Business Stops Bill Allowing Private Attorneys Into Tax Enforcement
A broad business coalition had an early victory in the California State Senate on April 23, when the Senate Revenue and Taxation Committee voted down SB 799 (Allen; D-Santa Monica).
SB 799 would have allowed the Attorney General (and, in some cases, private attorneys) to step into tax enforcement by filing individual lawsuits where they alleged tax fraud.
Years-Long Battle
The business community has been fighting this legislation for years, voicing strong concerns that allowing anyone besides California’s tax agencies into tax enforcement invites abusive demands and conflicting interpretations of tax obligations.
Attorney General Rob Bonta was the sponsor of the bill — just as his predecessor, Attorney General Xavier Becerra, had supported similar legislation in 2019 and 2020. Notably, Consumer Attorneys of California also supported the bill — which is not surprising, given they would be the private attorneys bringing those cases.
In a lively legislative hearing, both Senate Revenue and Taxation staff’s analysis and Senator Tim Grayson (D-Concord) expressed strong questions about the need for the bill in light of how effective California’s tax agencies are.
Although the proponents asserted that California had a “tax gap” between expected revenues and tax payments, testimony at the hearing clarified that the so-called “tax gap,” to the extent it exists, is caused mostly by non-filers or underpayment from small-time filers — and not the alleged large-scale fraud asserted by the Attorney General’s team.
Business groups also raised concerns that similar legislation, when passed in other states, was prone to abuse or did not appear to significantly change tax collection.
Although the bill was technically granted re-hearing, no hearing dates remain this year — so businesses can celebrate for this year, but will need to stay wary that this bill may return in 2026.
Key Vote
SB 799 failed to pass Senate Revenue and Taxation on a vote of 2-1.
Ayes: Ashby (D-Sacramento), McNerney (D-Pleasanton).
Noes: Valladares (R-Santa Clarita).
Not voting: Grayson (D-Concord), Umberg (D-Santa Ana).