LEGISLATIVE AND TECHNICAL AFFAIRS
2018: The Year in Review
Idaho—Military Vehicles: Governor Butch Otter signed into law legislation that allows a vehicle built for the U.S. Armed Forces to be registered and operated on public highways in Idaho, even if such vehicle does not meet federal motor vehicle safety standards. Many military surplus vehicles were not designed to meet those standards and previously could not be registered.
The laws and regulations that govern how SEMA members do business have a continuous impact on the way automotive specialty-equipment products are made, distributed and marketed. The charge of the SEMA government affairs office is to stay on top of all relevant state and federal legislation and regulations and advocate for industry positions to ensure the best possible outcome for SEMA’s membership. The following are a few examples of critical legislative/regulatory issues addressed by the SEMA government affairs team over the past year.
California—CARB Staffing: Governor Jerry Brown signed into law as part of the state’s budget a provision adding six staff to the California Air Resources Board’s (CARB) aftermarket parts division. The provision also allocates approximately $960,000 annually. The division is responsible for approving Executive Orders for aftermarket auto parts that impact emissions, which is critical for SEMA businesses wishing to sell emissions-related parts nationwide. SEMA worked with former State Senator Josh Newman and CARB staff to provide additional resources to CARB to expedite testing of the industry’s products as they move through the Executive Order process.
California—Oceano Dunes-ORV Access: The number of off-road vehicle (ORV)riding areas at Oceano Dunes in California will be reduced under a settlement agreement reached between the California State Parks Department and the San Luis Obispo County Air Pollution Control District. The agreement is intended to decrease fine particulate matter emissions by about 30% by 2023. Under the agreement, about 100 acres of riding area would be immediately fenced off, including some within the popular La Grande Tract. The program includes reintroduction of native vegetation within fenced-off areas, deployment of wind fences, and installment of grooved concrete to help remove sand from vehicles as they exit the park.
Louisiana—Military Vehicles: Legislation was signed into law to allow for the registration and titling of military vehicles in the state of Louisiana.
Maryland—Emissions Inspections: Governor Larry Hogan created rules to exempt light-duty vehicles, model-year ’96 or older, from emissions inspections. In Maryland, light-duty vehicles are defined as vehicles with a gross weight under 8,500 lbs. In a statement to the press, the governor noted the small impact these vehicles have on overall air pollution and the burden testing places on owners. Further, the rules will exempt new vehicles purchased in the state from emissions testing for an additional year. This decision is estimated to save Maryland more than $2 million annually.
Maryland—Off-Highway Vehicles: Governor Hogan signed pro-hobby legislation into law that establishes the OHV Trail Fund as a special non-lapsing fund. It also specifies that the purpose of the fund is to maintain and construct trails for off-highway recreational vehicles on land that is owned or leased by the Department of Natural Resources. Currently, there is no specific fund related to OHV trails.
Michigan—Environmental Regulatory Process: Governor Snyder signed into law a bill to create a more cooperative environmental regulatory process at the Michigan Department of Environmental Quality. The legislation establishes an Environmental Rules Review Committee, which will evaluate proposed environmental rules and advise on whether to advance them. Affected industries represented include statewide environmental and conservation groups, local governments, the general public, public utilities, small business, manufacturing, solid waste, oil and gas, and agriculture groups. In addition, it establishes an Environmental Permit Review Commission and creates an Environmental Science Board to advise on issues affecting the protection of the environment or management of the state’s natural resources.
Utah—Emissions Inspection: Governor Gary Herbert signed into a law a bill to extend the emissions inspection exemption to vehicles that are model-year ’67 or older as well as diesel vehicles ’97 or older. Under the previous law, all gasoline and diesel vehicles six model years or older were tested biennially, and all vehicles ’67 or older were tested annually.
Michigan—Removal of Towing Restriction: Governor Rick Snyder signed into law a bill to allow for the attachment of a tow ball, a bicycle rack, a removable hitch or any other device designed to carry an object on the rear of a vehicle, even if it obstructs the rear license plate.
Mississippi—Collector Car Appreciation Day: The Senate and House passed Senate Concurrent Resolution 649, officially designating July 13, 2018, as Collector Car Appreciation Day in the state. The SEMA Action Network announced that date to mark the ninth commemoration in what has become an annual event to raise awareness of the vital role automotive restoration and collection plays in American society. Thousands of enthusiasts in the United States and Canada gather at car cruises, parades and other events to celebrate the nation’s automotive heritage each year.
