June 2017 Massachusetts Auto Dealer Magazine

MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109

auto M a s s a c h u s e t t s

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FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216

June 2017 • Vol. 29 No. 6

The official publication of the Massachusetts State Automobile Dealers Association, Inc

Facing the UNKNOWN

Ma s s a c h u s e t t s

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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Jorge Bernal Administrative Assistant/ Membership Coordinator jbernal@msada.org Auto Dealer MAgazine Robert O’Koniewski, Esq. Executive Editor Tom Nash Editorial Coordinator nashtc@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to MSADA by e-mail: jbernal@msada.org.

Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.

Ad Directory Blum Shapiro 21 Boston Herald 32 Ethos Group 11 Lynnway Auto Auction 23 O’Connor & Drew, P.C. 31 Reynolds & Reynolds, 14 Southern Auto Auction 22

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The official publication of the Massachusetts State Automobile Dealers Association, Inc

Ta b l e o f C o n t e n t s

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From the President: Looking Toward Hands-Free THE ROUNDUP: Cost of Doing Business Could Increase Substantially in Next Two Years

9 legislative scorecard 10 TROUBLESHOOTNG: Quick Hits 12 AUTO OUTLOOK 15 ACCOUNTING: Are You Ready for a Sales Audit?

16 Cover Story: Facing the Unknown

20 24 25 26 28 29

NEWS From Around the Horn Sound Off: Aitport Advertising LEGAL: How Will New Cori Regs Affect Your Dealership? nada Market Beat TRUCK CORNER: Now is the Time to Repeal the Federal Excise Tax nada update: Walking the Halls of Power

ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400

Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600

Join us on Twitter at @MassAutoDealers www.msada.org

Massachusetts Auto Dealer JUNE 2017

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From the President

MSADA

Looking Toward Hands-Free

As the auto industry moves toward autonomous vehicles, we need to stay informed

By Chris Connolly, MSADA President Predicting the future of this industry is, more often than not, a fool’s errand. How much metal are we going to move this year? What policies might get put in place that could hurt our bottom line? We do everything we can as dealers, and at the Association, to see a few steps ahead.

While that has always been difficult, these past few years have seen drastic changes in our political and technological climate. This month, we take a look at how the autonomous vehicle revolution is creating a whirlwind even before the technology is at our doorsteps. Dealers, however, need to these past few be kept at the discussion table as policies and procedures are considered. As a recent study conducted by the Masyears have sachusetts Institute of Technology shows, dealers will be seen drastic relied on more than ever among some car buyers to show them the ropes when they buy a car with autonomous changes in our systems.

So it is up to you and me to ensure that we are staying political and up to speed, not just on what technology our vehicles technological have right now but also where technology could be taking us. If moves by several of our manufacturers are an climate. indication, that means electric vehicles and self-driving vehicles are the wave of the future. In this month’s cover story, you will see an overview of some of the recent developments in the self-driving arena as well as what it could mean for us.

We dealers need to stay involved right at the ground floor of this technological revolution, so that our customers’ needs are represented. What is becoming more clear is that, as these vehicles get more advanced, buyers will need more help, not less. All of us who make our livelihoods selling and servicing these vehicles are the front of the line ambassadors -- which means it is time for us to get ahead of the curve on what the next ten years look like.

TIME Dealer of the Year Nominations Open Every year, we take time to recognize one of our own as a nominee for TIME magazine’s annual Dealer of the Year program. The broad experience represented by the candidates we have chosen the past few years is astounding, and I am excited to accompany whomever we choose to the NADA Convention to receive some hard-earned recognition.

I encourage you to nominate a dealer who fits the mold of the best of the best today.

The Board of Directors will make a decision some time in August, so please do not delay.

More information and a faxable nomination form is available on page 2. t JUNE 2017

Massachusetts Auto Dealer www.msada.org

Msada Board Barnstable County

Brad Tracy, Tracy Volkswagen

Berkshire County

Brian Bedard, Bedard Brothers Auto Sales

Bristol County

Richard Mastria, Mastria Auto Group

Essex County

William DeLuca III, Woodworth Motors John Hartman, Ira Motor Group

Franklin County

Jay Dillon, Dillon Chevrolet

Hampden County

Jeb Balise, Balise Auto Group

Hampshire County

Bryan Burke, Burke Chevrolet

Middlesex County

Chris Connolly, Jr., Herb Connolly Motors Frank Hanenberger, MetroWest Subaru

Norfolk County

Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree

Plymouth County

Christine Alicandro, Marty’s Buick GMC Isuzu

Suffolk County

Robert Boch, Expressway Toyota

Worcester County

Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto

Medium/Heavy-Duty Truck Dealer Director-at-Large [Open]

Immediate Past President Scott Dube, Bill Dube Hyundai

NADA Director

Don Sudbay, Jr., Sudbay Motors

Officers

President, Chris Connolly, Jr. Vice President, Charles Tufankjian Treasurer, Jack Madden, Jr. Clerk, Steve Sewell

Associate Members

MSADA A ssociate M ember D irectory ACV Auctions Will Morris (860) 670-7867 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (616) 450-1871 American Tire Distributors Pamela LaFleur (774) 307-0707 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 AutoAlert Jessica Gates (816) 506-0515 Auto Auction of New England Steven DeLuca (603) 437-5700 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 BMO Harris Bank Chris Peck (508) 314-1283 Boston Globe Mary Kelly and Tom Drislane (617) 929-8373 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Capital Automotive Real Estate Services Willie Beck (703) 394-1323 Catalogs.com David Solar (954) 908-7122 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Nicole Mitsakis (781) 246-9400 Cox Automotive Ernest Lattimer (516) 547-2242 CVR John Alviggi (267) 419-3261 Dealer Creative Glenn Anderson (919) 247-6658 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Jane Webb (800) 304-3341 Downey & Company Paul McGovern (781) 849-3100 EasyCare New England Greg Gomer (617) 967-0303

Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance Matt Johnson (606) 923-6350 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320 Gatehouse Auto Jay Pelland (508) 626-4334 Gulf State Financial Services Bob Lowery (713) 302-5547 GW Marketing Services Gordon Wisbach (857) 404-0226 Harbor First Ron Scolamiero (617) 500-4080 Hireology Kevin Baumgart (773) 220-6035 Huntington National Bank John J. Marchand (781) 326-0823 Independent Power Systems Mariana Seabra/Ryan Ferrero (978) 998-4079 JM&A Group Jose Ruiz (617) 259-0527 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 Key Bank Mark Flibotte (617) 385-6232 KPA Rob Stansbury (484) 326-9765 Leader Auto Resources, Inc. Chuck August (518) 364-8723 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 Micorp Dealer Services Frank Salkovitz (508) 832-9816 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004

www.msada.org

Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 PreOwned Auto Logistics Anthony Parente (877) 542-1955 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 Reflex Lighting Daryl Swanson (617) 269-4510 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Mike O’Connor (860) 462-7958 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Santander Richard Anderson (401) 432-0749 Schlossberg & Associates, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Southern Auto Auction Tom Munson (860) 292-7500 SPIFFIT Sean Ugrin (303) 862-8655 Sprague Energy Claude Peyrot (603) 430-7254 SunPower Christie McCarthy, (408) 457-2357 SunTrust Bank Michael Walsh (617) 345-6567 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance Marc Gerhart (781) 697-1525 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Stephen Janetz (215) 986-8498 Zurich American Insurance Company Steven Megee (774) 210-0092

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The Roundup

Cost of Doing Business Could Increase Substantially in Next Two

By Robert O’Koniewski, Esq. MSADA Executive Vice President Follow us on Twitter - @MassAutoDealers

First Up, Pregnant Workers Protections The Massachusetts Legislature’s current twoyear session is shaping up to be one committed to expanding worker protections, benefits, and compensation, to the detriment of the business community. This is being accomplished with very little discussion or overt demonstration of concern by our elected officials for the overall cost to employers and what that means for long-term economic prospects in the Commonwealth, including workforce development and wage growth.

