SEMA News - December 2010
2010: The Year in Review
By Steve McDonald
The laws and regulations that govern how SEMA members do business have an increased and growing impact on the way automotive specialty-equipment products are made, distributed and marketed. As the nation and our industry struggle with a still-balky economy, SEMA’s charge is to stay on top of every relevant state and federal matter of consequence to its membership to ensure the best possible outcome.
Canada (Prince Edward Island) Nitrous Oxide: The province of Prince Edward Island enacted a new law to permit the installation of nitrous-oxide systems as long as the feed lines are disconnected or the canisters are removed while the vehicle is being operated on a public road. The law largely mirrors SEMA-model legislation to better protect public road safety while ensuring legitimate off-road uses of nitrous-oxide systems.
Canada Leaded Fuel Exemption: Environment Canada issued a SEMA-supported final rule to indefinitely extend an exemption allowing the use of leaded gasoline in competition motor vehicles. 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, Environment Canada will work with the racing industry to encourage a voluntary reduction or phase-out of leaded racing fuel.
California Brake Friction Materials: A coalition of industry associations helped alter legislation that would have placed restrictive limits on substances in brake friction materials. The amended bill provides for exemptions for brakes to be used on vehicles manufactured by low-volume manufacturers and those to be used on vehicles manufactured before the prohibition goes into effect. Amendments to the bill also included the creation of an advisory board with the power to grant further exemptions on a case-by-case basis. The amended bill was signed into law by Governor Schwarzenegger.
California Emissions Tests: SEMA defeated legislation to require annual smog-check inspections for vehicles 15 years old and older. The bill would have required that funds generated through the additional inspection fees be deposited into an account that could have been used to scrap older cars.
California “Gas Guzzlers”: Legislation to authorize the establishment of a purchase surcharge for some new motor vehicles based on state calculations of carbon emissions was defeated. Funds collected under the program would have been used in part to fund rebates for vehicles, including hybrids and electric cars. SEMA opposed the bill because it would make popular performance and luxury cars as well as SUVs, light trucks and minivans substantially more expensive to own. The measure also would not necessarily curtail greenhouse gas emissions, which depend on a host of other factors, such as total
California Tire Age Notification: SEMA derailed legislation that would have required tire dealers to provide a written disclosure to customers informing them about the risks associated with tire age. SEMA had previously asked the sponsor to adopt an amendment to exempt limited-production specialty tires from the scope of the tire-age notification requirement. This exemption is consistent with tire regulations at the federal level and California’s tire fuel-efficiency law. Similar legislation that would require automotive repair dealers to list on the invoice the manufacture date of any tire installed or sold was also abandoned.
California Consumer Products: Legislation to place additional requirements on the manufacture, sale or distribution of certain consumer products, including automotive products used to maintain the appearance of a motor vehicle (including those for washing, waxing, polishing, cleaning or treating the interior or exterior of the vehicle) was defeated. Under the bill, a manufacturer would have been required to disclose each ingredient contained in the product on the manufacturer’s website and provide the web address and a statement on the product’s label.
California Diesel Parts: California is now including the inspection of light- and medium-duty diesel vehicles in its smog-check program. In order for uncertified diesel parts to not cause failure of the visual portion of a smog check, the California Air Resources Board (CARB), in conjunction with SEMA and SEMA members, created a procedure whereby members were able to submit certification applications. CARB then conducted an “engineering analysis” of the parts and placed them on a “Products in Progress List.” Parts that fail the engineering analysis will likely be classified as defeat devices and not certified. Upon successful completion of this initial process, applicants will be given one year to conduct the required emissions tests and obtain certifications, during which time no diesel vehicle equipped with these parts will fail the visual portion of a smog-check test.
Colorado Emissions Exemption: SEMA-opposed legislation that sought to reset to 1959 the latest model year at which a vehicle is excluded from the emissions testing process was “postponed indefinitely” by the legislature. Currently, model-year vehicles ’75 and older are exempted. Colorado’s current emissions-test exemption recognizes the minimal impact of older cars on vehicle emissions and air quality.
