The Expert Podcast

Well, here it is. The big breaking news on the Montana LLC loophole kind of tax evasion. If you've been watching our channel for any length of time, you know we've been reporting on this Montana LLC title process that's been used really going back five or six years now. And if you notice, we've mentioned that many DMV commissioners have been talking amongst themselves about doing a big crackdown, a big bust of the people that are using this process. And in the internal meetings, they're mentioning putting together task force operations and starting to do monitoring and enforcement.

Well, big breaking news today out of Car and Driver Magazine, major publication, friends of the channel. We've actually been featured on their magazine before, that there's a crackdown on the tax dodging practice by citizens and it's starting out with a few states. They mentioned Utah and California, although there's seven states right now that are starting to do enforcement and prosecutions and we're going to get into that a little more in detail here in a minute.

But what is the Montana LLC loophole? This is a process where if a person has a vehicle that either has a title or doesn't have a title that they don't want to go through their state, they want to avoid their state for whatever reason. Maybe they're trying to avoid taxes. They're trying to avoid smog inspection emissions. They're trying to avoid the title process. They're going to do a Montana process.

Now, why is it called LLC? Well, no state can give a title to a non-resident. You have to be a resident of a state to get a title from that state. That's always been the case. You can't just say, "Well, I live in New Jersey. I want to get a title from Colorado." You have to get a title from the state where your driver's license is located. So, what people do is they form a company, an LLC corporation in the state of Montana and then put the vehicle in the name of that corporation, right? And technically, that part's legal. You can put a vehicle in the corporation name. Montana will let you do that.

And the reason why people use Montana is Montana is a state that does not have sales tax. So when you register a vehicle, you don't have to pay sales tax. And they don't have a lot of inspections and emissions and a lot of the regulations that other states have. So many people will use that loophole for their vehicle.

Now, just a little side note, the process isn't any easier than just going through your own state. If you have a title problem, you only have a bill of sale, maybe you have missing documents, you're not going to be able to magically get a title from Montana. You still have to do some process like a bonded title or a court order title in Montana. So that is not really any different from going through your state. So really, the only difference is you don't have to pay tax and you don't have to do emissions.

So people think, well, it's legal, so I'll do it. Ah, but it's not really legal. The reason why is the tax is not a sales tax. Taxes for vehicles is a sales and use tax. That's what the tax is called in the statute. So if you title your vehicle in Montana and then use it in your state, you're actually evading taxes. Even companies like FedEx or Amazon when they title vehicles in other states, if they use them primarily in a state where they deliver the packages, they have to pay taxes in that state.

So what is happening now? What's happening now is the other states besides Montana that have been losing tax revenue are now rolling out the prosecutions, doing sting operations. They're doing all kinds of enforcement. How are they catching people? Well, one way to do it is if they see a Montana plate driving around, they can run the plate and if it's LLC, they'll pull it over and they'll check who's driving it, what the ownership is.

But more importantly, they're using, and we've talked about this on this channel many times, ALPR, automated license plate readers, where around town, they will have cameras that read license plates that will identify a Montana license plate, the same one, driving by over and over for weeks or months at a time. That's obviously not somebody just on vacation. That's somebody who is living there. And that's what they say in this article. The DMV is using plate readers to sniff out Montana plated cars and tracking registrations to catch tax evaders, going after what could be a 100 million in back taxes and penalties.

So, they're not playing around. They're also going after what they call LLC mills. These are companies that do this Montana process for you. They charge you a fee, and they're starting to crack down on those. Remember back in the '90s, there were a few kind of fly-by-night sketchy car title companies that were using illegal methods to get people titles like fraudulent mechanics liens and some other sketchy methods. And there was one in Nevada. There was one in Tennessee. They all got busted. There's people in prison over that. So now they're starting to also crack down on the providers of these services knowing that they're illegal. And many states have now passed laws closing the loophole.

It’ll be trickier to dodge the sales tax unless you live in Montana. So that's obviously if you live there, you can register there, not a problem. And in reality, it's not new. Back in 2019, a few years ago, Georgia did this. They cracked down, but they were a single state. This is a collection of states that's doing this, and they're working together to get the records. They can get the records directly from the Montana LLC, Secretary of State, to find out who the owners are, who the registered agents of that company, and if they see you're out of state, they'll slap you with tax evasion.

Why is this happening? Well, Montana has the highest car ownership by population in the United States, more than double California. That's because many people are putting cars in their name in Montana, even though they don't live there. Again, they're cracking down on using this to dodge paying taxes. Even if you did the process for some other reason besides just avoiding taxes, if you didn't pay the taxes afterwards in your state, they're still going to say, "Well, you did it for another reason, but since you didn't pay the taxes, that's tax evasion." And they'll come after you for taxes, penalties, interest. They could even seize your vehicle.

So, this is breaking news. This article came out April 30th. That was yesterday. We're recording this on the 1st of May. And if you've been watching our channel, you've seen the prediction of this coming. And it's not a prediction. We've heard from the DMV commissioners. We work with them all the time, the different states, DMVs, and they've told us that it's just a matter of time. They had to put together the task force, put together the investigative resources, put together the rules for their state, and now they've kind of dropped the hammer, and people are going to find their titles will be revoked. There will be penalties and interest. Some people will have their vehicles seized and there will be some people that will be criminally prosecuted. Probably a few people go to jail, especially the ringleaders, people organizing this and doing it on a large-scale basis.

So, it's happening now. Now again, once you see it in Car and Driver, that means it's making the mainstream news. And like I said, we've seen it for over a year now where the states have been telling us this is what's going to happen. And that's the reason why as a professional certified title company, we never got involved with this. We never did this Montana process. We've had clients that we've been doing business with for 20 years that said, "Hey, you know, why don't you do this Montana thing? It seems like a big deal." We've told them this is not going to end well for people who are doing it.

Consumers maybe who did it years ago, you might be able to get away with it. But recent registrations will probably get revoked. And a lot of people ask, well, what's different between this and the Vermont loophole, the Vermont registration loophole? Because we did those. The difference is this: there was no tax evasion. People who did the Vermont loophole paid taxes and it wasn't designed to leave the Vermont plate on the vehicle and drive around with, right? You would actually use the process to get something with your name on it as an owner and then transfer to your state. That's different. That's not evading anything. You're still going through the process of your state. You're still paying your tax. You're still abiding by all the rules of your state. It's just that it's one step to help you get some documents that'll allow you to be eligible to register in your state.

So, that's a whole different thing. That one still got shut down eventually because some states didn't like the fact that people weren't primarily using like a bonded title or a court-ordered title. But even something as innocent as that got shut down. This Montana thing is really going to be bad. Mark my words. You watch this channel. We'll put the articles on there when people are starting to get arrested, vehicles being seized, big huge penalties, million-dollar penalties, and some of the ringleaders that are organizing all of this widespread large-scale operation will be in the news. They'll be big time in the news. And we've gotten some tips and some articles and some background records from some of our viewers and people that have told us who they're going after first. So, we kind of have a little bit of an inside track, but keep an eye on this. This is something that's breaking news and there'll be more coming about it.