Why So Many California Supercars Have Montana License Plates

By Hannah Elliott | Bloomberg

The 1987 Porsche 911 sold on Bring a Trailer on July 26 was such a dreamy coupe that late founder Ferdinand Porsche would be sorry to have missed it. Its diamond blue metallic paintwork — a hue so subtle it looked like lavender from certain angles — and 3.3-liter flat-six engine were enough to fetch $141,000 and more than 120 reviews on its list.

Careful observers would also have noticed a far more polarizing detail than the semi-lavender paint job: The Turbo came with “a proper Montana title in the name of the seller’s LLC,” the listing says.

In some circles, Montana’s registration is a touchy subject. The practice of registering a vintage car there, regardless of where it actually is, is done in order to avoid paying taxes and evading emissions standards. And it attracted many detractors.

“People who have Montana license plates are like people who put fake handicap badges in their cars,” says Paul Zuckerman, a Los Angeles attorney and avid car collector. “It’s garbage.”

“I can’t believe so many customers got away with this scam,” says Alex Ross, owner of Sharkwerks, a high-performance auto tuning shop in Fremont, California. “No matter where in California, to every car and cafe [gathering], look for Montana plates. It’s funny.

Randy Nonnenberg, the founder of BAT, is more circumspect, though he’s quick to say he doesn’t have any personal vehicles with Montana plates. “It’s not a red flag; that’s something to note,” he says. “We don’t believe it’s up to us to lecture that person to do this or not. It’s a strategy you may or may not agree with.

But with tougher emissions standards enacted in Connecticut on July 22, Colorado lawmakers are expected to discuss requirements to drastically reduce toxic air pollution by 2027 next month, and a handful of automakers, including BMW , Volkswagen and Ford, recently backed the U.S. Environmental Protection Agency’s decision to restore California’s ability to set its own tough tailpipe and zero-emission vehicle standards, the debate intensifies over distance traveled to avoid restrictions.

The Montana Program

The Montana car registration debate can seem very complicated for a piece of metal. But real money – and ethical considerations – are at stake.

Car owners from Mendocino to Miami title collector cars in Montana, even – mostly, in fact – if they don’t live there. Some set up an LLC in the state, which gives them a mailing address and residency status of some sort. Others acquire a mailbox address or property at which they can claim residency in Montana.

“We’re seeing, obviously, a lot of sellers — a lot are doing it, and buyers are interested in doing it,” Nonnenberg says. “We manage the BAT dispatch, so we see where people move all the cars. And, yes, there is significant movement.

As of 2021, 10% of all McLaren P1s ever made — cars worth more than $1 million each — were registered in Montana, according to the Montana DMV. Four of the 100 Pagani Huayras ever made were registered in Montana. They were listed at $2.5 million each.

Montana offers two important advantages. First, it does not charge sales tax on personal property. (Alaska, Delaware, New Hampshire, and Oregon are the other states that charge no sales tax.) That means someone who spends $500,000 on a new Lamborghini doesn’t have to pay approximately $36,000 in additional taxes to acquire it. (California sales tax, for example, is 7.25%.) That’s no change, even for those who can afford it. Many see it as a smart decision.

“It’s such a notorious tax scam that even my own accountant suggested I use it to protect my vehicle from California taxes,” says Jeff Wright, a Los Angeles-based car enthusiast who owns a ranch in Montana. .

Second, Montana does not require vehicle emissions testing or annual inspections. Indeed, with less than half the population of the borough of Queens, NY, there are no populated areas federally classified as having “non-compliant” status to meet Clean Air Act regulations. . In California, on the other hand, owners must ensure that all vehicles manufactured after 1975 meet emissions standards and can pass safety inspections.

Where 10 years ago the sight of a Ford GT sporting a Montana blue plate was rare, a drive to the popular Friday morning car rallies at Newcomb’s Ranch outside Los Angeles reveals that even 911s relatively pedestrian areas carry Montana plates.

“It’s gotten so out of hand that even people in Florida are doing the Montana tax scam,” Ross says. “And as a bonus, you avoid smog [regulations].”

Montana has become a tax haven for supercar owners because it does not charge sales tax on personal property and does not require vehicle emissions testing or annual inspections. (File photo: Getty Images)

A legal vacuum

Technically, the practice is legal. Companies help make it easier. Search “how to register my car in Montana” and you’ll see a dozen sites offering services to help clients form LLCs. You don’t even have to set foot in the state. They will remotely manage titles and registration fees.

“Don’t buy a motorhome, a luxury car, a boat or a plane! Let your Montana LLC buy it! reads the opening page on the website of Montana Corporate, a Helena, Montana-based company that offers LLC formation for $625, “securities management” for $150, registration at abroad and the acquisition of securities for $840, and other conveniences, including “courier service” and “retrieval of documents”.

Law enforcement authorities and legislators are familiar with the regime. (California State Police began cracking down on residency discrepancies for drivers arrested for other violations with California licenses and out-of-state license plates.) In 2017, Montana lawmakers proposed a sales tax of up to 1% on cars and recreational vehicles. worth more than $150,000; Aimed at out-of-state enthusiasts, House Bill 650 has been dubbed the “Ferrari Tax”.

At the time, the Bozeman Daily Chronicle estimated the proposed tax could bring in $2.5 million a year for the state. But car and RV dealers objected – strongly. Ultimately, a “luxury” fee of $825 was added to the regular registration fee for vehicles over $150,000.

In addition to normal registration fees, individual counties in Montana may also impose a so-called local option tax of up to 0.7% of a vehicle’s retail value, providing direct revenue. As of August 2021, Big Horn, Deer Lodge, Flathead, Granite, Phillips, and Richland counties did not have this local option tax. Not surprisingly, Flathead, Granite and Deer Lodge counties have the highest number of luxury vehicle registrations, according to data from a vehicle registration manual for the Montana DMV. In total, light vehicle registrations contribute about 4% of total state revenue, according to the primer.

Personal Ethics and Risk

Unless and until it becomes outright illegal, the decision to title something like a $2.4 million Ferrari F40 in Montana rests with the owner of the individual car who makes personal ethical choices. Many classic cars are labeled “heavy polluters” in the state of California and do not pass emissions testing. Registering them elsewhere is fooling the system that California authorities have put in place to help reduce air pollution for everyone.

Then there are the tax issues. If you can’t afford the taxes to register your supercar in the state you live in, you might not be able to afford the car, says Barry Ritholtz, proud vintage Corvette and Defender owner and president of Ritholtz Wealth Management LLC. (Ritholtz also hosts the “Masters in Business” show on Bloomberg Radio.)

“I like paved roads and working infrastructure,” Ritholz tweeted. “I have to pay him one way or another.”

Ultimately, it comes down to each car owner’s personal appetite for risk, as these loopholes tend to get plugged later. There’s no guarantee that car enthusiasts’ relative leeway regarding Montana’s titles will last.

“I advise my clients to set up a Montana LLC only when the chances of a sales tax audit are minimal,” says Doug Trotter, owner of Trotter, LLC, a firm that specializes in advising, acquiring, and managing. car financing. “It’s borderline tax evasion.”

“It’s a risk – a cheap thrill,” echoes Zuckerman, the Los Angeles attorney. “I always feel better if my cars are registered in California.”

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