New vehicle and dealership laws from 2023

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As with prior years, California enacted additional legislation with the goal of limiting catalytic converter theft. Dealerships will need to take the necessary action to comply with these new laws. AB 473 is a victory for dealerships in that, among other things, it closes a loophole used by manufacturers during the Protest process. And, as with new laws governing businesses, in general, California has passed additional legislation aimed at minimizing the impact of climate change that targets the vehicle and dealership process.

Contents:

US Treasury Department Regulation:tax creditsfor new or used electric or plug-in hybrids

What the law currently requires

In 2023 the Inflation Reduction Act introduced a new set of modernized tax credits for new and used electric and plug-in hybrid cars. But starting January 2024, they’ll be less like breaks you can claim on your annual tax refund and more like discounts you can apply to a car right when you buy or lease it.

How this regulation changes the law

Under the Inflation Reduction Act consumers can choose to transfer their new clean vehicle credit of up to $7,500 and their previously owned clean vehicle credit of up to $4,000 to a car dealer starting January 1, 2024. This will effectively lower the vehicle’s purchase price by providing consumers with an upfront down payment on their clean vehicle at the point of sale, rather than having to wait to claim their credit on their tax return the next year. Only vehicles that provide for consumer clean vehicle credits are eligible for this benefit.

For buyers to be eligible to claim or transfer a credit starting January 1, 2024, the selling dealer must first register with Energy Credits Online. Dealers will also use Energy Credits Online to submit “time of sale” reports, which will confirm vehicles’ eligibility for a credit, whether or not the buyer chooses to transfer the credit to the dealer.

When a buyer chooses to transfer the credit, registered dealers will reduce the purchase price of the vehicle or provide cash to the buyer. The amount provided must equal the full amount of the credit available for the eligible vehicle. When completing the sale, the dealer will electronically submit information regarding the transfer, including a time of sale report, to receive an advance payment for the value of the credit. The IRS expects to issue advance payments within 72 hours.

To provide clarity and certainty, the dealer will provide buyers with required disclosures as part of the credit transfer and electronic time-of-sale submission process and with written confirmation that the vehicle they’re buying is eligible for a credit and the credit amount.

Action Items

The new regulation gives eligible consumers the option of transferring the tax credit to the dealer at the point of sale. This will result in an immediate price reduction. To participate in the program, dealers need to register with Energy Credits Online which is now live at https://www.irs.gov/credits-deductions/register-your-dealership-to-enable-credits-for-clean-vehicle-buyers. Dealerships should act now to register to give the IRS adequate time to approve the registration. Currently, dealers need to designate an initial user that signs-up for the dealership, and beginning in December of 2023 the initial user can add other authorized users from the same dealership.

At the point of sale, the dealer must provide the buyer with a written disclosure under penalty of perjury, providing the following information:

  • The MSRP of the new vehicle or sale price of used vehicle
  • The maximum amount of the credit allowable and any other incentives
  • The amount provided by the dealer to the seller as a condition of making the transfer election
  • The modified AGI limitations

The IRS currently has form 15400 (https://www.irs.gov/pub/irs-pdf/f15400.pdf) that can be used for these disclosures, but after January 1, 2024, when a dealer is using the Energy Credits Online portal to verify that the vehicle is eligible for the federal credits, the system will generate a form with all the required disclosures to give the buyer to satisfy their requirements for disclosures.

When the credit transfer request is submitted to Energy Credits Online portal, the IRS will review to accept or reject. This will happen in real-time before the sale is completed so the dealer will know whether the vehicle qualifies for the credit at the point-of-sale. It is not mandatory that a buyer transfer their federal EV tax credits to the dealer at the point-of-sale, so if the dealer’s time-of-sale report is rejected by IRS through the Energy Credits Online portal, and the customer believes the car is actually eligible for the federal tax credits, the customer can still apply for the credits themselves, and they would be responsible to repay any claimed credit that was rejected later by the IRS.

If the time-of-sale report is approved, then the dealer can be assured reimbursement by the IRS for the credit, which the IRS expects to be paid within 72 of the sale.

AB 251—California Transportation Commission: vehicle weight safety study

What the law currently requires

Existing law establishes the California Transportation Commission (“CTC”) to advise and assist the Secretary of Transportation and the Legislature in formulating and evaluating state policies and plans for transportation programs in the state. Existing law tasks the CTC with various transportation-related studies and reports to the Legislature.

How the bill changes the law

This bill would require the CTC to convene a task force to study the relationship between vehicle weight and injuries to vulnerable road users, such as pedestrians and cyclists, and degradation to roads, and to study the costs and benefits of imposing a passenger vehicle weight fee to include consideration of vehicle weight. The bill would require the CTC, by no later than January 1, 2026, to prepare and submit a report to the Legislature, as specified.

