Montana’s Luxury Car Loophole Is Now In California’s Crosshairs

California Has Come After The Montana Luxury Car Loophole

You may remember that weird Montana luxury car loophole we told you about earlier this year?

It's the one where wealthy people from other states would create a Montana LLC and register their expensive car here, potentially avoiding taxes in their home state.

Why California Is Cracking Down On The Montana Loophole

Well, California has officially started coming after people trying to take advantage of that loophole.

California Gov. Gavin Newsom signed a new law targeting the practice, better known as the "Montana loophole." The new law gives California more ways to determine whether an out-of-state LLC is really just a shell company being used to avoid taxes on luxury vehicles.

If you're curious how the whole thing works, we explained it in our earlier story, which you can read here. You might think this isn't that big of a deal, but to California, it is.

The state estimates the loophole costs about $20 million a year in lost tax revenue. Earlier this year, California prosecutors also charged 14 people in a case involving more than $20 million worth of luxury vehicles and alleged tax evasion.

Nick Northern TSM-GF//Canva

Could California's Montana Loophole Crackdown Cost Montana Money?

And we're not talking about your standard Chevy or Ford here. We're talking about cars that cost more than most houses.

That California case involved vehicles including a $1.8 million McLaren Elva, a $1.5 million Porsche 918 Spyder, and a $1.26 million Ferrari F12tdf.

Interestingly enough, you have to wonder if California cracking down on the loophole because it's losing tax revenue could end up costing Montana some tax revenue too, once all those supercars are no longer being registered here. I guess we'll have to wait and see.