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Office of the Attorney General
State of Maryland

*1 Opinion No. 92-020
June 24, 1992

VEHICLE LAWS--TAXATION--ENVIRONMENT--PREEMPTION--VALIDITY OF "GAS GUZZLER LAW"

Mr. W. Marshall Rickert 
Motor Vehicle Administrator 
6601 Ritchie Highway, N.E. 
Glen Burnie, Maryland 21062

Dear Mr. Rickert:

  You have asked for our opinion whether federal law preempts the Motor Vehicle Administration ("MVA") from enforcing certain provisions of the recently enacted Chapter 3 of the Laws of Maryland 1992 (First Special Session). These provisions, which were enacted as new §  13-818 of the Transportation Article ("TR" Article) and become effective on July 1, 1992, require an excise tax surcharge to be imposed on a buyer of a vehicle with a low fuel mileage rating, a tax credit to be given to a buyer of a vehicle with a high fuel mileage rating and a notice to be affixed to vehicles offered for sale telling consumers about the applicability of the surcharge or credit. By letter dated June 8, 1992, the Chief Counsel of the National Highway Traffic Safety Administration ("NHTSA") expressed NHTSA's view that TR §  13-818 is preempted in its entirety and may not be enforced.

  We do not agree with NHTSA's overall assessment, which we find to be too broad. While we share its conclusion that the consumer notice requirement in TR §  13-818(f) is preempted, we do not concede that the tax surcharge-tax credit aspect of the Maryland law is likewise preempted. In our view, Maryland and the other states are not barred from enacting important environmental legislation merely because the State law uses fuel economy numbers as a point of reference.

  Nevertheless, applying principles of Maryland law, we advise that the tax surcharge and tax credit provisions of TR §  13-818 should not now be enforced, because they are not severable from the invalid notice requirement in TR §  13-818(f). If the legal defect in the notice requirement is corrected in the future, the surcharge and credit provisions could then be applied, and we will defend the statute if it is challenged in court.

I

TR §  13-818

  The April Special Session of the General Assembly enacted a number of measures related to transportation funding, combined in Chapter 3. These measures included the tax mechanism summarized in TR §  13-818(b): "In conjunction with the tax imposed under §  13-809 of this Article, a fuel efficiency surcharge or fuel efficiency credit shall be imposed under this section based on the fuel economy rating of the model type of the passenger car."

  "[T]he tax imposed under §  13-809" refers to the vehicle excise tax. The term "fuel economy" is defined to have "the meaning stated in §  4064 of the Internal Revenue Code as determined and adjusted by the U.S. Environmental Protection Agency to account for the difference between controlled laboratory conditions and actual road driving." TR §  13-818(a)(3). Section 4064 of the Internal Revenue Code defines "fuel economy" as "the average number of miles traveled by an automobile per gallon of gasoline (or equivalent amount of other fuel) consumed as determined by the EPA Administrator...."

  *2 For passenger cars with a model year of 1993 or 1994, a surcharge of $100 is to be imposed if the car has a fuel economy rating that is less than 21 miles per gallon. TR §  13-818(c)(1)(i). For cars with a model year of 1995 or later, the fuel efficiency surcharge is computed by multiplying by $50 the "nearest whole number of miles per gallon that the fuel economy rating of the model type of the automobile is less than 27 miles per gallon." TR §  13- 818(c)(1)(ii)2. So, for example, the purchaser of a 1995 model with a fuel economy rating of 23 miles per gallon would pay $200 ((27-23) x $50). However, the surcharge for cars with a model year of 1995 or later may not exceed 1% of the purchase price of the car. TR §  13-818(c)(2).

  As an incentive for people to buy vehicles with a high fuel economy rating, the General Assembly provided a $50 credit against the excise tax paid for any passenger cars with a model year of 1993 or 1994 that have a fuel economy rating greater than 35 miles per gallon. TR §  13-818(c)(3)(ii). For cars with a model year of 1995 or later and with a fuel economy rating over 35 miles per gallon, the credit is computed by multiplying $50 by the number of miles per gallon that the fuel economy rating exceeds 35 miles per gallon. TR §  13-818(c)(3)(ii). The buyer of a 1995 model year car with a fuel economy rating of 38 miles per gallon, for example, would receive a $150 tax credit against the excise tax owed under TR §  13-809 ((38-35) x $50). As with the surcharge, though, the amount of the tax credit is limited to an amount not to exceed 1% of the purchase price of the car. TR §  13-818(c)(4).