Action Items

None recommended.

AB 473—Motor vehicle manufacturers, distributors, and dealers

What the law currently requires

Existing law recognizes the new motor vehicle dealer franchise system and provides multiple dealer protection provisions. Existing law also provides for a limited number of factory/dealer disputes to be resolved by the New Motor Vehicle Board under its protest jurisdiction.

How the bill changes the law

AB 473 contains multiple provisions designed to improve California’s franchise laws, with key components including:

  • Expansion of Dealer Protest Rights. In addition to the existing rights of protest pertaining to termination, add-point, warranty rates, warranty and incentive payment claims/chargebacks, and unreasonable performance metrics, AB 473 gives dealers the right to protest alleged factory violations of law concerning facilities requirements, vehicle allocation, and factory competition with dealers.
  • Transparency relative to allocations. Manufacturers must provide their allocation methodology and a description of how it is applied to the specific dealer upon the dealer’s request.
  • Expansion of prohibitions against factory competition with dealers. AB 473 expands the existing limited ban on factories competing with their dealers by now making the ban state-wide (and not limited to the competing within the relevant market areas). The bill also extends the ban to not only vehicle sales, but leasing and warranty service as well. This new ban on competition was drafted in a way that will prevent manufacturers from seeking to create any “direct-sales” brands that compete with existing dealers.
  • Brings a degree of fairness to manufacturer-imposed DC fast charging mandates. AB 473 prohibits the manufacturer from imposing on their dealers the entire cost of installing and maintaining public-facing DC fast chargers. All fast charger requirements, whether or not public facing, must be reasonable in light of supply constraints, time constraints, advancements in vehicular technology, and electric grid integration.
  • Restricts the ability of manufacturers to offer post-sale paid subscriptions or paid over-the-air updates that enable features that are physically built into the vehicle.
  • Provides that, in reviewing a buy-sell for approval, the factory may not exercise its right of first refusal (“ROFR”) in bad faith.
  • Enhances existing statutory mandates for the factory to indemnify the dealer to include indemnification against legal violations committed by factory “preselected” digital service providers.

Action Items

A lot of important franchise protections have been expanded and added. When dealing with any issue addressed in this bill, speak to our automotive franchise attorneys to navigate the road to protect your rights.

AB 844—Zero-emission trucks: insurance

What the law currently requires

Existing law establishes the Air Quality Improvement Program, administered by the State Air Resources Board, for the purposes of funding projects related to, among other things, the reduction of criteria air pollutants and improvement of air quality. As part of the funding plan for the Air Quality Improvement Program, existing law requires the state board to include a 3-year investment strategy for zero- and near-zero-emission heavy-duty vehicles and equipment commensurate with meeting state greenhouse gas emissions reduction goals.

Existing law provides for the regulation of insurance by the Department of Insurance, which is under the control of the Insurance Commissioner.

How the bill changes the law

This bill would require the department to implement specific data collections on the availability and affordability of insurance for heavy-duty trucks and truck fleets. The bill would require the department to issue a bulletin on or before February 1, 2024, to initiate the first data collection, and would require admitted insurers to respond on or before May 1, 2024. The bill would require the surveys and data calls to include specified information, including, among other things, whether an insurance company offers insurance for zero-emission trucks options including technologies that reduce greenhouse gas emissions and improve air quality when compared with conventional or fully commercialized alternatives. The bill would require the information to be submitted to the commissioner and to be confidential, as specified. The bill would require the commissioner to publish the information in the aggregate, and would prohibit the identification of an individual respondent or insurer, except as specified. The bill would require the commissioner to establish and maintain a link on the department's internet website that provides public access to this aggregate information.

This bill would require the department, in consultation with the State Air Resources Board, to create a consumer-focused online insurance information resource tool for the public to use to readily find information and insurance options for battery-powered, hydrogen-powered, or other zero-emission advanced truck technology to provide a “one-stop” for the public. The bill would also require the department, in consultation with the state board, to create a strategy, on or before January 1, 2025, to address insurance gaps for new heavy-duty truck technologies, as specified.

Action Items

None recommended.

