Northern California Record

Saturday, April 4, 2020

Halt on False Claims Act amendment 'good news for all taxpayers,' NFIB policy director says


By Amanda Smith-Teutsch | Sep 9, 2019

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SACRAMENTO – Proposed changes to the False Claims Act, which 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. Shawn Lewis, policy director of the National Federation of Independent Business in California, said this is good news for anyone who pays taxes in California.

“AB1270 failing last week was good news for all taxpayers,” he said. 

Lewis said under this proposed bill, any error, even accidental mistakes, could be used as a foundation for a tax lawsuit. Under current law, the state must prove intentional misrepresentation to pursue legal damages.  

An error on tax filings could have been used in litigation against small business owners. Lewis said much of the wording in the law was unclear. For example, 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. NFIB lobbied for changes that would have limited the ability to file lawsuits involving public contracts to the state attorney general’s office; however, those changes were not accepted into the bill’s current version.

Lewis pointed out that California’s state taxing agencies were not seeking the passage of the bill. He said it was being sponsored by the state attorney general’s office and trial attorneys.

“It was our perspective that the function of paying taxes is a sacred function, not something subject to profit motive by trial attorneys,” Lewis said.

In an analysis provided with the bill, the state attorney general’s office wrote that 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.

Lewis said he expects another version of the bill to appear in next year’s legislative session. He said the NFIB will continue to fight against it, saying it could have been used to prey on small businesses.

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Organizations in this Story

National Federation of Independent BusinessCalifornia State Assembly