In early May, the state House of Representatives unanimously passed legislation that would mandate protections for pregnant workers. House 3680, The Pregnant Workers Fairness Act, would require businesses to offer reasonable accommodations to pregnant employees, such as longer breaks, seating, and lighter duty.

Initially reported out favorably by the Joint Committee on Labor and Workforce Development, the bill would make it illegal to refuse to hire or employ, to terminate, or to discriminate against an individual in compensation or in the terms, conditions, or privileges of employment based on pregnancy, or a condition related to pregnancy, including, but not limited to, lactation or the need to express breast milk for nursing a child. Moreover, it would make it illegal for an employer to deny a “reasonable accommodation” for an employee’s pregnancy or related condition if the employee requests it, unless the employer can show it would impose an “undue hardship” on its business.

Furthermore, as attorneys Ambash and Fritz detailed in their Legal column in last month’s Auto Dealer magazine, the new law also would make it JUNE 2017

Massachusetts Auto Dealer www.msada.org

illegal to take any “adverse action” against an employee who requests or uses a reasonable accommodation in connection with her pregnancy. Such adverse actions may include failing to reinstate the employee to her original employment status or an equivalent position with equivalent pay and accumulated seniority, retirement, fringe benefits, and the like.

Additionally, the new law would make it illegal to: • deny an employee an employment opportunity based on the employer’s need to make such a reasonable accommodation; • require a pregnant employee to accept an accommodation she chooses not to accept, so long as the accommodation is not necessary to enable her to perform the essential functions of the job; • require an employee to take a leave of absence if another reasonable accommodation may be provided without undue hardship to the employer; and • knowingly refuse to hire a woman because of pregnancy or any related condition, provided she is capable of performing the essential functions of the job with reasonable accommodation that does not impose an undue hardship to the employer.

The legislation contains new bureaucratic demands such as notice requirements, making reasonable accommodations, et cetera et cetera. And, of course, what would a new employee protection law be without increasing the scope of the state’s anti-discrimination law, Chapter 151B, under which violations are subject to damages such as lost wages, compensation for emotional distress, punitive damages, and reasonable attorneys’ fees and costs.

The action next moves to the state Senate, which is expected to take up the bill right before the Indepen-

MSADA dence Day holiday. A provision the Senate will add involves requiring the Massachusetts Commission Against Discrimination, subject to appropriation, to develop courses on an employee’s right to be free from pregnancy-related discrimination.

We will keep you informed as this legislation progresses and of any requirements you will need to be aware of as business owners subject to the bill’s requirements.

Next, Paid Family and Medical Leave Bill Another proposal presently before the same Joint Committee on Labor and Workforce Development relates to paid family and medical leave. As you may recall as an employer, current federal law includes unpaid opportunities under the Family and Medical Leave Act as well as approved military leaves of absence, and state law includes unpaid leave opportunities under the Massachusetts Maternity Leave Act, the Small Necessities Leave Act, and the Domestic Violence or Abuse Leave Act, as well as approved military leaves. These are all discussed in great detail in the March 2016 version of our Wage-Hour Guide, as well as bulletins we have issued over time.

Now the state Legislature is considering a paid leave bill that would establish the right of employees to receive job-protected paid family and paid medical leave. Notice that new word there – “paid”. Under House 2172 and Senate 1048, benefits would include up to 16 weeks of paid family leave and 26 weeks of paid medical leave. Weekly benefits would begin at 50 percent of the employee’s weekly wage and capped at $1,000 per week. But benefit costs would accelerate quickly if the bill becomes law. The 50 percent salary replacement level required at implementation in January 2019 would increase to 90 percent by January of 2021.

The bill provides that family leave is leave taken by an employee to provide care for a family member. “Family” is defined as a spouse, domestic partner, child, parent, parent of a spouse or domestic partner, an individual who stood in loco parentis to the employee when the employee was a minor child, grandchild, grandparent, or a sibling

of the employee.

Leave may be for any of the following reasons: • to bond with the employee’s child during the first 12 months after the child’s birth or the first 12 months after the placement of the child for adoption or foster care with the employee; • for a serious health condition of a family member; or • because of a qualifying exigency pursuant to the federal Family and Medical Leave Act, arising out of a family member of the employee being on active duty in the armed forces of the United States.

“Medical leave” is leave taken by an employee from employment due to a serious health condition of the employee that renders the employee unable to perform the functions of the employee’s position.

Massachusetts employers all struggle with some of the highest costs of doing business in the nation - health care, unemployment insurance, workers compensation insurance, and utility/electricity rates.

Take these in combination with higher than national average wage costs, one could surmise that increased employee benefit mandates from these new laws could hinder future wage growth – to what extent, we will see. But these first two bills are coming and employers should be prepared.

Which brings us to the next big item lurking in the shadows…

The $15 Minimum Wage As of January 1, 2017, the state minimum wage is $11 per hour, which is substantially higher than the federal minimum wage of $7.25 per hour. Neither wage has a planned hike set in law presently.

Now the group that brought you the earned sick time law through the November ballot in 2014 is gearing up to bring a $15 minimum wage to the 2018 ballot.

The Raise Up Massachusetts coalition is in the process of formulating campaigns to increase the minimum wage as well as to pass the aforementioned paid family and medical leave law by taking them directly to the people through are constitutionally provided initiative and petition process www.msada.org

should the state Legislature fail to pass something by next May. To add fuel to the fire, Senate President Stan Rosenberg just about guaranteed that the minimum wage question will be on the ballot should the Senate, the House, and Governor Baker not come to an agreement on a new set of wage hikes.

Yet one more item to keep an eye out for as the legislative process unfolds.

Millionaires’ Tax Moving to 2018 Ballot, Unless Courts Stop It On June 14 the Massachusetts Legislature, meeting in a joint constitutional convention, gave final approval to a proposed constitutional amendment that would slap a four percent (4%) surtax on annual incomes over $1 million. (The state constitution presently prohibits a graduated income tax.) The item now moves to the November 2018 ballot, unless opponents prevail in litigation challenging its legality.

Under our state constitution, a proposed amendment needs at least 50 “yes” votes out of a total of 200 legislators, voting in combined constitutional convention, in two successive sessions. This month legislators easily passed the 50-vote threshold, approving the item 134-55. This follows a vote to approve by a similarly large margin in the last session in 2016. This time, 12 House Democrats and 2 Senate Democrats opposed the item, while only one Republican, a Senator, supported the proposal.

Proponents claim that the surtax would raise $2 billion annually in new tax revenue, which would be earmarked for education and infrastructure (as so stated in the amendment). There are approximately 20,000 income earners who would be affected by this new surtax, provided they remain in the state.

The legal challenge will essentially rest upon whether the surtax revenue can bypass the required “subject to appropriation” requirement that demands all general revenue be allocated by legislative directive. Opponents say that by earmarking the new funds for transportation infrastructure and education that this bypasses the constiMassachusetts Auto Dealer JUNE 2017

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The Roundup It will most likely be ultimately decided by the Supreme Judicial Court, five of whose seven members will have been Republican Governor Baker appointees by the time the case is ripe for their review.