Nebraska—Titling and Registration: Governor Pete Ricketts signed into law a bill to ease the process by which replica, assembled, kit and reconstructed cars are titled and registered. The legislation is based on a SEMA-model bill and provides registration categories for replica vehicles, assembled vehicles, kits and reconstructed vehicles.
New Mexico—License Plates: Legislation requiring plates on the front and back of all motor vehicles died when the legislature adjourned. The bill had already been approved by the New Mexico House of Representatives and was awaiting consideration by the Senate. The bill may be reintroduced in the 2019 session.
Rhode Island—Specialty License Plates: Courtesy license-plate bills for antique vehicles and street rods/customs were signed into law by Governor Gina Raimondo. The bills provide antique vehicles with courtesy year-of-manufacture plates. Under the current law, “antique” plates are available for vehicles that are at least 25 years old and used only for exhibitions, parades and car club activities. Vehicles currently registered as antique may purchase and display replica year-of-manufacture plates with DMV approval. S.B. 2484 provides a courtesy plate for street rods and custom vehicles. Under current law, a street rod is defined as a ’48 or older vehicle or a vehicle manufactured after ’48 to resemble a vehicle manufactured before ’49. Custom vehicles are defined as any motor vehicle at least 25 or more years old (or replicas that resemble a vehicle that is at least 25 years old) and of a model year after ’48 that has either been altered from the manufacturer’s original design or has a body constructed from non-original materials.
Southern California OHV Recreation Areas: The U.S. House of Representatives passed SEMA-supported legislation from Rep. Paul Cook (R-CA) that would permanently designate six existing OHV areas comprising 300,000 acres in San Bernardino County: Johnson Valley (expanded by 11,000 acres), Spangler Hills, El Mirage, Rasor, Dumont Dunes and Stoddard Valley. While the so-called California Off-Road Recreation and Conservation Act expands wilderness designations in the California desert, the bill prohibits the Secretary of the Interior from closing any roads or trails that are currently open for motorized recreational access. The U.S. House Natural Resources Committee passed SEMA-supported legislation to create the Apple Valley Off-Highway Vehicle Recreation Area. The Desert Community Lands Act would transfer 4,630 acres of federal land from the U.S. Department of the Interior to the town of Apple Valley, California, and provide the public with opportunities for OHV recreation. The bill also provides 80 acres of federal lands to the City of Twentynine Palms, making race events at 29 Palms Motorsports Arena more accessible to the public.
South Carolina—Motorsports Complexes: Governor Henry McMaster signed into law legislation aiding and incentivizing the construction of motorsports complexes in the state. The bill recognizes the important economic and civic value that additional motorsports facilities can provide. The new law will help pave the way for new racing facilities in the state. A motorsports tourism incentive fund will be created to award grants or loans to attract and expand tourism and hospitality projects related to events at such complexes. The new law exempts certain building materials for a complex from sales tax and provides the process by which a qualified company may claim the exemption.
South Dakota—Historic Vehicle: Governor Dennis Daugaard signed into law a bill allowing historic vehicles to display a single license plate for certain vehicle model years. Currently, a historic car is a motor vehicle more than 30 years old and not used for daily transportation. The new law also sets the mileage limit for vehicles with historic plates at 4,000 miles per year.
South Dakota—Special-Interest Vehicles: Governor Daugaard signed into law legislation increasing the mileage limitation from 6,000–7,500 miles per year for special-interest vehicles and allowing the option of personalized plates for those vehicles. A special-interest vehicle is a motor vehicle that is collected, preserved, restored or maintained by the owner as a leisure pursuit and is not used for general or commercial transportation.
Utah—Off-Highway Vehicles: Governor Herbert signed into law pro-hobby legislation increasing funding for OHV infrastructure. Utah residents now have a public fund solely devoted to OHV trail expansion and maintenance. Previously, there was no specific fund dedicated to off-roading.
Virginia—Military Vehicles: Governor Ralph Northam signed into law a bill that allows qualifying military vehicles to be registered and operated on public roadways as antiques. In Virginia, a military surplus off-road motor vehicle is defined as a high-mobility multipurpose wheeled vehicle (Humvee) that was manufactured by or under the direction of the U.S. Armed Forces and subsequently authorized for sale to civilians. Additionally, a favorable amendment was made to allow currently registered military vehicles to retain registration without the antique designation.