SB 478—Consumers Legal Remedies Act: advertisements

What the law currently requires

  1. The False Advertising Law makes it a crime for a person or a firm, corporation, or association, or any employee thereof, to engage in specified false or misleading advertising practices. The Unfair Competition Law makes various unfair competition practices unlawful, including any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising.
  2. The Consumers Legal Remedies Act makes unlawful certain unfair methods of competition and certain unfair or deceptive acts or practices undertaken by a person in a transaction intended to result or that results in the sale or lease of goods or services to a consumer, including advertising goods or services with intent not to sell them as advertised. Existing law authorizes a consumer who suffers damage as a result of the use or employment by a person of a method, act, or practice declared to be unlawful by that provision to bring an action against that person to recover or obtain certain relief, including actual damages of at least $1,000.
  3. Existing law authorizes vehicle rental companies, when providing a quote or imposing charges for a rental, to separately state specified rates and charges that a renter must pay to hire or lease the vehicle for the period of time to which the rental rate applies. Existing law prohibits a rental company from imposing charges or fees in addition to the rental rate unless specified conditions are met. Existing law requires the rate advertisements of vehicle rental companies to include a disclaimer providing that additional mandatory charges may be imposed, as specified.
  4. Existing law requires any solicitation to enter into a lease contract that includes the amount of any payment, as specified, to also state, among other things, “Plus tax and license” or a substantially similar statement, if amounts due for use tax, license fees, and registration fees are not included in the payments.
  5. Existing law imposes specified requirements on dealers of motor vehicles and motorcycles sold or leased in this state. Existing law prohibits a holder of a dealer’s license from doing specified acts, including advertising the total price of a vehicle without including all costs to the purchaser at time of sale, except taxes, vehicle registration fees, the California tire fee, emission testing charges not exceeding $50, actual fees charged for certificates, finance charges, and any dealer document processing charge or charge to electronically register or transfer the vehicle.
  6. Existing law imposes specified requirements on manufacturers of motor vehicles and motorcycles and prohibits a person from acting as a motor vehicle manufacturer without having first been issued a license by the Department of Motor Vehicles, as specified.

How the bill changes the law

  1. This bill would, beginning on July 1, 2024, with specified exceptions, additionally make unlawful advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges other than taxes or fees imposed by a government on the transaction, as specified. The bill would provide that assessments made pursuant to the California Tourism Marketing Act and the Parking and Business Improvement Area Law of 1989, and business assessments made pursuant to the Property and Business Improvement District Law of 1994, are fees imposed by a government on the transaction for purposes of these provisions.
  2. This bill would provide that a rental company is not in violation of unlawful advertising, displaying, or offering a price for a good or service for excluding from the advertised, displayed, or offered price of a rental vehicle charges that are disclosed to the consumer in compliance with the above-described provisions.
  3. This bill would specify that a lessor is not in violation of this prohibition against unlawfully advertising, displaying, or offering a price for a good or service because it excludes from the advertised, displayed, or offered lease payment a fee or charge in accordance with the provision described above.
  4. This bill would specify that a holder of a dealer’s license is not in violation of unlawful advertising, displaying, or offering a price for a good or service for excluding from the advertised, displayed, or offered price of a vehicle tax, a vehicle registration fee, the California tire fee, an emission testing charge not exceeding $50, an actual fee charged for a certificate, a finance charge, or a dealer document processing charge or charge to electronically register or transfer the vehicle.
  5. This bill would specify that a motor vehicle manufacturer, or any other person, that advertises a motor vehicle manufacturer’s suggested retail price (MSRP) set by an automobile manufacturer, or lease payments based upon an MSRP, does not, by doing so, violate the prohibition described above relating to unlawful advertising, displaying, or offering a price for a good or service.

Action Items

The purpose of the bill is to ban hidden fees or “junk fees” starting July 1, 2024. The aspects of the bill applying to rental companies does not apply to dealerships. Fortunately, the bill specifically exempts dealerships and lessors. Specifically, the bill adds Vehicle Code section 11713.27 which specifically provides that a holder of a dealer’s license issued under this article is not in violation of False Advertising Law for excluding from the advertised, displayed, or offered price of a vehicle a vehicle tax, a vehicle registration fee, the California tire fee, an emission testing charge not exceeding $50, an actual fee charged for a certificate, a finance charge, or a dealer document processing charge or charge to electronically register or transfer the vehicle.

Similarly, the bill adds Civil Code section 2985.71 which provides similar protection to lessors.

AB 1263—Bureau of Automotive Repair: smog check program

What the law currently requires

Existing law, the Automotive Repair Act, provides for the registration and regulation of automotive repair dealers by the Bureau of Automotive Repair (“BAR”) in the Department of Consumer Affairs. A violation of these provisions is a misdemeanor unless otherwise specified. Existing law authorizes the Director of Consumer Affairs to adopt and enforce those rules and regulations that the director determines are reasonably necessary to carry out the purposes of the act and declare the policy of the bureau. Existing law subjects the bureau to review by the appropriate policy committees of the Legislature, as specified, and requires that review to be performed as if the act were scheduled to be repealed on January 1, 2024.