Florida Tires: SEMA-opposed legislation that would have required tire dealers to disclose the date of manufacture and provide warnings related to the effect of aged tires was not considered by the legislature prior to adjournment for the year. Additional legislation prohibiting the sale of any new or used tire that is more than six years old was also not considered. The National Highway Traffic Safety Administration (NHTSA) has studied the tire-aging issue but has yet to reach a conclusion. SEMA contends that the service life of a tire is affected by many factors that are independent of the chronological age of the tire. SEMA recommends having tire inflation pressure checked and properly adjusted at least once a month to maintain safety and fuel economy.
Kansas Inoperable Vehicles: A SEMA-opposed bill to allow cities and towns to enforce “nuisance abatement” procedures by notifying affected property owners by use of first-class mail instead of certified mail (with a return receipt) was withdrawn. Nuisance abatement laws are often used by local jurisdictions to force removal of inoperable vehicles, including parts cars stored on private property by car collectors. SEMA opposed the bill because owners could risk removal of valuable collector cars and parts without actual and verified notification, especially when they are not at home to receive a first-class mailing.
Massachusetts Street Rods/Customs: Massachusetts Governor Deval Patrick signed into law a version of SEMA-model legislation to create a vehicle registration classification for street rods, custom vehicles, replicas and specially constructed vehicles. Replica vehicles will 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. Under the new law, street rods and custom vehicles are exempted from emissions inspection requirements. The measure also provides that specially constructed and replica vehicles that are registered on or before April 30, 2012, will be exempted from emissions inspection requirements. If registered after April 30, 2012, these vehicles will 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, a rebuilt engine or a crate engine.
Massachusetts Exhaust Noise: A bill targeted for defeat by SEMA to ban the “use and sale of any exhaust pipe that increases the sound emissions of any vehicle, including motorcycles,” was set aside for study by the legislature. Among other things, the measure ignored the fact that aftermarket exhaust systems are designed to make vehicles run more efficiently without increasing emissions and did not supply law enforcement with a clear standard to enforce, allowing them to make subjective judgments on whether or not a modified exhaust system is in violation.
Mississippi Nitrous Oxide: Working with the Mississippi State Troopers Association, SEMA successfully negotiated a compromise on legislation that originally threatened to prohibit public road use of all motor vehicles equipped to supply the engine with nitrous oxide. The bill was signed into law by Governor Haley Barbour. Originally written as an outright ban, the new law allows for the installation of nitrous-oxide systems as long as the feed lines are disconnected or the canisters are removed while the vehicle is being operated on a public road. The SEMA amendment better protects public road safety while ensuring legitimate off-road uses of nitrous-oxide systems.
Nebraska Abandoned Vehicles: Legislation opposed by SEMA that would have expanded the definition of “abandoned motor vehicle” to include vehicles that were left unattended for more than six hours on private property without valid plates, title or permit was not considered in the 2010 legislative session. The bill also sought to include vehicles that are inoperable, partially dismantled, wrecked, junked or discarded. Under current law, a vehicle is not considered to be abandoned on private property until it is left unattended for more than seven days. Motor vehicles are defined as abandoned for the purpose of allowing state and local authorities to remove them from private property.
New York Tire Efficiency: SEMA helped defeat legislation that sought the development of a statewide program to mandate that replacement tires for passenger cars and light trucks be as energy efficient as tires sold as original equipment. While the measure contained a SEMA-drafted exemption for some hobbyist tires, including limited-production and off-road tires, SEMA has consistently recommended that the bill be rejected, since the replacement tire-efficiency program conflicts with federal law by regulating fuel economy, imposes substantial redesign costs on tire manufacturers, competes with federal consumer information requirements and essentially sets a 50-state standard.
New York Tire Dating: SEMA defeated legislation that would have prohibited the manufacture, distribution or sale of tires for passenger vehicles, multi-purpose passenger vehicles or light trucks unless a date of manufacture is clearly molded on both sides of the tire in a non-coded fashion. SEMA also defeated bills that sought to prohibit the sale of tires that are more than six years old.
New York Taxing “Gas Guzzlers”: SEMA beat back legislation to establish a progressive purchase or lease surcharge for some new motor vehicles based on state calculations of carbon emissions. Depending on the vehicle purchased, this surcharge could have required owners to pay up to $2,500 more for the vehicle. Separate legislation, also defeated, proposed to create a task force that would have recommended higher toll and registration fees for vehicles based on weight, emissions and fuel-efficiency ratings.