Virginia—Exhaust Requirements: Governor Northam signed into law legislation excluding antique motor vehicles, defined as motor vehicles 25 years old or older, from the requirement that such vehicles be equipped with an exhaust system in good working order to prevent excessive or unusual levels of noise. Current law excludes only antique motor vehicles manufactured prior to 1950 from such requirements and allows only an exhaust system originally installed by the manufacturer or an equivalent.
West Virginia—License Plates: Governor Jim Justice signed into law legislation that allows for personalized license plates on antique vehicles. The plates will be available for an annual fee of $40. Antique vehicles are vehicles that are more than 25 years old and owned solely as collector’s items.
West Virginia—Off-Road Recreation: Legislation sponsored by State Caucus member Senator Mark Maynard was signed into law. The bill creates a two-year pilot program allowing all-terrain and recreational vehicles in Cabwaylingo State Forest, which currently has no all-terrain or recreational vehicle access.
Bonneville Salt Flats (BSF): The salt flats have significantly decreased in size over many decades as salt brine was channeled away from the area. Along with other organizations and companies comprising the Save the Salt Coalition, SEMA is working closely with the U.S. Bureau of Land Management (BLM), which manages the salt flats, in addition to federal and state lawmakers on ways to restore the BSF and its 13-mile speedway. The coalition has proposed a comprehensive plan that includes increasing the amount of salt being pumped onto the salt flats during the winter. The coalition is working with the adjoining potash mine owner on plans to dramatically increase the amount of salt being pumped onto the salt flats and with lawmakers to fund the program. For more information, visit www.savethesalt.org.
Collector Car Appreciation Day: The ninth annual Collector Car Appreciation Day (CCAD) took place on Friday, July 13, 2018. Both the U.S. Senate and the House of Representatives introduced resolutions (S. Res. 574/H. Res. 980) to focus attention on the vital role automotive restoration and collection plays in American society. Thousands of Americans gathered at car cruises, parades and other events to celebrate the nation’s automotive heritage. It is also international in scope, as many Canadian Provinces passed resolutions and hosted events.
Tariffs: SEMA is working with several coalitions of industry associations to oppose the imposition of tariffs on a variety of worldwide products and materials. While SEMA supports the Trump administration’s efforts to create fair and reciprocal trade and to protect intellectual property rights, the association remains concerned that tariffs are not accomplishing that shared objective. The following is a description of the tariffs.
Steel/Aluminum: The U.S. government has imposed global tariffs on steel (25%) and aluminum (10%). Most of the tariffs began on June 1. To date, only Argentina, Australia, Brazil and South Korea have trade agreements exempting them from the tariffs. The tariffs apply to processed raw materials (steel/aluminum plate, sheets, bars, etc.) but not finished products (e.g., wheels, exhausts, etc.). U.S.-based companies are eligible for a one-year tariff exclusion if they can demonstrate that the foreign-produced material is not made in the U.S. in reasonably available quantity or satisfactory quality. More than 40,000 company exclusion requests have been received to date.
Chinese Products: 25% tariffs have been imposed on $50 billion worth of Chinese imports and 10% tariffs on another $200 billion worth of goods. Tariffs on another $267 billion in Chinese imports are being threatened. The tariffs are an attempt to lower the U.S./China trade deficit and to deter cybertheft of intellectual property by Chinese government and companies. The imposition dates for the $50 billion tariffs were staggered (described below).
$34 billion: On July 6, 25% tariffs were imposed on 818 Harmonized Tariff Code listings, including miscellaneous metal and rubber parts for auto equipment, machinery, tools, measurement and medical devices.
$16 billion: On August 23, 25% tariffs were imposed on 279 HTC listings, including many types of plastics.
$200 billion: On September 24, 10% tariffs were imposed on 5,745 full or partial lines of the original 6,031 HTC listings, including many auto parts ranging from engines and metal fasteners to tires, steering wheel components, rubber gaskets, transmission belts, brake pads, windshields and suspension springs. Companies may seek exclusion requests for the first two tariff lists covering $50 billion but not the last list covering $200 billion. Companies must demonstrate that the product is available only from China, that the duties will cause severe economic harm, and that the good is strategically important.