Existing law provides a host of requirements and regulations governing automotive repair dealers (“ARD”) including smog check stations.

How this bill changes the law

This bill does the following:

  • Authorize BAR to adopt regulations to clarify the authority to regulate storage fees charged by automotive repair dealers consistent with provisions of the Vehicle Code and Civil Code.
  • Authorize BAR to establish a centralized testing network for inspecting model year 1995 and older vehicles that require a BAR-97 inspection, which may include subcontracted licensed smog check stations
  • Beginning no earlier than January 1, 2025, require testing using onboard diagnostic systems only (i.e., no BAR-97 inspection) on model year 1996–1999 vehicles, as is currently done on model year 2000 and newer vehicles.
  • Exempt a motor vehicle from biennial inspection if BAR adopts regulations and determines that the motor vehicle warrants temporary waiver from the biennial inspection. Require the Smog Check Performance Report to be completed biennially rather than annually.
  • Specifies that it is the intent of the Legislature that the bureau continues to maintain the BAR advisory group to advise the bureau on regulatory issues and programs affecting the automotive repair industry.
  • Provides that any employee of the ARD who is involved in the violation resulting in the bureau’s issuance of the citation also may be required to attend remedial training with the ARD to prevent disclosure of the citation.
  • Provide that, for purposes of the provisions of relating to the smog check program, the term “qualified smog check technician” refers to both smog check (repair) technicians and smog check inspectors.
  • Provide that a fraudulent inspection additionally includes clean plugging, clean glassing, clean tanking, or any other fraudulent inspection practice.
  • Make technical cleanup updates to the Business and Professions Code and Vehicle Code to transition the lamp and brake programs to the vehicle safety systems inspection program pursuant to AB 471 (Low, Chapter 372, Statutes of 2021).
  • Require the seller of a salvaged vehicle to provide the purchaser a valid vehicle safety systems certificate prior to, or at the time of, delivery for sale.

Action Items

Automotive repair dealers (“ARD”) and smog check station operators will need to carefully review the new regulations and develop SOPs and work flows to ensure full compliance.

AB 641—Automobile Dismantlers

What the law currently requires

Existing law defines an “automobile dismantler” as a person who is engaged in the business of buying, selling, or dealing in vehicles that are required to be registered under the Vehicle Code, for the purpose of dismantling the vehicles, who buys or sells the integral parts and component materials of those vehicles, or deals in used motor vehicle parts, as specified. The definition of “automobile dismantler” also includes a person who keeps or maintains on property owned by the person, or under their possession or control, two or more unregistered motor vehicles no longer intended for, or in condition for, legal use on the highways, as specified.

Existing law makes it a crime for a person to act as an automobile dismantler without having an established place of business, meeting specified requirements, and having a current, valid license or temporary permit issued by the Department of Motor Vehicles.

How the bill changes the law

This bill would revise the definition of automobile dismantler to include a person who keeps or maintains on property owned by the person, or under their possession or control nine (9) or more used catalytic converters that have been cut from a motor vehicle using a sharp implement

This bill would apply to vehicles or catalytic converters that are used for restoration or replacement parts or to a “junk dealer,” a “recycler,” a “commercial enterprise” or “core recycler,” as defined in the Business and Professions Code even if it does possess six or more used catalytic converters that have been cut from a motor vehicle.

Action Items

Fortunately, the bill does not apply to the occasional and incidental dismantling of vehicles by dealers who have secured dealer plates from the department for the current year whose principal business is buying and selling new and used vehicles, or by owners who desire to dismantle not more than three personal vehicles within any 12-month period.

AB 436—Vehicles

What the law currently requires

Existing law makes it unlawful to operate a passenger vehicle, or commercial vehicle under 6,000 pounds, that has been modified from its original design so that any portion of the vehicle, other than the wheels, has less clearance from the surface of a level roadway than the clearance between the roadway and the lowermost portion of any rim of any wheel in contact with the roadway.

How the bill changes the law

This bill would repeal that prohibition.

Action Items

None recommended

AB 1519—Vehicles: catalytic converters

What the law currently requires

Existing law licenses and regulates motor vehicle dealers and retail sellers. Existing law prohibits a motor vehicle dealer or retail seller from selling any motor vehicle that is not in compliance with the requirements enumerated in the Vehicle Code.