North Carolina Scrappage: SEMA turned back legislation that would have implemented a state vehicle scrappage program for passenger vehicles that are at least 14 years old. Under the program, participants would have received around $1,000 to $1,500 to scrap their cars and purchase current-year vehicles under 10,000 lbs. or one from the previous three model years. All trade-in vehicles would have been subject to scrappage, regardless of their historical value or collector interest.
Vermont Inoperable Vehicles: SEMA-supported legislation to provide an exemption to automotive hobbyists from the restrictions on salvage yards was signed into law by Vermont Governor Jim Douglas. The new law increases the regulation of salvage yards and automobile graveyards in the state but includes a provision stipulating that hobbyists are not to be confused with the owners of automobile graveyards. The law defines an “automobile hobbyist” as a person not primarily engaged in the sale of vehicles and parts or dismantling junk vehicles. The definition of “automobile graveyard” does not include an area used by an automobile hobbyist for storage and restoration purposes, provided their activities comply with federal, state and municipal law.
Washington Scrappage: SEMA again helped turn back legislation that would have implemented a vehicle scrappage program for passenger vehicles more than 15 years old. Under the bill, qualifying vehicles would have had to be registered for a 24-month period and be in satisfactory operating condition. Replacement vehicles purchased under the plan would have been required to have an EPA highway gasoline mileage rating of at least 30 mpg. Participants in the program were to be granted a sales-tax exemption for the first $2,000 of tax paid on the purchase price. All trade-in vehicles would have been destroyed, regardless of their historical value or collector interest.
West Virginia Exhaust Noise: A SEMA-opposed bill to provide that the noise from a motor-vehicle exhaust system that has been deemed “disturbing or unreasonably loud” constitutes the crime of disturbing the peace is dead for the year. Under the bill, violators could have been fined up to $1,000 per occurrence, jailed for six months or both. Among other things, the bill did not supply law enforcement with an enforcement standard, allowing them to make subjective judgments on whether an exhaust system is “disturbing or unreasonably loud.”
Health Care: President Obama signed a sweeping health care reform mandate into law that is intended to extend insurance to about 32 million uninsured, increasing coverage to 95% of Americans (from the current 83%). The law takes effect in stages over a number of years. Of most interest to SEMA members are the Small Business Health Options Programs (SHOP exchanges) operated by the states, which will allow small businesses (50 employees) and individuals to pool together to purchase insurance that meets or exceeds new federal minimum standards. While the SEMA-supported exchanges should spur competition, they are not required to begin operating until 2014. This is a problem since most insurance companies are hiking their premiums now under the guise that they need the additional revenue to meet current and anticipated requirements under the new law. The law has been challenged in court over mandates that individuals purchase insurance and states bear increased Medicare/Medicaid costs. It will likely take years for the lawsuits to complete their path through the court system. If Republicans gain a majority in the November election, an opportunity could be provided for lawmakers to modify the current law to address flaws and reduce its scope. SEMA remains committed to pursuing additional reforms and is working with the National Federation of Independent Business and the Coalition for Affordable Healthcare toward that goal.
Small-Business Tax Credit: Companies that purchase health care insurance and have 25 or fewer employees may claim a tax credit as of January 1, 2010. The credit is intended to help small businesses with low- and moderate-income workers and is gradually phased out as average wages rise from $25,000 to $50,000.
Collector Car Appreciation Day: At SEMA’s request, U.S. Senators Jon Tester (D-MT) and Richard Burr (R-NC) co-sponsored Senate Resolution 513 designating July 9, 2010, as Collector Car Appreciation Day. To celebrate, enthusiasts across the country gathered to recognize the value in collecting and restoring historic and classic cars. Car clubs, enthusiast organizations and affiliated businesses hosted more than 100 events in more than 40 states to commemorate the day. Events ranged from car cruises to small-business open houses and product giveaways. SEMA will seek to have another resolution introduced for a second annual event in 2011.
