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California legislators set for vote to expand the state’s False Claims Act to false tax claims

Wed 28th Aug 2019, Blogs

A bill winding its way through the California legislature seeks to extend the reach of the California False Claims Act.  The bill would amend California Government Code 12651 and 12653 to add claims under the California Revenue and Taxation Code. 

The California False Claims Act, as well as its Federal equivalent, are specialized statutes with specific pleading requirements and a robust body of case law.  The IRS, the SEC, and many other Federal and state agencies also have their own “whistleblower” programs.  These statutes and programs can lead to significant economic recoveries for government agencies.  They also provide that a portion of the money collected be shared with whistleblowers. 

Currently, the California False Claims Act says that anyone who presents a false claim for payment or approval, presents a false record, or makes a materially false statement or fraudulent claim, must pay three times the amount of the loss and the cost of any civil action brought against it.  It also allows a person with knowledge that other people or companies have submitted false claims to bring a civil action in the name of the state.  That “whistleblower” is referred to as a “qui tam plaintiff.”  The qui tam plaintiff files the complaint under seal and forwards a copy to the California Attorney General.  After given a period to investigate, the California Attorney General may take the case on itself, a process called “intervention,” or decline prosecution and have the qui tam plaintiff litigate the case on his or her own. 

As it stands now, the California False Claims Act does not apply to false claims under the Revenue and Taxation Code.  If the legislature approves the proposed amendment and it enters into law, a qui tam plaintiff could file a civil suit based on a false claim under the Revenue and Taxation Code if the alleged damages exceed $200,000.  The proposed amendment would only apply to claims made on or after January 1, 2020.

Assembly Bill 1270 https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1270 is set for hearing before the Senate Appropriations Committee on August 30, 2019.

Ms. Hawbecker is a partner at Bienert Katzman. She has represented qui tam plaintiffs under both Federal and state False Claims Acts.  She has also represented taxpayers in civil and criminal investigations in California and Alaska.