California Passes SB 1406 on ‘Montana Loophole’

What California did

California passed SB 1406, a measure aimed at cracking down on supercar tax evasion associated with the practice commonly labeled the “Montana loophole.” The action places the issue in tax administration: whether taxes connected to expensive vehicles are properly paid, rather than whether a particular vehicle may be bought or driven.

The bill’s passage marks a state policy response to the practice. Its practical reach will turn on the legal text, including who is covered, what conduct triggers the rules and which dates control. Those details matter because a broad label such as “Montana loophole” does not by itself define a taxpayer’s duties. Vehicle owners and businesses must follow the operative law and any implementing instructions, not a nickname for the targeted conduct.

Why it matters

The measure concerns California revenue and compliance involving costly vehicles. Tax collection affects public finances, while compliance requirements can affect people and businesses subject to them. The central policy question is how California distinguishes lawful arrangements from conduct the state treats as tax evasion and how consistently it applies that distinction.

This development is not directly tied to a Montana election, candidate or documented campaign position. The immediate questions are administrative: when SB 1406 takes effect, which California agency will carry it out, whether guidance or regulations will follow, and how enforcement will work. Any effect on public revenue, the economy or jobs will depend on implementation and taxpayer response. The law’s operative language and subsequent agency instructions will define the obligations more precisely than the “Montana loophole” shorthand.