New Uber, Lyft Law Attacked by Boston Taxi Group

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Adrianne Appel

Sept. 28 — A first-in-the-nation Massachusetts law illegally gives ride-sharing companies like Uber Technologies Inc. and Lyft Inc. a competitive advantage over taxis, a group of taxi medallion owners claim in a federal lawsuit ( Boston Taxi Owners Association, Inc. v. O'Connor, D. Mass., No. 1:16-cv-11922, complaint filed 9/23/16 ).

The Boston Taxi Owners Association, Inc., a nonprofit organization representing people who own taxi medallions, seeks an injunction to stop the new law from being enforced, plus monetary damages. The lawsuit was filed Sept. 23 in the U.S. District Court in the District of Massachusetts and names Gov. Charlie Baker (R) and members of his cabinet as defendants.

The law violates the owners' constitutional rights to just compensation, equal protection and due process, according to the lawsuit.

Baker was pleased to sign the legislation, Billy Pitman, Baker spokesman, told Bloomberg BNA in a Sept. 28 e-mail.

The bill establishes a regulatory framework for ride-sharing companies that didn’t previously exist and includes some of the strongest ride-for-hire background check systems in the nation, Pitman said.

The governor has made it clear to ride-sharing services and taxis that “the administration is open to having future conversations on any outstanding issues,” Pitman said.

Law ‘Unfair' to Taxis

The new law, enacted Aug. 5, spells out requirements for ride-sharing services, including paying the state a 20-cent-per-ride tax and other fees, carrying adequate car insurance and undergoing background checks (2016 Weekly State Tax Report 25, 8/5/16).

The law also prevents cities and towns from regulating or taxing ride-sharing companies.

Taxi companies are exclusively regulated by towns and cities, which apply unfairly burdensome requirements, according to the complaint.

Boston Medallions

The lawsuit points to the Boston medallion system as an example of a costly permit requirement that because of the new law, is levied against cab owners and not ride-sharing services.

Medallions are required to drive a cab in Boston. There are just 225 medallions and they are bought, sold, invested in and rented. People can amass multiple medallions, which until recently cost $700,000, but now cost about $175,000.

The influx of ride-sharing services have caused the price of medallions to plummet, the lawsuit said.

By not protecting medallion owners from their loss in value, the state has violated the takings clause, the lawsuit said.

“Without compensation to the medallion owners or the lenders holding security interests in the medallions, the Commonwealth allows the de facto taxi companies to usurp and trespass upon the exclusive property rights of medallion owners by providing those services without buying or leasing medallions or complying with the taxi regulations,” the lawsuit said.

“The Commonwealth has thereby taken exclusive rights from medallion owners and transferred them to the de facto taxi companies without any compensation, let alone the just compensation that the Takings Clause requires,” the lawsuit continued.

The plaintiffs are also seeking a declaratory judgment as to the validity of the law and whether ride sharing services must be required to comply with state and local laws, they said.

Two Sets of Laws, Same Industry

“Two similarly situated industries are being regulated by different government bodies in an entirely unequal way thereby violating the taxi owners’ constitutional rights,” the complaint alleged.

The medallion owners want the state to be permanently enjoined from enforcing the law. They also want the court to order the state to apply taxi cab laws, taxes and rules to ride sharing services, or for the two entities to otherwise be regulated the same.

The medallion owners also are seeking monetary damages if they don't receive swift injunctive relief.

To contact the reporter on this story: Adrianne Appel in Boston at aappel@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of the complaint is at http://src.bna.com/iXA.

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