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> According to Detwiler, Tennessee did not bother to notify him in advance that he was in violation.

Why would they? The people who use these "loopholes" know exactly what they're doing.

Well, by definition, if it's a loophole it isn't illegal. So.. he had no reason to believe it was

Except it was illegal, so it wasn't a loophole. It was something technically doable, not legally.

You can get married in multiple states - though some states may share, most don't share marriage registration. Nothing will stop you. But you're still breaking the law of bigamy.

I put "loophole" in quotes for a reason.

The person in question was arrested and charged with tax evasion and filing a false sales tax return. What he is alleged to have done is illegal.

The state was under no obligation to alert him to the fact that they believed he had committed tax evasion and filing a false sales tax return before they arrested him and charged him with a crime.

What he seems to have expected was an opportunity to pay to settle a criminal charge before it landed him in cuffs. This I should be able to pay to make it go away attitude seems especially prevalent in American society today.

This Montana car registration scheme is, I believe, often referred to as "loophole" not because it's legal but because so many people have been able to get away with it without consequence that it is seen by many as relatively low-risk.

> This I should be able to pay to make it go away attitude seems especially prevalent in American society today.

It works for the billionaire class, why shouldn’t it work for everyone else?

This is what’s ultimately going to kill what’s happening in the US today: when people in power decide that the rule of law is just a suggestion, they’re going to find that there are people willing to use that against them in ways that they’re not going to like.

> It works for the billionaire class, why shouldn’t it work for everyone else?

As George Carlin said, "It's a big club...and you ain't in it!"

When it comes to financial crime, billionaires get benefits, plebs get prison.

Creating a LLC or other entity with no purpose except [checks notes] tax avoidance is not legal. That’s about as fundamental of a tax law as there is.

"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes."

Gregory v. Helvering, decided by the US Supreme Court in 1935.

Edit: So if it's a legal arrangement that reduces taxes, then yes, it's legal.

There's probably a law that makes this arrangement illegal.

At least in some jurisdictions, arrangements solely for the purpose of avoiding taxes (barring explicit carve-outs) are not permitted.

https://www.canada.ca/en/revenue-agency/programs/about-canad...

TLDR: if the only reason for a transaction is tax avoidance, it may not be "illegal", but it may be disallowed (and presumably incorporated in subsequent legislation).

Similar is "wash sale" legislation: for example, selling a security for a tax loss and

- buying it back within 30 days

- buying a call option on that security.

I will guess that the former might get you just a reassessment (the first time). The latter... well, you're smart enough to know about options and tax-loss sale, now you need to demonstrate that you didn't do it for tax avoidance.

Not sure what US law (federal and gazillion states) has on this.

Setting up the LLC is not illegal. On its own, this is not tax evasion.

The tax evasion comes in when you fail to pay the use tax due and make false declarations or intentionally omit information when you make representations to the government (i.e. in tax filings).

The individual in question could have set up a Montana LLC, purchased a vehicle through it, paid the use tax due when he moved it to Tennessee and changed the registration within the 30 day limit.

Of course, there is no benefit of going out of your way to buy a car in Montana if you don't intend to drive it there, but the charges against this person relate to his failure to pay tax, not the mere fact that he set up an LLC.

Whats the penalty though?

If its just a monetary fine then there’s little reason to arrest somebody to immediately release them when you could’ve just told the accountant he needs to pay a fine or he’s going to be arrested.

You could say that about a lot of crimes, but that's not how it works.

Generally-speaking, this type of tax evasion is not treated the same as, say, making a mistake on a tax return that results in you owing a bunch of money to the state.

It's akin to intentionally defrauding the state.

A quick Google search indicates that willful tax evasion is a Class E felony in Tennessee, with a potential prison term of 1-6 years.

In current terminology, tax avoidance is legal, tax evasion is not.

Sounds sensible but I don't think that's actually a law. If doing something via a business legally reduces your tax bill then it is, by definition, legal.

As mentioned in the article, the exception is intended for when the majority of the business is conducted in the other state. If in fact you don't do any business in the other state at all, then you are lying and evading taxes. The law is not about how you set things up on Day 1, it's about whether your ongoing behavior is actually consistent with the requirements of the law.

I think that could be actually illegal. The fact that you can do it, and also avoid taxes is different than doing specifically to avoid taxes.

