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Originally Posted by xlr8or
Part of the problem is people using services like Titles Unlimited to under report value when registering it in CA thereby cheating the state out of tax dollars. This is a big no-no.
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True, but the real issue why people used an out-of-state titling company was to avoid smog requirements.
Before SB100, there were only two ways to smog a kit car:
1. Smog by year of manufacture (ie: kit assembly completion)
2. Smog by year of block.
With the stoked 351 and 302 motors being the most popular, neither of these motors meet smog requirement for year of block (and most definitely not for year of manufacture). Same goes for those with 460 blocks. This left only 289's and 427/428's to use, and if you use one of these vintage blocks, then you can meet the smog requirements for year of block.
Since any vehicle in CA with model year 1975 and older is exempt from smog requirements, if one built a kit car with a non-smogable motor, then the common solution was to use an out-of-state title service to acquire a "1965" (or "1932") model year title. This is what TU provided for $200 - you sell your vehicle to TU (via a notarized Bill of Sale, where you state that you are selling to TU a "1965 Ford" and the dollar amount for which you are selling your vehicle to TU), and in turn, TU sells it right back to you for the same dollar amount. Being in Alabama, TU provides you with a "Bill of Sale" and an Alabama registration - when used together, these documents are legally acceptable by the CA DMV in order to "re-title" and register in CA. The CA DMV would change 8.x% as a "use tax" since you "purchased" an out-of-state vehicle; this total amount is based up on the dollar amount on the bill of sale from TU. This is where people were able to avoid paying high tax by putting a low dollar amount on the notarized bill of sale (selling the vehicle to TU).
That's how it worked. The "tax fraud" was actually a side "benefit" from the real goal, which was to acquire smog exemption by titling the new kit car with a model year of 1965, and therefore being smog exempt because all cars with model year 1975 and older are smog exempt.
In 2001, along come SB100 and now 500 lucky recipients can choose from three ways to smog their kit car:
1. Smog by year of manufacture (ie: kit assembly completion)
2. Smog by year of block.
3. Smog by year that the vehicle replicates.
Choice #3 above is what SB100 gives us, so that we can have our 1965 Cobra Replicas meet the smog requirements of a "real" 1965 Cobra, which in turn are minimal, so all is good for these 500 lucky recipients.
Another year later, we got SB1578 which removed the word "initial" from the titling process as described in SB100, in order to allow those with "incorrect" or out-of-state titles to be re-titled a SPCN and acquire a certificate of sequence to take advantage of #3 above.
Now, where the AG got involved was not only from a "tax fraud" point of view, but from a "perjury" point of view as well. Remember, when one fills out DMV forms to title a vehicle, one is doing so under "penalty of perjury". Well, with a "newly purchased 1965 Ford from TU", one would fill out the DMV forms to title a "1965 Ford" - this matches the bill of sale and registration from TU...right? However, this is fraudulent, since in reality, one has a recently built kit car, not a "1965 Ford". Even if your "1965 Ford" is legally titled from another state where they legally title kit cars this way, the CA DMV requires that your kit car be titled as a Specially Constructed Vehicle (which is what it is). And so, titling your kit car replica of Cobra as a "1965 Ford" is consider fraud and perjury, and potentially tax fraud can be found and persecuted as well. And committing fraud to avoid taxes and to avoid smog are both defined as felonies in CA.
Moving along, from the AG's investigation, the DMV began suspending titles for potentially illegally titled kit cars. The DMV forced the owners of these vehicles to prove the vehicle is a kit car, to make it smog compliant and to pay any/all back taxes and penalties. These actions cleared up the issues with the DMV, however the open issues (and evidence) of felony fraud and tax evasion where passed from the AG's office to the county DA's office, so that the DA can decide whether to criminally prosecute or not. The AG was not going to do this from Sacramento.
Moving forward, the CA Gov is looking at a bill (I don't recall the number) to give owners of fraudulently titled vehicles amnesty from criminal prosecution if they take the initiative to correct their vehicle's title. This can be seen as a relief for some, however if the volume projections hold true, there are clearly not enough SB100/1578 numbers to meet these needs. So, for these owners to correct their titles they will either take a chance to get a sequence number or make their vehicle smog compliant by year of build or year of block - for those with unsmoggable block, they may have to swap in a smoggable block.
Whew... That's enough for one post.
Last, I'm not debating whether all of this CA DMV stuff is right or wrong, or whether the CA DMV must accept kit car titles from other states, etc... I have no desire to argue these opinions. What I have written above is fact, not opinion. You don't have to like it, but it is what it is.
Regards,
Randy R...