DealerPro Event On June 15 at the Verve Hotel in Natick, your Association hosted a full ballroom of dealer principals, general managers, service managers, and other dealership personnel for a full-day workshop presented

by Don Reed of DealerPro Training Solutions.

In his presentation “Six Simple Changes for Record Profits in Fixed Ops”, Don covered: • Always put your customer first • Recruit service advisors • Compensate to motivate • Build your own profit improvement plan • Learn four essentials to 100% absorption • Identify opportunities for fixed ops improvement Judging by attendees’ comments, Don hit a home run for the day. Be on the alert for when we host DealerPro again here in Massachusetts.

ATD Congressional Fly-In In conjunction with the American Truck Dealers (ATD) Board of Line Representatives summer meeting, approximately 40 truck dealers and state association staff gathered in Washington in mid-June for the third annual legislative fly-in dedicated to medium- and heavy-duty truck dealer issues.

The ATD fly-in was focused on gathering co-sponsors for H.R. 2946, legislation filed by Rep. Doug LaMalfa (R-California), which would repeal the current 12% federal excise tax (FET) on heavy-duty trucks and trailers. On the books since 1917, initially created to help fund the U.S. effort in the War to End All Wars, the FET is the highest federal excise of its kind. It brings in approximately $3 billion annually to the federal highway trust fund, about 7% of the fund’s total.

The FET adds approximately $20,000 to the price of a tractor truck. In combinaJUNE 2017

tion with the OEMs’ efforts to comply with federally required emissions technologies that add about $40,000 to the price of the truck, these federal requirements, in effect, inhibit and discourage the sale of cleaner and safer new trucks.

It is hoped that the NADA/ATD efforts to highlight the onerous nature of the FET will make repeal part of an overall tax or infrastructure package once Congress gets to those pieces of the Trump Administration’s’ priorities checklist.

Legislative meetings (staff and/or elected officials) included Rep. Richard Neal (D-Springfield), the ranking minority member of the House Ways and Means Committee, Rep. Niki Tsongas (D-Lowell), Rep. Michael Capuano (D-Somerville), Rep. Jim McGovern (D-Worcester), and our two U.S. Senators Elizabeth Warren and Ed Markey, both Democrats.

Heavy-duty truck dealers are encouraged to contact their members of Congress to ask them to co-sponsor H.R. 2946.

TIME Dealer of the Year 2018 It is that time of the year again. The highest honor bestowed on a dealer each year at the NADA convention is the TIME Magazine Dealer of the Year Award (TDYA).

The process begins with nominations from each state. At MSADA we consider the state nominee so important that he or she is also designated as the “Massachusetts Dealer of the Year”.

Dealers may nominate him/herself or another dealer. Since your Association’s leadership does the selection at the state level, the members of the MSADA Executive Committee are not eligible; neither are the TDYA Recipients for the last four years: Gary Johnson, Adam Connolly, Scott Shulman, and Brian Kelly.

Please help by nominating candidates for selection as the Massachusetts TDYA. Please give this your careful consideration.

Use the form on page 2 of this month’s magazine to nominate a worthy dealer or e-mail me at rokoniewski@msada.org with your nomination. Nominations must be received at our office by Friday, July 14. Thank you for your assistance on this matter.

Massachusetts Auto Dealer www.msada.org

MSADA Scott Dube Elected to Succeed NADA Director Don Sudbay This year Don Sudbay will be finishing his second consecutive three-year term as our NADA director, representing Massachusetts dealers on the national association’s board of directors. Don had indicated that he did not wish to stand for re-election.

Recently, NADA conducted a request for nominations to fill our Massachusetts slot, and Scott Dube of Bill Dube Hyundai in Wilmington has been elected. His threeyear term will start in early 2018.

Congratulations to Scott, and thank you to Don for his strong advocacy for our dealers and our industry at the NADA board and in dealings with the OEMs and legislators here in Boston and Washington.

Jay Dillon Elected to MSADA Executive Committee Congratulations are in order for our Franklin County director Jay Dillon, Dillon Chevrolet, who was recently elected by the MSADA board of directors to serve on its executive committee as an at-large member from the board. Jay fills the slot vacated by director Steve Sewell, who was elected to serve as the board’s clerk in last December’s officer elections.

Rep. Gailanne Cariddi, RIP State Rep. Gailanne Cariddi (D-North Adams) died on Saturday, June 17, succumbing to her battle with cancer. Rep. Cariddi had served in the Massachusetts House since 2011 and was a small business owner prior to that, running her family’s retail toy operations. She was a strong proponent of auto tech education and training programs, as well as small business issues, and was very active with assisting the Berkshire County dealer body. She was instrumental in helping to create the auto tech program within the economic development act last year. More importantly, Rep. Cariddi was a true class act, always professional, dignified, intelligent and respectful in her dealings with others. She will be greatly missed in the realm in which she lived and worked. Rep. Cariddi was 63. t

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Massachusetts Auto Dealer JUNE 2017

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Troubleshooting

Quick Hits

Selling Cars to Minors and Other Head Scratchers

By Peter Brennan, Esq.

MSADA Staff Attorney In this column we will be providing answers to questions that we receive at the MSADA legal offices from time to time. If you would like to see a question answered in this space, please send it along using the contact info at the bottom.

Question: Can I charge an extra fee or surcharge to a customer that pays for dealership goods or services using a credit card?

Answer: Not in Massachusetts. Under M.G.L. c. 140D, §28A, businesses are prohibited from imposing a surcharge on customers that elect to use a credit card as payment. However, businesses may offer a discount to customers that use a form of payment other than a credit card in a transaction, which is how gas stations can get away with charging one price for credit transactions and another for cash. Dealers should check the fine print of their agreements with the credit card companies before offering any type of incentive to use credit instead of cash, or vice versa, as credit card issuers are historically persnickety on these issues.

Question: Can I sell a vehicle to a sixteen-year-old that wants to pay cash and register the vehicle in her name?

Answer: Pursuant to M.G.L. c. 231 §85O, a minor may void a contract at any time until they are no longer a minor. In JUNE 2017

certain situations, the right to rescind a contract made while a minor may extend past the individual’s eighteenth birthday.

Additionally, a minor who disavows a contract to purchase a motor vehicle has no obligation to return the motor vehicle to the dealer unless it is still in his or her possession. Thus, a dealership is advised never to sell a motor vehicle solely to a minor.

However, a contract where one of the buyers is of majority age and the other buyer is a minor is enforceable against the party who is of majority age. There is also no law that prevents minors, even under 16 years of age, from owning motor vehicles. M.G.L. c. 175 §113K provides that a minor of sixteen years of age or over is deemed competent to contract for a motor vehicle liability policy.

Consequently, if a minor is interested in purchasing a vehicle, you can proceed with the transaction so long as someone of majority age is also listed as a purchaser on the motor vehicle purchase contract. The car can still be registered and titled in the minor’s name, and the minor can acquire insurance on the vehicle in their own name.

It is important to note that these principles also apply to a contract with a minor for service work on their vehicle, so be wary of agreeing to large dollar figure repair jobs with those under eighteen years of age.

Question: A customer dropped off a vehicle and agreed to certain necessary repairs. When the repair job was completed and the customer was informed of the total cost, he simply disappeared and stopped returning calls. How can I recover my repair costs?

Answer: If the customer refuses to respond, your best recourse is to legally acquire the vehicle and sell it to cover the cost of the repairs and storage. The statutory cite in Massachusetts law that cov-

Massachusetts Auto Dealer www.msada.org

ers this is M.G.L. c. 255, sec. 25 & 26.

