Tracking legal, legislative, and regulatory developments impacting the racing and performance industry.

PRI’s Washington, DC-based legal and advocacy teams work continuously to protect and support motorsports venues, sanctioning bodies, and businesses around the nation. We are tracking two vital initiatives this month, including a response to the US Environmental Protection Agency’s (EPA) new emissions standards, and a proposed sales tax credit for California manufacturers.

EPA’s New Emissions Standards & Impact On Small Business

The EPA has proposed new federal emissions standards intended to dramatically increase sales of electric vehicles (EVs), which would be achieved by reducing multi-pollutant emissions from new light-duty and medium-duty (8,501 to 14,000 lbs.) vehicles for model years 2027 to 2032. 

The EPA maintains its proposal would reduce average fleet GHG levels by 56%, resulting in an industry-wide target for light-duty vehicles of 82 grams per mile of CO2. As a result, the Biden Administration and the EPA estimate that, by 2032, two out of three new vehicles sold in the US would be EVs under its proposed standards. In addition, the proposed standards eliminate an exemption provided to low-volume car manufacturers (those that produce fewer than 5,000 vehicles a year) and lowers the allowable emissions from internal combustion engine (ICE)-powered vehicles over the course of five years by about 13% each year.

PRI and SEMA have significant concerns about the proposed rule. The proposal, as drafted, is essentially the knock-out punch to the ICE technologies upon which the racing industry has built its foundation. The proposal is not technology-neutral, as the EPA and White House suggest. Ultimately, if these regulations are implemented, it will likely lead to more government subsidies (such as tax breaks, funding, and incentives) for large automakers to manufacture EVs, and for consumers to purchase them.

“Government policies should support the work of small business innovators—those that employ millions of Americans—by letting the market and innovation drive solutions to the environmental challenges we all seek to solve. Given the subsidies in place for EV purchases and production, EVs are the de facto choice to achieve climate goals. Other options, such as hydrogen, new synthetic fuels, and multiple renewables, do not enjoy a level playing field of subsidies,” said Karen Bailey-Chapman, senior vice president, PRI and SEMA Public & Government Affairs. “A dozen states have recently introduced or passed legislation or resolutions affirming support for the internal combustion engine and for government to remain technology-neutral in the debate to reduce automotive emissions. The federal government should follow the states’ lead.”

Small businesses will be most vulnerable to the disruptions caused by a seismic shift to battery-electric vehicles. According to the most recent Census Bureau tally of the almost 1,200 auto engine and transmission parts suppliers in the US, more than 60% had 20 or fewer employees. These companies often make specialized components, operate on tight margins, and rely on long-term contracts.  

“Large automakers are losing billions a year in their electric-vehicle programs, despite the massive financial infusion of taxpayer dollars they receive from the government and subsidies to purchase EVs. If the large manufacturers are struggling, how are small businesses expected to survive?” said Bailey-Chapman.

PRI will update readers on how to file public comments through our action centers when available. For the latest information, visit performanceracing.com. To submit specific questions or comments, contact Eric Snyder at erics@sema.org.

Voice Your Support: CA Manufacturing Equipment Sales Tax Credit

California Assembly Member Tim Grayson (D-Concord) has reintroduced PRI- and SEMA-supported legislation (AB 52) that would provide businesses with a state tax credit equal to what they pay in local sales tax for qualified manufacturing equipment. If enacted, AB 52 would effectively eliminate the sales tax on most manufacturing equipment purchases. 

Manufacturing is a vital industry in California, accounting for over 10% of the state’s GDP and employing nearly 8% of the state’s workforce. A total of 38 states already offer sales tax exemptions on manufacturing equipment and R&D, and by failing to do the same, California risks losing businesses to these states that can provide a more attractive business environment. Alternatively, providing incentives for manufacturing and R&D can help the state attract new businesses and create additional jobs.   

At press time, the California Legislature had heard testimony from Assembly Member Grayson and key stakeholders, including members from a coalition of California manufacturers. 

The bill was set to be voted on May 1. PRI will continue to update readers on the bill’s status. For the latest available information, visit performanceracing.com. For specific questions or comments, contact Christian Robinson at christianr@sema.org.