SAN DIEGO – California Attorney General Xavier Becerra and Assemblymember Lorena Gonzalez, D-San Diego, unveiled legislation, AB 1296, the Tax Recovery in the Underground Recovery program (TRUE Act), on Friday to combat underground economic crimes.
AB 1296 is sponsored by Becerra and was introduced by Gonzalez.
“With underground economic crime, our workers get exploited, business owners face unfair competition, consumers get ripped off, and taxpayers bear the burden,” Becerra said. “AB 1296 expands on successful efforts to prosecute violators and recover funds involved in wage theft, tax evasion, counterfeit commerce and other economic crimes. The funds recovered become available to benefit cheated workers, our schools, law enforcement and our communities.”
“The underground economy hurts everyone: workers who are left without protection, consumers who are sold dangerous or fake products, and the state as we lose tax money,” said Assemblywoman Gonzalez. “This task force is a unique, collaborative approach for law enforcement to breakdown its usual silos and execute wider solutions for targeting the underground economy.”
According to a University of California at Los Angeles Labor Center report, the state’s underground economy generates between $60 to $140 billion in unreported revenue annually, depriving the state of $8.5 billion in corporate, personal, and sales and use taxes each year.
TRUE’s pilot program, established in 2014, allowed agencies in Sacramento and Los Angeles to work together to investigate and prosecute the most outrageous felony-level multi-jurisdictional underground economic crimes in California.
In September 2018, Becerra announced the results of a year-long investigation that led to charges against a family of four for labor exploitation and human trafficking.
In October 2018, Becerra also announced that the State of California regained lost state revenues from an underground prescription drug business, from an illegal pharmaceutical scheme and from operators who possessed counterfeit merchandise intended for sale.
AB 1296 builds on the success of a state pilot program by permanently establishing law enforcement teams in Sacramento and Los Angeles and authorizing additional teams in the three other major metropolitan regions of the state—San Diego, the Bay Area and Fresno.
Since the beginning of the pilot program, investigative teams have identified $482 million in unreported gross receipts and $60 million in associated tax loss to the state. Additionally, through its criminal enforcement actions, the pilot program has recovered over $25 million in lost tax revenue, victim restitution, and investigation costs.
The legislation sponsored by Becerra strengthens the program by ensuring multi-agency collaboration between several governmental entities, including the Department of Justice, the Department of Tax and Fee Administration, the Franchise Tax Board, and the Employment Development Department. Together these agencies combat wage theft, tax evasion and other crimes in the underground economy.