Gavin Newsom closes Montana-loophole as damning texts reveal what luxe car buyers saved on taxes
California is cracking down on a tax strategy that allowed some luxury-car owners to save tens of thousands of dollars by registering their vehicles through shell companies in Montana.A $600,000 Lamborghini owner bragged about saving $70,000 through the arrangement, but California has now moved to shut down the strategy as the state estimates it could recover $20 million a year.The boast appeared in a criminal complaint filed by the California Department of Justice, with the buyer celebrating five years of Montana registration for just $3,000, according to The Los Angeles Times.“70k saved — I can’t believe Montana registration lasts for 5 years — that’s crazy.Stupid California.
Paid 3k to own a 600k car for 5 years — lol in Cali that’s like 75k for 5 years.Hella dumb.”The strategy was built around Montana’s lack of a statewide sales tax on vehicle purchases and its permissive rules for forming LLCs.
People living outside the state could create a Montana company, title an expensive vehicle through it and register the car there before bringing it home.That escape hatch is now getting slammed shut.Gov.Gavin Newsom signed Senate Bill 1406 into law Sept.
30 after it passed the Assembly 59-19 and Senate 31-8.The measure expands California’s rules for determining when a shell company is effectively a California resident for tax purposes.The new standard could be particularly painful for owners who thought they had insulated themselves through an out-of-state company.
If any shareholder, partner, member or beneficial owner of a shell company is a California resident, the company can be treated as a California resident under the new law.And the liability does not necessarily stop at the company.Officers, managers, partners, beneficial owners and members can be held personally liable for unpaid taxes, interest and penalties connected to purchases of vehicles, vessels or aircraft.Failure to pay may constitute a crime.California officials estimate the M...