Imported Autos/Auto Parts: President Trump directed the U.S. Department of Commerce (DOC) to investigate whether to impose tariffs on imported automobiles and auto parts if it is found that they pose a threat to America’s national security (manufacturing base). The DOC will issue its findings and recommendations for presidential actions, if any. President Trump has stated that he is considering global tariffs of 20%–25%. The investigation applies to all types of cars and parts, including new cars, classic cars, OEM parts and specialty auto parts. The move would directly affect all U.S. automakers and parts suppliers that use imported components, as well as importers of cars, trucks and SUVs. In response, SEMA and seven other major trade associations representing the broad scope of the auto industry formed the Driving American Jobs Coalition. The coalition opposes the tariffs as being counterproductive and threatening American companies, workers and consumers.
RPM Act: More than 190 members of Congress have co-sponsored the bipartisan Recognizing the Protection of Motorsports (RPM) Act. The RPM Act clarifies that the Clean Air Act allows motor vehicles to be converted into dedicated race cars and that it is legal to produce, sell and install race parts for those vehicles. Passage of the RPM Act will protect sales beyond emissions-related parts, including racing tires, wheels, brakes, suspension equipment and rollcages. Customers won’t be buying and installing those products if a car or motorcycle cannot be converted into a dedicated race vehicle. The House Energy and Commerce Committee has approved the bill, and the Senate Clean Air Subcommittee has held a hearing, setting up potential votes by the full House and the Senate Environment and Public Works Committee. While significant progress has been achieved, racers, fans and the industry must keep the pressure on their members of Congress to get the RPM Act over the finish line. To contact your lawmakers, visit www.sema.org/rpm.
Replica Vehicle Law: A SEMA-supported law enacted in 2015 will allow small auto manufacturers to sell completed replica cars. Those vehicles resemble cars manufactured at least 25 years ago. Companies will be able to produce up to 325 turnkey replica vehicles (per company) in the United States and 5,000 worldwide under a simplified regulatory system. Until now, the federal government’s regulatory system did not differentiate between a company producing millions of vehicles and a business producing a few custom cars. The U.S. Environmental Protection Agency and the California Air Resources Board are finalizing regulations to implement the law. Industry and enthusiasts are challenging the National Highway Traffic Safety Administration to move forward so that the program can take effect in 2019.
Tax Reform: President Trump signed a bill into law in December that overhauls the U.S. tax code and reduces taxes by $1.5 trillion over the next decade. The Tax Cuts and Jobs Act provides the most sweeping changes to the federal tax code in decades while reducing tax bills for businesses and workers alike. Among other highlights, the law permanently reduces the corporate tax rate from 35% to 21% and reduces personal income tax rates through 2025 to seven rates between 10%–37%. The exemption from the estate tax is doubled to $11 million for individuals and $22 million for couples through 2025. Businesses can write off the full cost of investments for the next five years, and small businesses (companies with less than $25 million in gross receipts) may continue to write off 100% of their interest expenses. The Section 179 deduction that allows smaller companies to write off their capital investments has been increased from $500,000 to $1 million, with an increased phase-out threshold at $2.5 million.
Estate Taxes: The U.S. Treasury Department reversed a 2016 proposal to limit family-owned businesses’ use of minority and marketability discounts when calculating the estate tax under Section 2704 of the Internal Revenue Code. SEMA joined with many other organizations in opposing the proposed rule, which threatened to raise the estate tax for a family-owned business by 30% to 50%. The minority interest and marketability discounts recognize that family beneficiaries usually can’t sell the inherited income at the valued rate when it is a family-controlled business.
Internet Sales Tax: The U.S. Supreme Court issued a decision allowing states to require internet retailers to collect sales taxes even when they have no physical presence in the state. The Court overturned the 1992 Quill vs. North Dakota decision, which said that retailers must have a certain level of physical presence (nexus) in a state before that state can force the retailer to collect taxes. The state of South Dakota successfully argued that the 1992 decision was obsolete in the e-commerce era. In 2016, South Dakota passed legislation requiring out-of-state retailers to collect sales taxes, regardless of whether they had a physical presence. The court upheld the South Dakota law, which includes a small-business exemption for retailers with less than $100,000 in annual sales. Other states are now expected to begin passing bills like the South Dakota law. The court noted that Congress has always had the authority to enact legislation to authorize collection, but that has not occurred to date. The court ruling may spur Congress to establish a single federal standard, including a uniform small-business exemption and limited ability for states to pursue out-of-state audits. Various studies estimate that the potential amount of uncollected state sales taxes may range from $13 billion to $33 billion.
