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The Dominant Narrative: A Tool to Tackle California’s Tax Gap
SB 799 was pitched as a bold fix for California’s persistent “tax gap” between what’s owed and collected. Backed by Attorney General Rob Bonta and the influential Consumer Attorneys of California, the bill would have allowed private attorneys to file lawsuits alleging tax fraud, acting as quasi-public enforcers in civil court.
Supporters claim this “deputized” model could empower the state to go after big tax cheats that regulators supposedly miss. Consider it a legal slingshot for David to go after Goliath: more lawsuits, accountability, and revenue.
Sounds noble, right?
The Risk: Turning Tax Enforcement Into a Legal Free-For-All
Here’s the problem: tax enforcement isn’t a courtroom game. It’s a regulatory science. SB 799 didn’t just propose extra oversight. It opened the door to unregulated, unaccountable litigation.
- Private attorneys would’ve had broad discretion to sue based on vague fraud allegations, often relying on interpretations at odds with the Franchise Tax Board (FTB) or California Department of Tax and Fee Administration (CDTFA).
- That creates conflicting guidance, duplicative audits, and settlement leverage divorced from fact-based findings.
- Imagine being a business that satisfies the FTB and only being sued anyway by a trial lawyer hoping to fish out a settlement.
That’s not tax justice. That’s a bounty system, and it’s ripe for abuse.
The Evidence: Tax Gaps Aren’t Closed by Lawsuits
During committee hearings, the myth of massive unpunished corporate fraud got a dose of reality. Testimony revealed that most of California’s “tax gap” is driven by:
- Non-filers (think: underground economy participants)
- Small businesses underreporting by error, not malice
None of these are ideal. But they’re not targets for high-profile fraud lawsuits.
And where similar laws have passed — such as qui tam-style tax fraud laws in Illinois and New York — the results have been mixed at best. These states haven’t closed their tax gaps. What they’ve increased are:
- Legal fees
- Taxpayer confusion
- Backroom settlements driven by pressure, not justice
Why This Was the Right Call; For Now
By voting down SB 799, the California Senate Revenue and Taxation Committee did something rare: it chose coherence over courtroom chaos.
Tax enforcement should be handled by tax agencies. These departments are trained to:
- Apply the law consistently
- Prioritize cases based on revenue impact
- Avoid weaponizing legal ambiguity
Letting private attorneys in — especially ones who stand to profit from outcomes — creates perverse incentives that distort enforcement priorities and overburden businesses already grappling with California’s notoriously complex tax code.
The Contrarian Take: This Bill Wasn’t About the Tax Gap — It Was About Legal Power
Let’s be clear: SB 799 wasn’t just a revenue tool. It was a power play by California’s trial bar, disguised as tax policy.
Private attorneys stood to gain access to sensitive tax data, the power to compel disclosures, and the leverage of fraud accusations — all without the burden of impartial administration.
This isn’t about helping tax agencies. It’s about circumventing them.
And Attorney General Rob Bonta — like Xavier Becerra before him — knew this. That’s why the business community, across sectors, drew a red line.
The Future: A Zombie Bill in Waiting
Don’t celebrate too soon.
SB 799 was technically “granted re-hearing,” which means it could be revived in 2026. There’s no hearing date this year, but that doesn’t mean the idea is dead.
- The Attorney General’s office still wants more tools.
- The Consumer Attorneys of California still want a new revenue stream.
- And the political temptation to “go after fraud” with splashy headlines still has traction.
Business leaders should assume this bill or a cousin of it will rise again.
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