NADA Legislative Priorities September 6, 2017

SELF-DRIVING CARS LEGISLATION SHOULD PRESERVE STATE VEHICLE LICENSING AND FRANCHISE LAWS  

Congress is considering legislation to advance self-driving vehicles or Highly Automated Vehicles (HAVs) which could preempt certain state laws. All states have enacted vehicle franchise and licensing laws to provide consumer protections and regulate vehicle commerce. While Congress seeks uniform regulation of self-driving vehicles to avoid a state patchwork that would hamper deployment of these vehicles, Congress must also ensure that the states’ traditional role to regulate motor vehicle commerce within its borders is preserved as applied to self-driving vehicles.

On Sept. 6, the House approved H.R. 3388, the “SELF DRIVE Act” by voice vote.  Bipartisan language to clarify that Congress does not intend to preempt state vehicle licensing/franchise laws as applied to self-driving vehicles was included in the bill.  In the Senate, Sens. Thune (R-S.D.), Nelson (D-Fla.), and Peters (D-Mich.) plan to introduce the Senate version of this legislation in the fall. Congress must ensure that legislation regulating self-driving vehicles explicitly preserves state vehicle licensing and franchise laws.

TAX REFORM

In 2016, the House Republican leadership released a “Tax Blueprint,” their outline for tax reform legislation expected this fall. NADA favors provisions in the Blueprint that: (1) treat pass-throughs fairly, since many automobile dealerships operate as pass-through entities; (2) maintain the LIFO (last in, first out) inventory accounting method, since repealing LIFO would take working capital away from dealerships that could otherwise be used to create jobs; and (3) eliminate the estate tax, since the tax hurts family-owned dealerships with assets, such as land and single-use showroom facilities, that cannot be easily liquidated to pay the tax without destroying the viability of the dealership. The Blueprint is silent on deductibility of advertising, which historically has been a major dealership expense.

The Blueprint eliminates the deduction for net interest expense, which would negatively affect dealers. Small business dealerships rely heavily on financing to fund vehicle inventory and facilities improvements and do not have access to the equity capital markets. Eliminating or limiting interest deductibility in exchange for full expensing would disproportionately harm small business dealerships and reduce cash flow, increase borrowing costs and hamper funding for new investments, inventory, and jobs. Tax reform legislative language is expected in September. Congress should ensure that overall changes to the tax code do not negatively impact small business dealerships.

OPPOSE S. 1634/H.R. 3449 – OVERBROAD RECALL BILLS 

Sen. Blumenthal (D-Conn.) and Rep. Schakowsky (D-Ill.) introduced partisan bills (S. 1634/H.R. 3449) that could cripple the used-car market by halting the sale or wholesale of any used car under open recall by a dealer, even though most vehicle recalls do not require the drastic step of grounding. These bills would create a “trade-in tax” that would instantly devalue a car buyer’s trade-in by grounding recalled vehicles for such minor matters as a peeling sticker. Because of a shortage of recall parts, it often takes months to repair recalled vehicles. A 2015 study by J.D. Power found that enactment of these bills would result in an average “trade-in tax” of $1,210, and some consumers’ trade-in values would decline by $4,000 to $5,000. Lowering trade-in values would immediately hurt car buyers by reducing the down payment a consumer could use to buy a newer vehicle. Also, since the bills do not regulate private sales, recalled cars would be pushed into the unregulated private market, making it more difficult to complete recall repairs. 

The Senate Commerce Committee rejected an amendment identical to S. 1634 in 2015. Congress should focus on legislation that increases recall completion rates, and oppose bills such as S. 1634/H.R. 3449 that create a tax on millions of customer trade-ins while not guaranteeing that a single, additional recalled vehicle gets fixed.

Download the brief