No, it is not correct that using a loophole is always legal. Law systems are not simple and absolute, and intent matters.

This is a huge problem with our legal system. Either make the law simple and absolute or don't make it a law. Intent should play absolutely zero role. Otherwise, all you get is a corrupt system of lawfare that interprets the intentionally ambiguous law to suit those in power.

I hit with my car in the night a pedestrian who is spaced out on mescaline and has suicidal tendencies. Vs I hit with my car a neighbor whom I had and have long list of legal disputes and physical confrontations and death threats.

Both hits are the same, resulting damage/death same. Law differentiates on (proven or disproven) intent and resulting sentencing difference may be huge. Or at least should be. World and people are unfortunately anything but simple generic use cases.

Million other cases proving there are good reasons to take intent into account, even if surface for mistreatment is not small. Unjustice otherwise would be bigger IMHO.

Yeah, exactly. There's a reason the law differentiates between murder and accidental homicide.

> Either make the law simple and absolute or don't make it a law.

The world isn't simple and absolute, and the law isn't a computer program.

>Either make the law simple and absolute or don't make it a law. I

Government doesn't just give up power like that. And they sure don't give it up over the kicking and screaming of the myriad of industries that benefit as middle men and over the kicking and screaming of the "there ought to be a law" class of useful idiots that exist for every exist of policy.

Intent matters.

You cannot reasonably create a law that covers all situations in their entirety. Even if you could, it would become obsolete the second it's in effect

I used to think this way and then after I got more experience and wisdom I concluded attempting to make simple absolute laws is inflexible and unrealistic.

Yeah but making handy wavy laws that are only enforced when cops and politicians like it inevitably leads to corruption and abuse. Law books 20 feet thick so that everybody is breaking the law at all times and can be basically arrested at will unless you got political connections is super authoritarian.

> make the law simple and absolute

When it comes to law, "simple" and "absolute" are basically mutually exclusive.

If the law is written simply, then lawyers will pick apart even the slightest ambiguity and the spirit of the law becomes irrelevant.

If the law is absolute, then it becomes verbose in order to close the loopholes.

Just like “regulations are written in blood,” complicated laws and lawyers exist because of all the times when simplistic laws and rules failed to account for edge cases.

To me, "loophole" in a legal context means that the law is written in such a way that there is an omission (perhaps unintentional, though sometimes intentional) such that using that loophole is legal. So yes, using a loophole is -- by definition -- always legal.

If doing something isn't legal, then it's not a loophole. It's just something that someone thought they could get away with if the government didn't notice.

Sounds like this was never legal in Tennessee; calling it a "loophole" isn't correct.

Because typically in tax matters the first step is to inform the person that they owe $X in taxes + $Y in penalties and give them a chance to pay up.

Not if the state thinks you committed a bigger crime than just making a mistake on your tax form.

Is that true for intentional tax evasion? Certainly I've gotten a letter in the mail when I've messed up my tax return and owed money, because it was a simple mistake. But when it's clear that someone is doing something to intentionally not pay a tax that's owed, I don't think we should expect law enforcement to be polite about it.

The ‘ol letter of the law vs spirit of the law.

The law permits the behaviour, don’t like it? Change it.

The law (at least in California as described in the article) did not permit this behavior. If you didn't actually do the majority of your business in another state then you were illegally evading taxes.

The problem is that this was hard to enforce, so now they have changed the law to something much simpler: if any corporate officer or beneficial owner is a resident of California, then the business is subject to Californian taxation.

Because, to the chagrin to many a statist in the HN comments, there are all sorts of legal precedents that prevent the .gov from rolling up with a swat team over petty civil violations with no aggrieved party other than the state.

Juicy! I'd like to see some of them.

> According to Detwiler, Tennessee did not bother to notify him in advance that he was in violation. Instead, they sent heavily armed men to his place of business, handcuffed him, and took him to jail. His bond was $20000.

Why should white collar crime deserve a lighter touch? This wasn't a no-knock raid in the middle of the night.

Because they’re part of the gentry class white collar, but blue collar crime the police force as we know it today was created to take care of the EastEnders not the Gentry class and the police have been successful in carrying out their remit in that area of law enforcement since the 1840’s/1850’s…

The police are a literal extortion racket in the US. “That’s a nice society you have there, wouldn’t want us to fuck it up would you? No? Better keep paying us then.”