Bank Loans and Bonus Depreciation: SEMA worked vigorously to help enact the Small Business Jobs and Credit Act, which was signed into law in September. The law contains $12 billion in tax incentives and creates a $30 billion resource to activate greater lending to small businesses by community banks. Besides pumping money into the banking system for small-business loans, the law extends the bonus depreciation program, allowing businesses to write-off 50% of the cost of newly purchased depreciable property. The 50% depreciation was also permitted in 2008 and 2009. The law also expands and extends the Section 179 program, allowing companies to write-off up to $500,000 in capital expenditures in tax years 2010 and 2011, double the previous limit.
IRS 1099 Forms: SEMA joined with a number of other organizations in an effort to have Congress repeal a requirement that businesses issue 1099 forms to all vendors from whom they buy more than $600 worth of goods or services in any year, beginning in 2012. The 1099 mandate is a funding measure included in the health care law. The provision has garnered widespread opposition on Capitol Hill. The Internal Revenue Service (IRS) is required to implement the law. In comments to the agency, SEMA urged the IRS to support the “repeal” message.
2001 Tax Breaks: A number of tax breaks from 2001 expire at the end of 2010 unless lawmakers specifically renew them. Lawmakers have put off a decision until after the November mid-term elections on whether to renew the tax breaks for all income brackets or whether to let them expire for upper-income taxpayers.
R&D Tax Credit: SEMA-supported legislation to extend the research and development tax credit has been deferred until after the mid-term elections. The R&D tax credit lapsed last December, marking the 11th time it had expired since being enacted into law in 1981. SEMA joined more than 100 associations and companies in the R&D Credit Coalition urging Congress to make the credit permanent. The credit offsets costs for companies investing time and money in new technologies and is applicable to both in-house and outside research. There is widespread support to make the credit permanent or, alternatively, to immediately renew it for another year or two. However, the issue has been tied to other, more controversial tax measures for which there have been no action to date.
Estate Tax: A one-year repeal of the federal estate tax began on January 1, 2010. As with the other tax cuts from 2001, unless Congress takes action, the estate tax will automatically revert to its old rate of 55% on anything above $1 million on January 1, 2011. SEMA supports legislation to permanently freeze the estate tax at a set rate (e.g., 35%) on amounts above a certain amount (e.g., $5 million/individual).
National Manufacturing Strategy: The U.S. House of Representatives approved the National Manufacturing Strategy Act, and SEMA urged the Senate to ratify the measure before it adjourns in December. Government policies would be refined to foster economic growth, increase employment and productivity and expand exports for the nation’s manufacturing sector. A public-private advisory board would make policy recommendations and establish action items on how to achieve short- and long-term goals. Topics for consideration would include competitiveness, stability, sustainability, trade balance and job creation in a global economy.
Tax Breaks When Hiring Unemployed: Under a SEMA-supported jobs bill enacted into law, private employers can claim tax credits if they hire someone in 2010 who has been out of work for at least 60 days. All businesses that hire an unemployed worker between February 5, 2010, and January 1, 2011, will be exempt from paying the 6.2% employer share of Social Security payroll taxes. The new worker must have been unemployed for at least 60 days and cannot replace another employee. If the business retains the newly hired worker for one year, the employer is then entitled to a one-time $1,000 tax credit for each such worker.
Credit 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 2%–4% transaction fee every time a card is used. The fees are automatically divided between the merchant’s bank, the cardholder’s bank and the network that processes the transactions. The Federal Reserve now has the authority to ensure that debit card transaction fees are “reasonable and proportional to the actual cost incurred.” 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).
Tougher Auto Safety Rules: After being passed by two committees in the House and Senate, action has stalled on legislation to mandate new automaker safety standards and strengthen the NHTSA’s authority. The legislation would require the NHTSA to consider establishing new motor-vehicle safety standards for unintended accelerations, such as brake-override requirement, along with event data recorders (“black boxes”). SEMA joined with a number of other auto-related organizations in signing a coalition letter to House and Senate leaders urging bill modifications. Among other issues, the coalition requested that the legislation preempt state laws and not expand the scope of early-warning data that is available to the public beyond that information already required by the NHTSA in order to protect confidential business materials.
