The current level of abusive tax shelters (ATS) activity—and its potential for future expansion—raises significant administrative challenges for FTB and for the continued viability of the state's revenue system. The use of ATSs not only results in significant immediate term revenue losses to California—in the hundreds of millions of dollars annually—but can also result in declining compliance by an increasing number of taxpayers over the longer term. While the Legislature has taken important steps to curtail the use of ATSs, it may want to consider additional measures in this regard. This discussion provides an overview of the ATS phenomenon, addresses the impacts of such shelters on the state, and suggests measures the Legislature may want to consider to address the ATS problem.