[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
   END DISCRIMINATORY STATE TAXES FOR AUTOMOBILE RENTERS ACT OF 2011 

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON COURTS, COMMERCIAL
                         AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                                   ON

                               H.R. 2469

                               __________

                            FEBRUARY 1, 2012

                               __________

                           Serial No. 112-100

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov

                               ----------
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72-691 PDF                       WASHINGTON : 2012 

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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             JARED POLIS, Colorado
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona
MARK AMODEI, Nevada

      Sean McLaughlin, Majority Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

       Subcommittee on Courts, Commercial and Administrative Law

                 HOWARD COBLE, North Carolina, Chairman

               TREY GOWDY, South Carolina, Vice-Chairman

ELTON GALLEGLY, California           STEVE COHEN, Tennessee
TRENT FRANKS, Arizona                HENRY C. ``HANK'' JOHNSON, Jr.,
DENNIS ROSS, Florida                   Georgia
BEN QUAYLE, Arizona                  MELVIN L. WATT, North Carolina
                                     JARED POLIS, Colorado

                      Daniel Flores, Chief Counsel

                      James Park, Minority Counsel



                            C O N T E N T S

                              ----------                              

                            FEBRUARY 1, 2012

                                                                   Page

                                THE BILL

H.R. 2469, the ``End Discriminatory State Taxes for Automobile 
  Renters Act of 2011''..........................................     3

                           OPENING STATEMENTS

The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Chairman, Subcommittee on Courts, 
  Commercial and Administrative Law..............................     1

The Honorable Steve Cohen, a Representative in Congress from the 
  State of Tennessee, and Ranking Member, Subcommittee on Courts, 
  Commercial and Administrative Law..............................    12

                               WITNESSES

Sally Greenberg, Executive Director, National Consumers League
  Oral Testimony.................................................    14
  Prepared Statement.............................................    17

Brian Frederick, Executive Director, National Sports Fan 
  Coalition
  Oral Testimony.................................................    26
  Prepared Statement.............................................    28

Raymond A. Warren, Deputy Commissioner of Revenue and Legal 
  Counsel, Arlington, VA, on behalf of the National Association 
  of Counties, the National League of Cities, the United States 
  Conference of Mayors, and the Government Finance Officers 
  Association
  Oral Testimony.................................................    36
  Prepared Statement.............................................    38

Michael W. McCormick, Executive Director, Global Business Travel 
  Association
  Oral Testimony.................................................    43
  Prepared Statement.............................................    45

                                APPENDIX
               Material Submitted for the Hearing Record

Letter from Josh Nassar, Legislative Director, International 
  Union, United Automobile, Aerospace & Agricultural Implement 
  Workers of America (UAW).......................................    54

Letter from Thomas M. James, President and CEO, Truck Renting and 
  Leasing Association (TRALA)....................................    56

Prepared Statement of the Federation of Tax Administrators, and 
  Government Finance Officers Association........................    58

Letter from Bob Barton, President, the American Car Rental 
  Association (ACRA).............................................    61

Prepared Statement of Matt Blunt, President of the American 
  Automotive Policy Council (AAPC)...............................    63

Prepared Statement of the Interactive Travel Services Association 
  (ITSA), and the Business Travel Coalition (BTC)................    66

Letter from Richard D. Broome, Senior Vice President, Corporate 
  Affairs & Communications, The Hertz Corporation................    70

Letter from Charles M. Loveless, Director of Legislation, the 
  American Federation of State, County and Municipal Employees 
  (AFSCME).......................................................    72

Prepared Statement of Jeffrey Friedman, Sutherland, Asbill & 
  Brennan LLP....................................................    73


