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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)
Your
IADA
Partner
For Insurance Solutions
to Protect Your Dealership
(click logo for more details)
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December 22, 2010 Vol 2010, Issue 12
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The Illinois Automobile Dealers Association sends its best wishes to you and your family this holiday season. As 2011 approaches, we hope your new year is filled with much joy, happiness and success. We thank you for your continued support throughout this past year and look forward to working with you in the coming year! Happy Holidays.
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IADA HOLIDAY OFFICE HOURS
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The IADA Offices will be closed for Christmas Vacation beginning at 1:00 pm on Thursday, December 23rd and back to normal business hours on Monday, December 27. We will be closed on Friday, December 31, in observance of the New Year. |
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DEAC FUNDS NEEDED
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Have you contributed to DEAC this year? DEAC is the political action arm of NADA and only makes contributions to candidates for federal offices. DEAC contributions pay for themselves many times over in helping to protect dealers on the federal political front. NADA was extremely effective this year on the national legislative front and deserves everyone’s support! NADA Director Jamie Auffenberg Jr., O’Fallon and DEAC State Chairmen Bill Abbott, Monticello; Jim Lombardi, Wilmington and Sam Roberts, Alton, encourage all Illinois dealers to forward your personal check today to DEAC! A listing of contributing dealers is attached along with a DEAC contribution form! |
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FRANCHISE LAW UPDATE - CHRYSLER LAWSUIT FEDERAL COURT
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A federal district judge in New York invalidated a provision in the Illinois Motor Vehicle Franchise Act creating a right of first refusal for dealers who are terminated as part of a manufacturer’s bankruptcy or similar reorganization if the successor manufacturer attempts to appoint a new dealer in the terminated dealer’s market area. IADA amended the Illinois Motor Vehicle Franchise Act in November 2009 to create this right of first refusal. In December of 2009, Chrysler sued to overturn the legislation (as well as similar legislation in North Carolina, Maine, Oregon, and Colorado), arguing that it violated the judge’s order in Chrysler’s bankruptcy case. The Office of the Illinois Attorney General, with assistance from IADA, defended against Chrysler’s challenge to the Motor Vehicle Franchise Act. IADA and the Attorney General believe that Chrysler’s bankruptcy protection applies only to past actions undertaken by Chrysler, but does not insulate Chrysler from state regulation affecting its future conduct.
The bankruptcy judge granted the Attorney General’s motion to withdraw consideration of the lawsuit from the very unfavorable forum of the Bankruptcy Court and into Federal District Court. Despite this early procedural victory, the federal district judge found that the Franchise Act provisions were pre-empted by federal bankruptcy law. At this time the Attorney General’s Office is determining whether it is worthwhile to file an appeal. IADA will notify you when the Attorney General’s Office makes its decision.
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2011 DOCUMENTARY FEE: $156.08
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The maximum documentary fee for 2011 will be $156.08. This is an approximate 1.1% increase in the 12-month Consumer Price Index for All Urban Consumers issued by the U.S. Department of Labor. The “doc fee” is subject to Retailers’ Occupation Tax as part of the gross receipts from the sale of a vehicle.
Pursuant to Section 11.1 of the Motor Vehicle Retail Installment Sales Act (815 ILCS 375/11.1), every retail installment contract under the Act shall contain or be accompanied by a notice containing the following information:
"DOCUMENTARY FEE. A DOCUMENTARY FEE IS NOT AN OFFICIAL FEE. A DOCUMENTARY FEE IS NOT REQUIRED BY LAW, BUT MAY BE CHARGED TO BUYERS FOR HANDLING DOCUMENTS AND PERFORMING SERVICES RELATED TO CLOSING OF A SALE. THE BASE DOCUMENTARY FEE BEGINNING JANUARY 1, 2008, WAS $150. THE MAXIMUM AMOUNT THAT MAY BE CHARGED FOR A DOCUMENTARY FEE IS THE BASE DOCUMENTARY FEE OF $150 WHICH SHALL BE SUBJECT TO AN ANNUAL RATE ADJUSTMENT EQUAL TO THE PERCENTAGE OF CHANGE IN THE BUREAU OF LABOR STATISTICS CONSUMER PRICE INDEX. THIS NOTICE IS REQUIRED BY LAW."
Please note that if your dealership is operating under a Consent Decree related to documentary fees, the Consent Decree may have requirements in addition to those set forth in the above law.
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RISK-BASED PRICING RULE
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The Federal Trade Commission and the Federal Reserve have issued a risk-based pricing rule that will take effect on January 1, 2011. The rule applies to motor vehicle dealerships (and other businesses) that obtain credit reports and extend credit to customers. Generally, the rule requires dealerships to issue a Risk-Based Pricing Notice to any consumer who is offered credit that is on terms that are less favorable than the terms offered to a substantial proportion of other credit customers.