E15 Gasoline: SEMA-supported legislation has been introduced in the U.S. House of Representatives that would expand the current warning label required on gas pumps dispensing E15 (gasoline containing 15% ethanol). The new label would include the words “Warning” and “Check your owner’s manual,” be 5x7 in. or larger, and include pictograms depicting a boat, a lawnmower, a chainsaw, a motorcycle and a snowmobile. The current label is about 3½x3 in. and does not include the words “warning,” “owner’s manual” or pictograms. Ethanol, especially in higher concentrations such as E15, can cause metal corrosion and dissolve certain plastics and rubbers in automobiles that were not constructed with ethanol-resistant materials. In 2011, the U.S. Environmental Protection Agency made it illegal to use E15 fuel in motor vehicles made before 2001, as well as motorcycles, boats and gasoline-powered equipment.
Autonomous Vehicles (AVs): SEMA has urged Congress to enact legislation providing federal oversight of AVs. In 2017, the House passed the SELF DRIVE Act and the Senate Commerce Committee passed the AV START Act, but no further Senate action has been scheduled to date. The legislation would override a patchwork of state bills. Both bills would create a uniform approach to governing the safety of AVs as it relates to design, performance and testing. Absent direct regulation, the automakers will submit safety evaluation reports to the National Highway Traffic Safety Administration, addressing such areas as safety, crashworthiness and cybersecurity. SEMA’s primary concern is that the legislation and the technology not lock out the sale and installation of aftermarket products (e.g., restrictive cybersecurity rules).
National Monuments Legislative Reform: The U.S. House Natural Resources Committee passed SEMA-supported legislation that would limit the president’s authority to unilaterally designate national monuments. The bill would limit the size of future national monument designations, require approval of state and local government bodies for larger monument designations, cap the size of designations at 85,000 acres, and narrow the criteria used to determine national monuments. The bill would specifically require a National Environmental Policy Act review for smaller monuments, along with an environmental assessment for larger sizes. The county, state and governor would need to approve even larger sizes. The issue is consequential, since national monuments automatically prohibit new roads or trails for motorized vehicles and require a new land-management plan be drafted that could lead to more road closures.
National Monuments Regulatory Reform: The Trump Administration reviewed nearly 40 national monument designations dating back to 1996 to determine whether any should be rescinded, resized or modified. The review resulted in the reduction in size of several monuments, including Bears Ears National Monument (reduced from 1.35 million acres to 202,000 acres) and Grand Staircase-Escalante National Monument (reduced from 1.9-million acres to more than 1 million acres) in Utah.
Outdoor Recreation: The U.S. House Natural Resources Committee passed a bill intended to promote access to outdoor recreation opportunities, streamline the permitting process for guides and recreation enthusiasts, make federal agencies accountable for prioritizing outdoor recreation, and address the maintenance backlog on America’s public lands through increased volunteerism. The Recreation Not Red-Tape Act is supported by the Outdoor Recreation Roundtable, which is comprised of 25 top industry associations, including SEMA, representing off-roading, camping, fishing, boating, hiking, archery and other sports. The outdoor recreation industry generates about $887 billion per year in economic activity and provides an estimated 7.6 million direct jobs. The bill was sent for House floor consideration. Action on a Senate bill was pending in the Senate Energy and Natural Resources Committee.
Federal Recreation Advisory Committee: The U.S. Department of the Interior created a Recreation Advisory Committee to help improve visitor experiences on public lands. The committee is “dedicated to looking at public-private partnerships, with the goal of expanding access to and improving the infrastructure on public lands.”
Endangered Species Act: The U.S. House of Representatives passed five bills to reform the Endangered Species Act (ESA). The 40-year old law has produced few tangible results beyond road and trail closures, restrictive land-use designations, and lawsuits. While millions of acres of land have been set aside to protect threatened and endangered animals and plants, more money has been spent on lawyers and court expenses than on wildlife management. Among other changes, the legislation would require the U.S. Fish and Wildlife Service (FWS) to consider the economic impact of adding a species as endangered or threatened when the agency makes listing decisions. The FWS would also have to make all data that is used as the basis for an ESA determination to be made available to impacted states. Billing rates awarded to lawyers and expert witnesses in ESA lawsuits would also be limited to $125 an hour. Hearings have been held in the Senate, but no other action has been scheduled.
Export Service Award: U.S. Secretary of Commerce Wilbur Ross presented SEMA with the President’s “E” Star Award for Export Service at a ceremony in June. The President’s “E” Award is the highest recognition any U.S. entity can receive for making a significant contribution to the expansion of U.S. exports. The award recognizes, in part, the large number of successful export trips organized by SEMA.