   END DISCRIMINATORY STATE TAXES FOR AUTOMOBILE RENTERS ACT OF 2011

                              ----------                              


                      WEDNESDAY, FEBRUARY 1, 2012

              House of Representatives,    
                    Subcommittee on Courts,
                 Commercial and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 1:34 p.m., in 
room 2141, Rayburn Office Building, the Honorable Howard Coble 
(Chairman of the Subcommittee) presiding.
    Present: Representatives Coble, Gowdy, Quayle, Cohen, 
Johnson, Polis
    Staff present: (Majority) Daniel Flores, Subcommittee Chief 
Counsel; Travis Norton, Counsel; Johnny Mautz, Counsel; Ashley 
Lewis, Clerk; (Minority) James Park, Subcommittee Chief 
Counsel; and Norberto Salinas, Counsel.
    Mr. Coble. The Subcommittee will come to order. Good to 
have you all with us today.
    This Congress, our Subcommittee has considered a number of 
bills addressing taxes that appear to be unfair or inefficient. 
While several iterations of H.R. 2469 have been included in 
past sessions of Congress, car rental taxes are another area of 
our tax law that have been routinely criticized on Capitol 
Hill.
    Ranking Member Cohen, my good friend from Tennessee, and 
our Republican colleague from Missouri, Sam Graves, have taken 
on the task of trying to address these criticisms by 
introducing H.R. 2469. Hopefully, today's hearing will shed 
some light on this issue and on H.R. 2469.
    State and local governments impose excise taxes on car 
rentals for a number of purposes. While these taxes are 
explicitly applied to rental vehicles, they undoubtedly raise 
the ire of the car rental industry, and travelers who rely on 
car rentals.
    During the past several years, our office has received 
critical comments about car rental taxes from the car rental 
industry. I expect that witnesses today will further highlight 
these criticisms.
    One issue that could be affected by H.R. 2469, which was 
recently brought to my attention, and creates great concern, is 
the potential impact on local transportation authorities. I 
understand many of these organizations rely upon car rental tax 
revenues. I cannot speak to every variation of--or use of car 
rental revenues, but I can say with certainty that this funding 
is critical for transportation authorities in my district and 
in my state.
    Along these lines, I am very interested in how H.R. 2469 
would affect the ability of jurisdictions to use these taxes to 
fund local transportation authorities. For many years, and 
perhaps you have heard me say it, I have warned that the number 
one issue, in my opinion, plaguing transportation in America is 
vehicular congestion. To the extent these revenues are utilized 
to alleviate congestion, I believe they are being invested 
wisely.
    I appreciate the bipartisan support for H.R. 2469, and look 
forward to the testimony from our witnesses who are here today. 
I apologize to you all for my raspy voice. I have come down 
with my annual winter cold, so bear with me. Even though the 
weather outside is more like April than February.
    [The bill, H.R. 2469, follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                               __________
    Mr. Coble. I recognize the distinguished gentleman from 
Tennessee, Mr. Cohen, for an opening statement.
    Mr. Cohen. Thank you. Thank you. Thank you, Mr. Coble. And 
welcome back.
    Mr. Coble. Oh. Thank you, sir.
    Mr. Cohen. It is good to have you back where you belong, 
just like Kotter.
    Mr. Coble. Thank you.
    Mr. Cohen. Yes. Thank you for holding this hearing as well.
    In the 111th Congress, this Subcommittee held a hearing on 
the earlier version of the bill that we consider today, H.R. 
2469, the ``End Discriminatory State Taxes for Automobile 
Renters Act of 2011,'' which I introduced that year. The act 
prohibits future discriminatory state and local taxation of the 
rental of motor vehicles, the business of renting motor 
vehicles, or a motor vehicle rental property. And I am glad 
that Mr. Graves, from Missouri, worked with me on this bill 
this year.
    Importantly, the Act does not apply to discriminatory State 
or local car rental taxes already in effect, as the effective 
date of this bill, and those that have already been authorized 
or those that will be after the effective after--the effective 
date and afterwards. So, it has no impact on current State and 
local taxes.
    In 2010, I noted that States and localities often turn to 
discriminatory taxes on certain goods or services. That is, 
taxes that are higher than the generally applicable sales tax 
in--in the jurisdiction on other types of goods and services. 
This temptation to rely on discriminatory taxation is 
heightened in the case of taxes imposed on rental cars.
    As a former State senator and a county official, I 
understand why States and localities love car rental taxes. 
They seem like a relatively painless way for political 
officials to raise revenue, because of the widespread belief 
that these taxes primarily affect out-of-towners, getting non-
constituents to pay for local needs. Even though that is wrong, 
it does make it politically more feasible for them.
    State and local officials like to impose discriminatory 
taxes on car rentals, because there is no political 
accountability, they get the money, and they can go to the 
groundbreaking.
    Such thinking reminds me of an old saying that I used to 
hear from Leonard Donovant, of Millington, Tennessee, a fine 
member of the Tennessee State Senate, and a conservative member 
of the Tennessee Senate. He said, ``Don't tax me. Don't tax 
thee. Tax that man behind that tree.'' And, indeed, those are 
the people you are taxing.
    For consumers, discriminatory rental car taxes impose an 
unfair burden on them. Many of our constituents have faced a 
situation where an individual rents a car from a rental car 
company, is told the daily rate would be $25. By the time the 
bill comes due, however, the renter is often shocked to learn 
the actual charges are closer to $40 a day, after these taxes 
are added on.
    Over 1 week's time, that is a difference of $105, from the 
quoted price, to the final bill, enough to persuade many from 
renting a car in the future, or from even traveling in the 
first place. Such an impact on the interstate traveler 
represents an unwarranted burden on interstate commerce by 
local taxing authorities. Worse, the discriminatory State and 
local taxes on car rental for consumers are often used to build 
local sports stadia and convention centers not to benefit car 
rental consumers.
    We also learned during our hearing last Congress that car 
rental taxes may be regressive, because low-income and minority 
individuals end up paying a larger share of car rental taxes, 
relative to their population. This impact is stark.
    In Georgia, in 2008, households making $50,000 a year or 
less paid over $9 million in rental car taxes. Households 
making $25,000 a year or less, roughly the poverty line for a 
family of four, accounted for $3.5 million of that $9 million.
    Additionally, Caucasians who account for two-thirds of 
Georgia's population paid less than half the car rental taxes. 
In contrast, African-Americans, who accounted for just 12 
percent of Georgia's population, generated one-quarter of 
rental car revenues, and shouldered 27 percent of the car 
rental tax burden. Minority groups, as a whole, bore 92 percent 
of the car rental tax burden.
    A broad range of groups have endorsed this legislation, 
including the National Consumers League, the United Auto 
Workers, the Global Business Travel Association, Americans for 
Tax Reform, the National Urban League, and the major automobile 
manufacturers as well.
    More than 117 discriminatory rental car taxes have been 
enacted in 43 States and the District of Columbia. It is time 
Congress put a halt to such taxation, which is discriminatory 
in several ways.
    So, I thank Congressman Graves for joining me in 
introducing the legislation. And I thank my predecessor in the 
Judiciary Committee, and in the House, Rick Boucher, a fine 
gentleman from Virginia, who introduced this bill prior to my 
taking over prime sponsorship. And he was the leader on it for 
quite a while. And I thank Chairman Coble for scheduling this 
hearing. And I thank our witnesses for participating. And I 
urge my colleagues to support this legislation.
    Mr. Coble. I thank you, Mr. Cohen. And we also have on the 
panel today Mr. Gowdy, the distinguished gentleman from South 
Carolina, Mr. Quayle, the distinguished gentleman from Arizona, 
Mr. Polis, the distinguished gentleman from Colorado. Good to 
have you all here as well.
    I am now pleased to introduce our panelists. I will start 
with Sally Greenberg, who serves as the Executive Director of 
the National Consumers League, a position she has held since 
2007. The mission of the NCL is to protect and promote social 
and economic justice for consumers, workers in the United 
States and abroad. Prior to her service at NCL, Ms. Greenberg 
worked at Consumers Union for 10 years on a variety of issues, 
including product liability and food safety issues. Her career 
also included positions at the U.S. Department of Justice and 
the Anti-Defamation League, in Boston.
    Dr. Brian Frederick is the Executive Director of the Sports 
Fan Coalition, a national non-profit organization dedicated to 
advocating issues of importance to sports fans. He's also an 
adjunct professor at Georgetown University, where he teaches 
sports industry management.
    Dr. Frederick earned his Ph.D. from the University of 
Colorado, at Boulder, and his master's degree from UNC, at 
Chapel Hill, North Carolina. He completed his undergraduate 
work at the University of Iowa.
    Bio for Mr. Ray Warren. Mr. Warren is a Deputy Commissioner 
of Revenue for Arlington County, Virginia. His testimony today 
is on behalf of the National Association of Counties, the 
National League of Cities, the United States Conference of 
Mayors, and the Government Finance Officers Association.
    Mr. Warren has been a practicing attorney for 28 years, 
having earned his law degree and undergraduate degree from the 
University of North Carolina. This is North Carolina day, it 
appears. Good to have you all here as well.
    He also served 2 terms in the North Carolina General 
Assembly, and 7 years as a North Carolina Superior Court judge. 
He has taught law classes at UNC, Charlotte, and Marymount 
University, in Arlington.
    As an aside, Mr. Warren, where were you reared? What was 
your home county?
    Mr. Warren. Mecklenburg County.
    Mr. Coble. Pardon?
    Mr. Warren. Mecklenburg County, sir.
    Mr. Coble. Oh. From the big city area.
    Mr. Warren. Absolutely.
    Mr. Coble. Well, good to have you with us, Judge.
    And finally, the bio for Mr. Michael McCormick. Mr. 
McCormick serves as Executive Director of the Global Business 
Travel Association, a position he has held since August 2009. 
GBTA is a leading source for networking, advocacy, and--and 
education for business and government travel managers, buyers, 
and planners.
    Prior to his tenure at GBTA, Mr. McCormick spent more than 
20 years in the travel industry. Mr. McCormick earned his 
bachelor's degree at the University of Notre Dame. Good to have 
you all with us. And I remember you now, Mr. Warren, as a 
Mecklenburger, since you refreshed my memory.
    Folks we will ask you all to keep a sharp lookout on the 
timer. It is on the desk. The light will go from green, to 
yellow, to red. And we try to comply with the 5-minute rule, if 
possible. Nobody will be keel-hauled if you violate it. But if 
you could wrap up when you see that yellow light appear, that 
is your warning that we have 1 minute to go. And Mr. Cohen and 
I will try to practice the 5-minute rule against ourselves as 
well.
    So, Ms. Greenberg, if you will be our leadoff hitter. And 
thank you all for being with us.

