CA lawmaker pushes to crack down on Montana luxury car tax-evasion scheme

A California lawmaker is attempting to reclaim millions in tax revenue through a bill introduced that targets a tax-evasion scheme involving high-end luxury car purchases. 

California residents for years have set up “shell corporations,” or companies with few or no business operations, in Montana to purchase luxury cars or recreational vehicles without paying California sales taxes and vehicle license fees, according to California Attorney General Rob Bonta’s office.

The California Department of Tax and Fee Administration estimates that since 2023, about 2,500 sales tied to this tax-evasion scheme have occurred, resulting in more than $10 million a year in lost tax revenue. Early last month, Bonta’s office charged 14 people for their suspected roles in failing to report more than $20 million in luxury vehicle purchases, which would have required about $1.8 million in California taxes. 

The scheme is known as the “Montana Loophole.” State Sen. Jerry McNerney, D-Pleasanton, introduced Senate Bill 1406, which aims to close the loophole.

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