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2010 IADA OFFICERS
Chairman
John Wolf
Wolf Chevrolet Sales, Inc.
Belvidere, IL
Vice Chairman
Tim Mooney
Tim Mooney, Inc.
Tuscola
Treasurer
Jim Lombardi
Lombardi Chev Buick
Wilmington
Secretary
Gary Knight
Carmack Car Capitol
Danville
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Your IADA Partner
Moving Vehicle Registration Into The Future
(click logo for more details)
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IADA
Partner
For Insurance Solutions to
Protect Your Dealership
(click logo for more details)
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May 13, 2010 Vol 2010, Issue 3
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ILLINOIS GENERAL ASSEMBLY RECESSES SPRING SESSION
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The Illinois General Assembly recessed this past week without passing a fiscal year 2011 state budget and announced they will return later in the month to finalize a budget. The Governor’s proposal to increase the income tax has received very little support on either side of the aisle.
As we approach the May 31st legislative deadline the Democratic majorities in both the House and Senate will be under intense pressure to reach some compromises for a new budget, otherwise after that date they will need Republican support in the House as the Illinois Constitution requires a 3/5ths majority for passage of any bills after that date! IADA will keep you advised when they return to Springfield later this month. |
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SENATE VOTE ON BROWNBACK AMENDMENT EXPECTED
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A Senate vote on the Brownback Amendment is expected at anytime. These past few days has seen a flurry of opposition regarding exempting auto dealers from this regulation. Credit Unions, Community Banks, the White House and the NAACP have voiced concerns about the amendment. President Barack Obama said in a statement Wednesday the Brownback proposal would undermine "strong consumer protections with a special loophole for auto dealer-lenders."The industry maintains that Senators should support the Brownback amendment because it is pro-consumer and helps preserve affordable auto finance options for consumers.
Don’t wait. Call your Senators TODAY and let them know you oppose new dealership oversight.
On April 26th & 27th IADA President Pete Sander along with Robert Paddor, Evanston Subaru in Skokie and CATA President Dave Sloan joined over 100 other dealers and association executives from 40 states to lobby U.S. Senators to support an amendment that would exempt auto dealers from the financial protection bill.
Sander and Paddor had an opportunity to discuss with Senator Durbin (at the airport boarding area) the dealers’ position on the legislation. We also met with senior staff members from the offices of Senators Durbin and Burris and it was apparent from the meetings that both offices had received numerous communications from dealer constituents urging their support of the amendment. However, neither office would commit to supporting the Brownback amendments! |
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IADA ENJOYS EXCELLENT LEGISLATIVE SESSION
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IADA enjoyed an excellent legislative session representing dealer’s interest in Springfield. An updated CAR of Illinois Report is included outlining the various legislative bills we worked on this session for behalf of our franchised dealer members.
This legislative session was dominated by Illinois’ budget deficits and legislator’s frustration with trying to formulate a 2011 budget. This past session IADA was successful in enacting two separate franchise bills:
HB 4628 – RIGHT OF FIRST REFUSAL/SITE CONTROL
IADA was successful in passing HB 4628 through the General Assembly during the 6-day Fall Veto Session. Normally, only bills that passed during the Spring Legislative Session and were vetoed by the Governor are considered during this time period. We were able to convince Democratic Leadership that HB 4628 was vital and needed to be addressed during the Fall Veto Session. Passing new legislation through the Fall Veto Session is very rare.
Special appreciation to IADA Board members Gary Knight, Carmack Car Capital (Danville) and Rusty Wagner, Wagner Motor Car Company (Belleville), who drove to Springfield to provide testimony during a House Committee. Their involvement was important to set the tone for passage of HB 4628.
Analysis
HB4628 provides for the following changes:
Ø Right of Refusal – Provides that for a period of 3 years after a successor manufacturer assumes the business of a predecessor (ex. Old Chrysler/new Chrysler) it shall be unlawful for the manufacturer to enter into a same line make franchise located within the relevant market area without first offering the addition or relocated franchise to the former franchisee unless one of the following applies:
o As a result of a termination, cancellation, discontinuance or nonrenewal, the predecessor manufacturer had consolidated the line-make with another of its line-makes for which the predecessor manufacturer had a franchise with a then-existing dealership facility located within the relevant market area.
o The manufacturer has paid the former franchisee the fair market value of the franchise. Payment is due within 90 days of the effective date of the termination.
o The manufacturer proves that it would have established good cause to terminate the former dealer based on poor past performance or lack of financial ability. Manufacturer must file a petition seeking a hearing on this issue before the Secretary of State Motor Vehicle Review Board.