  TESTIMONY OF SALLY GREENBERG, EXECUTIVE DIRECTOR, NATIONAL 
                        CONSUMERS LEAGUE

    Ms. Greenberg. Well, thank you very much, Congressman. And 
I'm delighted to be here today. Thank you, Ranking Member 
Cohen, and Congressman Polis, and Congressmen Gowdy and Quayle. 
I really appreciate the opportunity to be here to talk to you 
about H.R. 2469. It is the End Discriminatory State Taxes for 
Automobile Renters Act of 2001.
    I am, indeed, the Executive Director of the National 
Consumers League. We are the nation's oldest consumer 
organization, founded in 1899.
    Mr. Chairman, consumers today feel that in many of their 
transactions they are being nickled and dimed constantly. Added 
fees are everywhere. The National Consumers League feels 
consumers' pain. And rental car taxes top the list of the worst 
abusers.
    Don't take it from me. ``Consumer Reports,'' in August 
2010, ran a piece called, ``Fees that Irk Consumers.'' The 
worst case were the fees attached to a rental car. And as 
``Consumer Reports'' puts it, ``But our hearts really go out to 
a couple who rented a compact car in Boston last summer. They 
paid $444 for 15 days of driving. And then came the rental 
vehicle surcharge, customer facility charge, parking surcharge, 
energy recovery fee, fleet recovery surcharge, concession 
recovery fee, and State tax.'' So, we are here to say, we 
support the legislation, and also to say enough.
    H.R. 2469 will prospectively bar discriminatory car rental 
taxes, which are simply added fees imposed by States and 
localities. Now the bill will grandfather in existing taxes and 
not affect the ability of States and localities to impose 
general taxes that are levied on all citizens or business.
    According to the New York Times, the most common use of 
these rental car excise taxes is to finance sports stadiums and 
convention centers. The ``Times'' noted that at least 35 sports 
stadiums were expected to be financed partly with subsidies 
from car rental taxes.
    As of this time, 43 States and the District of Columbia 
have imposed 118 excise taxes on car rentals. This is eight 
times the number of these taxes that existed in 1990.
    A perfect example is Minneapolis. The Minnesota Vikings 
already have the Metrodome. But the Minnesota Vikings' owner, 
Zigmunt Wilf--I may be pronouncing it wrong. The Vikings' 
billionaire owner, he wants another stadium, with a retractable 
roof. And State lawmakers were asking consumers who rent cars 
to help pay for it with a 2.5 percent tax on rental cars to 
finance this new billion-dollar stadium.
    Interestingly, more than half of those who rent cars in 
Minnesota are residents of the State. So, to add insult to 
injury, Minnesota residents are already paying a special 6.2 
percent excise tax on car rentals, a tax that was adopted to 
pay for the cost of the State trying to bring the Super Bowl. 
That tax was supposed to expire in 2005, but it was extended, 
even though the revenue it raised has far exceeded its original 
purpose. Talk about fleecing the consumer.
    In addition, I want to talk for a moment about how 
nonprofit organizations experience the heavy taxes on rental 
cars. I have a staff of 16. When my people travel, or even have 
meetings locally and need transportation, we must often rent 
cars. Receipts from our car rentals over the past year tell the 
tale.
    In September of last year, I rented a car in Minneapolis. 
The base fee was $128. But the following taxes were added on. 
CFC, at $2 a day. $6. APCONGR fee, I have no idea what it was 
for, $14.33. State taxes of $10.86. Vehicle tax, $7.47. Rental 
tax, $9.26. Total, $176. So, 37 percent of the total cost in 
Minneapolis was fees and taxes.
    I have another example in my testimony in renting a car in 
Chicago last year. I also paid 37 percent in total taxes for my 
rental there. My base rental was somewhere around $123. I also 
had no idea, when I paid these fees, what they were for. Nor do 
other consumers. The names of the taxes are indecipherable, 
maybe by design.
    Unfortunately, there are misconceptions about who rents 
cars. There is the myth that those that rent cars are from out 
of state, and, therefore, it is easy to impose taxes on people 
who are just passing through. In fact, a study by the Brattle 
Group said that 54 percent of those who rent cars are actually 
in-state residents.
    This tax falls very heavily on--on African-Americans. They 
generate 26 percent of the rental car revenues, according to 
the same Brattle Group study, and pay 27 percent of the excise 
tax, despite accounting for only 12 percent of the population.
    So, in conclusion, with an 8-fold increase in taxes on 
rental cars since 1990, it seems clear that the multitude of 
fees, taxes, and charges have dramatically inflated the cost of 
renting a car. My organization, the National Consumers League, 
certainly understands the importance of citizens paying their 
fair share of taxes to provide critical services that we all 
rely on, our schools, hospitals, libraries, and roadways. We 
don't--we don't object to paying for those items. But what we 
do object to is paying for sports stadiums and taxes that 
have--that consumers have no idea what the tax is for, let 
alone what it is being used for. So, it is time to say enough 
is enough.
    For those reasons, the National Consumers League is pleased 
to offer our support for H.R. 2469. Thank you very much.
    [The prepared statement of Ms. Greenberg follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
                               __________