Fortunately, because it is difficult for dealers to determine which customers should or should the Risk-Based Pricing Notice, the rule allows motor vehicle dealers to issue a Credit Score Disclosure Exception Notice (Exception Notice) to all customers who apply for credit. The Exception Notice must be issued as soon as is reasonably practicable, but in any event prior to the consummation of the credit transaction. There is one Exception Notice to use when the dealer was able to obtain the consumer’s credit report and a separate Exception Notice to use when the consumer’s credit report is unavailable. In the case of a joint credit application, a separate Exception Notice must be given to each applicant, but Exception Notices are not required for guarantors or co-signers. The Exception Notice must contain:
(1) The consumer’s current credit score;
(2) The date the credit score was created;
(3) The name of the agency or other person that created the score;
(4) The range of possible scores under the credit scoring model;
(5) Either;
a. A bar graph (with at least 6 bars)depicting the range of possible credit scores and the percentage of consumers within each bar; or
b. A statement indicating that the consumer’s credit score ranks higher than __% of U.S. Consumers; and
(6) Boilerplate information that explains credit reports and credit scores, including information about where consumers can obtain free credit reports.
Copies of the model Exception Notices can be found on the Federal Trade Commission’s website at: http://www.ftc.gov/os/2009/12/R411009riskbasedpricingfrn.pdf.
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EMPLOYEE CREDIT PRIVACY ACT
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The Illinois Employee Credit Privacy Act takes effect January 1, 2011. The Act provides that an employer may not:
(1) Refuse to hire, discharge, or otherwise discriminate against an individual with respect to employment, compensation, or terms of employment because of the individual’s credit history or credit report;
(2) Inquire about an applicant’s or employee’s credit history; or
(3) Obtain an applicant’s or employee’s credit report from a consumer reporting agency.
However, the prohibitions listed above do not apply when a satisfactory credit history is a bona fide occupational requirement of a particular position. For a position to be exempt from the Act, at least one of the following must apply:
(1) State or federal law requires that the individual be bonded or post other security;
(2) The duties of the position include custody of or unsupervised access to cash or other marketable asset valued at $2,500 or more.
(3) The duties of the position include signatory authority over business assets of at least $100 per transaction;
(4) The position is a managerial position that involves setting the direction or control of the business;
(5) The position involves access to personal or confidential information, financial information, trade secrets, or State or national security information;
(6) The position if defined by U.S. or Illinois Department of Labor rules as one for which a credit history is a bona fide occupational requirement; or
(7) The employee’s or applicant’s credit history is otherwise required by or exempt under State or federal law.
The full text of the legislation can be found on the Illinois General Assembly’s website at: http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=096-1426.
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REVISED MODEL PRIVACY NOTICE
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The federal Trade Commission has created a revised Model Privacy Notice for dealers to use to notify their customers about the dealerships information-sharing practices. Use of the FTC’s model form is not required, but is strongly encouraged because it provides a safe harbor from FTC penalties. The FTC’s website has a form-builder that dealers can use to customize their privacy notices based on whether the dealership permits affiliate marketing and whether the dealership permits customers to limit the sharing of customers’ personal information. The FTC’s Model Privacy Notice form builder can be found at: http://www.federalreserve.gov/newsevents/press/bcreg/20100415a.htm. |
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IRS CREATES UNICAP SAFE HARBOR FOR DEALERS
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In a major victory for car and truck dealers, the IRS has created uniform capitalization (UNICAP) "safe harbor" methods of accounting that favorably resolve several contentious and potentially very costly income tax issues that have arisen during IRS audits of franchised dealers over the past five years.
The new safe harbor methods, which the IRS issued following numerous meetings with NADA, generally allow car and truck dealers to be classified as retailers who are not required to capitalize handling, storage, or production costs incurred at their retail sales facilities. A brief summary of the new safe harbor methods is posted at www.nada.org/regulations. |
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HOLDER IN DUE COURSE INVESTIGATIONS
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Several Dealer Associations in other states have reported dealers receiving a letter from the Federal Trade Commission inquiring into their compliance with the FTC Holder In Due Course Rule (16 CFR Part 433). The rule requires sellers to include in consumer credit contracts the following disclosure in at least ten point, bold face, type:
NOTICE
ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
This language routinely appears in the retail installment sales contracts that dealers enter into and assign to their various finance sources. Consequently, if the FTC's information requests seek all consumer credit contracts executed by the dealer since October 1, 2009 (or something similar), the dealer should consider requesting that the FTC investigator accept a sample (as opposed to all) of the different retail installment sales contract forms that it has executed with consumers during the specified period. Dealers should consult with their counsel concerning how they should respond to these information requests. |
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VEHICLE EXPORTS
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Before you sell a new vehicle to a customer who intends to export it outside of the United States, or who you have reason to believe intends to export it outside of the United States (be careful with the customer who wants his new car shipped directly to the Port of New Jersey), be sure to review your dealer franchise agreement. IADA has received notice from some dealers, especially General Motors dealers, who have been cited for violations of their franchise agreements for selling new motor vehicles that were exported out of the United States. These dealers were charged back for incentives that were paid on sales of vehicles that were ultimately shipped out of the U.S.