  The law also requires a dealer to "prominently display on a vehicle offered for sale" notice to its customers indicating whether the car being purchased is subject to a surcharge or a tax credit. TR §  13-818(f). The customer is informed, generally, that the mileage or credit is based on the fuel economy rating, as that rating is determined by the Environmental Protection Agency. The MVA is to develop the exact form that will appear on vehicles, but the statute sets out the basic requirements. The notice is to begin as follows: 
    "For this vehicle, the fuel economy rating is _____. The fuel efficiency surcharge is _______ or the fuel efficiency credit is ________." 
The notice goes on to describe the manner in which the fuel economy rating is determined, the legislative requirements for a surcharge, and the legislative requirements for a credit.

  Finally, the law grants to the MVA authority to "adopt rules and regulations to implement and operate the fuel efficiency surcharge and credit program under this section." TR §  13-818(g).

II

Federal Cost Savings Act

  Subchapter V of the Motor Vehicle Information and Cost Savings Act, 15 U.S.C. § §  2001 through 2013 (the "Cost Savings Act"), establishes a comprehensive average fuel economy program. The Cost Savings Act, enacted as part of the 1975 Energy and Conservation Act, Pub.L. No. 94-163, 89 Stat. 90 (1975), was intended to bring "measured savings in consumption of energy by improving the efficiency of the cars wedrive." H.R. Rep. No. 94-340, 94th Cong., 1st Sess. 1 (1975), reprinted in 1975 U.S. Cong. & Admin.News 1762, 1763 (94th Cong. 1st Sess.).

  *3 Specifically, the Cost Savings Act authorizes the federal Secretary of Transportation to establish the average fuel economy standards for manufacturers of passenger automobiles. 15 U.S.C. §  2002(a)(4). "The term 'average fuel economy standard' means a performance standard which specifies a minimum level of average fuel economy which is applicable to a manufacturer in a model year." 15 U.S.C. §  2001(7). "The term 'fuel economy' means the average number of miles traveled by an automobile per gallon of gasoline (or equivalent amount of other fuel) consumed, as determined by the EPA Administrator in accordance with procedures established under section 2003(d) of this title." 15 U.S.C. §  2001(6). [FN1]

  The Cost Savings Act contains the following preemption provisions: 
    (a) Whenever an average fuel economy standard established under this subchapter is in effect, no State or political subdivision of a State shall have authority to adopt or enforce any law or regulation relating to fuel economy standards or average fuel economy standards applicable to automobiles covered by such Federal Standard. 
    (b) Whenever any requirement under section 2006 of this title is in effect with respect to any automobile, no State or political subdivision of a State shall have authority to adopt or enforce any law or regulation with respect to the disclosure of fuel economy of such automobile, or the fuel cost associated with the operation of such automobile, if such law or regulation is not identical with such requirement. 
15 U.S.C. §  2009. [FN2]

III

Preemption of the Notice Requirement

  Turning first to the notice requirement in TR §  13-818(f), we conclude that it is a law "with respect to the disclosure of fuel economy ... [that] is not identical with" the federal disclosure requirement. Accordingly, TR §  13-818(f) is preempted by 15 U.S.C. §  2009(b) and is unenforceable. [FN3]

  There can be no doubt that TR §  13-818(f) is a provision "with respect to the disclosure of fuel economy of [an] automobile...." It requires notice of a car's "fuel economy rating" and explains the method by which that rating was determined.

  Furthermore, TR §  13-818(b) is not "identical with" the federal requirement. Under 15 U.S.C. §  2006(a)(1)(A), automobile manufacturers are required to affix a label on each automobile indicating, among other things: 
    (i) the fuel economy of such automobile, 
    (ii) the estimated annual fuel cost associated with the operation of such automobile, and 
    (iii) the range of fuel economy of comparable automobiles (whether or not manufactured by such manufacturer), 
    as determined in accordance with rules of the EPA Administrator.... 
The "form and content" of this label is to be determined by the EPA Administrator. 15 U.S.C. §  2006(a)(3). EPA has in fact issued a regulation specifying in elaborate detail the content and appearance of the familiar window sticker with "gas mileage information." See 40 C.F.R. §  600.307-86 and Part 600, App. III.