    Mr. Coble. Due to the lady's time has expired, Mr. 
Frederick?
    Dr. Frederick?

  TESTIMONY OF BRIAN FREDERICK, EXECUTIVE DIRECTOR, NATIONAL 
                      SPORTS FAN COALITION

    Mr. Frederick. Thank you, Chairman Coble, Ranking Member 
Cohen, Representative Quayle, Representative Polis.
    It is a great honor to speak to you on behalf of Sports 
Fans Coalition, where I am the Executive Director. Sports Fans 
Coalition is the largest non-profit advocacy organization in 
the country for fans. We are a bipartisan organization, founded 
by members of the Clinton and Bush White Houses to give sports 
fans a voice on public policy issues.
    We urge your support on this bill today, because rental car 
taxes are one of the primary ways that sports team owners are 
able to manipulate public--public dollars into private profit. 
Experts across the political spectrum agree that these stadiums 
provide little to no economic benefit for the community, and 
only serve to increase the value of the franchise.
    The rental car taxes that help finance stadiums are assumed 
to be paid by non-residents, but, in fact, more residents rent 
cars than non-residents. Eliminating these excise taxes will 
help shift the responsibility back toward the sports teams' 
owners to privately finance stadiums.
    Mr. Chairman, let me state that I do not wish to sit up 
here and single out the NFL or any particular owner. These 
owners are all playing by the same rules that everybody--
everyone else is, and the leagues are--are playing by the same 
rules as well.
    But this weekend, the Super Bowl will be played in Lucas 
Oil Stadium, in Indianapolis. The stadium opened in 2008, and 
cost $720 million, of which the public was supposed to pay 87 
percent through taxes on hotels, and food, and a tax on rental 
cars.
    For his part, Indianapolis Colts' owner, Jim Irsay, kicked 
in $100 million, although $48 million of that came from the 
public buying out the Colts' lease on the RCA Dome. So, the 
public share was actually more like 92 percent.
    Irsay and the Colts also receive around $14 million per 
year for advertising in the stadium, $25 million for luxury 
seating, and $6 million for the naming rights of the stadium, 
all while paying nothing in rent.
    Situations not unique to Indianapolis. Last year the Super 
Bowl was played in Cowboy's stadium in Arlington, Texas. That 
stadium opened in 2009, and cost $1.2 billion, of which the 
public paid at least $440 million, or 37 percent, in part, 
through a 5 percent increase in Arlington's car rental tax.
    Several other arenas----
    Mr. Coble. Dr. Frederick, if you would suspend for a 
moment.
    Mr. Frederick. Sure.
    Mr. Coble. I appreciate what you are saying, but this is 
not an NFL operation. Try to confine this to the--to the bill 
at hand.
    Mr. Frederick. Absolutely. I am sorry, Mr. Chairman. My 
point was to give examples of how the public dollars were being 
pushed toward these particular NFL stadiums. I will say that in 
some situations, like in Kansas City, where Kansas City built a 
downtown arena, even though it didn't have a particular team, 
the public ended up spending $276 million, paid for entirely by 
hotel and car rental fees. To this day, 5 years later, they 
still don't have a--a team.
    So, how this plays out for the consumer like me, as--as the 
head of one of the largest sports fans organizations, and 
considering that sports fans are one of the biggest consumer 
groups, if I were to fly home to Kansas this weekend to watch 
the Jay Hawks and the Tigers, renting an economy car at Kansas 
City Airport at a base rate of $11 per day for 3 days, I would 
pay $33 for the car, and $42.84 in tax--taxes and fees. So, 
that is an increase of 129 percent, giving me a total bill of 
$75.84 for a--16 percent of that would be going toward the 
Sprint Center, even though I am not seeing a game there, nor 
are there any actual teams that play there. As a result, I no 
longer rent cars when I return home to Kansas City.
    So, these excise taxes and car rentals enable local 
politicians and stadium supporters to claim the costs of 
building a new--new stadium will be born by out-of-town 
visitors. Indeed, these taxes are often referred to as tourism 
taxes. But while hotel rooms are primarily rented by out-of-
towners, a June 2010 study, conducted by the Brattle Group, 
found that 54 percent of the total revenues generated from 
car--rental cars were from home city rentals. In other words, 
just over half the cars were rented by local residents.
    As Representative Cohen pointed out, while car rental 
excise taxes may seem like an attractive option for shifting 
the burden of paying for a stadium onto non-residents, in 
truth, residents bear the majority of the burden. So, because 
sports fans are often manipulated into paying for stadiums in 
order to keep their favorite teams in town, and often wind up 
paying these costs through rental car taxes, Sports Fans 
Coalition is pleased to offer our support for H.R. 269. It is 
legislation that is long overdue, and we urge you to support 
it.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Frederick follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               __________
    Mr. Coble. Thank you, Mr. Frederick.
    Mr. Warren?