Ø Site Control
o Prohibits a manufacturer from requiring a dealer or prospective dealer to sign a “site control agreement” or “exclusive use agreement” as a condition of the manufacturer (1) awarding a new franchise or additional line make, (2) a renewing existing franchise, (3) permitting the relocation of a dealer’s facility, (4) approving the sale or transfer of ownership of a franchise.
- Permits dealers to accept reasonable consideration, if they choose to allow manufacturers to have site control.
- A “site control agreement” or “exclusive use agreement” is (1) any agreement between a dealer or prospective dealer and a manufacturer that requires the dealer to establish or maintain a facility that is exclusive to a certain vehicle line or certain manufacturer or (2) any agreement that restricts a dealer’s ability to transfer, sell, lease, or change the use of the dealership premises.
SB 1417 – DUALING/TRUCK COMPONENTS & OTHER FRANCHISE CHANGES
During the Spring Legislative Session, the General Assembly passed and Governor Pat Quinn signed SB 1417 (Franchise Act Legislation) into law. SB 1417 provides for the following changes:
- Termination Safeguards – Requires manufacturers when discontinuing entire line makes to be able to prove good cause before the Illinois Motor Vehicle Review Board, prior to terminating dealers. Also, when terminating dealers or entire line makes—requires manufacturers to purchase back new vehicles, parts and equipment from franchised dealers, and reimburse dealers for one year’s fair rental value of the dealer’s facility.
- Multiple Vehicle Lines and Single Location – Permits a dealer to sell multiple vehicle brands at a single location.
- Sale of Factory Pre-owned Vehicles – Prohibits manufacturers from denying access to certain dealers when selling factory pre-owned vehicles.
- Audit Periods – Clarifies the audit time period a manufacturer can audit a dealer’s incentives and reimbursement claims (18 to 12 months).
- Motor Vehicle Definition - Amends the definition of “Motor Vehicles” to include truck engines, transmissions and rear axles for 16,000 lbs. and above trucks.
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NADA DIRECTOR ELECTIONS TO GET UNDERWAY
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NADA is conducting Director Elections to serve on the NADA Board of Directors representing Illinois dealers. Illinois has two directorships on the NADA Board, one to represent dealers in Lake, DuPage and Cook counties and the other to represent dealers throughout the state. Both are up for nomination – the Chicago area is currently underway, nomination ballots mailed May 7th. Directorship nomination ballots for all other dealers will be mailed to members on May 21st. Dealers interested may contact IADA for additional information. |
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RED FLAG RULES ENFORCEMENT TO BEGIN JUNE 1ST - We think they mean it this time!
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For the past few years the FTC has continued to put off enforcement of the Red Flag Rules, by now you should be at least somewhat familiar with the Red Flag Rules, which require your dealership to implement a comprehensive and dealership-specific Identity Theft Prevention Plan (ITPP), which must be updated regularly. While the FTC has postponed enforcement action for violations of the Red Flags Rule several times since its original
November 2008 implementation date, no further delays are anticipated for the planned June 1st start of enforcement action. The Federal Trade Commission (FTC) is set to finally begin enforcement of the Red Flags Rule beginning next month. If you have questions about dealership obligations under the rule, or would like assistance with compliance, please review the information on our IADA Website www.illinoisdealers.com or contact the IADA office. NADA University also has three ways you can find out if your dealership is adequately prepared: contact NADAFrontPage.com for more information. |
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APPRAISING AND BIDDING ON AUCTION VEHICLES
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Bidding on vehicles at auction without first appraising them is a big mistake. Unless you have done your homework, how can you possibly know what to bid?
Before even leaving the dealership, you should examine your inventory needs and check recent auction reports. What price did the vehicles you need bring at auction? How do they compare to wholesale valuation books and guides? Are they in a range that seems reasonable to you, or are they higher or lower than you expected? If prices don’t seem compatible with prices you would have bid, try to find out why. Is your own market research current, or has it been a while since you last studied your market?
On the day of the auction, go early. Auction personnel will give you the lane schedule, a list of the vehicles that will be offered at the sale. The vehicles will be grouped according to the lane in which they will be sold and the time that particular auction will begin. Armed with your inventory “wish list,” look over the lane schedule and place a check mark next to the vehicles that interest you. Recognize that others will be bidding on the same cars and that your bid might not always be the winning bid. If you plan to buy five cars, select at least ten cars to appraise.
You are encouraged by auction personnel to look over the vehicles before the sale begins, and you should take advantage of this opportunity. When appraising vehicles at the auction, use the same used-vehicle appraisal form you use in the dealership and the same appraisal procedure. The more you do it, the easier it will become and the faster you will be able to complete the appraisal. Being able to appraise thoroughly but quickly is essential if you plan to become a successful auction “regular.”
