Under the largest automotive class-action settlement in U.S. history, people who own or lease one of about 475,000 Volkswagen and Audi 2.0-liter diesel models designed to cheat emissions tests could sell their car back to the manufacturer or terminate their lease without penalty and receive cash restitution ranging from $ 2,634 to $ 9,852.
Or they could keep their car and get an emissions repair if one is approved, and get the same cash payment.
Details of the settlement, which still requires approval by the U.S. District Court in San Francisco, were disclosed Tuesday by plaintiff's attorneys and federal and state regulators. A preliminary approval hearing is scheduled for July 26 before Judge Charles Breyer. If he approves it, Volkswagen will pay up to $ 10.03 billion to consumers.
2013 Volkswagen Beetle TDI
2013 Volkswagen Beetle TDI
Photo: Volkswagen
These 2.0-liter diesel TDI models are covered by the proposed class-action settlement (clockwise from top): 2013-15 Beetle, 2010-13 and 2015 Audi A3, 2009-15 Jetta, 2010-15 Golf and 2012-15 Passat.
These 2.0-liter diesel TDI models are covered by the proposed class-action settlement (clockwise from top): 2013-15 Beetle, 2010-13 and 2015 Audi A3, 2009-15 Jetta, 2010-15 Golf and 2012-15 Passat.
Photo: Volkswagen
2014 Volkswagen Golf TDI
2014 Volkswagen Golf TDI
Photo: Volkswagen
2015 Volkswagen Jetta
2015 Volkswagen Jetta
Photo: Volkswagen
Elizabeth Cabraser in S.F. is the court- appointed lead counsel for VW owners.
Elizabeth Cabraser in S.F. is the court- appointed lead counsel for VW owners.
Photo: Connor Radnovich, The Chronicle
Photo: Eric Risberg, AP
Photo: Eric Risberg, AP
Photo: Eric Risberg, AP
Under related settlements with the U.S. Environmental Protection Agency and California Air Resources Board, Volkswagen will pay $ 2.7 billion to support environmental programs and reduce emissions nationwide, including $ 380 million for programs in California. VW also will pay $ 2 billion to promote zero emissions vehicles, of which $ 800 million will go to California.
VW promoted its TDI models as "clean diesels," but secretly installed devices and software that allowed them to pass emissions tests while spewing illegal levels of nitrogen oxide pollutants.
The state air resources board "uncovered the fraud and figure out how it worked," Chair Mary D. Nichols said in a press conference.
Deal reached quickly
The nearly $ 15 billion agreement is one of the swiftest and largest settlements of a complex class-action case, said San Francisco attorney Elizabeth Cabraser, the court-appointed lead counsel for VW owners. "I hope it will be a model for future resolutions in which private plaintiffs and government entities can work together to forge resolutions that, like this one, as a whole are greater than the sum of its parts," she said.
The settlement applies to 2-liter diesel Beetles, Golfs, Jettas, Passats and Audi A3s made in certain years (depending on model) between 2009 and 2015 and sold in the United States.
Owners who remain in the class will have the option of selling these cars back to the company or obtaining an approved emissions fix.
Sell, fix or buyback
If they choose the buyback, they will get the September 2015 trade-in value published in the NADA Used Car Guide, adjusted for options and mileage. This is the value when the emissions accusations became public on September 18.
Regardless of whether they choose a repair or buyback, they also will get a cash payment equal to 20 percent of the vehicle's value, plus $ 2,986.73 (subject to a minimum of $ 1,500). If you combine the trade-in and cash payments, total compensation will range from $ 12,475 for a basic 2009 VW Jetta Sedan TDI to $ 44,176 for a loaded Audi A3 TDI Prestige, according to a court document posted at http://1.usa.gov/298cKRO.
If an owner sold one of the tainted cars after Sept. 18, the current owner can get the buyback or repair and roughly half of the cash payment. The previous owner will get the rest of the cash payment, but must identify himself or herself within 45 days of preliminary approval, which could happen as early as July 26.
People who sell an eligible car after June 28 (except back to the company) cannot participate in the settlement.
People who had leased an eligible car with VW Credit as of Sept. 15 and remain in the class can terminate the lease without penalty or get it fixed. Either way, they also will receive a cash payment, but it will be about half the amount owners get.
"I'm heartbroken that the fabulous, efficient, fun-to-drive, environmentally friendly car I thought I bought turns out to be a fraud," said David Jones, a Peninsula resident who owns a 2011 Jetta Sportwagen TDI. "I will likely opt for the buyout. I don't think I can recapture the romance I had with this car. Time to move on."
Some cars not included
The settlement does not cover about 100,000 late-model TDIs made by Audi and Porsche that also had emissions tampering. They are part of the class-action suit, but not part of this settlement, Cabraser said. Breyer is holding a status conference on those cars Thursday, she added.
If preliminary approval is granted by the court, eligible owners can go www.vwcourtsettlement.com and enter their Vehicle Identification Number to see what their payment would be.
Cabraser said she has communicated with thousands of TDI owners and lessees, but can't predict what most will do. Some will take cash as soon as it's available, which could be this fall if the settlement gets final approval in early October. Others might wait to see if a fix becomes available and if so, how it would impact their fuel economy and performance.
"The assumption is that fixes will be approved," but it's possible they won't be for some models, Cabraser said. "Some modifications will be simpler than others." VW must submit plans for repairing various models between November 2016 and October 2017. Regulators will then have to determine whether these repairs pass environmental muster.
If a fix is not approved, the owner can take the buyback or withdraw from the class. There is no rush to decide because the buyback price will be "frozen in time" at the September 2015 value, Cabraser said. "While everyone else's car has depreciated, your car is Sleeping Beauty."
Attorney's fees and court costs will not be deducted from consumer payments; those will be negotiated separately with the court.
Cabraser said they are intended to be nontaxable, but people who receive payments should consult their tax advisers.
Taxable or not
In general, "any settlement you get for something other than personal physical injury or sickness is taxable," said Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting. Most other settlements, such as for back pay and punitive damages, are taxable.
In the case of property, if the settlement merely restores your original value, it's not taxable, but if it enriches you beyond where you were before, it is taxable, he said.
Theoretically, owners who sold their cars back would not owe tax if the combined payment (trade-in plus cash payment) was less than their basis, which is generally what they paid for the car (or the depreciated basis if they used it in a business). If it was more than their basis, they could owe tax on the excess.
If they kept the car and got it fixed, the cash payment likely would not be taxable if the payment is designed to compensate them for lost value.
If they leased the car, the payment could be taxable because "they had no basis" in the car, according to Luscombe.
Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender@sfchronicle.com Twitter: @kathpender
Eligible vehicles
These 2.0-liter diesel TDI models are covered by the proposed class-action settlement
VW Beetle
2013-2015
VW Golf
2010-2015
VW Jetta
2009-2015
VW Passat
2012-2015
Audi A3
2010-2013; 2015
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