TESTIMONY OF RAYMOND A. WARREN, DEPUTY COMMISSIONER OF REVENUE 
    AND LEGAL COUNSEL, ARLINGTON, VA, ON BEHALF OF NATIONAL 
  ASSOCIATION OF COUNTIES, THE NATIONAL LEAGUE OF CITIES, THE 
UNITED STATES CONFERENCE OF MAYORS, AND THE GOVERNMENT FINANCE 
                      OFFICERS ASSOCIATION

    Mr. Warren. Good afternoon, Chairman Coble. Good to see you 
again. Mr. Cohen. Representative Cohen. Representative Polis. 
Thank you for having us here today.
    My name is Ray Warren. I am a Deputy Commissioner of 
Revenue, and legal counsel to the elected commissioner of 
revenue in Arlington, Virginia. She is, in essence, the tax 
assessor.
    I am pleased to submit testimony on behalf of the National 
Association of Counties, the National League of Cities, the 
United States Conference of Mayors, and the Government Finance 
Officers Association. The above organizations respectfully 
oppose H.R. 2469, the ``End Discriminatory State Taxes for 
Automobile Renters Act of 2011,'' for several reasons.
    First, the operative part of the proposed legislation 
provides that no State or locality may levy or collect a 
discriminatory tax on the rental of motor vehicles, the 
business of renting motor vehicles, or motor vehicle rental 
property. The determination that a tax is discriminatory is 
made without any reference to the factors that State and local 
policymakers use to evaluate the local needs and best manner to 
distribute the tax burden. Nor does the determination that the 
tax is discriminatory take into account offsetting exemptions.
    For example, in Virginia, we exempt the inventory of rental 
vehicle companies from what is a fairly significant vehicle 
property tax. As a result, rental car companies do not pay the 
property tax. They are also exempt from the sales tax in 
Virginia. These tradeoffs are not accounted for in the bill, 
and in our case, they are actually sort of favorable to the 
industry.
    The congressional mandate determines that discrimination 
exists by reference to other items of business subject to the 
tax, without evidence of the differences that may exist in 
those items or businesses.
    For example, the bill attempts to compare taxes levied on 
all other commercial and industrial taxpayers, instead of other 
retailers. Yet, common sense dictates that different taxes are 
imposed on retail sales than on manufacturing. Indeed, it is 
unclear if the ordinary sales tax, a mainstay of local finance, 
would be held discriminatory if a similar apples-to-orange test 
was applied to it.
    Second, the vague language of the preemption proposal and 
the lack of an administrative agency that can issue 
interpretative rulings leaves it to the courts to determine 
what the law means. This would lead to expensive litigation and 
result in fiscal and budget uncertainty, at a significant cost 
to taxpayers. It is a very cumbersome process that may result 
in different definitions in different jurisdictions. It will be 
virtually impossible for a uniform set of rules to be developed 
in a reasonable period of time, because of the nature of trial 
court and appellate litigation.
    Thirdly, over the past year, States and local governments 
have witnessed a parade of various industries coming forward to 
request that Congress preempt State and local government taxing 
authority for their particular industry. First, the 
telecommunications industry, the hotel industry, and today, the 
rental car industry.
    The members of the organizations for which I speak have 
always maintained that any industry's plea for Federally 
mandated tax favoritism would open the door to other industries 
asking Congress for similar exemptions. This is what we are now 
witnessing.
    H.R. 2469 and other legislation of its kind pose a dire 
threat not merely to State and local tax revenues, but to the 
entire existence of independent State and local taxing 
authority in our system of federalism.
    Finally, the fundamental principle of federalism vests 
States and local governments with the responsibility for 
providing services and raising funds needed to pay for these 
services. Fees may be placed on cars rented for airport 
locations that are used for capital improvements and tourism 
campaigns that directly benefit rental car companies 
themselves.
    Rental car taxes are also imposed throughout this country 
by cities, counties, and states, with the proceeds used to pay 
for a variety of governmental services and programs.
    For example, Revere, Massachusetts, uses the rental--the 
revenue from rental car taxes to build police and fire 
stations. Cleveland, Ohio, and Schaumburg, Illinois, divert 
their tax dollars to their general fund, to assist with a host 
of operating expenses. Kenosha, Racine, and Milwaukee Counties, 
in Wisconsin, have used their revenue to expand their commuter 
rail system.
    King County, Washington, uses its revenue to fund sports--
sports programs that keep youth focused on positive activities 
and off the streets. And finally, my county, Arlington County, 
Virginia, allocates its rental car tax revenue to the general 
fund. Among the services funded by the revenue are street 
maintenance and the provision of police, firefighter, and 
emergency services to Reagan National Airport, the Pentagon, 
Arlington National Cemetery, and other venues frequented by 
rental car users.
    For the above reasons--the above examples illustrate the 
longstanding principle of federalism. And for the above 
reasons, we urge Congress not to encroach upon this important 
principle. So, once again----
    And I see my time is up, and I do want to honor that, Mr. 
Chairman.
    So, once again, I would say, based on federalism, and the 
use of these taxes, and the opportunity for local governments 
to make local decisions, we urge you to oppose this 
legislation.
    [The prepared statement of Mr. Warren follows:]

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                                   __________
    Mr. Coble. Thank you, Mr. Warren.
    Mr. McCormick?

