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Bill Targeting Underground Economy Clears the Assembly

BOE Chairman Jerome E. Horton

A partnership to strategically target criminal tax evasion is getting closer to formation. Assembly Bill 576 (V. Manuel Pérez) passed by a 70-2 vote on the Assembly floor.

“This bipartisan support for legitimate businesses that are put at a disadvantage by criminal activity in California’s underground economy is truly heartening,” said BOE Chairman Jerome E. Horton. “This vote shows our legislature’s commitment to stop these tax dodgers who don’t pay their fair share.”

AB 576 will create the Revenue Recovery and Collaborative Enforcement (RRACE) Team to formalize data sharing and communication among the Board of Equalization and partnering agencies. The legislation enables these agencies to strategically collaborate on prosecuting criminals who underpay or do not pay state sales, use, and income taxes. The team’s efforts will benefit Californians by recovering tax dollars that fund vital state services such as public schools, highways, public safety, and health care programs, with no added costs to the taxpayers.

“To effectively pursue criminal tax evasion, state agencies must be able to share data and intelligence. The solution is AB 576,” said Assemblymember V. Manuel Pérez as he presented his bill on the Assembly floor.

“Currently, we have no structure in place where state agencies will coordinate efforts for the singular purpose of making sure that criminals in the underground economy don’t get away with evading their taxes,” Assemblywoman Diane Harkey echoed in support.

California’s underground economy deprives the state of an estimated $8.5 billion in state sales, use, and income taxes annually through a spectrum of illegal activities such as selling counterfeit goods like “knock off” designer items, exploiting victims of human trafficking, and smuggling goods into California without paying the required taxes. A report issued by the UCLA Labor Center earlier this year estimates this loss at 11 percent of the total tax revenues owed to the state.

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