Smog Fee Refund Stalled by Car Dealers Dispute

SACRAMENTO — At Department of Motor Vehicles offices throughout the state, 223,000 applications are stacked up from Californians eager to claim $300 refunds for a “smog impact” fee that was declared illegal five months ago.

And motorists are asking when their checks will arrive.

“It is a question we are familiar with and our answer is the same: We will act as expeditiously as we can, once the legislation is approved,” DMV spokesman Evan Nossoff said Friday.

DMV officials have been offering that explanation for weeks while a two-bill package sought by Gov. Gray Davis to get the $677-million refund program rolling has been stalled in a dispute with car dealers about whether they or their customers are entitled to some of the rebates.

But the bills’ authors, Assemblyman Alan Lowenthal and state Sen. Betty Karnette, both Long Beach Democrats, say a definitive answer may soon be on its way because the impasse appears ready to break.

“We had held back because we wanted to respond to the car dealers’ issues,” Lowenthal said. “We’ve done that.”

Karnette said working out the details of the mammoth refund was “a little more complicated than what we first thought.”

“We’re close to working out the final details of an agreement. We’re 98% of the way,” said Davis spokeswoman Hilary McLean. “The governor is eager to get this done.”

Representatives of car dealers’ associations did not return calls for comment, but Karnette said she understood that the dealers have agreed to withdraw their opposition to the bill.

The refund issue was handed to Davis and the Legislature in October when the state 3rd District Court of Appeal struck down as unconstitutional California’s “smog impact” fee of $300. Since 1990, the fee had been paid on about 1.7 million used cars and trucks from out of state when they were registered in California.

The fee was enacted by the Legislature and former Gov. George Deukmejian to help balance the state budget. Until recently, virtually none of it was spent for automobile-related clean air purposes.

Davis decided against appealing the ruling, ordered the DMV to quit collecting the funds and announced his support of legislation to refund the fees to qualified applicants.

Anticipating an onslaught of claims, the DMV posted refund applications on its Web site (https://www.dmv.ca.gov) and invited Californians to begin filing for refunds. The department also cautioned that payment would await the enactment of legislation.

“We’ve got 223,000 applications for refunds,” Nossoff said.

Hundreds of thousands more are anticipated because the legislation directs the DMV to search its records and notify motorists that they may file for refunds. The department then would “promptly” mail the refund, which would be exempt from state personal income taxes. The sum would also include interest.

Generally, the refunds will go to people who moved to California and registered their cars. However, some out-of-state vehicles were purchased by dealers for resale in California. In the vast majority of those cases, the fee was paid by customers when their vehicles were registered and was included as a line item in sales contracts, car dealers say. But in other transactions, they say, the fee was paid by dealers and included in the sales prices.

If the dealer paid the fee, they say, the refund should be made to the dealer. Dealer representatives also insisted that the legislation establish a procedure to resolve conflicting claims between customers and dealers.

Davis administration negotiators were wary, however, of making the DMV the arbiter of disputed claims, sources said.

Consequently, the proposed compromise would give the consumer the benefit of the doubt in disputes with dealers. If an agreement cannot be reached, the bill provides that the parties can take the issue to small claims court.