Dealers Beware – Succession Pitfalls and Ways to Avoid Them

Business Law Notes

Special to Our Automobile Friends

Spring 2007 Edition

 

DEALERS BEWARE – SUCCESSION PITFALLS AND WAYS TO AVOID THEM

By Richard J. Vinegar

All franchise automobile dealers, located both in and out of North Carolina, should be aware that some factories and distributors are not currently honoring a dealer’s succession choice or nomination when the dealer is given a new franchise agreement. There are, however, ways to avoid these succession issues and protect your dealership’s long-term future.

Many dealers have “term agreements” or franchise agreements that run for a specified length of time. Near the expiration of that term, the factory revises the contract and then sends the dealer a new or renewal agreement, also for a specific term. The new or renewal franchise agreements used by some factories do not recognize or accept the successor previously appointed by the dealer. Moreover, these factories often do not notify the dealer that, under the dealer’s new franchise agreement, the dealer has no named successor.

Although NCADA-sponsored legislation now pending before the North Carolina General Assembly might alleviate this problem, the better and safer practice for all dealers is to contact their factory in advance of signing any new or renewal franchise agreement. Dealers should make sure that their chosen successor is formally named as successor in the new or renewal franchise agreement. This is most often accomplished via a “successor addendum” added to the back of the franchise agreement.

IRS & HYBRID MOTOR VEHICLE CREDIT NEWS

Income Tax-Hybrid Motor Vehicle Credit: According to News Release IR-2007-95 (May 22, 2007), purchasers of qualified GM hybrid vehicles can continue to claim the full Section 30B credit of the following amounts:

  1. Chevrolet Silverado and GMC Sierra Hybrid 2WD for 2006 and 2007: $250;
  2. Chevrolet Silverado and GMC Sierra Hybrid 4WD for 2006 and 2007: $650;
  3. Saturn Vue Green Line for 2007: $650; and
  4. Saturn Aura Hybrid for 2007: $1 ,300.
  5. News Release IR-2007- 97 adds that purchasers of the 2007 Altima Hybrid, which is Nissan’s only certified hybrid vehicle, can continue claiming a $2,350 credit.

On the other hand, News Release ffi-2007-96 notes that purchasers of qualified Toyota and Lexus models are limited to a reduced credit of the following amount for the period from 4/1/07 through 9/30/07:

  1. Toyota Prius for 2005,2006, and 2007: $787.50;
  2. Toyota Highlander 2WD and 4WD for 2006 and 2007: $650;
  3. Toyota Camry Hybrid for 2007: $650;
  4. Lexus RX 400h 2WD and 4WD for 2006 and 2007: $550; and
  5. Lexus GS450h for 2007: $387.50.

Income Tax-Hybrid Motor Vehicle Credit: The IRS provided interim guidance, pending the issuance of regulations, on the procedures a vehicle manufacturer or domestic distributor (in the case of a foreign manufacturer) should follow to certify that a heavy-duty hybrid vehicle of a particular make, model, and model year qualifies for the Section 30B hybrid motor vehicle credit, as well as the amount of the allowable credit for that vehicle. Notice 2007-46, 2007-23 IRB .

 

About our Author:

 


Richard J. Vinegar
graduated from Duke University, magna cum laude, 1976, and from Cornell University School of Law , 1979, He served as research assistant to the Han, Burley B. Mitchell, Jr., and the Han. Hugh A. Wells, N.C. Court of Appeals, 1979 – 1980. His practice concentrates on automobile dealership law, contracts, employment law, appellate practice and franchising.

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