Sen. McNerney proposes bill to close "Montana" vehicle-registration loophole; business group warns of overbreadth

Sen. McNerney presented SB 1406 to close what he described as the "Montana tax loophole," a practice where out-of-state shell companies are used to register expensive vehicles and avoid California sales and use taxes and fees.

"SB 14 06 will increase state revenues by up to $20,000,000 a year without raising taxes," McNerney said, describing an Attorney General investigation that identified millions in avoided California taxes. Terry Bridal of SEIU California said the bill simply closes a narrow loophole used to register very high-end vehicles and supported the measure.

Maddie Hyatt of the Capital Business Alliance opposed the bill as written, asking the committee to amend the "new shell company" language because it could sweep in legitimate single‑member or family businesses that lack W‑2 employees or a physical office. Hyatt told members the bill, as drafted, could impose personal liability on passive or minority owners and asked the committee to require "actual participation, control, or knowing benefit before personal liability imposes."

The chair closed the item and confirmed SB 1406 will be referred to the committee's suspense file for fiscal review and further consideration.