Accomplished auction buyers suggest that you write down the top price you’re willing to spend on a particular car and refuse to bid more than $200 above that. The excitement of the auction is contagious, and it can be hard to stop if the bidding’s still going strong. Remember, however, that you have carefully calculated the value of the vehicle in your market. The competing bidders may be able to get more for the same car in their markets. For that reason, they may be able to spend more. Know your limits and stay within the boundaries you have set.
First-time auction buyers might wish to do a “Select Ten” exercise. This “stress free” visit will prepare you to buy on your second visit. Before the auction begins, select 10 cars that interest you (preferably of the type you’d want to buy for your dealership). Using your dealership appraisal form, appraise each selected vehicle to determine the price you’d be willing to pay. When the auction begins, don’t bid, just watch the action. When the hammer falls on one of “your” vehicles, write down the sale price. Later on, compare your estimated buying price with the actual sale price of the vehicle. This exercise will help you see if you’re ready to buy next week or if you need to spend a little more time studying guide books, auction reports, and market values.
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HEALTH CARE REFORM - Upcoming Plan Design Issues
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The Patient Protection and Affordable Care Act, along with the Health Care and Education Reconciliation Act of 2010, make up the new health care reform law. This legislation creates a number of issues for employers that sponsor group health plans. The changes are intended to be implemented over the next several years, but employers need to be aware of some impending plan design issues for the upcoming plan year.
Click here to view the Legislative Brief from our partners at R.W. Troxell & Company. IADA & R.W. Troxell can assist dealer members with all your insurance needs. For more information please contact the IADA office. |
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INTERNAL REVENUE SERVICE -- HIRE ACT
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The new federal Hiring Incentives to Restore Employment (HIRE) Act includes 2 key potential dealer benefits for employees hired this year.
1. If a dealer hires a person who has been unemployed for more than two months, the dealer does not have to pay the employer’s portion (6.2 percent) of the Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2 percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.
In order to be eligible, dealers must hire a “qualified” employee, who:
- Starts work between February 3, 2010, and January 1, 2011 (note that only wages paid after March 18 will be eligible);
- Must not have worked for more than 40 hours over the preceding 60 days before the date of hire. (The employee must certify this by signing an affidavit);
- Does not replace a current employee unless that employee resigned or was terminated for cause;
- Must not be related to the owner of the business or have more than a 50% ownership interest;
- May have been previously laid off from the dealership; and
- May be a full-time or part-time employee.
The payroll tax forgiveness does not apply to wages paid in the first quarter of 2010, but wages paid after the bill was signed (March 19) would be credited against the dealership’s tax liability for the second quarter.
2. Dealers who employ the newly hired employee for 52 continuous weeks would also be entitled to a tax credit of up to $1,000, which can be filed on the dealership’s corporate tax return.
Additional information about the HIRE Act can be found at www.irs.gov.
Note: The employer benefits in the federal HIRE Act are in addition to the Illinois Hiring Tax Credit described in IADA’s April 28th legislative fax letter. You may be able to qualify for both benefits.
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FEDERAL COBRA SUBSIDY ELIGIBILITY EXTENDED TO MAY 31
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Workers who lose their jobs during April and May may qualify for a 65-percent subsidy on their COBRA health insurance premiums, according to the Internal Revenue Service. On April 15, Congress reinstated the COBRA subsidy, which had expired on March 31. As a result, workers who are involuntarily terminated from employment between Sept. 1, 2008 and May 31, 2010, may be eligible for a 65-percent subsidy of their COBRA premiums for a period of up to 15 months. In some cases, workers who had their hours reduced and later lose their jobs may also be eligible for the subsidy.
Employers must provide COBRA coverage to eligible individuals who pay 35 percent of the COBRA premium. Employers are reimbursed for the other 65 percent by claiming a credit for the subsidy on their payroll tax returns:
Form 941, Employers QUARTERLY Federal Tax Return
Form 944, Employer’s ANNUAL Federal Tax Return
Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees
Employers must maintain supporting documentation for the claimed credit.
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ILLINOIS MINIMUM WAGE INCREASE
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On July 1, 2010, the Illinois Minimum Wage will increase from $8.00 per hour to $8.25 per hour. For those under 18 years of age it increases to $7.75 ($8.25 when employee attains 18 years of age). A minimum wage of $7.75 is also allowed during a probationary period, which can last no longer than 90 consecutive calendar days after the employee is hired (and $8.25 thereafter). Additional information is available on the Illinois Department of Labor website at: http://www.state.il.us/agency/idol/. |
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