  *4 The notice required by TR §  13-818(f) departs from the federal label. For example, the federal label shows separate "City MPG" and "Highway MPG" figures; TR §  13-818(f) mandates disclosure of a single "fuel economy rating." As NHTSA points out in its letter, these differing versions of information on the same topic--"fuel economy," defined by 15 U.S.C. §  2001(6) to mean miles per gallon as determined by EPA--potentially give rise to consumer confusion. Congress evidently sought to allay that risk by allowing states to use only the federal disclosure information if a state wishes to legislate with respect to the disclosure of "fuel economy," as defined in the Cost Savings Act.

  The General Assembly could correct the problem by amending TR §  13-818(f) to eliminate any reference to "fuel economy"--that is, a car's miles-per-gallon rating. Presumably consumers can be informed about the tax surcharge-tax credit mechanism in other ways. For example, the notice could refer to the fact that a surcharge is imposed "because this car's excessive use of energy harms the environment." Such a general disclosure, devoid of any reference to the car's miles-per-gallon rating, would not be one 'with respect to the disclosure of fuel economy" and would not be preempted by 15 U.S.C. §  2009(b). [FN4]

IV

Preemption of Tax Surcharge and Credit

  A second issue is whether the tax surcharge-tax credit mechanism in TR §  13-818 "relates to [federal] fuel economy standards or average fuel economy standards"and so is preempted under 15 U.S.C. §  2009(a).

  At the outset, we reject any suggestion that Maryland is generally barred from acting to encourage the purchase of fuel-efficient cars. The federal preemption provision speaks only of "fuel economy standards," which by definition concern only the miles per gallon attained by a car. See 15 U.S.C. §  2001(6). Thus, if the Maryland General Assembly used its tax power to shift consumer demand away from gas guzzlers toward fuel-efficient cars without reference to the federal fuel economy standards--by linking the tax surcharge and credit to factors like engine displacement and vehicle weight, for example, rather than miles per gallon--the State law would not be preempted.

  TR §  13-818 is problematic because it describes the incidence of the tax surcharge and credit by explicit reference to the federal fuel economy standards. NHTSA is of the view that the Maryland law is preempted for this reason. [FN5] And, indeed, we acknowledge that the case for preemption has seemingly been bolstered by a recent decision of the United States Supreme Court interpreting a different preemption provision using the term "relating to."

  On June 1 of this year, the Supreme Court ruled that a federal statute prohibiting states from enacting laws "relating to" airline rates preempted the Texas Attorney General from enforcing certain guidelines on airline advertising that had been established by the National Association of Attorneys General ("NAAG"). Morales v. Trans World Airlines, 60 U.S.L.W. 4444, 4448 (June 1, 1992).

  *5 The Court, in construing the preemption clause of the Airline Deregulation Act contained in 49 U.S.C. §  1305(a), stated that the words "relating to" had a broad meaning. They mean " 'to stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with ...,' and the words thus express a broad pre-emptive purpose." 60 U.S.L.W. at 4446 (citing Black's Law Dictionary 1158 (5th ed. 1979)). Relying on a series of cases construing the same phrase in the preemption provision of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § §  1001 et. seq., the Court held that "State enforcement actions having a connection with or reference to airline 'rates ...' are pre-empted...." Id. The Court specifically rejected the Texas Attorney General's argument that the preemption language in the Airline Deregulation Act simply precluded a State from establishing or prescribing rates. The Court stated: 
    This [argument] simply reads the words "relating to" out of the statute. Had the statute been designed to pre-empt state law in such a limited fashion, it would have forbidden the States to "regulate rates...." 
Id. (emphasis in original).

  In its letter urging the view that the Cost Savings Act preempted TR §  13- 818 in its entirety, NHTSA quoted some of the language from Morales set out above as if it were dispositive. We do not view the issue as quite so simple.

