CALIFORNIA Governor Arnold Schwarzenegger vetoed a bill in late September that would have made it illegal for taxpayers to buy insurance against loss of tax benefits. 

Schwarzenegger said the bill was at best premature because the legislature has not given other recent legislation time to curtail tax avoidance transactions and “at worst, [it] takes away an important type of indemnity insurance that allows legitimate business ventures to go forward.” The measure would have taxed away as a penalty 75% of any proceeds received by California taxpayers “from insurance, guarantees, stop loss agreements or other similar arrangements” that ensure tax benefits in tax-motivated transactions.