Alert: California False Claims Expansion Bill Preparing to Advance

The revived False Claims expansion bill in California, A.B. 2570, is on the agenda to be heard by the Assembly Judiciary Committee on May 11 at 10:00 am PDT. The proposal would authorize tax-based false claims actions, allowing private, profit-motivated parties to bring punitive civil enforcement lawsuits—an abusive practice that is prohibited under current law consistent with the vast majority of other states with similar laws. A nearly identical bill sputtered out last summer but has now been revived, as our colleagues covered in February:

AB 2570 is replete with problematic provisions, including: (1) the imposition of a separate statute of limitations that will arguably trump any shorter limitations periods imposed by the Revenue & Taxation Code (See Cal. Gov’t Code § 12654(a) which permits claims under the CFCA to be pursued for up to 10 years after the date the violation was committed, compared to standard three or four years for tax audits); (2) a more lenient burden of proof for elements of an alleged violation; and, (3) extremely punitive damages—violators are subject to treble damages (i.e., three times the amount of the underreported tax, interest and penalties), an additional civil penalty of $5,500 to $11,000 for each violation, plus the costs of the civil action to recover the damages and penalties including attorney’s fees.

Few of these cases will involve internal whistleblowers, actual fraud, or reckless disregard of clear law. Instead, the cases in Illinois (a state that has adopted false claims expansion to tax) usually involve inadvertent errors or good-faith interpretations of murky tax law. With the party bringing the case able to keep up to 50% of the proceeds, the only winners in the proposal is the cottage industry of money hungry plaintiffs’ attorneys that will descend and harass good-faith taxpayers in an effort to pad their own pockets.

Charles Moll, IIICharles Moll, III
Charles (Chuck) Moll focuses his practice on state and local tax (SALT), primarily concentrating on the resolution of tax controversies. He regularly appears before the various California tax authorities—including the State Board of Equalization, the California Franchise Tax Board, the California Department of Tax and Fee Administration, and the Office of Tax Appeals—as well as local authorities such as assessors and assessment appeals boards. He has litigated at all levels of California’s courts, the US Tax Court, and the US Supreme Court. View Chuck's full bio.


Stephen P. KranzStephen P. Kranz
Stephen (Steve) P. Kranz is a tax lawyer who solves tax problems differently. Over the course of his extensive career, Steve has acquired specific skills and developed a unique approach that helps clients develop and implement holistic solutions to all varieties of tax problems. He combines strategic thinking with effective skills for the courtroom, the statehouse and the conference room. Read Stephen P. Kranz's full bio.


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