Insight May 25, 2022
Since 2012, the federal government has issued voluntary guidelines to enable state governments to create statutory frameworks for autonomous vehicles (AVs) to permit and/or encourage research and development in self-driving technologies. Over the past decade, this state-focused approach has led 40 states and Washington, DC, to enact various levels of AV legislation allowing for off-road testing, fully autonomous driving on public roads, and/or for-profit on-demand transportation services.
In January 2020, the U.S. Department of Transportation (DOT) and the National Highway Traffic Safety Administration (NHTSA) issued an updated and broad voluntary AV regulatory framework, “Ensuring U.S. Leadership in Autonomous Vehicle Technology: Autonomous Vehicles 4.0 (AV Policy 4.0),” which serves as a blueprint for future autonomous technology legislation.
AV Policy 4.0 is the most comprehensive guidance on the development of AV technology. AV Policy 4.0 was a joint effort between the U.S. Department of Transportation and the White House Chief Technology Officer. This was the first time that a senior White House official was involved in developing regulatory guidance for AVs to coordinate efforts governing autonomous vehicles and artificial intelligence across 38 federal agencies and commissions. This development signals that AV technology is finally closer to having a federal regulatory framework in place.
AV Policy 4.0’s voluntary guidelines expand on the framework’s three previous versions, placing an increased emphasis on passenger safety, modernization, and technology neutrality. AV Policy 4.0 also includes updated guidance on privacy, cybersecurity, patents, and vehicle accessibility. Former U.S. Secretary of Transportation Elaine Chao explained, “Such innovation requires appropriate government oversight to ensure safety, open markets, strategic allocation of public resources, and protection of the public interest. It is not the federal government’s role to pick winners and losers.”
Funding Opportunities
To encourage AV research and development, AV Policy 4.0 provides that AV companies can receive a federal income tax credit of up to 20% of eligible expenditures on research and development activities.
Additionally, AV Policy 4.0 explains that the U.S. Treasury Department and the Internal Revenue Service (IRS) allow the following immediate expenses:
Research and development activities that are experimental in nature, aimed at eliminating uncertainty when developing or improving a product. Expenses for qualified business property purchased after September 27, 2017 and before January 1, 2023. Expenses for the purchase of new or used manufacturing equipment, AV operated or leased by the company, and computer hardware and software. Start-up and organization costs up to $5,000 (per category) in the year the business begins operations. The $5,000 deduction is reduced by the amount of start-up or organization costs in excess of $50,000, and the remaining expenses are deductible over a 180-month period. Because AV manufacturers, especially new market entrants, may have more operating expenses than revenues in the early stages of their business, the tax law allows the carryforward of net operating losses to offset 80% of taxable income arising in future years.
In 2021, during Secretary of Transportation Pete Buttigieg’s term, the Department of Transportation issued a standing general order requiring all state transportation departments and AV officials to submit accident reports and information about accidents to better identify safety concerns and risks in the autonomous vehicle field. On January 6, 2022, Secretary Buttigieg called for federal AV regulation during his keynote address at the Consumer Electric Show in Las Vegas.[C]Consider self-driving cars: They hold great promise, but they also raise complex philosophical questions about safety, fairness and the workforce.”
State Regulations
In the absence of federal autonomous vehicle regulation, several states, including Michigan, California and Arizona, have led the way as hubs for the development of some of the most advanced and innovative autonomous vehicle technology in the United States.
Michigan
In 2013, Michigan enacted Michigan Motor Vehicle Code Section 257.665, which at the time was the most progressive AV legal framework in the United States. The purpose of Section 257.665 was to create a balanced, industry-friendly, and safety-focused regulatory scheme to ensure Michigan remained a leader in automotive innovation and foster a community of connected vehicles and next-generation mobility companies in Detroit and Ann Arbor.
Notably, Michigan is the first state to extend manufacturer license plates (M plates) for AV testing to companies other than traditional OEMs, so long as parties follow a set of legally mandated safety requirements.
As noted in a Morgan Lewis presentation by Kelly Bartlett, a connected and autonomous vehicle expert at the Michigan Department of Transportation, Michigan’s approach was an immediate success, and soon more advanced legislation was needed to keep up with the technology. In 2016, Michigan responded to industry requests by enacting Section 257.665b, known as Project Safe Autonomous Vehicles (SAVE). Notably, Project SAVE allows qualified AV parties to develop fleets of autonomous vehicles that provide on-demand transportation to the public within defined geographic boundaries.
More recently, the state of Michigan announced it will build a first-of-its-kind connected and autonomous corridor between Detroit and Ann Arbor in January 2022. The corridor will feature dedicated AV lanes and facilitate faster and safer autonomous transportation at all levels.
California
In 2012, California became the third state to enact legislation allowing self-driving cars to operate on state highways, ordering the California Department of Transportation (DMV) to promulgate safety regulations specific to self-driving cars.
In response to this legislative demand, the DMV launched the AV Tester Program in 2014 with strict test driver requirements. To date, approximately 60 AV companies hold test permits under this program. In 2018, the DMV established the AV Tester Driverless Program with even stricter requirements. Currently, only four AV companies hold permits under the AV Tester Driverless Program.
In the near future, California has several autonomous shared vehicle (SAV) projects underway, including the Livermore Amador Valley Transportation Authority’s SAV project, which launched last June and provides environmentally friendly transportation between bus lines and the Bay Area Rapid Transit Authority in the San Francisco metropolitan area.
Arizona
Arizona eased regulatory barriers for AV stakeholders to conduct semi- and fully autonomous testing in the state through a series of Governor’s Executive Orders issued between 2015 and 2018. Notably, in 2018, Arizona eliminated the requirement that AVs have a safety driver on board, as long as the autonomous system is remotely monitored.
Additionally, Arizona has established the Automated Mobility Consortium Laboratory, which aims to drive innovation and collaboration by building research, development, testing and evaluation capabilities for AV systems.
Finally, Arizona allowed for-profit AV on-demand transportation services to be tested and operated through an executive order in 2018. Currently, there are more than 600 AVs operated by more than a dozen AV companies in Arizona.
If you are interested in “All Things Autonomous – Regulatory and Commercial Considerations for AVs,” part of the Morgan Lewis Automotive Hour webinar series, we encourage you to subscribe to Morgan Lewis publications to receive the latest information on trends, legal developments and other related areas.
