Southern California Record

Tuesday, November 19, 2019

California Retail Association says bill amending False Claims Act would have created double jeopardy for taxpayers

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By Amanda Smith-Teutsch | Sep 7, 2019

Court

SACRAMENTO – Proposed changes to the False Claims Act that business groups say would have made it easier for the state to sue taxpayers won’t be debated again this year.

The amendment, known as Assembly Bill 1270, was placed on suspense file on Aug. 19, effectively halting further action on the bill.  

Rachel Michelin, president of the California Retailers Association, said her organization was concerned about the impacts of the amendment and actively worked against it.

“We are always about how do we manage regulation in California,” she said, pointing out there are already laws in place that effectively do the same thing. “Why do we need another piece of legislation?”

Under the proposal, an error on tax filings could have been used in litigation against small business owners and retailers. The proposed changes to tax law may have applied to businesses that have public contracts with state or local governments, but some interpretations of the law could have been used in cases where there were no public contracts at all. Also, the current law states only the attorney general’s office may file lawsuits over tax issues and public contracts. The proposed changes would have opened that up to private attorneys.

In an analysis provided with the bill, the state attorney general’s office wrote the changes were needed to strengthen the False Claims Act’s whistleblower protections and to protect the state against tax fraud. The attorney general’s office said tax fraud is not covered under the current law.

Michelin says she disagrees with that assessment.

“We already have a robust tax fraud statute and enforcement programs and whistleblower programs; so it was almost a solution in search of a problem,” she said.

Michelin said the most concerning part of the proposed changes were that they created a "double jeopardy" of sorts for taxpayers. Even if the taxpayer was cleared of malicious intent by the taxing authority, private attorneys could have still taken them to civil court where they’d have to defend their mistakes and errors again.

“In our opinion, it would increase frivolous lawsuits in California and it really opened up the floodgates for costly tax litigation,” Michelin said.

The law was sponsored by the state Attorney General’s Office and introduced by Assemblyman Mark Stone (D-Santa Cruz).

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