Crackdown on Montana LLCsBreaking news. Keep an eye on this channel. This is an older article from about six months ago where California was cracking down on Montana LLCs.
State Consortium Joins the CrackdownBut there’s some news. There’s a group of states, a consortium of other states that have piggybacked on what California did. California was very successful in cracking down on these illegal Montana LLC titles and registrations.
Illegal Use and State ResponseWhat makes it illegal is people are using it to avoid sales tax, to avoid title requirements, to avoid registration requirements such as emissions, inspections, and a whole number of other things.
Enforcement and ProsecutionsWhen the states started finding out about this a few years ago, they didn’t know what to do. Well, California figured out what to do. They actually came up with a system to trace these vehicles, trace them back to the owner who lives in their state, and they busted a bunch of people.
Expansion of EnforcementA group of other states, about 28 states have joined in now, and they’re copying the same thing. So over the next few months, you’re going to see a whole bunch of rollouts of prosecutions, regulation, and enforcement against these plates.
Legal Issues for Non-ResidentsA lot of people think it’s legal because it’s legal to get a registration in Montana, which is legal in Montana. The problem is if you are a resident of another state and you title it out of state in Montana through an LLC, you’re more than likely violating your state laws on taxes, on registering a vehicle in your state, and on avoiding different types of requirements.
ALPR and TrackingHow do they find you? Well, there are a number of ways they do, but here’s one of them. They have what’s called ALPR—license plate readers. They’re cameras all over the place. They’re on street signs. They’re in parking lots. They’re on police cars. They’re on taxi cabs. They’re everywhere.
Enforcement TacticsThey’re monitoring every plate that drives by. If they see a Montana plate go by on a regular basis over the course of a few weeks or a few months, they know that’s not just somebody visiting the state from Montana on vacation.
Investigation and ConsequencesSo if, let’s say, you live in Texas and you have a Montana LLC license plate, they’re going to see that plate go past a certain place on your way to work or at a gas station. Then what they’re going to do is file a request for the records of that license plate in Montana.
State Responses and Future DevelopmentsIf they see it’s under an LLC, they’re going to back-trace the LLC and they know where you go because you drive by the same intersection every day. They’re going to have you pulled over and they’re going to do an investigation—this is what they did in California.
Future Developments and AdviceThey’re going to charge you with back taxes, penalties, revoke your plate, maybe revoke your title, and in some cases even seize your vehicle. So keep an eye on this channel for some news coming out over the next few weeks or months where these other states—we’re hearing feedback from the DMV commissioners and their offices—other states are following the lead of California and getting rid of this so-called loophole about getting license plates.
Resolution and Further InformationRemember, if you have a vehicle title problem, there are many easier ways than doing the Montana process. It may seem like it’s appealing because you’re doing some kind of backdoor loophole, but it really takes more time and costs more money than just going through a process in your state.
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Possible Loan ReductionDid you know that up to 20% of the balance of your existing car loan may be able to be removed from that balance? When you purchase your vehicle, you may have been inadvertently charged extra interest and add-ons, which include things like gap insurance, force-placed insurance, VSI insurance, and add-ons like service maintenance contracts, extended warranties, and theft notifications. There are all kinds of add-ons that they put on car loans in the F&I office (the finance and insurance office) at a dealership.
Baked-In Add-OnsWhen you sign all those documents, sometimes those charges are already baked into the payment that you’re quoted in the showroom. They don’t have to raise your payment. They can just say, “Yes, here’s your payment.” And when you sign it, it’s already in there. They’ve already figured that in. What happens is after you pay on the car for a year or two, you’ve paid down some principal—mostly interest, though. Then you call for your payoff and you owe $32,000, but your car is only worth $24,000. So you have $8,000 in negative equity. You can’t trade it in or sell it because you owe more than it’s worth.
Negative EquityWhat if you could cut off $4,000 or $5,000 worth of that balance, maybe more, and get closer to breaking even? Now you could trade it in, sell it, or work with your lienholder. Some lienholders have a short sale process. You can click the link below.
Options and ReliefEither way, you want to look at all of your options because in many cases, up to 20% of your loan balance can be removed from the principal amount. And 20% could be a lot. That could get you closer to an equity scenario where you don’t have upside-down or underwater balances owed on your vehicle and get you closer to getting out of that high car payment and into something that’s more affordable or a vehicle that’s better suited for your current life.
What is the 25-Year Import Exemption Rule?This is a rule that allows vehicles that are 25 years old or older to be imported without all of the same import requirements typically required by the EPA, DOT, and other customs requirements.
