Lorena Gonzalez Bill to Combat California’s Underground Economy Heads to the Governor’s Desk

Saturday, September 14, 2019

SACRAMENTO – (Saturday, Sept. 14, 2019) – Assembly Bill 1296 authored by State Assemblywoman Lorena Gonzalez (D-San Diego), sponsored by California Attorney General Xavier Becerra, to substantially strengthen the state’s efforts to combat the illegal underground economy that targets the most vulnerable members of our community passed the State Legislature tonight after a 75-0 concurrence vote in the Assembly. It now heads to the governor’s desk for a signature or veto.

AB 1296 will enshrine in state statute California’s unique, multi-agency task force of law enforcement professionals known as the Tax Recovery and Underground Economy (TRUE) Team that currently operates out of Sacramento and Los Angeles.

“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,” Assemblywoman Gonzalez said. “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.”

Attorney General Becerra’s Department of Justice leads the TRUE Team. Established in 2014, the pilot program has allowed agencies in Sacramento and Los Angeles to work together to investigate and prosecute the most outrageous felony-level multijurisdictional underground economic crimes in California. AB 1296 builds on the success of a state pilot program by permanently establishing law enforcement teams in Sacramento and Los Angeles.

California’s underground economy generates between $60 to $140 billion in unreported revenue annually, according to a University of California at Los Angeles Labor Center report, depriving the state of $8.5 billion in corporate, personal, and sales and use taxes each year. In September 2018, Attorney General 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, Attorney General 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.

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.

AB 1296 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.