April 2012 SDADA Column

You may have read about some crazy South Dakota dealer who has been chasing college basketball for the past thirty plus years in a recent NADA Headlines story. Well that same dealer sandwiched this year’s basketball trek between NADA committee meetings in Washington, DC and New York. Both the basketball and the meetings were productive!

I attended Government Relations Committee and Public Affairs Committee meetings in DC. The Government Relations Committee heard from Rep. John Campbell (R-CA), who holds a special place in dealers’ hearts for sponsoring the Campbell Amendment which excluded auto dealers from the jurisdiction of the Bureau of Consumer Finance Protection (CFPB) last year. Rep. Campbell, a former car dealer, spoke of the frustration current legislative environment in which the greatest accomplishment seems to be to see how far they can “kick the can down the road”. He did not look for much action on anything until after the November election.

That was a common theme as I visited with Senator Thune and Representative Noem. I did not see Senator Johnson (again), only a staffer. Thune and Noem are supportive of NADA’s positions on the estate tax, CAFE and LIFO but expected no action on these issues until next year unless a “lame duck” Congress saw fit to take them on. It is doubtful Sen. Reid will have an appetite for that so look for no action until 2013.

The Public Affairs Committee discussed the two issues that dealers seem to be most concerned with, facility image programs and multi-tier pricing, at length. While the multi-tier pricing issue is one that cuts across the country, it is a violation of each state’s existing franchise laws and thus, NADA is limited in their alternatives. The consensus is that this issue will have to be handled at the state level, by state associations. NADA can offer limited support but it seems that state associations might find more help by working together to take on the manufacturers on this. I have weighed in on this issue in detail here.

The facility image program, however, is a different story. I feel NADA needs to take a lead role on this issue. There are a couple of opportunities to stand with dealers ongoing.

Perhaps you read megadealer Norman Braman is suing General Motors over the manufacturer's Essential Brand Elements program. This would seem to be good news for all dealers as Braman has deep pockets and appears ready to fight. Dealer Jack Fitzgerald also is suing General Motors in a Maryland state court over the EBE program.

NADA needs to stand by these dealers, and any others willing to take on the manufacturers, in a very public way. These dealers must be able to count on NADA’s legal, public relations and financial support. Dealers on the Public Affairs Committee agreed that we need to help “take the fight to the people” by letting all dealers know about the details of the fights as they unfold.

I would really appreciating hearing your thoughts on these issues. As I mentioned above, these two issues seem to drive EVERY conversation that I have with dealers and they seem to be looking to NADA for some leadership.

NADA/ATD Study: EPA Underestimated Costs for Model Year 2004-2010 Heavy-Duty Trucks
I am quite certain this won’t surprise you: a government agency has underestimated the cost of regulation! NADA and ATD released a new report March 8 that calls into question the Environmental Protection Agency’s (EPA) cost analysis of emissions control requirements for model year (MY) 2004-2010 commercial trucks. The mandates resulted in substantially higher prices for commercial vehicles, depressed sales and delayed the environmental benefits that the EPA originally sought. NADA/ATD released the following statement:

“Until now, few studies have ever compared the EPA’s cost predictions to the actual cost of meeting its motor vehicle emissions mandates. The study, which looks back at the 2004-2010 medium- and heavy-duty truck emissions mandates, reveals that the EPA underestimated actual compliance costs on average by a factor of two to five. It shows what can happen when a regulatory proposal – based on far in-advance predictions – seeks to set mandates far in the future. Importantly, the study documents the real-world market disruptions that can occur as a result. The lessons learned from this report apply directly to the proposed MY 2017-2025 fuel economy regulations for light-duty vehicles. That rulemaking, combined with previous Obama administration fuel economy mandates, will raise the average price of a vehicle by $3,000, according to EPA and National Highway Traffic Safety Administration estimates. When faced with unreasonable federal regulatory mandates that increase motor vehicle costs, buyers of light-duty vehicles – similar to what commercial truck buyers experienced – will seek out less expensive alternatives in the marketplace.” Click here for the study.

Consult Your Tax Practitioners Soon About the UNICAP Safe Harbors
On Nov. 9, 2010, the IRS issued Revenue Procedure 2010-44, which created two optional safe harbor methods of accounting for motor vehicle dealerships (including light, medium, and heavy duty truck dealerships). If properly elected and applied, the new safe harbors permit dealers to (i) deduct, instead of capitalize, certain costs related to their inventories, and (ii) significantly simplify their computation of these costs (known as their Uniform Capitalization – or UNICAP – computation). If qualifying dealers elect the safe harbor methods of accounting for their first or second tax year ending after Nov. 9, 2010, they may do so without having to consider most of the potential restrictions that apply to automatic method of accounting changes. Consequently, for dealers whose tax year corresponds with the calendar year and who did not elect these methods for the 2010 tax year, they should speak with their tax practitioner soon about whether they should elect the UNICAP safe harbors for the 2011 tax year. The election is made on IRS Form 3115. For more information, consult summaries of the revenue procedure by the IRS Motor Vehicle Technical Advisor and NADA.