Customs Requirements ExemptionThe 25-year requirement only excludes and exempts vehicles from US customs requirements. It does not require states to exempt vehicles from their titling and registration requirements.
New Opportunities in 2025Now that it is 2025, there are some additional vehicles—tremendously interesting vehicles—that can now be imported into the US without having to go through the stringent import requirements. This is a great article in Motor Trend about some of these new additions to the approved list.
Featured VehiclesToyota Caldina GT: An all-wheel-drive rally-type wagon, similar to a Subaru WRX but in wagon form, available for around $10,000 to $12,000. Subaru WRX Type STI: An upgraded version with 276 horsepower.Mitsubishi Lancer: A very interesting vehicle, typically priced in the $30,000 to $40,000 range. Honda Accord SiR Wagon: A cool car from the late 90s/early 2000s, now importable.
Final ThoughtsOnce you take a look at the new allowances for these Japanese imports, you can see which ones might be of interest. Just make sure that you’re going to be able to get it through the titling process in your state before you start shelling out a whole bunch of money to get one of these cars through customs, because customs is only the first step before it goes into a situation where you can put it on the road and be driving it.
Thinking About Titling Your Car in Another StateSo, you’re thinking about trying to title your car in another state to try to evade requirements like inspections or certain insurance requirements or maybe even sales taxes. Maybe you have the wrong kind of paperwork and you’re thinking, “If I go to another state, I can get my paperwork passed.” Well, whether it’s Vermont, Montana, or other states that you think are going to be easier, keep in mind that if you use another state’s process to evade rules in your state, you’re probably going to get caught. Here’s why. Here’s a good example of what’s called ALPR.
What Is ALPR?ALPR stands for automated license plate readers. And that means that there are cameras all over the place that are monitoring license plates that are driving by. So, here’s what happens. Let’s say you live in California and you have a vehicle that is not going to pass smog or not going to pass inspection or maybe you don’t want to pay sales tax. So you say, “Hey, I’ll just title this vehicle in Montana so that way I don’t have to pass smog. I don’t have to pay the tax. I don’t have to get it inspected and I’ll just drive it around with Montana license plates.” Well, that’s great.
Forming a Montana CorporationNow, first of all, you have to put it in the name of a corporation because states don’t give out titles if you’re not a resident. But what the loophole is, what people do is they form a corporation in that state in Montana. They put the car in that corporation and then they just drive it around in your state and you think you’re legal because it’s a legal plate. However, every state has a law that says if you are a vehicle operator in your state, you have to title and register the car in the state where you primarily use the vehicle.
ALPR and EnforcementAnd you might say, well, if it’s a company car, I can use it anywhere I want. Yeah, you can. But what they’re going to do is they’re going to use ALPR data, automated license plate readers, that’s going to see these license plates all over the place. Now, first of all, in most states, because Montana is such a notorious loophole, if a police officer sees a Montana plate far away from Montana, they’re going to run the plate manually on their computer.
Getting Stopped and InvestigatedAnd if they see that it’s a corporation, they can stop you, check your ID, if you have a California license, why are you driving a Montana car? And if your answer’s no good, they’ll submit a report to the franchise tax board and they’re going to investigate and they’re going to find out that that corporation is in your name or in the name of somebody that is in California. But even if they don’t catch you manually, automated license plate readers are monitoring these plates.
Pattern Detection and InvestigationsIf they see the Montana license plate driving by the same intersection every day for a month, they’re going to figure this is not just somebody vacationing in Santa Monica. This is not somebody just visiting Disneyland in Anaheim. This is somebody who has titled and registered a vehicle out of state to evade something and they’re going to open an investigation. All they have to do is request the records from Montana Secretary of State. It’ll give them a printout. It’ll see the name of a person that’s the registered agent or the name of a person that’s an officer and they will track it back to you.
Legal ConsequencesAnd then they know when you go by an intersection because you go there every day. They’ll pull you over. They may be allowed to seize and impound your vehicle.
Seizure of Vehicle and Government AwarenessThey may also not have to give it back. If they can prove tax fraud, if you did not pay sales tax, if you did not register the vehicle properly, if you did not do smog, they can seize your vehicle and you’re out of luck. You lose the car for good and you can’t get it back. So, these loopholes, you’re not the only one that’s heard of it. The governments know about it. All the different DMV commissioners know this inside and out. The tax departments of every state have very clear understanding of how these work and this is how they undo it.
Task Forces and ALPR TechnologyThey have task force groups committees that are looking to try to catch people that are doing it. What does ALPR look like? Well, here’s a picture. Flock, if you notice on this picture, it says Flock. That stands for Flock Safety. It’s a company that sells these cameras not just to police departments, but if you’re an HOA, if you’re an apartment complex, a parking lot, you can get Flock cameras for your private sector location and it’ll track the license plates there.