How the bill changes the law

This bill would prohibit any person, except as exempted, from removing, altering, or obfuscating the vehicle identification number that has been added to a catalytic converter, or from knowingly possessing 3 or more catalytic converters that have been so altered.

A violation of these provisions would be punishable as misdemeanor.

This bill is intended to deter the theft of catalytic converters, which has become a growing problem in California and other states. The bill also requires any person who purchases a catalytic converter to keep a record of the transaction, including the name and address of the seller. Additionally, the bill establishes a fuel transportation program that provides competitive grants or other financial assistance to encourage the use of alternative fuels and reduce greenhouse gas emissions.

Action Items

Although the legislative intent of the bill is aimed at preventing catalytic converter from those that steal catalytic converters to remove and sell the mineral contents, dealerships are subject to the new law. To ensure compliance with the law, dealers should conduct an inspection of vehicles in their inventory if they have any reason to believe that the catalytic converter was illegally marked or installed. If any are found to have the VIN removed, altered or obfuscated, the dealer should etch a new VIN that matches the vehicle in which the catalytic converter is, or will be, installed.

SB 55—Vehicles: catalytic converters

What the law currently requires

Existing law licenses and regulates motor vehicle dealers and retailers. Existing law prohibits a motor vehicle dealer or retailer from selling any motor vehicle that is not in compliance with the requirements enumerated in the Vehicle Code.

How the bill changes the law

This bill would prohibit a dealer or retailer from selling a new or used motor vehicle equipped with a catalytic converter unless the catalytic converter has been permanently marked, as defined, with the vehicle identification number of the vehicle to which it is attached.

The bill would, until January 1, 2025, exempt from this prohibition a vehicle purchased from a dealer licensed in this state who is also licensed in another state and does not have a warranty service facility in this state.

A violation of this provision would be punishable as an infraction.

Action Items

The manufacturers will not be marking the catalytic converters. Dealers have two options to comply with the law. First, they can pre-mark all catalytic converters, and include the cost as a hard-add accessory in the advertised price of the car, OR they can ask the customer if they would like to add it on as an option. If the customer would like it marked, they can add the price on the supplemental sticker, or if the customer declines the marking, the dealer should get the customers signature documenting they were offered the marking but declined.

The CNCDA and Reynolds & Reynolds are developing a form that that is compliant with this provision.

SB 296—In-vehicle cameras

What the law currently requires

Existing law prohibits a person or entity from providing the operation of a voice recognition feature within this state without prominently informing, during the initial setup or installation of a connected television, either the user or the person designated by the user to perform the initial setup or installation of the connected television.

Existing law further prohibits any actual recordings of spoken word collected through the operation of a voice recognition feature by the manufacturer of a connected television, or a third party contracting with a manufacturer of a connected television, from being sold or used for any advertising purpose.

Existing law prohibits a person or entity from compelling a manufacturer or other entity providing the operation of a voice recognition feature to build specific features for the purpose of allowing an investigative or law enforcement officer to monitor communications through that feature.

Existing law prohibits a waiver of these prohibitions and authorizes their enforcement by injunction or civil penalty in a court of competent jurisdiction by the Attorney General or a district attorney.

How the bill changes the law

One of the growing trends in vehicle technology is that more vehicles are equipped with in-vehicle cameras that look inside your car. Consumers spend a lot of time in their vehicles, and the increase of in-vehicle cameras potentially puts consumer privacy at risk. SB 296 would enhance consumer protections by requiring that consumers be informed at the time of purchase if an in-cabin camera is in a car, and prohibit video recordings from that camera from being used for advertising or sold to third parties. This bill would require a manufacturer of a new motor vehicle that is equipped with one or more in-vehicle cameras to disclose that fact.

Action Items

It is recommended that dealerships code their inventory for vehicles with in-vehicle cameras. Once the inventory is coded, dealerships should create a disclosure form to be signed by the customer at the point of sale which reflects that the customer was advised that the vehicle includes an in-vehicle camera. The signed disclosures should be included in the deal jacket.

AB 1519—VIN Marking Requirements

What the law currently requires

Existing law licenses and regulates motor vehicle dealers and retail sellers. Existing law prohibits a motor vehicle dealer or retail seller from selling any motor vehicle that is not in compliance with the requirements enumerated in the Vehicle Code.

How the bill changes the law

This bill would prohibit any person from removing or altering the VIN that has been added to a catalytic converter, or from knowingly possessing three or more catalytic converters that have been so altered. A violation of these provisions would be punishable as a misdemeanor.

Action Items

Dealerships should make sure that the VIN that is included with a catalytic converter is not removed or altered. In addition, dealerships should ensure that they are not in possession of any catalytic converters with altered or removed VINs.