BILL ANALYSIS SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 2461 SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: emmerson VERSION: 5/24/10 Analysis by: Jennifer Gress FISCAL: yes Hearing date: June 15, 2010 SUBJECT: Specially constructed vehicles: amnesty program. DESCRIPTION: This bill extends the amnesty program for incorrectly or fraudulently registered vehicles by two years, exempts specially constructed vehicles seeking amnesty that were "built" prior to 1976 from the smog check program, and provides that specially constructed vehicles seeking amnesty are exempt from the visual component of the smog inspection. ANALYSIS: AB 619 (Emmerson), Chapter 420, Statutes of 2008, established a vehicle registration amnesty program whereby vehicle owners who had previously registered their vehicle incorrectly or fraudulently may, with some exceptions, correctly register their vehicle and avoid criminal prosecution for false statements relating to the value, make, or model of the vehicle or for failure to register the vehicle. The amnesty program is in effect for one year, beginning January 1, 2010 and ending December 31, 2010. The Department of Motor Vehicles (DMV), which administers the program, is required to grant amnesty to a vehicle owner if the owner meets the following requirements: The owner has filed a completed amnesty application with DMV attesting, under penalty of perjury, to the owner's eligibility to participate in the program. The owner has correctly registered the vehicle, including AB 2461 (EMMERSON) Page 2 disclosing to DMV the make, model, and true cost of the vehicle, including parts and labor; paying to DMV all fees and penalties owed for the underreporting of the vehicle's value and the nonpayment of taxes or fees; and submitting a certificate of compliance indicating that the vehicle has passed its smog inspection. The emission control standards that a vehicle must meet in order to pass its smog inspection are determined by the vehicle's model year. Under the amnesty program, a specially constructed vehicle, defined as a vehicle that is "built for private use, not for resale, and is not constructed by a licensed manufacturer or remanufacturer," is assigned a model year of the calendar year in which the vehicle owner applied for amnesty (i.e., 2010). This bill : Extends the amnesty program for incorrectly or fraudulently registered vehicles by two years. Exempts specially constructed vehicles seeking amnesty that were "built" prior to 1976 from the smog check program. Provides that specially constructed vehicles seeking amnesty are exempt from the visual component of the smog inspection. COMMENTS: 1.Purpose . According to the author, this bill is a clean-up measure to AB 619, which established an amnesty program for improperly titled or registered specially constructed vehicles. This bill would provide the Bureau of Automotive Repair (BAR) unambiguous legal authority to implement certain procedures to test specially constructed vehicles required to obtain a certificate of compliance under the amnesty program. The specially constructed vehicles entering the amnesty program are produced from a variety of parts and equipped with engines never designed to meet current model-year emissions standards. A retrofit kit has been developed, however, that will allow this population of vehicles to meet current year tailpipe standards. The package of parts developed for this application is slightly different for each vehicle, making it impossible to compare any of these vehicles to current-year production original equipment manufacturer (OEM) vehicles. AB 2461 (EMMERSON) Page 3 In general, a smog inspection involves four components: a tailpipe emissions test, an evaporative emissions test, a smoke test, and a functional inspection. This retrofit kit will allow the vehicle to produce fewer tailpipe emissions, but will not meet the standards for a functional inspection whereby a technician inspects the vehicle to ensure that all required emission control equipment is in place on the vehicle. Under the conventional procedures for smog inspections, therefore, a specially constructed vehicle equipped with this retrofit device would fail its inspection, even if the vehicle passed the tailpipe test. In consideration of the retrofit device, the Air Resources Board (ARB) recommended to BAR procedures to test specially constructed vehicles seeking amnesty that only included the tailpipe and smoke tests, not the test for evaporative emissions or the visual, functional inspection. The author contends that BAR did not believe it had the authority to implement the ARB- recommended procedure for testing amnesty vehicles, believing that AB 619 required them to do a full inspection. This bill also extends the sunset for the original amnesty program to the end of 2012. Under AB 619, amnesty would only be available for one year, sunsetting at the end of 2010. Because the clouded legal authority surrounding the emissions testing requirements caused months of delay, it is necessary to extend the program deadline. 2.Background on the vehicle registration amnesty program . AB 619 was introduced in response to an ongoing investigation conducted by the California Attorney General's Office regarding the fraudulent titling of vehicles in California. Owners of specially constructed vehicles, also referred to as "kit cars" and "hot rods," are being registered as the year of the vehicle they seek to replicate using a fraudulent title or other paperwork. According to the Attorney General's Office, the primary reason for mis-titling vehicles with earlier model years is to avoid the requirements of the smog check program. In the process, vehicle owners often under-report the value of their vehicle in order to owe less in sales tax and the vehicle license fee than they would otherwise be required to pay. The Attorney General's Office estimates that approximately 70,000 vehicles in California have been fraudulently titled and that the state has lost approximately AB 2461 (EMMERSON) Page 4 $285 million in revenue. The Attorney General's Office has been targeting businesses that supply fraudulent titles to vehicle owners but does not have the resources to pursue each individual who has fraudulently titled his or her vehicle. The vehicle registration amnesty program was established in order to encourage vehicle owners to re-register their vehicles properly without fear of criminal prosecution. 3.Amnesty period . The original amnesty period was one year, January 1, 2010 to December 31, 2010. This bill extends it two additional years from January 1, 2010 to December 31, 2012 for a total of three years. The author and sponsor, the Specialty Equipment Manufacturers Association, contend that the purpose of providing two additional years is to provide BAR time to develop appropriate procedures to test vehicles under the program. Because the amnesty program is currently authorized and the revised procedures are simply an exemption of two components of the usual smog inspection, BAR reports it will not require a full additional year to ready itself to implement the program. For this reason, the author or committee may wish to consider an amendment that would extend the amnesty period by only one year, to January 1, 2012. 4.Year the vehicle was "built" and exemptions from smog check . The bill exempts specially constructed vehicles "built" prior to 1976 and seeking amnesty from the requirement that it pass its smog inspection similar to the exemption that currently applies to any other pre-1976 vehicle. There is no way to determine when a specially constructed vehicle was "built." Even if this provision were amended to reflect when the vehicle was "registered," DMV has no way to verify when a specially constructed vehicle was originally registered. Finally, the original agreement when developing AB 619 was that all amnesty vehicles would be required to submit a certificate of compliance. While this provision of the bill is consistent with current law for pre-1976 vehicles, it is inconsistent with the agreement reached when negotiating amendments to AB 619 for hearing in this committee. Furthermore, if a vehicle owner had genuinely registered his or her specially constructed vehicle before 1976, the vehicle would not have been subject to the smog check program, thus negating much of the reason to mis-identify the model year. The sponsor is concerned about those people who, back in 1975 AB 2461 (EMMERSON) Page 5 or earlier, were not trying to avoid smog inspection, but were instead under-reporting the value of their vehicle. The sponsor would like to afford those individuals the same exemption that they would have enjoyed had they registered their vehicle correctly. The number of people in this situation is likely to be extremely low. The likelihood that a person within this very small group would seek amnesty after at least 35 years and pay what would by now be an enormous sum of money in late fees and penalties is also extremely low. Given DMV's inability to verify when a specially constructed vehicle was originally registered, the committee may wish to consider amendments to delete the exemption from smog check for specially constructed vehicles "built" before 1976. Assembly Votes: Floor: 71-0 Trans: 13-0 POSITIONS: (Communicated to the Committee before noon on Wednesday, June 9, 2010) SUPPORT: None received. OPPOSED: None received.