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  




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            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. 




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            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  




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            $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  




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            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.