McNerney bill to close ‘Montana Tax Loophole’ that costs California millions in tax revenue

State Sen. Jerry McNerney, D-Pleasanton, has announced new legislation – Senate Bill 1406 – that would close the so-called “Montana Loophole,” which costs California $20 million a year in lost tax revenue.

SB 1406 would strengthen state law by barring tax scams in which California residents create an out-of-state shell company to buy exotic luxury cars or recreational vehicles in Montana to avoid paying California sales taxes and vehicle license fees, McNerney’s office said in a press release.

The Montana Loophole was the subject of a recent sweeping criminal investigation in which 14 Californians allegedly engaged in an illegal tax evasion scheme to evade the reporting of over $20 million in luxury vehicle purchases and avoid paying $1.8 million in California taxes.

“The Montana Loophole is widening, with increasing numbers of tax evaders creating bogus shell companies so they can avoid paying sales taxes on Ferraris, Porsches and pricey RVs, costing California tens of millions in revenue,” said McNerney, chairman of the Senate Revenue and Taxation Committee. “SB 1406 will close the Montana Loophole for good and restore much-needed state revenues to fill potholes and make other essential road repairs.”

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