OHVs and Land Use: A number of wilderness bills were introduced and considered in Congress during 2010, but all are expected to die. A U.S. Department of the Interior document earlier this year indicated that the agency plans to designate 14 new or expanded national monuments covering 13 million acres in the western United States. Interior Secretary Ken Salazar provided subsequent assurances that the plans were preliminary and that the Obama administration would not bypass public input if the plans move forward. Unlike wilderness designations, motorized recreation is permitted within national monuments. However, closing off-highway vehicle (OHV) roads and trails is a frequent byproduct when land receives the national monument designation. Targeted lands include popular OHV areas, such as the San Rafael Swell and Cedar Mesa (Utah), Berryessa Snow Mountains and Bodie Hills (California) and parts of the Great Basin (Nevada). SEMA opposes unnecessarily restrictive land-use policies and has urged Congress, states and local communities to take an active role in participating in land-use decisions.
Ethanol Content in Gasoline: The EPA was expected to rule by the end of the year on whether to raise the ethanol content in gasoline from 10% (E10) to 15% (E15) for late-model cars. It could permit the use in other cars at a later date. SEMA opposes the initiative due to concerns that the additional content will harm automobiles of all ages, including special-interest collector and historic vehicles. A lack of conclusive information regarding E15’s effect on engines of different model years reinforces the need to defer or deny the increase. In addition to the potential harm of E15 on engine components, the EPA has no procedure in place to ensure that misfueling does not occur nor any plan for ensuring that regular gasoline continues to be available for older vehicles. SEMA is coordinating its actions with other organizations spanning a broad cross-section of industries, from boating and snowmobiles to grocers and convenience stores.
CO2 Emissions Standards: Just months after establishing Corporate Average Fuel Economy (CAFE) mileage and CO2 emissions standards for model year ’12–’16 cars and light trucks, the EPA, NHTSA and CARB are now drafting standards for model-year ’17–’25 vehicles. The EPA and NHTSA also plan to establish fuel economy and CO2 standards for medium- and heavy-duty trucks beginning in model-year ’14. Federal and state officials will work with the automakers with the goal of setting one national CO2 standard. The automakers participated in formulating the ’12–’16 rules, supported by SEMA, since it provided a national approach to regulating CO2 emissions rather than a patchwork of state rules. Federal regulators intend to issue a “game plan” for model-year ’17–’25 light-duty vehicles by October 2010 and adopt a final rule by mid-2012.
New Fuel Economy Car Labels: The EPA and NHTSA intend to expand the mileage rating information contained on new-car window labels. The regulators want to make this information more evident by including graphics, increasing type size and providing CO2 emissions information. In this fashion, buyers may focus more attention on these issues when considering a new-car purchase. SEMA supports efforts to make consumers aware about mileage to allow comparison-
shopping within specific vehicle classes. SEMA opposes a proposal to adopt an “A–F” letter grading system that doesn’t distinguish vehicle classes as too simplistic to provide value. When selecting a new car, consumers must also balance other window label information regarding the vehicle’s front and side crash-worthiness and rollover propensity. The rule would only apply to new cars and light-duty trucks in dealerships beginning in model-year ’12.
Tire Fuel Efficiency: The NHTSA moved closer to establishing a consumer information system to rate the fuel economy, safety and durability characteristics of most replacement tires. The agency issued a final rule to establish test procedures to be used by tire manufacturers in determining tire ratings. However, the NHTSA has not yet finalized a program on how the information will be conveyed to consumers at the point of sale and online. The program is required under a 2007 law that contains a SEMA provision exempting from the rating system those tires that have been produced or imported in annual units of less than 15,000 and that do not exceed 35,000 tires in total brand-
Federal Lighting Standard: The NHTSA postponed the effective date for the revised lighting standard, Federal Motor Vehicle Safety Standard No. 108, from December 2009 to December 2012. The agency wants the extra time to confirm that there were no substantive changes included when the agency published the reorganized and simplified standard in 2007. The revised standard was originally scheduled to take effect in 2008. The lighting standard has been amended many times since it was first adopted in 1967 in order to address technological advances and enhance safety. As a consequence, the previous regulation was unnecessarily complex and difficult to understand. Early compliance to the revised standard is permitted.