2009,
inclusive. Subsequent calculations shall be made every
three months thereafter.
2. The rental company shall determine the total amount of
the increased VLF actually paid during the 12 months
preceding the calculation date, for each particular
class of vehicle being rented.
3. The total amount of increased VLF actually paid for each
class of vehicle shall be divided by the number of
vehicles in the class, to determine the average
increased VLF for each class.
4. The average increased VLF for vehicles in each class
shall be prorated at 1/365th, to determine the daily
increased vehicle license recovery fee for vehicles in
each particular class of vehicle, to be charged for each
full or partial 24-hour rental day that the vehicle is
rented.
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This bill provides that as of November 21, 2009, and
annually as of each November 21 thereafter, a rental
company shall reconcile the amount of increased VLFs
actually paid by the rental company during the preceding 12
months for each class of vehicle and the amount of
increased vehicle license recovery fees charged to
customers during that same 12-month period for rental of
vehicles in those classes. The rental company shall post
that information on its Internet website by December 31 of
each year.
This bill provides that the total of all increased VLFs
actually paid by the rental company for each class of
vehicle on an annual basis shall not exceed the total of
increased vehicle license recovery fees charged to
customers for rental of vehicles in those classes on an
annual basis.
Existing law provides that the provisions of Section
1936.015 which relate to the disclosure and separately
stated charges for a customer facility charge or an airport
concession fee shall remain operative so long as the
Secretary of the Business, Transportation, and Housing
Agency provides notice as specified. (Section
1936.015(e)(2) of the Civil Code)
This bill deletes this provision.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/1/09)
Alamo
Avis Budget Group
Enterprise
Hertz Corporation
National
OPPOSITION : (Verified 6/1/09)
Center for Public Interest Law
ARGUMENTS IN SUPPORT : The author writes:
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"Existing law authorizes rental car companies to 'pass
through' the VLF increase that was approved as part of
the budget deal. For practical purposes, the pass
through allows rental car companies to include the amount
of the VLF increase as a separate line item on a
customer's bill.
"Although the intent of the Legislature, as agreed to
during budget negotiations, was to authorize rental car
companies to utilize a pass through, the language in [SB]
10xx contained several provisions that make doing so
difficult, if not impossible for rental car companies to
utilize their pass through without violating the law.
"The default rule for taxes, fees, and charges is that
those subject to them must pay them. They then compete
in the market. Some of them pass through the charge,
while others increase efficiency and gain a competitive
advantage over those who decide to pass through all of
it. Some pass through only part of it. This is an issue
the market should decide, not the legislature. A tax or
fee on an automobile applies to the owner of it, and is
not a proper subject for pass-through to consumers."
In addition, as supporters note, the language contained in
SB 10XX was modeled on language in a 1996 bill, SB 1070
(Calderon), Chapter 992, Statutes of 1996. That bill
defined "taxes" for the purposes of the requirement that
rental car companies could only advertise, quote, and
charge a rental rate that includes the entire amount except
taxes and a mileage charge, if any. Under the bill, taxes
were defined to include the VLF which shall be separately
charged, clearly stated on the rental agreement, and
pro-rated at 1/365th of the annual VLF actually paid on the
particular vehicle being rented for each full or partial
24-hour rental day that the vehicle is rented. That bill
sunset in 2002.
Supporters also point out that the Legislature passed and
the Governor signed AB 2592 (Leno), Chapter 790, Statutes
of 2006, which permitted rental car companies to separately
state airport concession fees and tourism commission
assessments. At the time of the quote, the rental car
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company must make a good faith estimate of these fees and
may not, at the time the rental commences, charge the
customer more than the amount of the quote. While some
have suggested that the formula in SB 10XX is inconsistent
with AB 2592 which permitted the entire cost of these
specified fees and assessments to be passed through and
separately stated, that formula recognized that the pass
through of airport concession fees and tourism commission
assessments is distinct from VLF charges.
ARGUMENTS IN OPPOSITION : The Center for Public Interest
Law notes in passing that "these same rental car companies
secured 2006 legislation (AB 2592 (Leno)) authorizing each
of them -- separately -- to unbundle and decide whether to
pass through to consumers all or part of the 'airport
concession fee' that they pay to airports for the use of
their facilities. Rather than making that decision
individually, we contend the companies colluded in deciding
(a) whether to pass on that charge, and (b) how much of
that charge to pass on. Those allegations are now the
subject of a federal antitrust lawsuit ( Shames v. Hertz ,
now pending in the U. S. District Court for the Southern
District of California). Although this bill does not
appear to allow the rental car companies to collude in
deciding whether and/or what percentage of the VLF to pass
on to consumers, the legislature should be aware that this
industry has abused prior legislation allowing a consumer
pass-through. This is a bad precedent to set. It applies
to no other industry. Neither history nor equity commend
it here."
RJG:mw 6/1/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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