  The Court was careful to end its opinion with the observation that " '[s]ome state actions may affect [airline fares] in too tenuous, remote, or peripheral a manner' to have pre-emptive effect." 60 U.S.L.W. at 4448 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21 (1983)). And the Court was at pains to point out the "significant effect" that the NAAG Guidelines supposedly would have on fares: Enforcement of the guidelines, according to the Court, would "curtail the airlines' ability to communicate fares to their customers"; would "severely burden [the airlines'] ability" to both restrict the availability of cheap seats and advertise cheap fares; would "effectively prevent the airlines from using [certain] terms to call attention to the fares ..."; and "may make it impossible [for the airlines] to use this marketing process at all." 60 U.S.L.W. at 4447. In our view, the point of the contrast is that some state laws, although they might literally "refer to" a matter within the zone of federal preemption, have so little actual impact on those subject to federal regulation as to avoid preemption.

  At the appropriate time, we are prepared to argue to a court that the tax surcharge-tax credit mechanism of TR §  13-818, despite its use of federal fuel economy standards as a point of reference, has at most a "tenuous, remote, [and] peripheral" effect on those standards. Unlike the NAAG Guidelines at issue in Morales, TR §  13-818 does not impose any obligations or restrictions on the federally regulated industry. Automobile manufacturers may continue to market their cars in Maryland whatever the cars' fuel economy. The tax program affects only consumers, not manufacturers or dealers. And if the Maryland law succeeds in its objective of shifting consumer demand incrementally away from the most environmentally harmful cars to more fuel- efficient ones, that change in demand will have no effect on the operation of the federal fuel economy program (except to make it marginally easier for manufacturers to achieve their minimum corporate average standard, if they produce more fuel-efficient cars to meet the incremental demand).

  *6 No immediate court test of the validity of TR §  13-818 will be necessary, for the reasons explained in Part V of this opinion. But if and when that time comes, we shall seek to convince the court that, "guided by respect for the separate spheres of governmental authority preserved in our federalist system," Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 522 (1981), it should uphold Maryland's exercise of its sovereign tax power to protect its environment. [FN6]

V

Severability

  Because the notice provision of TR §  13-818(f) is invalid, running afoul of the preemption provision in 15 U.S.C. §  2009(b), we must consider whether the otherwise enforceable balance of TR §  13-818 is severable. The issue of severability is entirely a matter of State law.

  As we observed in a prior opinion, "The question of severability is in every case a question of legislative intent. Of course, the intent to be ascertained is not the actual legislative intent (which is always that the entire law should be effective), but what the General Assembly would have intended had it known that the statute could be only partially effective." 73 Opinions of the Attorney General 78, 83 (1988). See, e.g., Porten Sullivan Corp. v. State, 318 Md. 387, 410, 568 A.2d 1111 (1990).

  TR §  13-818 as a whole is primarily intended to achieve environmental benefits by encouraging car buyers to choose fuel-efficient cars (although in the long run it is also expected to yield significant revenue). It can achieve this objective only if consumers learn about the tax consequences of their purchasing decisions while they are considering various car models. The notice in TR §  13-818(f) would give them that information. Indeed, this subsection was the result of an amendment by the sponsors, who saw the value of this uniform method of consumer notification.

  Without the notice, the law loses much of its capacity to affect consumer choice. A tax surcharge buried in the excise tax line item on the purchase agreement, if it is noticed by the buyer at all, is not likely to change a decision already made. The program will work as intended only if the surcharge- credit mechanism is brought forcefully to the buyer's attention early in the transaction, when even the comparatively small sums involved might be enough to shift a buyer's preference. We cannot conclude that the General Assembly would have intended to have the surcharge-credit mechanism operate without any real opportunity to sway buying decisions. Hence, we advise that the tax surcharge- tax credit mechanism cannot now be given effect. [FN7]

  That TR §  13-818 is not presently enforceable because of a combination of federal preemption of one part of the statute and nonseverability of the rest does not take the statute out of the code. It remains a part of Maryland law, albeit dormant for now, and it could become enforceable in the future if TR §  13-818(f) were no longer invalid.

  One possibility is that Congress could amend 15 U.S.C. §  2009(b) to permit the kind of notice now contained in TR §  13-818(f). If Congress did so, all of TR §  13-818 would become enforceable without further action by the General Assembly. See Home Utilities Co. v. Revere Copper & Brass, Inc., 209 Md. 610, 619, 122 A. 109 (1956).