To summarize the process: If a customer brings a motor vehicle in for inspection, reconditioning or repair, the dealer will have a statutory lien upon the motor vehicle for proper charges due for work as well as for the storage and care of the vehicle. This lien provides the dealer with exclusive rights to the possession of the vehicle until the charges are paid.

If the charges remain unpaid, the following steps must be followed before the vehicle can be sold: (1) After the charges have been outstanding for ten days, the dealer must make a formal written demand to the owner disclosing the dealership’s intent to sell the vehicle to pay for the repair, storage, and care costs that have been accrued; and (2) After providing a reasonable time for response from the owner, the dealer will need to file a civil action in the district court or superior court within the jurisdiction where the dealership conducts its business to obtain a court order endorsing a sale.

Under no circumstances should the dealer ever sell the motor vehicle without the court’s permission or attempt to seize the vehicle after relinquishing possession to the customer.

It is recommended that you retain an attorney to handle this process. The statute must be followed precisely to achieve the desired result, and your time is likely not best spent sitting in a courtroom. t If you require any additional information on these issues please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@msada.org, or Peter Brennan, MSADA Staff Attorney, pbrennan@msada.org, or by phone at (617) 451-1051.

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AUTO OUTLOOK

JUNE 2017

Massachusetts Auto Dealer www.msada.org

MSADA

www.msada.org

Massachusetts Auto Dealer JUNE 2017

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Accounting

MSADA

Are You Ready for a Sales Audit?

By Lauren Carnes CPA, O’Connor & Drew As the Massachusetts Department of Revenue (DOR) makes an attempt to recoup lost tax dollars, the number of sales and use tax returns chosen for verification and audit are on the rise. The process begins with a simple Notice of Audit Appointment letter accompanied by an Information Document Request. The next step is a call to your CPA or trusted advisor to discuss the logistics of the exam, execute a Power of Attorney granting the DOR authority to deal with your advisor, and discuss areas of potential exposure.

The pre-appointment work includes the gathering and reviewing of the following information: • federal, Massachusetts, and other tax returns for the periods under exam; • general ledger; • charts of accounts; • accounts payable/voucher register/purchase journal; • accountants’ work papers (trial balance/ adjusting entries); • schedule of operating expenses; • accounts payable invoices, leases, and contracts; • resale and exempt certificates; • detail of depreciation schedules; and • copy of sales and use tax filing.

The key areas that the Massachusetts DOR is currently focusing on include the following: • Resale Certificates - Do you have a resale certificate from all vendors? Review all parts sales to customers claiming exemption from sales tax and determine whether or not you have proper documentation for these customers. If not, immediately mail them a resale cer-

tificate and request that it be returned and executed as soon as possible. The DOR will give you 60 days to provide them with an executed resale certificate or the sales become taxable.

• Fixed Assets - Review depreciation schedules for all fixed asset additions and their corresponding invoices to see if sales tax or use tax was paid on all instate and out-of- state purchases.

• Demos - Are you self-assessing use tax on at least one? The amount of sales/ use tax to be paid on a monthly basis should equal the Annual Lease Value x .003 x .625 (see MSADA Bulletin 2001-3).

• Parts and Repair Sales - If you are the end customer, did you pay use tax on the parts used in policy work - air filters, oil filters, etc.? Or, are maintenance services considered part of the original purchase price of the vehicle that are offered free when the vehicle is sold? For other free maintenance, consider which items’ sales and use tax need to be paid by the dealership.

• Rental vehicles - Review invoices received by vendors and verify whether or not they charged you sales tax on the rentals provided to customers. If not, you must charge the customer for this. It is important to note a rental is a separate transaction and requires both a sales and use tax charge no matter what the circumstances: warranty service or regular service.

• Office Supplies/Other Supplies/Miscellaneous Supplies - Review invoices and determine that items used in the service department and/or body shop such as gloves, paper towels, wipes, glass cleaner, wheel weights, razor blades, or polish pads, etc. all were taxed when purchased. Office supplies all should be taxed upon purchase. Items bought at BJ’s or Costco used by everyone should be subject to tax.

• Advertising/computer subscriptions - General software and specialized service software should be subject to sales www.msada.org

tax. This is a highly specialized area and somewhat new and includes cloud services and subscriptions, such as Autotrader.com and other dealer online services that can be edited and/or modified for the dealership’s own situation.

• Lease/Rental bills - Sales tax must be charged on a monthly basis for all computer hardware and for computer maintenance.

Prior to the initial appointment, you and your staff should perform a self-audit with respect to the items listed above and determine before the examination begins where your dealership might have some exposure.

The initial appointment is a lengthy meeting between the DOR agent, his/her manager, your controller, and, in most cases, your CPA. Both parties will agree upon a test period, and the agent will go through the information document request and an explanation of the sampling procedures he/she will use.

The agent will conduct his/her examination of the records and other information at the dealership for a few days at a time for a period of anywhere from a six to nine months. The agent will provide a report at the end of the examination, and the taxpayer and its CPA are given ample opportunity to dispute and negotiate the results.

In order to avoid or minimize any potential sales and use tax assessments, you can review your current procedures and exposure with respect to the above areas.

It is important that you perform a self-audit of the above areas and take the necessary precautions to become sales and use tax compliant prior to becoming notified of an audit. Accordingly, you would be much more prepared and ready if notified by the Massachusetts Department of Revenue of an Audit Appointment Letter. t Lauren Carnes, CPA, MST is a Principal at O’Connor & Drew. She can be reached at lcarnes@ocd.com.

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COVER STORY

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Facing the Unknown

“

Dealers have an opportunity here to increase their future customer base by introducing present-day customers to technology incrementally, so they will be ready and interested in autonomous technology as it is released.

”

–Hillary Abraham, MIT AgeLAb JUNE 2017

Regulation and liability questions dominate the self-driving car landscape in Massachusetts

By Catherine MacDonald and Tom Nash The lanes have changed in the year since Massachusetts Auto Dealer took the pulse of the emerging autonomous vehicle industry in the Commonwealth. As start-ups continue to dominate the discussion of new technology and testing in Massachusetts, traditional manufacturers have instead used our State House as a proving ground for their own turf battles.

As companies such as NuTonomy put rubber on the road in prepara-

Massachusetts Auto Dealer www.msada.org

MSADA MSADA tion for a full-scale rollout in the next few years, we are left with more questions than answers from the established old guard manufacturers. As companies such as Ford promise fully autonomous vehicles by 2021, what may be missing is the equivalent action to match the hype.

Regulation, Regulation, Regulation Whether in the media, on Beacon Hill or among industry experts, how autonomous vehicles would be regulated remains the chief question before all others. In April, the vehicle manufacturers, Uber, and Lyft testified in a legislative public hearing to gauge where industry stood on Beacon Hill regulating the industry.

“From Google to Uber and beyond, every manufacturer and transportation company essentially testified that they did not want any regulation,” MSADA Executive Vice President Robert O’Koniewski said. “The general sense is that manufacturers don’t want to be regulated any more than they would be at the federal level. They don’t want a mish-mash of 50 different policies around the country.”

As of this writing, the only regulation statewide comes via Governor Baker’s executive order that allows autonomous vehicle testing in some areas. “We don’t have a crystal ball,” O’Koniewski added, “but it is apparent that some sort of state regulation is coming.”