The General Motors franchise agreement, for example, is vague about what constitutes a violation of the exporting prohibition. The agreement merely states that U.S. dealers are authorized to sell new motor vehicles only to customers located in the United States, that U.S. dealers “will not sell new Motor Vehicles for resale or principal use outside the United States” and that the dealer “agrees not to sell any new Motor Vehicles which were not originally manufactured for sale and distribution in the United States”. General Motors and, doubtless, other manufacturers maintain lists of customers that their dealers are not permitted to sell new vehicles to. It is very important that dealers consult this list before selling to out-of-state customers. It is similarly important that dealers stay up-to-date on all communications from their manufacturers concerning export violations to avoid violations whenever they face factory audits.
It is also important that all dealers understand their rights under the Motor Vehicle Franchise Act. One of the most important things to remember with any incentive or warranty audit is that the audit period is limited to one year after the warranty of incentive claim is paid. If you are audited, for an export violation or any other violation of your dealer agreement, make sure that the factory limits the audit to the statutory one-year period! |
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WOODWARD & ASSOCIATES END OF YEAR CHECKLIST
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CPA Carl Woodward has generously provided IADA with his year-end income tax checklist designed specifically for automobile dealers. Carl Woodward and his team at Woodward and Associates are associate members of IADA and are automobile dealer specialists serving dealers in all accounting and financial matters and serve over 200 automobile dealerships in the United States. Click here to view the checklist. |
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FORM 8300 END-OF-YEAR REMINDER
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The IRS requires all retailers and financial institutions that receive more than $10,000 cash in any one transaction (or any two or more related transactions) to file IRS Fin CEN Form 8300.
For every deal where you file a Form 8300, you must notify the customer that you filed that form. The notice must state your dealership name and address, the amount you reported on the form, and a statement that the information has been reported to the Internal Revenue Service. You can send the written notice any time after you file Form 8300 up until January 31st of the year following the calendar year in which you received the cash. If you have already given written notice to the customer this year, you need not do it again. The notification you provide may be a copy of Form 8300, or it can be a letter that says:
Dear Customer:
We are required by the Internal Revenue Service to report certain transactions involving cash and certain kinds of checks under the provisions of 26 U.S.C. 6050i. (Name of Dealership) filed a Form 8300 with the IRS on (date) indicating you provided us ($ amount) in cash to purchase a (describe the vehicle).
Sincerely,
(Name of Dealership)
Publication 1544 explains the Cash Reporting Rule, and can be downloaded by clicking here. You can download Form 8300 and instructions by clicking here.
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EPA/DOE FUEL ECONOMY GUIDE
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The U.S. Department of Energy and the Environmental Protection Agency have just released the 2011 Fuel Economy Guide. The guide provides detailed fuel economy numbers for MY 2011 light-duty vehicles, along with estimated annual fuel costs and other information for prospective purchasers. Dealers must display a copy of the guide and provide copies to customers upon request. There are a number of options available for dealers to comply:
• EPA/DOE is electronically distributing the guide to dealers for printing as needed.
• Dealers can download the guide, save it, and print it as necessary.
• Dealers can order hard copies of the guide by clicking here, by calling DOE’s Information Center at 877.337.3463 between 9 a.m. and 7 p.m. EDT, or by using a form to order copies by mail. Hard copies will be mailed, free of charge, in December 2010.
Click here for an EPA/DOE letter detailing how to make the guide available to customers. |
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OBITUARY NOTICE
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IADA regrets to advise that William E. “Bill” Kallister, 80, passed away December 21, 2010. Bill was a former IADA Board member representing the Peoria Dealers. He was President/co-owner of S&K Chevrolet car dealership in Peoria and S&K Pontiac - GMC in Springfield, retiring in 1997. His son Kevin and grandson Jeffery continue to operate the Springfield dealership. IADA expresses our heartfelt condolences to his wife Jackie and many family members.
Visitation will be Monday, December 27 from 5 - 8 p.m. at Woolsey-Wilton Funeral Home on Allen and Willow Knolls Roads in Peoria. Funeral services will be Tuesday, December 28 at 11 am at Northwoods Community Church with visitation 1 hour prior to the service. Burial will be at the Lutheran Cemetery in South Peoria. |
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