Tracking in Private LocationsThe governments can buy that data even from a parking lot, even from, you know, if you pull into, you know, Vons grocery store, they can track your license plate. Police cars, tow trucks, taxis, all kinds of cars have these ALPR readers all over the place and they’re taking pictures just like this and they can automatically read the license plate and track it back.
Triggering InvestigationsIf they see Montana plates on a regular basis, they’re going to flag you and investigate to see why you have a Montana plate. Look, if you’re just visiting on vacation, no harm, no foul. But if they see that it’s in a corporation name, an LLC name, Montana LLC, they’re going to investigate further and undo you because they’re going to figure that you did it for a reason.
Reasons for Loopholes and Their ConsequencesEither your car is not eligible because it’s not going to pass inspection. Maybe it’s not allowed in California. Maybe you did tax evasion because Montana has no sales tax. Maybe it’s something that won’t pass smog. Either way, they’re going to get to the bottom of it and eventually it’ll cost more than what it would have to properly register in the first place.
Insurance IssuesSo, you may get away with it to begin with, but at some point, it’s going to come back to haunt you. Plus, the other problem is insurance. When you tell your insurance agent where you garage the car, where you park the car, you’re going to have to tell them either Montana or California.
Conflicts in Insurance CoverageIf you tell them Montana, you’re going to have a Montana insurance card. And if you use the car in California, if the car gets stolen, it gets damaged, or you cause a wreck, your Montana insurance agent insurance might not cover you because you said that it’s a Montana use vehicle. If they can see that you’ve been using it in California most of the time, they can deny your claim, which means if you total your car, you’re out the money.
Franchise Tax Board InvolvementNow, if you tell them it’s a California address with Montana plates, they may now turn that in to the California Franchise Tax Board. Or even if they don’t, if the franchise tax board looks up your insurance and they see that you put California as an address, that just proves that you’re evading California laws for a California used vehicle.
Final WarningSo, it’s a catch-22. No matter what state you declare that you’re using it in for your insurance, it’s going to create some problems for you. So, think twice about these out-of-state loopholes. Even though it might save you some money or, you know, do something that makes it easier, in the long run, it could create a lot more liability for you than you signed on for.
How Can a Clean Title Go to Salvage?So how can a clean title go to salvage if you have no accident? Here’s a great example of how a title record may not be 100% accurate. This is a person who purchased a Tesla with a clean title, and then, after they purchased it, they found out that it’s a salvage and it’s going to cost $12,000 to fix it. Here’s how this happened.
The way that a salvage title can be created isn’t just one method. It can be created either by the insurance company, who pays a claim on a vehicle that says, “We paid out this much money to have this vehicle fixed, so now it’s a salvage.”
Other Ways a Salvage Title HappensAnother way to do it is if the owner of the vehicle fixes the car themselves and says, “I fixed this damage, and I want to make it a salvage to protect my liability if I sell it.” Another way is if the damage is detected by the factory or the manufacturer, and then they put it on the record. That’s what happened with this Tesla.
What happened was this Tesla was damaged in an accident. The owner of the vehicle at the time fixed it themselves. They didn’t want to go through their insurance. They didn’t want to put it on the title. They fixed it, and then they sold it to a third party.
What Happens When a Dealership Finds the DamageOnce that third party purchased the vehicle, they brought it to the Tesla dealership to have some repairs done. The manufacturer was able to determine that the car had been previously damaged both from the diagnostics on the vehicle. The computer said there was an impact; there was deceleration, and then also they did an inspection, and they found that the frame had been dented and the battery had been damaged. So the Tesla dealership put a salvage designation on it. This is completely legal. The salvage designation does not have to come from an insurance company. It can come from any method.
Why Buyers Must Be Extra CarefulSo this is why it’s very important when you’re purchasing a vehicle not only to check the title record. In this case, the buyer checked Carfax. Now keep in mind, even if the car had been filed through an insurance company, Carfax doesn’t catch everything. Carfax is not 100% accurate. It’ll even say in their disclaimer that the records aren’t 100%. So you may have Carfax records that are not complete. But the only way they do get it at all is if it goes through an insurance company. They’re not going to pick it up if the owner did it or if the manufacturer did it.
What to Check Before Buying an EVSo be very diligent, especially on these electric vehicles, to check out the frame. Check out the underneath. Check out the battery. Do a battery test. But also make sure that the physical examination doesn’t indicate there was damage, even if the title doesn’t show salvage on it.
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