Regulation Issue: Liability MSADA sees liability as one of the lingering questions behind this new technology: Will the manufacturer be on the hook if an incident occurs when a vehicle occupant does not

control their own vehicle? In Sweden, Volvo has issued test autonomous vehicles with the promise that they accept all liability. Is that realistic as a model?

“Given the large number of manufacturer recalls in these past few years, there are many unknowns when it comes to how an OEM will handle everything from a fender bender on a street corner in Cambridge to a large scale product issue,” O’Koniewski said. “If these vehicles have brakes that get recalled, are manufacturers going to allow people to ride around in them or shut them off remotely? We simply do not

know yet.”

Beyond recalls, O’Koniewski notes that general warranty and lemon laws will also need to come under scrutiny. “As an Association, we need to make sure that whatever happens, dealers do not face more responsibility than they already bear for the mistakes or issues an OEM encounters.”

Regulation Issue: Carbon versus Electric While manufacturers work against the “patchwork” of 50 different regulatory systems that could limit product features, Massachusetts will likely continue the push toward all-electric vehicles.

We know that consumers, our customers, presently are not in line for what Massachusetts officials insist they want,” MSADA staff attorney Peter Brennan says of EVs. “While fuel efficiency is increasing across the board generally, we may see states like California and Massachusetts backing manufacturers into a corner by insisting that autonomous vehicles also be all-electric.” continued on next page www.msada.org

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FACING THE UNKNOWN “It is too early to see how dealers will be affected by these swirling controversies, but we know as an Association that protecting our franchise law is paramount in all these discussions.”

Robert O’Koniewski, MSADA Executive Vice President

Regulation Issue: Manufacturer Competition Around the time of the April hearing, General Motors pushed for a bill at the State House that would limit AV manufacturing to traditional OEMs, pushing out competition from companies such as Google and Uber.

While the bill quickly achieved notoriety, and likely won’t move forward in its current form, O’Koniewski notes that OEMs have proven willing to use the “patchwork” of state legislatures to their advantage when they can, such as states’ franchise laws. “GM was attempting to muscle out competition in one state — where we have important innovation happening — because it is perceived to be easier than working on national legislation,” O’Koniewski said. “Going forward, we may see more attempts from OEMs to one-up each other on Beacon Hill. This issue is truly the Wild West right now.”

Ultimately, O’Koniewski said, the issue will remain that “technology is moving way faster than the regulations, which makes people nervous, especially legislators. You don’t want to over regulate and stifle innovation, but you don’t want to let manufacturers do whatever they want.”

Do consumers want this technology?

While manufacturers continue to make varying promises about autonomous availability, the Massachusetts Institute of Technology’s yearly attitude survey puts the brakes on the idea that consumers are universally ready to let their hands off the wheel. The MIT AgeLab study found that nearly half of 3,000 people surveyed said they would never purchase a vehicle that was completely autonomous.

Even more interesting: Overall interest has declined from the previous year among younger survey takers. MIT’s Hillary Abraham said that the results show the space dealers have to work in.

“If the declining interest in automation we saw this year continues, dealers may have a limited customer base for individuals willing to purchase autonomous technology if and when it JUNE 2017

Massachusetts Auto Dealer www.msada.org

rolls out,” Abraham said. “Dealers have an opportunity here to increase their future customer base by introducing present-day customers to technology incrementally, so they will be ready and interested in autonomous technology as it is released.”

MSADA will need more comprehensive education on systems at vehicle delivery in order to ensure they know how to use systems properly.”

The long list of unknowns will make it difficult to make predictions about where dealers fit into the discussion, but O’Koniewski maintains the Association’s first priority is making sure franchise laws and dealers’ customers are safeguarded.

“Consumers are going to need dealers more than ever as technology evolves beyond even the science fiction dreamers of yesteryear,” O’Koniewski said. “As a nationwide technology leader, it makes sense that Massachusetts will be at the top of the pack in testing autonomous vehiChris Connolly, Jr. cle advancements. And MSADA President while it is too early to see how dealers will be affected by these swirling controversies, we know as an Association that protecting our franchise law is paramount in all these discussions.” t

“Dealers will be relied on more than ever among some car buyers to show them the ropes when they buy a car with autonomous systems.”

The Road Ahead

While the obvious conclusion to the MIT study might be for manufacturers to put the brakes on rushing fully autonomous vehicles to market, manufacturers that have committed to aggressive timelines will likely not change course. Ford may be taking a middle path — they are now saying that its 2021 target date is geared toward vehicles meant for ride hailing services.

MIT’s Abraham noted that these shifting sands will almost certainly mean some sort of shakeup to the traditional dealer model. “These technologies are extremely different from anything dealers have had to sell before,” she said. “Therefore, the sales/delivery model may need to change in order to adapt to the specific needs of driver assistance systems. Drivers are more likely to need extended exposure to systems prior to sales in order to realize the potential benefits, and they www.msada.org

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NEWS from the NEWS from Around Around the Horn Horn from Around

NEWS the Horn

WEYMOUTH

ACTON

Former Air Station Hosts ‘VW Graveyard’

Drive Green Program Gets More Ink

A former air station awaiting redevelopment as housing has been serving as host to hundreds of Volkswagen vehicles bought back by the company following its Clean Air Act scandal.

Weymouth Mayor Robert Hedlund is not happy about the use of the South Weymouth Naval Air Station -- telling The Patriot Ledger that the vehicles being stored on the site point to weaknesses in the town’s zoning laws.

The Drive Green initiative, launched by MassEnergy in conjunction with several Massachusetts dealerships, saw more coverage this past month as the Town of Acton prepares infrastructure to take on more electric vehicles.

Green Acton President Debra Simes told The Beacon that the

Drive Green program should help kickstart sales in the region.

“The price point is kind of high. Not everyone can afford it.

But there are always early adopters, and it’s certainly starting to happen,” Simes told the paper.

“The Drive Green program is a terrific opportunity,” she added. “It is time-limited because the contracts Drive Green has with dealerships do expire at some point. If people are thinking about it at all, this is probably the time to do it.”

RAYNHAM

“Our vehicle-storage bylaws are almost nonexistent,” Hedlund said. “It is ironic timing because we are undergoing a review of our zoning, and used-car dealerships are licensed in a way unique to Weymouth compared to almost every town in the commonwealth.”

The company buying back the vehicles says the location is temporary. Meanwhile, a three-minute aerial drone video of the site reveals at least one measure of how far-reaching the 400,000-vehicle buyback goes.

The drone video is available at this link: https://www.youtube.com/watch?v=vxjM7pTknHU&feature=youtu.be.

JUNE 2017

Massachusetts Auto Dealer www.msada.org

Honda Dealership VP Quoted in The New York Times Silko Honda Vice President Adam Silverleib was quoted in a recent New York Times story outlining the state of the U.S. auto industry following the January presidential inauguration.

Amid flagging sales, Silverleib told the paper that “the market is tapped out. It is no longer expanding at the rate the manufacturers thought it would.”

He later added that the reported improved consumer outlook “has not translated into what’s happening in dealerships where we’re trying to sell cars.”

The full story is available at www.nytimes.com.

MSADA EVERETT

Herb Chambers Mulls Expansion City officials have told The Everett Independent that Herb Chambers is looking to expand across the border from his Somerville headquarters.

Officials told the paper that Chambers is eyeing a current Best Buy site for a potential BMW dealership.

City Councilor Mike McLaughlin said he had been made aware of the plan and struck a positive note.

“It’s something to consider, and I’m going to watch for more information as it becomes available,” he said. “When a company of the caliber of Herb Chambers comes in, you can’t turn a blind eye. That area of my district is really booming, and so people like Herb Chambers are taking notice. I can’t wait to find out more as the process continues.”

