As seen in the Sacramento Business Journal
By Therese Twomey and Chris Micheli
During the 2019 legislative session, a bill was pursued to expand California’s False Claims Act (CFCA) to tax matters. Here’s why that’s a bad idea.
First, it would open the door for profit-seeking lawyers to bring legal actions against taxpayers. We’ve all seen what’s happened in California, infamous for its litigiousness. Look at California’s experience with the state version of the Americans with Disabilities Act and the ensuing “drive-by lawsuits.” Or the frivolous civil suits under the Private Attorneys General Act to enforce alleged violations of California’s Labor Code. And, who can forget the rampant abuse of Business & Professions Code Section 17200 lawsuits against nail salons, auto repair shops and others that ultimately had to be curbed by the electorate when they adopted Prop 64 in 2004.
The few states that have enacted similar tax false claims laws, namely New York and Illinois, have seen an explosion of lawyers indiscriminately filing questionable claims and threatening demand letters in a shotgun approach to see what claims may “stick.”