LEGISLATIVE AND TECHNICAL AFFAIRS
Law and Order
By Christian Robinson
Virginia—ZEV Mandate: Lawmakers in Virginia introduced SEMA-supported legislation to repeal the law tying the state to California’s motor vehicle emissions standards. Under current law, sales of new gas- and diesel-powered vehicles will be banned starting in 2035. Virginia is seen as the most likely state to repeal its mandate and Governor Glenn Youngkin has made it one of his top priorities. However, control of the legislature is narrowly split between Republicans and Democrats, making the final outcome hard to predict.
FEDERAL UPDATE
Defeat Devices: The U.S. Environmental Protection Agency-proposed (EPA) National Enforcement and Compliance Initiatives (NECI) draft list for 2024–2027 does not include “stopping aftermarket defeat devices for vehicles and engines.” While illegal aftermarket parts would remain a standard or core priority, as they had been for many years until 2020, they would no longer be a top EPA enforcement priority. SEMA submitted comments in support of the agency’s preliminary decision to remove “stopping aftermarket defeat devices for vehicles and engines” from the NECI. The EPA is expected to publish the final NECI list this fall. Aftermarket defeat devices had been included on the NCI list (now “NECI”) for 2020–2023. During this time, the EPA noted that it had resolved approximately 130 cases, addressing more than 460,000 violations. In fiscal year 2022 alone, the EPA concluded 41 cases with more than $19 million in civil penalties. The EPA’s Office of Inspector General (OIG) issued a critical review of the agency’s implementation of the NECI for stopping aftermarket vehicle defeat devices, noting that the agency is “not on track” to meet 10 of its 40 goals for the initiative. The OIG report reviewed the implementation over 2021 and 2022 and was issued shortly after the EPA announced its top enforcement priorities for 2024–2027.
China Tariffs: SEMA urged the U.S. Trade Representative (USTR) to remove the tariffs imposed on goods from China because they have not helped achieve the goal of eliminating China’s unfair practices with respect to technology transfer, intellectual property and innovation. The Section 301 tariffs were imposed in 2018 and are being reviewed by the USTR to determine whether they should continue, expire or be modified. Nearly all SEMA members sourcing goods from China have been directly impacted by the 25% tariffs. The tariffs have had the opposite of their intended effect and are making U.S. manufacturers less competitive and preventing American companies from growing. They have also increased costs for American consumers and contributed to inflation. There is no deadline for completing the review.
R&D Tax Credit and Bonus Depreciation: When the 2017 tax law was enacted, it allowed companies to amortize certain tax deductions over one year, but the benefit was only temporary. The business community urged Congress to extend the provisions in 2022, but this did not occur despite widespread support in Congress. Until 2021, companies could take a 100% tax deduction for research and development (R&D) spending in the year it occurred. Starting in 2022, companies must deduct their R&D expenses over five years. Until 2023, a company could also expense 100% of the cost of any Section 179 property (includes equipment, vehicles and software) and deduct it in the year the property was placed in service, with a maximum deduction of $2.5 million, adjusted for inflation. The Section 179 deduction now phases out over the next four years: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, 0% in 2027. SEMA and the business community will be making a push in 2023 to get Congress to reinstate the 2017 provisions for R&D expenditures and the bonus depreciation.
Noncompete Clauses: The Federal Trade Commission (FTC) issued a proposed rule to ban employers from including noncompete clauses in worker contracts. The agency contends that the provisions are an unfair method of competition that have the effect of suppressing wages, hampering innovation, and thwarting entrepreneurs from starting up new businesses. The FTC argues that removing them would allow workers to more freely switch jobs, seek higher wages and better working conditions, and expand the talent pool from which other businesses hire employees. Opponents of the proposed rule argue that noncompete provisions encourage companies to retain and promote workers and invest in training. The FTC estimates that at least 30 million Americans are subject to noncompete clauses. The proposed rule would not apply to other types of employment restrictions such as non-disclosure agreements. SEMA is reviewing the proposed rule along with member feedback on its potential impact.
STATE UPDATE
Maine—Imported Vehicles: SEMA State Automotive Enthusiast Leadership Caucus member Rep. Shelly Rudnicki introduced a bill to allow on-road registrations to be issued for imported vehicles manufactured at least 25 years ago. Under federal law, these vehicles are exempt from federal safety and emissions standards. Current Maine law prohibits vehicles that do not meet these standards from being driven on public roads.
District of Columbia—Noise Cameras: Councilmembers in Washington, D.C., have introduced the SEMA-opposed Vehicular Noise Reduction Act of 2023, which would test noise cameras to ticket loud cars and trucks. While the city currently has a fair exhaust noise law in effect, noise camera technology is not a fair and reliable way to fine motorists.
New Hampshire—License Plates: Lawmakers in New Hampshire introduced SEMA-supported legislation to allow the display of only a single, rear-mounted license plate for all passenger vehicles. A similar bill passed the House of Representatives in 2022 but was not taken up by the Senate before the end of the legislative session.
New Hampshire—ZEV Mandate: Members of the New Hampshire House of Representatives introduced SEMA-opposed legislation to adopt California’s low- and zero-emissions motor-vehicle standards and ban the sale of new gas- and diesel-powered motor vehicles starting in 2035. Republicans currently control the legislature and governor’s mansion, making adoption of California’s standards unlikely.
North Dakota—License Plates: The North Dakota House of Representatives introduced SEMA-supported legislation to allow the display of only a single, rear-mounted license plate for all passenger vehicles. If enacted, the bill would protect the aesthetic contours of collector cars and prevent vehicle owners from having to drill mounting holes in bumpers.
Vermont—ZEV Mandate: Lawmakers in Vermont introduced SEMA-supported legislation to repeal the law tying the state to California’s motor-vehicle emissions standards. Under current law, sales of new gas- and diesel-powered vehicles will be banned starting in 2035. Democrats currently control the legislature, making repeal unlikely.
Washington—ZEV Mandate: Lawmakers in Washington introduced SEMA-supported legislation to repeal the law tying the state to California’s motor-vehicle emissions standards. Under current law, sales of new gas- and diesel-powered vehicles will be banned starting in 2035. Democrats currently control the legislature and governor’s mansion, making repeal unlikely.
West Virginia—Antique Vehicles: Delegate Gary Howell, chairman emeritus of the SEMA State Automotive Enthusiast Leadership Caucus, reintroduced legislation to create an “Antique Fleet” plate program whereby the owner of five or more antique vehicles would be able to use a single registration plate. The owner would be required to register every antique vehicle upon which the plate will be displayed.
West Virginia—Motorsports: West Virginia lawmakers, including Senator Mark Maynard, SEMA’s 2018 Stephen B. McDonald Lawmaker of the Year, introduced SEMA-supported legislation to establish the Motorsport Responsibility Act, which would define areas of responsibility and assumed risks by participants for recreational and commercial motorsports facilities.