MEDFORD

Microburst Damages Nissan Dealership Lot

BOSTON

Ciccolo Celebrates 60 Years with Volvo Ray Ciccolo, right, dealer principal of Boston Volvo Village, received an award for 60 years with Volvo from Greg Hembrough, vice president of Volvo Car USA’s northeast region in late May. Ciccolo will help host the Swedish Car Day at the Larz Anderson Museum in August.

A sudden “microburst” thunderstorm that struck over the Boston area in June saw a tree smash through a windshield at Colonial Nissan.

The damage saw widespread local media coverage as news crews came to document the storm, which cut power to thousands in the Medford-Somerville area.

No injuries were reported at the dealership. www.msada.org

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Around the Horn NEWS fromSERVICES DEALER

MSADA

BOSTON

Ciccolo Heralds Arrival of Throwback V90 The boxy Volvos that most consumers and Volvo lovers have long associated with the manufacturer will be making a return this summer with the release of the new V90.

A recent Bloomberg online story recounted Americans’ love affair with the iconic wagons that had since faded away in a market driven by crossovers and more luxury oriented vehicles.

Boston dealer Ray Ciccolo, who just celebrated 60 years with the company, explained the comeback to Bloomberg.

“It has been the biggest part of our business” Ciccolo told the site. “Over the years, we have at times struggled selling the sedan because the wagon was so popular. It is a very practical vehicle.”

The new wagon splits the difference between the more rounded curves consumers look for now and a throwback to the classic model. Ciccolo told Bloomberg that he expects Volvo loyalists who have been left cold by other luxury market offerings to be sold on the updated vehicle.

“They are bought by people that can afford a lot more,” Ciccolo added. “But they’re not ostentatious.”

JUNE 2017

Massachusetts Auto Dealer www.msada.org

The new model will join its mid-size V60 and V60 Cross Country in an expanded wagon lineup, even though those earlier models made up only 7.5% percent of the brand’s sales in 2016. Bloomberg also spoke to Volvo wagon enthusiast Dick Anderson, a Massachusetts resident who has owned 15 of the vehicles over the past 25 years.

“I think it is the versatility, the driveability, and there is some eco-friendliness to it,” Anderson told Bloomberg. “I think it says you are a thinking person. You think about safety. You think about value for your dollar, and you’re willing to spend for quality.”

MSADA BOSTON

Chevrolet Bolt Enjoys High Sales Figures The Chevrolet Bolt had its best sales month ever in May, with 1,566 sales. Analysts at The Drive and elsewhere noted those numbers are favorable for a niche car that is only sold in 14 states at the moment; for example, it is more than the 1,083 combined sales of the Subaru BRZ and Toyota 86 across all 50 states in April.

Chevy also sold 1,292 Bolts in April, more than the Nissan Leaf’s

1,063 units and the Tesla Model S’s 1,200.

The all-electric Bolt is also rapidly catching up to its hybrid cousin, the Volt, which sold 1,807 cars in April. Again, these numbers are impressive, given the Bolt’s limited distribution.

Part of the reason for this sales increase between April and May is that, according to Green Car Reports, as of April, the Bolt was only available in eight states—California, Oregon, Massachusetts, Maryland, Virginia, New York, New Jersey, and Washington. The Bolt began selling in the rest of New England and Colorado in May. Pent-up demand in these states may account for the increase in sales numbers.

Chevy plans to make the Bolt available in all 50 states in September.

www.msada.org

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Sound Off

MSADA MSADA

Airport Advertising

A powerful must-have medium for car dealership

By Colette A.M. Phillips

it’s FREE to the end user with a high degree of ROI! 2) Makes your brand memorable • Reinforces your campaign in the minds of consumers People are spending less and less time at home. Out-ofthrough new media, and it has a strong carry-over effect that home advertising has become the more viable option for will strengthen brand awareness. reaching the masses. It markets to consumers while they are • Provides a continuous, 24/7 presence. “on the go” in public spaces, waiting in line, or in transit. A • Establishes a big brand feel even for a smaller dealership. recent Nielsen study showed forty percent of shoppers recalled • 92% of business travelers said they would respond to an airthat they notice out of home ads 30 minutes prior to making a port advertisement, and 53% said they would visit an adverpurchase – which is higher than any other media. tiser’s website after seeing an ad.

Airports, specifically, are a hub for 3) Customizable content. You can place upscale, sophisticated shoppers. Frequent your ad in five different terminals for as air flyers are the “cream of the crop” target Exclusive 15% little as $5,000 per four-week period or in audience, according to a study by Arbitron Discount offered to one terminal where you feel it will have Airport Advertising.

The biggest challenge facing retailers MSADA Members the most impact. Plus, you can choose when you want to advertise (a particular and car dealerships today is how to drive holiday week or slow month). traffic to their establishments. Effective advertising methods vary among different types of businesses 4) Better quality, lower price. With new technology, digital and industries. Businesses looking to modernize the advertising advertising is giving higher resolution and greater opportunity of their products and services must be forward-thinking. In to ad repetition, therefore costing advertisers less for more today’s fragmented and disruptive media environment, car impressions. dealerships and retailers can no longer afford to overlook airport advertising, which has become accessible and cost effective, Quick tips to get the most out of your particularly for Massachusetts car dealerships of all sizes. advertising investment As advertising evolves and expands technologically, so • Repetition brings brand recognition and fosters brand credibility. are consumers’ expectations. Consumers are demanding • Ads with fewer words and a unique design are more memmore of advertisers. Airport advertising gives advertisers the orable. advantage by allowing them to leverage new platforms such • Location, location, location. Ad placement can make or as digital interactive screens as well as on-sight displays and break the success of an advertisement. promotions.

Car dealerships can stay on top of the marketing game Whether your budget is $5,000 or $500,000, here are some through airport advertising. They can accurately capture their clear advantages to implementing airport advertising in your target demographic to maximize revenue. This is a simple marketing strategy: way for a company to effectively strategize toward the future.

1) You can’t miss it!

To view opportunities at Boston Logan and see how other • No channel surfing, ad-blocking or flipping past advertising local companies are taking advantage of this medium, go as with traditional media like television and web ads. to www.airportadcpc.com. A 15% discount is available for • Travelers spend a significant amount of dwell time in the MSADA members. t airport, and this makes for high frequency interaction with consumers.

Colette A. M. Phillips is President and CEO of • According to a Nielsen study, three out of four business and Colette Phillips Communications, a strategic marketing leisure travelers have reported noticing digital advertising communications company that has consulted with retailers. at airports The company is a strategic partner of JC Decaux, the • Airport advertising can achieve sustained awareness of an exclusive advertising agency for Logan International Airport. advertisement and reach markets no other medium can, plus

Have an opinion you want to share? Email rokoniewski@msada.org.

JUNE 2017

Massachusetts Auto Dealer www.msada.org

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MSADA

Legal

By Joseph W. Ambash and Jeffrey A. Fritz

How Will the Amended CORI Regulations Affect Your Dealership?

Recent amendments to the regulations governing the state’s Criminal Offender Record Information (CORI) system have altered employer responsibilities and obligations when it comes to conducting criminal background checks on employees.

While none of these regulations will have a drastic effect on your business, there are some key changes you should keep in mind when running criminal background checks on potential or current employees and as you revise your employee handbooks.

