California is taking action against a tax strategy that has allowed some luxury car owners to avoid tens of thousands in taxes by registering their vehicles through shell companies in Montana. The state is cracking down on this loophole, which has cost California an estimated $20 million annually in tax revenue.
A Lamborghini owner recently boasted about saving $70,000 through this scheme, where vehicles were titled under a Montana company for a fraction of what California residents would typically owe in taxes. California Governor Gavin Newsom has signed Senate Bill 1406 into law, targeting wealthy individuals who exploit this loophole.
Under this new law, if a shareholder or partner of a Montana-based shell company is a California resident, that company will be considered a California resident for tax purposes. This exposes owners to potential personal liability for unpaid taxes, penalties, and interest.
The legislation aims to restore equity in the state’s tax system and support essential services like road repairs. It specifically targets high-net-worth individuals who evade taxes by using these shell entities to purchase luxury vehicles in Montana.
