A new ruling by the Montana Public Service Commission clarifies how nonprofit taxi services must operate and likely will affect services such as The Ride Guy taxi service based in Whitefish.

The declaratory order issued last month comes on the heels of complaints statewide from regulated and licensed taxi companies that have been frustrated by competition from unregulated passenger transportation providers, said Bill Gallagher, the PSC commissioner who represents the district that includes the Flathead Valley.

The order clarifies that taxi services accepting remuneration such as gratuitous tips are considered “for hire” and require PSC authority.

The ruling also emphasizes that while nonprofit taxi services may operate, they must be 501(c) nonprofit organizations recognized by the Internal Revenue Service.

“Some of these operators do not realize that while anyone can form a nonprofit corporation, applying for and getting IRS recognition as a recognized 501(c) nonprofit is a significant undertaking,” Gallagher said.

The process includes filing a 990 form with the IRS, and in return the federal agency issues a letter officially recognizing a nonprofit taxi service.

The Ride Guy, started by Brian Murchie two years ago to shuttle bar patrons in Whitefish, operates as a nonprofit with a focus on service in Whitefish between 8 p.m. and 3 a.m.

Gallagher said he checked the Montana Secretary of State website and found The Ride Guy is listed as a nonprofit corporation, but that in itself doesn’t qualify him as a recognized nonprofit. A search of IRS records did not show The Ride Guy as a recognized 501(c) nonprofit organization, he added.

“He’s on the [PSC] radar. He’ll probably get a show-cause order,” Gallagher said.

Murchie did not return several calls for comment.

Gallagher said the commission’s ruling aims to protect both the public and regulated taxi companies that pay much higher insurance premiums to operate as licensed carriers.

Public safety is a concern for the commission.

“The difference between getting into a regulated taxi and unregulated taxi can be significant,” Gallagher said.

And there’s the issue of fairness.

In the past the commission, which has general supervisory and regulatory powers over motor carriers in the state, has taken a more lenient approach to nonprofit taxi services that receive gratuities as payment, Gallagher said. But members of the current commission wanted to more specifically define the parameters for nonprofit taxi services.

Regulated taxi services were notified by the commission just a month ago that they had to triple their liability insurance coverage, while recognized nonprofit taxi services pay only a fraction of what regulated taxi companies pay.

“It’s harder for the [regulated taxi services] to do business,” Gallagher said. “They have to jump through the hoops and work under the constant shadow” of the commission.

“The legal taxi services are saying it’s not fair,” he said.

While unregulated taxi services operating under the guise of nonprofit status can choose their hours of operation, regulated services must provide around-the-clock service.

“The trade-off for being regulated is you must provide the service,” Gallagher said. “You don’t get to cherry pick and you can’t turn down fares.”

Jeanne Herron knows well how challenging it is to run a taxi service in the Flathead. She and her husband, Gary Herron Sr., and son Gary Jr. operate Drive4U Taxi Service. They lease the taxi permit previously held by Lee Sturdevant of Kalispell.

In October the Herrons paid for a full-page advertisement in the Daily Inter Lake, offering a reward “for information and citations and/or the arrest of persons operating, impersonating or providing illegal taxi services.

“There are a number of persons operating unlicensed taxi services, which hinder the growth and financial stability, employees’ jobs and the ability to provide quality services,” the ad stated.

Jeanne Herron said the taxi business is so competitive here that she believes she’s had competitors tap into her phone system to snatch calls for service away from her.

“It’s been happening,” she maintained. “I’ve had private [phone] conversations reported back to me” word for word.

Gallagher acknowledged that the “Flathead probably is the longest-running area of contention.

“There have been accusations of outright pirates in the Flathead Valley,” he said.

The commission sent an investigator to Kalispell recently to assess the taxi situation, and Gallagher said he himself came to Kalispell to conduct a “bar-hopping” probe of his own, but didn’t find anything irregular the night he was in town. His assessment was limited to Kalispell.

In addition to Drive4U’s license, there are three other state-issued taxi permits in the valley: Flathead-Glacier Transportation, Winter Sports Inc. (the parent company of Whitefish Mountain Resort) and a newer permit that was held by Jim’s Taxi. Jim Elgin, who operated Jim’s Taxi, died in August.

Features editor Lynnette Hintze may be reached at 758-4421 or by email at lhintze@dailyinterlake.com.