SEMA News - March 2010 

Legislative and Technical Affairs 

By Steve McDonald

Law and Order is an update of some of the most recent federal and state legislative and regulatory issues that could potentially impact the automotive specialty-equipment industry. These include issues affecting small-business owners and their employees.
Canada Leaded Fuel

SEMA is supporting a proposal issued by Environment Canada to indefinitely extend an exemption that permits the use of leaded gasoline in competition motor vehicles. The exemption has been renewed several times since it was first established in 1996, but it was set to expire in 2010. SEMA had previously opposed efforts to terminate the exemption and require an outright ban on vehicles using leaded fuel. The new proposal recognizes the relationship between the Canadian and U.S. racing industries and adopts a consistent environmental approach to leaded fuel use. Environment Canada will conduct a five-year review and revisit the exemption issue, if necessary, based on science, technology and fuel replacement developments. Meanwhile, the agency will work with the racing industry to encourage a voluntary reduction or phase-out of leaded racing fuel.


Exhaust Noise

SEMA is opposing legislation introduced in Maine that seeks to prohibit exhaust noise in excess of 62 decibels at 50 feet in areas designated as “quiet zones.” The new bill conflicts with a SEMA-model law enacted in 2003 to create an enforceable statewide motor-vehicle exhaust noise standard. Under the SEMA law, an exhaust system modification is legal if it results in a sound level of 95 decibels or ess as measured using the Society of Automotive Engineers (SAE) test standard J1169.


Military Vehicles

SEMA-supported legislation has been introduced in Wisconsin to provide for the registration of former military vehicles. The bills are the result of the negative response by enthusiast groups to a Wisconsin Department of Transportation proposal to restrict the registration of these vehicles. Collectors emphasize that these historic vehicles are used in part to educate the general public about military history and heritage and are, therefore, valuable treasures that should be maintained and protected. The legislation defines a former military vehicle to include vehicles that were manufactured for use in any country’s military force, so long as they are maintained to accurately represent their military design and markings. The designation would include military vehicles designed both for off- and on-road use, including trailers. The bills would allow former military vehicles to be registered and operated in a manner similar to antique vehicles registered in the state (i.e., driven only on special occasions and for the purpose of necessary testing, maintenance and storage).


Health Care Reform

In response to the contentious federal health care reform debate, states have filed proposed legislation specifically addressing their citizens’ right to opt out of a national health care plan. Sixteen states have already filed legislation, including Arizona, Florida, Georgia, Indiana, Michigan, Ohio and Pennsylvania. While there are major differences in the way that states are addressing the issue, most of these bills condemn on constitutional grounds the individual mandate, which would impose a penalty on citizens for declining health care coverage. The Supreme Court may ultimately answer the question of whether the mandate would be in violation of the U.S. Constitution. SEMA opposes a mandate that employers provide health insurance. Given the enormous diversity in the size and economic well-being of millions of businesses across the country, SEMA believes that such a requirement would impose a significant economic burden on many companies. SEMA supports a limited mandate that individuals purchase minimum levels of insurance in the same fashion that motorists must have auto insurance. It would bring people into the health care system who are currently outsiders receiving health care without insurance and, ultimately, not paying for the services that they receive. SEMA has advocated for more attention to be focused on reducing health care costs to ensure that insurance is affordable and can be purchased on a voluntary basis by both companies and individuals.  

SEMA Federal Update

Greenhouse Gases

The U.S. Environmental Protection Agency (EPA) issued a finding that carbon dioxide (CO2) and other greenhouse gas emissions endanger public health and the environment. The Supreme Court directed the EPA to consider the issue. The EPA’s finding may increase pressure on Congress to specify how emissions are regulated rather than allowing the EPA to issue its own rules. To date, the EPA has joined with the National Highway Traffic Safety Administration to limit average CO2 emissions from cars and light trucks to 250 grams per mile and to increase average fuel efficiency from 25 to 35.5 miles per gallon by model year 2016. California agreed to adopt the same standard in exchange for a waiver recognizing the state’s authority to regulate greenhouse gas emissions. The automakers and SEMA support a national approach to tailpipe standards. In Congress, the U.S. House of Representatives has passed a bill to require a 17% reduction in CO2 emissions by 2020 and 80% by 2050, based on 2005 levels. Legislation is pending in the U.S. Senate. The legislation targets large stationary-source emitters.

Estate Tax

A one-year repeal of the federal estate tax began on January 1, 2010. The estate tax will reappear in 2011 at the old rate of 55% on anything above $1 million. Efforts to pass a SEMA-supported bill to permanently freeze the estate tax at a 45% rate on amounts above $3.5 million per individual ($7 million per couple) failed in the U.S. Senate. The House passed the bill in December. Under President Bush’s tax cuts of 2001, the so-called “death tax” was gradually reduced in advance of the 2010 repeal. However, during the last nine years, lawmakers failed to agree on a permanent status for the tax. A stalemate emerged between lawmakers who wanted to abolish it altogether and those who wanted to retain it at modified rates. The one-year repeal will not benefit many smaller estates, since the heirs will receive assets on a carry-over basis, meaning that they will have to pay capital gains taxes based on the original value of the assets. The tax could be substantial for a long-held family business that was “built from scratch.” Under the repealed estate tax, the assets were valued as of the date of death. It is unclear if lawmakers will revisit the issue in early 2010 and seek to extend the estate tax on a retroactive basis.

Research and Development Tax Credit

The R&D tax credit expired at the end of 2009. The House passed a SEMA-supported measure to extend the credit for one more year. The Senate is expected to approve the measure in early 2010 and make it retroactive to 2009. Companies receive a credit for monies spent on n-house or outside research to develop a new or improved product based on function, performance, reliability or quality.  


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