Committee advances bill to close 'Montana' vehicle tax loophole after testimony of avoidance schemes

Senator McNerney presented SB 1406, which the author described as a targeted fix to close the so-called "Montana tax loophole" used by some Californians to avoid paying state vehicle taxes and registration fees by purchasing vehicles through out-of-state shell companies.

The author told the committee that the scheme costs California roughly $20 million a year and recounted a recent criminal investigation in which 14 Californians allegedly bought $20 million worth of luxury vehicles through shell companies to avoid paying over $1.8 million in California taxes. SB 1406 would give the California Department of Tax and Fee Administration clearer authority to treat officers, managers, beneficial owners or members of shell companies as personally liable for unpaid taxes and fees on vehicle purchases made to evade California taxes.

Michelle Warshaw testified in support on behalf of the California Teachers Association; the committee recorded no registered opposition at the hearing. With no questions from committee members, the author closed and asked for an "aye" vote.

The committee moved SB 1406 to the Committee on Appropriations (motion recorded and bill placed on call), noting that CDTFA would implement the compliance aspects if the bill becomes law.