CORI is criminal background information which includes arrest records, criminal pre-trial proceedings and hearings, records of convictions, and records of incarceration and/or rehabilitation. The new regulations clarify that the CORI excludes criminal information held by courts or other administrative bodies. For you, this means that any information you obtain directly from state or federal courts is not CORI and, therefore, is not subject to the CORI disclosure and acknowledgement rules. Also excluded from the definition of CORI is information obtained relating to a criminal proceeding initiated against a person before they turned 18, unless the person was tried as an adult.

The Definition of “Employee” Has Changed Under the new regulations, the definition of “employee” is expanded to include subcontractors, vendors, and contractors, among others. Dealerships now have the authority to run criminal background checks on these individuals, as well as their traditional employees and job applicants.

iCORI Agency Agreement Dealerships who wish to use the interactive CORI (iCORI) system on an ongoing basis must sign an agreement prior to obtaining records from the system. This agreement states that you will: (1) comply with CORI laws and regulations; (2) maintain an updated “need to know” list of peo-

ple who will be accessing the system on a regular basis and provide all staff with a “need to know” CORI training materials; (3) confirm that you will only request an authorized level of CORI access; and (4) acknowledge that you may be liable for violations of the rules and regulations.

Your “need to know” list of staff who will access iCORI must be updated every six months, at a minimum, and sent to the Department of Criminal Justice Information Services (DCJIS).

CORI Acknowledgement Forms, Notification, and Storage The regulations require a number of changes relating to the collection, use, and destruction of CORI acknowledgment forms along with a reduction in the number of requests for consent of background checks you have to obtain. For example, you may now collect CORI acknowledgment forms electronically and as part of any electronic job application you currently utilize. The regulations also require that you continue verifying the identity of individuals by viewing a form of government-issued identification.

Employers now may access CORI for up to one year after obtaining consent from the employee to access their CORI. The new rule allows you to access CORI as many times as you want within one year without the need for additional consent or notification.

You may also store CORI information on the Cloud, provided that you have a written agreement with your cloud provider ensuring that the data is encrypted and password protected. Finally, you may not maintain CORI records for more than seven years after the employee’s last day of employment or the date of the final decision not to hire the applicant. Dealerships are advised to speak with their attorneys to ensure that their CORI acknowledgement forms are updated to incorporate these and other changes required by the new regulations. www.msada.org

Obligations Relating to Potential Adverse Actions When considering adverse action against an employee because of information in a CORI report, you are required to provide the employee with specific information from the report that is the basis for the potential adverse action, along with the source of the information. This is the case even when information is obtained from sources other than iCORI. As a reminder, if an employer intends to base the adverse action on CORI information, the employer is also required to provide information from DCJIS regarding how to correct inaccurate CORI records. You are required to provide the individual with an opportunity to dispute the accuracy of the information. And, of course, you should (and must) document all steps taken to comply with the law.

Next Steps As with any of the recent changes to state law and regulations, now is an opportune time to review your handbooks and other employment policies. Dealerships should review their CORI policies immediately, as well as their pre-adverse action notifications, if any, and discuss the needed changes with their attorney to ensure compliance and avoid costly penalties. t

Joe Ambash is the Managing Partner and Jeff Fritz is a partner at Fisher Phillips, LLP, a national labor and employment firm representing hundreds of dealerships in Massachusetts and nationally. They may be reached at (617) 722-0044.

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26 MAY 2017

JUNE 2017

Massachusetts Auto Dealer www.msada.org

MSADA

NADA MARKET BEAT

JANUARY 2016

www.msada.org

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TRUCK CORNER AUTO OUTLOOK

MSADA

Now is the Time to Repeal the Federal Excise Tax

By Steve Parker

Baltimore Potomac Truck Centers ATD Chairman Steve Parker is chairman of ATD, a division of NADA, in Tysons Corner, Virginia, which represents 1,800 heavy- and medium-duty truck dealerships. He is president of Baltimore Potomac Truck Centers in Linthicum, Maryland, which operates five fullservice commercial truck dealership locations with

Mack, Volvo, and Hino Trucks franchises in Maryland and Virginia.

JUNE 2017

Tax reform and spurring economic growth are at the top of the agenda on Capitol Hill. But when it comes to a harmful tax in the commercial truck retail market, there is none greater than the federal excise tax. This year, with the political climate ripe for tax reform and an infrastructure bill, ATD is aggressively pursuing a measure to repeal the FET that is advancing on Capitol Hill.

The FET and NADA turned 100 years old this year.

The FET originally was imposed in 1917 to help defray the cost of World War I. This tax on most new heavy-duty trucks, tractors, and trailers has grown from 3%, when it was incorporated into the Highway Trust Fund in 1955, to 12% today. The problem is the tax has remained at 12% and is the highest excise tax Congress levies on a percentage basis. The FET routinely adds $12,000 to $22,000 on the price of a new heavy-duty truck, a difficult cost for truck purchasers nationwide. In the past, policymakers have offered proposals to further increase the FET. As truck dealers know, an increase in the FET would severely depress new heavy-duty truck sales and delay the deployment of cleaner, safer, and more fuel-efficient trucks.

This outdated tax also is essentially a tax on American jobs. Unlike light-duty vehicles, all heavy-duty trucks sold in the United States in 2016 were manufactured and assembled in North America. The FET hurts truck sales and inhibits job growth, directly affecting the 7.3 million Americans employed in the U.S. trucking industry. Additionally, the FET is a difficult and unclear tax to administer, and truck dealers spend considerable resources attempting to comply with complex IRS regulations associated with collecting the tax.

Last Congress, ATD supported H.R. 33, introduced

by Reps. Reid Ribble (R-Wisconsin) and Tim Walz (D-Minnesota), and S.R. 40, introduced by Sen. Cory Gardner (R-Colorado). Both concurrent resolutions put Congress on record as opposed to an increase in the FET. This year, ATD has decided to support new legislation to eliminate the FET altogether. Rep. Doug LaMalfa (R-California), a member of the House Transportation and Infrastructure Committee and a commercial driver license holder who has purchased and operated a heavy-duty truck, has indicated that he

Massachusetts Auto Dealer www.msada.org

will introduce an FET repeal bill in June.

On June 21-22, ATD held its Legislative Fly-In to garner support for this new legislation. Truck dealers across the nation took time away from their businesses to visit Capitol Hill to advocate for repeal of this tax. Forty-three truck dealers, including the ATD board, held meetings with more than 100 House and Senate members. One hundred years of this onerous and outdated tax is long enough.

This is not the first time Congress has considered eliminating this tax. In 1975, the Senate passed a repeal of the FET as part of a large tax-cut bill. The repeal of the FET was passed by a Democratic-led Senate to spur economic growth. Unfortunately, the FET repeal provision was removed from the final tax bill when the House and Senate worked out their differences between their separate bills.

It is time again for Congress to take a hard look at the FET and determine if this tax has outlived its usefulness. With tax reform legislation under consideration for the first time since 1986, this is a great opportunity to educate elected officials on how the FET negatively affects safety, the environment, and the trucking industry overall. Congress also needs to consider a new factor that policymakers did not have to contend with in 1917, 1955, and 1975: nearly $40,000 in increased regulatory costs added to a new truck due to new and recent federal emissions and fuel-economy mandates.

The federal government is adding a $40,000 cost to new heavy-duty trucks, and then levying a tax on the increased cost it created. This “insult to injury� will make it harder for small businesses to afford a new heavy-duty truck, which is a result no one wants. If our customers cannot purchase new trucks because of excessive taxes or burdensome regulations, the environmental and safety benefits of these new trucks will be nonexistent, as our customers will simply keep their old trucks longer.

