SEMA News - October 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.
Leaded Fuel: Environment Canada issued a SEMA-supported final rule to indefinitely extend an exemption allowing the use of leaded gasoline in competition motor vehicles. The exemption has been renewed several times since it was first established in 1996. SEMA had previously opposed efforts to permanently terminate the exemption and effectively ban racing vehicles using leaded fuel. The new rule 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.
Massachusetts Street Rods/Custom Vehicles: A version of SEMA-model legislation to create a vehicle registration classification for street rods, custom vehicles, replicas and specially constructed vehicles was passed by the Massachusetts House and Senate. The bill defines a street rod as an altered vehicle manufactured before 1949 and a custom as an altered vehicle at least 25 years old and manufactured after 1948. Replica vehicles are defined as assembled by a non-manufacturer from new or used parts that replicate an earlier year, make and model vehicle. Specially constructed vehicles are those reconstructed or assembled by a non-manufacturer from new or used parts that have an exterior that does not replicate or resemble any other manufactured vehicle. The bill allows a replica vehicle to be assigned a certificate of title bearing both the year in which the vehicle was built and the make, model and year of the vehicle intended to be replicated. The measure also provides that specially constructed and replica vehicles that are registered on or before a certain date would be exempt from emissions inspection requirements. Specially constructed and replica vehicles registered after that date would be subject to emissions control requirements based on the model year and configuration of the engine installed, whether the engine is an original equipment manufacturer’s production engine, rebuilt engine or crate engine.
Ohio Street Rods/Custom Vehicles: SEMA-model legislation to create a vehicle registration and titling classification for street rods and custom vehicles and provide for special license plates for these vehicles remains pending in the Ohio Legislature. The House Transportation Committee unanimously passed the bill earlier this year. The bill defines a street rod as an altered vehicle manufactured before 1949 and a custom as an altered vehicle at least 25 years old and manufactured after 1948. The bill allows kit cars and replica vehicles to be assigned certificates of title bearing the same model year designations as the bodies of the vehicles they were constructed to resemble. The measure also includes street rods and customs in the historical motor vehicle definition for the purpose of holding these vehicles only to the equipment standards specified by law during the model year listed on the title of the vehicle. The bill will now be sent to the floor for a vote by the full House.
Bank Loans and Bonus Depreciation: The U.S. Senate was unable to agree on a SEMA-supported bill to provide smaller banks with access to $30 billion in funds intended to be loaned to small businesses. The Senate may reconsider the measure later this year. Besides pumping $30 billion into the banking system for loans, the Senate bill would also extend the bonus depreciation through 2010. In 2008 and 2009, all businesses were permitted to immediately write off 50% of the cost of new equipment (“bonus depreciation”). The depreciation expired at the end of 2009. SEMA contends that the depreciation write-off encourages companies to invest in newer, more-efficient equipment and spurs sales and creates jobs. In addition, the bill would expand and extend the Section 179 program, allowing companies to write off up to $500,000 in capital expenditures in tax years 2010 and 2011, double the current limit for 2010. The legislation needs a “super majority” of 60 Senate votes for passage. No Republicans have supported the bill to date, voicing concerns about procedural issues and the fact that the $30 billion would come from unspent money in the Troubled Assets Relief Program (TARP). SEMA is working with the National Federation of Independent Business and National Association of Manufacturers in support of the legislation.
Internal Revenue Service 1099 Forms: SEMA urged Congress to repeal a requirement that taxpayers with business income issue 1099 forms to all vendors from whom they buy more than $600 of goods or services in any year, beginning in 2012. Under current law, most corporations are exempt from receiving 1099s. The requirement is expected to raise $17 billion over 10 years by identifying potential sources of unreported income. SEMA is working with a coalition of other associations to enact legislation to repeal the rule. Unless overturned, the rule threatens to impose enormous burdens on small businesses as they attempt to track and report a wide range of payments to contractors, vendors and others.
Debit Card Swipe Fees: SEMA and 54 other trade associations asked Congress to limit the amount credit card companies can charge merchants when processing payments. Congress addressed some but not all swipe fees when it enacted the new financial reform law. Under the old system, the merchant pays an average of a 2%–4% transaction fee every time a card is used. The fees are automatically divided between the merchant’s bank, cardholder’s bank and network that processes the transactions. As a result of the new financial reform law, the Federal Reserve now has the authority to ensure that debit card transaction fees are “reasonable and proportional to the actual cost incurred” when processing a transaction. However, the Federal Reserve’s power is limited to the fees charged or received by the issuing institution (bank). Credit card fees charged by a payment network, such as MasterCard or Visa, will be generally free from regulation. Merchants are allowed to offer discounts for one form of payment over another (cash or check vs. debit or credit).
National Manufacturing Strategy: The U.S. House of Representatives approved the “National Manufacturing Strategy Act,” which would make manufacturing a top priority for Congress and the Obama Administration. The SEMA-supported legislation is intended to promote government policies to foster economic growth, increase employment and productivity and expand exports for the nation’s manufacturing sector. The legislation would establish a public-private advisory board to make policy recommendations to the president on how to achieve short- and long-term goals and report its findings to Congress. The board would include representatives from various federal agencies, two state governors, private-sector members with experience in managing companies, supply chain providers and labor organizations. Topics for consideration would include competitiveness, stability, sustainability, trade balance and job creation in a global economy. The board would be challenged to outline specific action items to achieve its goals and recommendations. SEMA is urging the Senate to approve the bill.