  *7 If Congress does not act to change federal law, the General Assembly nevertheless could amend TR §  13-818(f) to eliminate the preemption problem. See Part IV above. Once the amendment became effective, all of TR §  13-818 would become enforceable, even if the General Assembly only amended subsection (f). Cf. Perkins v. Eskridge, 278 Md. 619, 651, 366 A.2d 21 (1976). [FN8]

VI

Conclusion

  In summary, it is our opinion that the notice requirement in TR §  13- 818(f) is invalid under federal law and is not severable from the rest of TR §  13-818. Therefore, the MVA should refrain from enforcing the entire provision until the problem with TR §  13-818(f) is corrected. If and when the law does become effective, this office will defend its validity if it is challenged in court.

  We conclude by observing that Congress could give meaning to basic principles of federalism, as it has done in related contexts, by amending the Costs Savings Act's preemption provision to explicitly authorize state laws like TR §  13-818. [FN9] Like many other states, Maryland faces a formidable task in meeting Clean Air Act requirements. An effort to promote use of more fuel-efficient cars would help reduce air pollution and might translate into jobs saved in the industrial sector of our economy. Such a law does no harm to national policy and could potentially achieve significant environmental benefits locally. Congress should act in the interests of both the federal system and the environment to ratify the validity of laws like TR §  13-818.

Very truly yours,

J. Joseph Curran, Jr.

Attorney General

Jack Schwartz

Chief Counsel

Opinions and Advice

Edward R.K. Hargadon

Assistant Attorney General

[FN1] The standards are established by regulation. See 49 C.F.R. §  531.5  (1991). Failure by a manufacturer to meet the standards established by NHTSA results in the imposition of civil penalties. 15 U.S.C. §  2008.

[FN2] 15 U.S.C. §  2009(c) contains language preserving the prerogative of a state to establish "requirements with respect to fuel economy of automobiles procured for its own use."

[FN3] When federal law preempts the state from enacting a law, Article VI, Clause 2 of the U.S. Constitution requires that the federal law shall prevail. Any attempt by a state to enforce a law preempted by Congress is unconstitutional. City of New York v. F.C.C., 486 U.S. 57, 63 (1988).

[FN4] TR §  13-818(f) authorizes the MVA to prescribe the form used for the notice. Because the statute sets out specific language and requires that the notice "be in substantially [that] form," however, we conclude that the MVA may not itself simply alter the notice to eliminate references to fuel economy. 
  The MVA could, however, exercise its regulatory authority to "implement" the program by fashioning some alternative method for informing consumers about the surcharge-credit mechanism. A regulation adopted under TR §  13-818(g) would have the force and effect of law. Like a legislative change in the notice, however, any regulatory alternative must avoid fuel economy disclosures that are not identical with federal disclosures. See also note 8 below.

[FN5] NHTSA's prompt decision to assert that TR §  13-818 is wholly preempted is somewhat surprising in light of Executive Order 12611 (October 15, 1987)), in which President Reagan ordered federal executive branch agencies to "closely examine the constitutional and statutory authority supporting any federal action that would limit the policy making discretion of the States, and [to] carefully assess the necessity for such action." Sec. 3(a).

[FN6] The Supreme Court itself is hardly of one mind about close preemption questions. See Gade v. National Solid Wastes Management Ass'n, No. 90-1676 (U.S. June 18, 1992).

[FN7] The rest of Chapter 3, a compendium of crucially important transportation revenue measures, is manifestly severable from TR §  13-818. See Porten Sullivan, 318 Md. at 410.

[FN8] The MVA has authority under TR §  13-818(g) to adopt a regulation embodying an alternative form of consumer notification. See note 4 above. Whether such action by an administrative agency could have the effect of restoring the enforceability of the statute is a novel question that we need not presently address. We understand from the MVA that other, unrelated issues might prevent implementation even if the problem resulting from the present invalidity of TR §  13-818(f) were corrected. This opinion does not address those other issues.

[FN9] Congress, for example, has wisely chosen to allow first California and then the other states to adopt and enforce certain emission control standards more stringent than federal standards. 42 U.S.C. § §  7507 and 7543.

77 Md. Op. Atty. Gen. 222, 1992 WL 524661 (Md.A.G.)

END OF DOCUMENT