Socially Conscious Car Sharing Service Lobbies for Tax Loophole

The non-profit car sharing service HOURCAR claims to be about more than just making a buck like ordinary car rental companies–much more.

As a 501(c)3 nonprofit, everything we do is in service to that mission, not to shareholders or venture capitalists. We work for the common good, not the bottom line. We’re not exploiting markets and extracting value; we’re envisioning a future and working to bring it into the present. We want to live in healthy and connected communities where everyone can get where they need to go in an efficient and sustainable manner.

Contrary to its mission statement, it turns out the St. Paul car loaning rental agency cares deeply about the bottom line, according to a report in Session Daily.

The St. Paul-based nonprofit car sharing service has 2,200 members, but its chief executive officer, Paul Schroeder, says that about a quarter of new customers leave the service after a few rides. When exiting, customers commonly say that the chief reason is discovering their rates to be much higher than expected.

In fact, a quest for more customers and higher revenues has led Schroeder to lobby lawmakers as intensely as any capitalist.  Despite its non-profit tax status, HOURCAR has a tax problem–Minnesota’s 9.2 percent tax on car rentals.

The combination of the 9.2 percent rental tax with the state’s 6.875 percent sales tax results in Minnesota’s taxes being the highest in the nation for car sharing services, according to Schroeder. He said it’s causing companies that have found success in such cities as Chicago, Seattle and Portland to stay out of the Twin Cities market, and inspired car-sharing service Car2Go to leave the state in 2016.

Legislation by Rep. Jennifer Schultz, DFL-Duluth would exempt politically correct car sharing operators from paying the 9.2 percent tax, along with a related tax. But the proposed special interest loophole quickly ran into reality at a House Tax Committee hearing.

Todd Hill, representing Enterprise Rent-a-Car, called the bill unfair. “We agree with the proponents of this bill,” Hill said. “Rental car taxes in Minnesota are way too high. The airport rental car tax is now 44 percent. We lose lots of business every day to Uber and Lyft and other types of transportation because our rental car taxes are too high. … We’d be fine if everyone had that tax break, but it doesn’t seem to us to be fair to give our competitor a tax advantage over us.”

Yet the tax break could still be inserted into a last-minute omnibus bill at the end of the legislative session. If so, just recall what it says on HOURCAR’s website:

As a nonprofit, we’re not just in it for the money; we’re in it for the long haul.