 TESTIMONY OF MICHAEL W. McCORMICK, EXECUTIVE DIRECTOR, GLOBAL 
                  BUSINESS TRAVEL ASSOCIATION

    Mr. McCormick. Mr. Chairman, Members of the Committee, on 
behalf off the Global Business Travel Association, I appreciate 
the opportunity to testify in support of H.R. 2469. I also 
appear before you as a member of the Coalition Against Car 
Rental Excise Taxes, which includes consumers, unions, tax 
reformers, auto dealers, auto renters, and manufacturers.
    For years, GBTA and its members have opposed discriminatory 
car rental taxes in their communities. Our members appreciate 
the Committee's willingness to consider an effective uniform 
remedy to discriminatory car taxes.
    First, a snapshot of the industry. The business travel 
sector, which includes transportation, lodging, entertainment, 
meals, meetings, and conventions, is a significant component of 
the U.S. and world economies.
    Domestically, 8 million Americans work and travel in 
tourism-related businesses. In 2011, U.S. spending on business 
travel topped $250 billion. Worldwide, over a trillion dollars 
was spent on business travel and meetings.
    GBTA actively tracks and reports on business travel trends. 
Despite a steep decline during the recession, our latest 
projections show business travel maintaining upward trajectory 
in 2012. We expect corporations to increase their domestic 
travel spend, and increase international travel spend by almost 
8 percent, to $34 billion. This followed a 9 percent growth in 
international travel spend in 2011.
    So, in short, after these increases in the last 3 years, 
you can think of it that we just hit the reset button on 
business travel. We will finally climb our way back to pre-
recession levels of business travel in 2012.
    And because we know--now know that new jobs follow 
increases in business travel spend, this is good news. The 
reason is simple. When businesses are confident in a growing 
economy, they send their employees on the road to secure even 
more business. The result is increases in the travel sector and 
a positive ripple effect throughout the economy.
    We project that domestic U.S. business travel sector, 
however, to lag international growth. Partly, this is due to 
continuing economic challenges in the United States. However, 
policy, tax, and funding decisions made by Congress can have 
major impacts on the growth of domestic business travel, an 
industry vital to the U.S. economic recovery.
    So, in sort, it is all about creating headwinds, or 
tailwinds, for the economy. And an enactment of H.R. 2469 
represents one of those policy decisions.
    Currently, governments in 43 States and the District of 
Columbia levy 118 different excise taxes on car rentals in 
various jurisdictions. States, cities, and counties can often 
justify the fees by citing budgetary constraints. While 
sometimes true, this phenomenal eight times increase in taxes 
and fees began in 1990, which predates the current downturn. 
And these fees have nothing to do with travel, security, or 
core government operations. The fees are added by local 
politicians, because, as Mr. Cohen stated, they wrongly think 
it only impacts business travelers who are out-of-town voters.
    Business travel buyers pay careful attention to 
discriminatory taxes. Congress does not need to pour over 
economic studies to know that travel demand is elastic. As 
prices increase, and in this case, artificially, travel demand 
decreases.
    So, to be clear, GBTA is not opposed to reasonable taxes or 
service charges that finance the cost associated with travel. 
We understand that a safe efficient transportation 
infrastructure requires funding. But business travelers, 
already a significant driver of revenue, should not be the 
financing source for new sports stadiums, museums, or 
performing art centers, or an attempt to offset new unplanned 
deficits.
    So, in conclusion, increasing business travel costs through 
unfair State and local car rental taxes hurts businesses, their 
travelers, and the economy as a whole.
    Mr. Chairman, thank you for your time to speak in favor of 
the End of Discriminatory State Taxes for Automobile Renters 
Act of 2011. And thank you again for your time and your 
efforts. I look forward to answering any questions.
    [The prepared statement of Mr. McCormick follows:]

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                               __________