This is the deal at this point.

No

Did he have a history of violence, or was there some good reason to send armed men to his place? If not, this is just a waste of resources, and also adding many armed men into the situation made it more likely for things to turn deadly.

US law enforcement are always armed by default. It would be shocking if they actually showed up unarmed. Possibly negligent and a firing offense.

Is there no policy of calling someone without a history of violence (or showing up to inform with no intention of on-the-spot arrest) to let them know they are in violation of the law and request they turn themselves in within the next X days if there is no reason to assume evidence could be destroyed by the person during that time?

Why would there ever be a “no reason to assume evidence could be destroyed”?

The evidence of knowingly evading taxes is likely in encrypted text messages and emails that can be trivially destroyed.

No. It gives people time to plan an escape.

Since the police should assume they are innocent, that shouldn’t be a consideration.

So that I understand correctly: a person broke the law, the legal system used legal methods to deal with it, and he complained because he's a celebrity? https://xkcd.com/1494/

He didn't break the law. The company was registered in Montana, and he bought the Ferrari in Texas where it was also destroyed in his "durability" test. Why should he pay taxes there? It's not a loophole it's just the law

I believe you're not fully understanding the entire context of his legal troubles.

Neither of us fully understand the entire context of the legal battle, since there is a gag order and neither of us are Cody Detwiler. Certainly though registering luxury vehicles like this under an LLC is common thing to do, and the Cody case is particularly silly because the vehicles were for his company.

Everyone wants to drive their Lambo on the moon with Montana plates thanks to social media clowns, and it has been this way since the blockchain craze of a few years ago.

I wonder if the Montana plates 'loophole' would be as well 'exploited' had it not been for the fictional world of YouTube.

that car was never in montana. is a scam that they would go after him.

It's really not a loophole, it's just how vehicle registration is done. That vehicle never drove into the state of Tennessee and was used for his business, why should it be registered where he lived and not where the company is set up?

And the IRS still requires US Citizens living and working abroad to file tax returns. Tennessee can decide how to tax its residents on their businesses and other assets. "It's just how taxation is done."

and told her not to let Detwiler know about they were investigating him.

... and she complied. Looks like he chose his accountant poorly.

is that a legal request?

Surely they can request anything they want? Assuming it's just a request and she can ignore it if she pleases.

I’m sure they were able to put pressure on her in order to stay silent; or, they had a gag order placed on her.

If she was doing it for him, she was likely doing it for others and thus it was in her best interests to stay silent for one to protect the revenue stream from the others.

Yeah, I feel like if I were an accountant who wanted to be able to keep practicing in a state without legal issues, and the state told me "we're pretty sure your client was doing something illegal and think you might have known about it, so tell us everything you know and don't tell your client before we arrest them and we'll take into account your cooperation", I probably would also do what they suggested

"I was advising someone to do something illegal but then they got caught so I'm throwing them straight under the bus to save myself"

Yeah that's the American spirit right there

There is no way his accountant actually told him to do a tax fraud meme. I’m sure he did it himself, then just plopped some random paperwork in the accounting portal and just assumed he’d be fine.

"I thought my criminal accountant had more principles" is a pretty hilarious complaint (if that's even what happened; I agree with the sibling comment that there's not really any reason to assume that it went down that way)

That’s a terrible plan in the large, though. You don’t want people lying to their accountant, or their doctor, or their lawyer. If you can’t trust a person in that occupation, they’re useless to you. It’s in society’s best interest for people to confide openly with their helpers in those professions.

Is it in society’s best interest or criminal’s?

Society's, clearly. Same reason you don't want someone lying to their doctor and hiding that they have an infectious disease.

The deal was probably that the acccountant wouldn't be charged for helping evading taxes.

If they were ignorant that would just be blackmail under cover of law. If they were guilty that would be selective enforcement.

See, if you had chosen your accountant with vigor, you'd have found one that uses a canary trap that daily sends you an email that no government agency inquired about you today and then just don't send an email on the day they did. Make 'em earn their money!

That works great until your account has an accident and requires emergency surgery or something, and then you panic for no reason

At least in the EU an account knowing filing tax evasion reports would lose their license and can be criminally charged.

I don't know the state law there but it's not uncommon for an account to be liable (and need to notify authorities in cases of tax evasion)