It is time for the entire trucking industry - including truck manufacturers - to tell Washington that change is needed. The FET may have been a great idea 100 years ago, but this tax, coupled with new crushing federal regulations, hampers growth in the trucking industry and the American economy. t

NADA Update

By Don Sudbay

Walking the Halls of Power We are asking two pivotal questions: Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your

questions

and

concerns

(donsudbayjr@sudbay.com).

As we celebrate the beginning of Summer, it is time to take a little well-earned vacation and enjoy all that we labor for, day-in and day-out. Over at NADA, we have been busy making sure that we represent your interests as dealers at the highest levels of power. Below, you will see that our NADA Chairman, Mark Scarpelli, recently attended a White House meeting where numerous issues were discussed.

It is our privilege to continue to serve our dealer body in making sure we work toward a more stable, and fair, business environment. We at NADA are working 24/7 for you, and this recent meeting is hopefully a sign of change to come.

NADA Visits the White House

By Mark Scarpelli, NADA Chairman I recently had the profound privilege of joining fellow NADA leadership at the White House to meet with some of the officials who write the rules and regulations that impact our great industry.

Along with NADA President and CEO Peter Welch and others, I presented the viewpoint of America’s franchised auto dealers directly to Gary Cohn, director of the National Economic Council, and other senior staffers from the White House and the U.S. Treasury Department. We also had the distinguished privilege to meet briefly with Vice President Mike Pence. Presenting a united front, NADA had productive discussions with people who are working closely with the House and Senate leadership to draft a tax bill that will preserve the benefits of America’s auto dealerships.

I am happy to report that individuals at the highest levels of this administration are reaching out to the business community, and they are listening to those of us in the auto industry.

Based on our conversations, it’s clear that tax reform remains at the top of the agenda in Washington. And this will, we hope, give American businesses new opportunities that we haven’t seen in the past few years. NADA is analyzing tax reform though the eyes of both consumers and dealers.

1. Will tax reform stimulate consumer demand in the market?

2. Will tax reform reduce the cost of dealer capital so you can continue to drive your local economy?

It is important to note that it is still early in the tax writing process. The White House and Republican congressional leaders are trying to reach consensus on specific bill language over the summer. We have already seen some big issues emerge in the past few months, and NADA continues to tell the government that no matter what reform is set forth, American consumers should not be subjected to additional costs. Overall the discussions have been healthy, and we’ve covered the topics that matter most to you, including repealing the death tax; creating a lower rate for business income

“Our White House visit is testimony to the larger public discussion and NADA’s movement to educate others about the dealer business.” from pass-through entities; lowering overall rates; accelerating cost recovery; eliminating the AMT; and repealing the 12-percent federal excise tax on heavy-duty trucks.

The NADA leadership and I were proud to promote the benefits of the retail auto business and the fact that America’s dealerships are local, diverse and modern, and that they save people money and create jobs. We reminded leaders in Washington that the majority of us are small businesses, but together we are an economic powerhouse, with more than 18,000 stores across the nation. Our local businesses are planted firmly in our communities, so we provide career opportunities on Main Street, and contribute mightily to our local tax bases.

Our White House visit is testimony to the larger public discussion and NADA’s movement to educate others about the dealer business—whether the general public, policymakers, opinion leaders, journalists, OEM executives, or www.msada.org

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NADA Update other stakeholders throughout the auto industry.

During NADA’s 100th anniversary convention in January, I told thousands of attendees in New Orleans that I would serve as the gatekeeper for this industry. Above all, that means being the gatekeeper between Washington’s policies—well-intentioned or not—and your doors. I am happy to report that there are great opportunities knocking for us all.

NADA Commends House Passage of CHOICE Act; Urges Timely Senate Action NADA this past month praised the House of Representatives for passing H.R. 10, the Financial CHOICE Act, a comprehensive financial reform bill that includes significant and much-needed reforms to the Consumer Financial Protection Bureau (CFPB) and relief for consumers facing the prospect of higher costs for financing vehicle purchases.

The CHOICE Act, which passed the House by a 233-186 vote, includes a bipartisan provision that is virtually identical to H.R. 1737, an NADA-backed bill from the last Congress, which overwhelming passed the House by a vote of 332-96. This provision would nullify the CFPB’s guidance on indirect auto financing, which attempted to eliminate a dealer’s ability to discount credit in the showroom. H.R. 10 also requires the Bureau to: provide public notice and comment before issuing any additional auto-financing guidance; make publicly available all studies, data, methodologies or other information relied upon to produce the guidance; and study the costs and impacts of the guidance. The CHOICE Act also brings the CFPB under the regular congressional appropriations process for the first time, which is another reform NADA has long supported.

“Access to affordable credit is essential to customers and their dealers,” said NADA President and CEO Peter Welch.

“Chairman Hensarling, members of the House Financial Services Committee, and the Members of Congress who supported H.R. 10 and worked to include these vital consumer protections should be commended for their efforts to keep auto financing affordable and available to consumers everywhere. I look forward to the Senate taking timely actions to help cement these consumer protections into law.”

“America’s franchised new-car dealers have always been on the side of our customers, which is why we have so strenuously opposed the CFPB’s anti-consumer guidance that would have raised the cost of car and truck loans, and pushed otherwise-creditworthy customers out of the auto credit market altogether,” said NADA Chairman Mark Scarpelli. “And we will continue to be on the side of our customers by urging Congress to get this legislation across the finish line, and by continuing to promote the voluntary NADA/NAMAD/AIADA Fair Credit Compliance Program

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MSADA that effectively manages fair-credit risk while preserving discounts on credit for consumers.”

Light Trucks Account for 63% of New-Vehicle Sales through May Sales of new crossovers, SUVs and pickup trucks continued to gain market share through the first five months of 2017, NADA reports in the May edition of Market Beat.

“While May traditionally is a good month for selling cars, light-vehicle sales came in below expectations,” said NADA Chief Economist Steven Szakaly. “The bright spot is the light-truck segment, which continues to grow market share and has comprised 62.7% of sales so far this year.”

Incentives offered during the Memorial Day weekend did not boost demand, which resulted in a seasonally adjusted annual rate (SAAR) of 16.58 million units in May. Year-todate, the SAAR is just shy of 17 million units, he added.

“The industry remains saddled with higher-than-normal inventory, particularly in the small- and mid-size car segments,” Szakaly added. “We expect incentives to continue rising the rest of the year, as manufacturers battle for market share against a backdrop of declining overall volume.”

Overall, NADA’s sales forecast remains unchanged at 17.1 million new cars and light trucks in 2017.

NADA Launches New Digital Collection of Archives As part of its 100th anniversary, NADA has partnered with the Hagley Museum and Library, a Smithsonian affiliate, to create a digital collection of historic publications, press releases, photographs, video, and other collateral.

The NADA digital collection at Hagley began with a scanning project supported by NADA in 2014. Since then, Hagley has digitized and made available more than 2,600 publications and 600 videos.

The publications include periodicals and newsletters like AutoExec, NADA Magazine, Cars & Trucks, and NADA Bulletin. Other documents in the collection comprise material related to the annual NADA convention, now known as the NADA Show.

Past NADA conventions make up much of the video material available in the archive. Material is also available for the American Truck Dealers (ATD) division of NADA. The NADA archive offers access to a significant resource on the study of automobile culture in America and provides a nuanced historical view of the thousands of dealerships that have played a vital role in local economies of small towns and big cities over the last century.

The archive is available here: http://digital.hagley.org/ nada. t

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