    Mr. Coble. Thank you again for your attendance here. And 
since this is the gentleman from Tennessee's bill, I am going 
to give him the courtesy of kicking--kicking it off. Keep in 
mind, folks, we try to impose the 5-minute rule against us as 
well. So, if you can keep your responses terse, that would be 
appreciated.
    The gentleman from Tennessee.
    Mr. Cohen. Thank you, sir. I appreciate your courtesy.
    Ms. Greenberg, Mr. Warren, in his testimony, concentrated 
on the definition of the word ``discriminatory,'' in terms of 
taxes, but never even got around to regressivity, and that this 
is a most serious regressive tax.
    Would you talk to us a little bit about how regressivity 
affects Virginians?
    Ms. Greenberg. Well, so those who rent vehicles often do 
so, because, we have already pointed out, they are often in-
state residents. And they do so, because they can't afford to 
own a--a vehicle. And they may be taking a child to a sports 
event, or they may visit an elderly parent in a nursing home.
    Mr. Cohen. To the doctor. They could be----
    Ms. Greenberg [continuing]. Relative to the hospital.
    Mr. Cohen. They could save their life.
    Ms. Greenberg. Right. And so there are multiple uses and 
consumers who can't afford a car have to rent a car for special 
occasions or emergencies. And as a result, those people end up 
paying these really onerous taxes. No, it is not a progressive 
tax, it is a very regressive tax, because it is not adjusted to 
the person's income.
    One of the studies we quoted said that various groups, 
including African-Americans, rent a disproportionate number of 
cars, and they pay these high taxes, and the benefits doesn't 
necessarily come back to them.
    So, yes, we do believe this is a very regressive tax. But 
the taxes on rental cars, and there are--as--as my testimony 
indicated, there are many, are very regressive, and we would 
much prefer to see States and localities--we don't oppose 
their--their raising--their imposing taxes. We would much 
prefer to see those being put in a--a progressive taxation 
system, rather than this very regressive tax.
    Ms. Cohen. Thank you, Ms. Greenberg. Mr. McCormick, further 
in Mr. Warren's testimony, he talked about the fact that 
Virginia exempts an inventory of rental vehicle companies from 
a fairly significant property tax, as well as the rental of 
vehicles from the State's sales-and-use tax. He says the Bill 
makes no allowance for this tradeoff, which is rather favorable 
to the industry.
    Does he make the--miss the point that what they are giving 
to the industry is the industry. What we are talking about here 
is the consumer, and that the individual traveler pays for 
this, and would get no benefit necessarily, even though there 
could be a pass-through, determined on the company, on these 
quote, unquote, tradeoffs.
    Mr. McCormick. Yes. Clearly, our focus is that the business 
traveler and the--and the consumer, and in this case, I mean 
you are right, the taxes that--that they are paying are 
artificially, you know, depressing business travel, having an 
impact on the consumer. People are paying exorbitant, you know, 
fees and taxes over and above what they are expecting. And it 
really is one, to me, has nothing to do with the other. It is 
not the issue.
    Mr. Cohen. Thank you. Mr. Frederick, you--you are well 
aware of the fact, and I think--I think it was in your 
testimony as well, that--that most of these taxes are, in fact, 
paid by local folk, and they are regressive. But a lot of them 
are paid with the--and even though, as Mr. Warren said, some--
they take it to the general fund in Virginia, et cetera, et 
cetera, but that most of them are for stadia.
    All the owners of these teams, and--and the people that 
build these stadiums, and they can be NBA, which they have in 
Memphis, or NFL, or whatever, they are all in favor of that, 
are they not, to let somebody else, don't tax me, don't tax 
thee, tax that guy behind that tree?
    Mr. Frederick. Absolutely. The--the owners of any team 
are--are more than willing to let the public pay for the costs 
of building the stadium, while at the same time, reaping the 
profits from that stadium.
    And as I said, you know, most the experts that have looked 
at this have said that all that these stadiums do is to move 
money around, and to increase the value of the franchise, but 
not to really degenerate any new economic revenue.
    Mr. Cohen. And I see him at the yellow, but we hadn't 
gotten to the red, and I don't know--but he also says in his 
testimony the tax burden on some consumers might relieve the 
burden on others would surely be exacerbated, as States find 
ways to recoup lost revenue to fund these type programs.
    Would it be so awful to exacerbate the tax burden on the 
multi-, multi-, multi-millionaires and billionaires who own 
these teams, none of whom seem to be missing any opportunity to 
go to Tiffany's, with maybe--and--and whatever they want, or 
whatever they want to do, and buy another team, or get a 
quarterback, or if they don't like Peyton, they might even 
trade and try to get Eli. [Laughter.]
    Mr. Frederick. Absolutely, Rank--Representative Cohen. And 
I--I would say that one of the--one of the drawbacks to these 
taxes is that, because they are regressive, the very same 
people who can't afford tickets to go into the stadium are the 
same ones that pay more for--for the rental car taxes.
    Mr. Cohen. Thank you, members of the panel. And thank you, 
Mr. Coble.
    Mr. Coble. Thank you, Mr. Cohen. Appreciate that. We have 
been joined by the distinguished gentleman from Georgia, Mr. 
Johnson. Good to have you with us.
    Ms. Greenberg, do you believe it is unfair that automobile 
rental taxes go oftentimes to support or construct stadiums and 
other non--non-related tax matters or transit matters?
    Ms. Greenberg. Yes, we do. And I certainly said that in my 
testimony. One of the things we point out is that we don't 
object to States and localities raising taxes for critical 
services like building hospitals, or roads, or schools. But to 
ask the average consumer who rents a car to pay the cost of a 
stadium which he or she may never be able to use, people--even 
tourists coming in from out of state, may never have the 
opportunity to use those stadiums, I think is unfair, and it is 
regressive, and that is why we support this legislation.
    Mr. Coble. Thank you. Mr. Warren, if Mr. Graves, and Mr. 
Cohen's bill is enacted, would H.R. 2469 prohibit all taxes on 
rental cars or only new taxes?
    Mr. Warren. Well, Chairman Coble, two things. It--it--it is 
a prospective bill. So, in theory, a--a jurisdiction such as 
Arlington would be able to keep its tax, but we could never 
change it. Moreover, the surrounding Northern Virginia 
communities, which may not have enacted one, would not be able 
to enact one.
    Insofar as what could be enacted, and not be quote, 
unquote, discriminatory, I don't now the answer to that. We 
have a 1 percent in Virginia. Some locations have a 1 percent 
daily rental tax on things other than automobiles. Would it 
be--it would be allowed 1 percent. But then we also have the 5 
percent sales tax. Would that be a comparable tax?
    And one of the problems with this bill is, it is very 
difficult to know how a court is going to compare A with B to 
come up with is it or is it not discriminatory. And the problem 
is, without an administrative agency to--to rule on this, you 
may--and you and I practice in the same area, we are 
attorneys--you may have a different ruling in the fourth 
circuit, in the third circuit. It is going to be a mess for 
everybody.
    Mr. Coble. Thank you, Mr. Warren. Mr. McCormick, States 
have a Tenth Amendment right to set their own tax policies, 
presumably. And if that is the case, some will say, well, why 
should the Congress interfere with State tax policy in purely 
intrastate issues. What do you say to that?
    Mr. McCormick. Well, I really go back to my earlier 
statements, which is, I think when we look at the taxes that 
are being levied, and they are, you know, discriminatory, and--
and just, you know, in some cases, outright ridiculous, in--in 
terms of their proportion to the cost of the rental, I think we 
need to take action. We can't leave it to the local 
jurisdictions to make those decisions.
    There are plenty of opportunities to collect tax revenues. 
There are plenty of opportunities to collect appropriate tax 
revenues on car rental. But we are looking to just look at--at 
ways to protect the consumer and the business traveler from 
exorbitant ones.
    Mr. Coble. Dr. Frederick, do you want to add anything to 
that?
    Mr. Frederick. I agree with him. Yes.
    Mr. Coble. Okay.
    Mr. Frederick. Thank you.
    Mr. Coble. I want you all to take judicial notice. I am 
beating the red light before it illuminates. [Laughter.]
    I am pleased to recognize the distinguished gentleman from 
Georgia for 5 minutes.
    Mr. Johnson. Yes. I kind of like the title of this, the--we 
are--we are looking to protect consumers from discriminatory 
State taxes on motor vehicle rentals. And while we--when we 
invoke the specter of discrimination, we talk about people who 
live in the cities. And I think, for the most part, intercity 
residents are assumed to be African-Americans and other 
minorities. So, we get a picture of protection of minorities 
against taxes that discriminate against them.
    This is just my perception of what we are dealing with. 
And--and so, those things being assumed as true, it--it kind of 
makes you want to protect those persons, particularly African-
Americans, since I am African-American, you know, from being 
discriminated against.
    And I guess what I want to know is, and, of course, the Act 
itself does not describe a discriminatory tax in that way, but 
that is my perception, given what we have heard today, and the 
title of the Act, and the purpose of the Act.
    Is there any--can anybody cite any evidence as to 
discrimination, in the classic sense of the word, that is 
directed at a particular class of individuals that this act is 
protecting?
    Who is it really protecting, in other words? Is it 
protecting the car rental companies from having to charge a 
tax, thus pricing, perhaps, their product out of the means of--
of people, or is it protecting people who have to pay the tax? 
What are we really trying to do here, so that we can make sure 
we understand the exact intent?
    Mr. Warren. Representative, if I could, this tax brings in 
$5.4 million to Arlington County. We do not have any rich 
sports moguls. Well, we may have them there, but I don't know 
how we are going to tax them, because their stadiums are not 
there. We tried for National Stadium. We didn't get it.
    If we were to lose this money, we would have just two 
choices. Raise the personal property tax on--on vehicles of 
ordinary citizens, or raise their real estate property taxes.
    Now, we have a historically Black community in Arlington, 
and people are losing their houses, because they cannot afford 
the taxes. So, when you get rid of this tax, you basically just 
shift the burden from some taxpayers. And I can guarantee you, 
the people in Crystal City, mostly renting these cars, are over 
here to lobby Congress to spend money on Federal contracts. 
They are not the poor people of Arlington. But a lot of middle 
class and poor people in Arlington do pay the real estate 
property tax, and they would be negatively impacted by the loss 
of this revenue.
    Mr. Johnson. Well, what you are pretty much saying is that 
your car rental taxes don't go to pay for stadiums for 
millionaires and billionaires. They go for other purposes like 
roads, and hospitals, and schools, and--and whatnot. Is that 
what you are arguing?
    Mr. Warren. Yes, sir. It goes into our general fund. It--it 
pays for--for roads. It pays for the firefighters. If you 
remember, in 9/11, it was the Arlington County firefighters who 
responded to the Pentagon.
    Mr. Johnson. Well, tell me this, in your jurisdiction, is 
it just minorities, intercity residents who are having to pay 
the tax--the car rental tax, or is it some other group of--or 
some other demographic?
    Mr. Warren. Frankly, Representative Johnson, it really does 
discriminate pretty heavily against lobbyists. They pay a lot 
of the taxes. But other than that, I certainly don't think in 
Arlington County, which is a very diverse community, that 
minorities pay a--a disproportionate fair--part of this tax. I 
do believe that the general fund contribution benefits 
minorities and others in Arlington County.
    Mr. Johnson. Well, Mr. Warren, I have been accused--because 
I can deliver a--a humorous line without smiling, I have been 
accused of being stupid. And I am glad to know that I have a 
fellow stupendous individual sitting right in front of me that 
I have been talking to during this hearing, and has been 
responding to my questions. So, thank you very much, sir, for 
your stupendous qualities.
    Mr. Warren. Thank you.
    Mr. Coble. And Mr. Johnson, I hope it won't erase that 
smile, but your red light has illuminated. [Laughter.]
    Mr. Johnson. Well, that does cause me to smile.
    Mr. Coble. Very good. Folks, again, thank you all for being 
here. I appreciate very much your time and your testimony 
today.
    Without objection, all Members will have 5 legislative days 
to submit to the Chair additional written questions for the 
witnesses, which we will forward, and ask the witnesses to 
respond as promptly as they can, so that their answers may be 
made a part of the record.
    Without objection, all Members will have 5 legislative days 
to submit any additional materials for inclusion in the record.
    With that, again, I thank the witnesses.
    And this hearing stands adjourned.
    [Whereupon, at 2:22 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

  Letter from Josh Nassar, Legislative Director, International Union, 
   United Automobile, Aerospace & Agricultural Implement Workers of 
                             America (UAW)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

   Letter from Thomas M. James, President and CEO, Truck Renting and 
                      Leasing Association (TRALA)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Prepared Statement of the Federation of Tax Administrators, and 
                Government Finance Officers Association

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                  Letter from Bob Barton, President, 
               the American Car Rental Association (ACRA)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                   Prepared Statement of Matt Blunt, 
       President of the American Automotive Policy Council (AAPC)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

   Prepared Statement of the Interactive Travel Services Association 
            (ITSA), and the Business Travel Coalition (BTC)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

         Letter from Richard D. Broome, Senior Vice President, 
       Corporate Affairs & Communications, The Hertz Corporation

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Letter from Charles M. Loveless, Director of Legislation, the American 
      Federation of State, County and Municipal Employees (AFSCME)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Prepared Statement of Jeffrey Friedman, Sutherland, 
                          Asbill & Brennan LLP

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 
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