BILL NUMBER: SB 1055	CHAPTERED
	BILL TEXT

	CHAPTER  282
	FILED WITH SECRETARY OF STATE  SEPTEMBER 25, 2008
	APPROVED BY GOVERNOR  SEPTEMBER 25, 2008
	PASSED THE SENATE  AUGUST 19, 2008
	PASSED THE ASSEMBLY  AUGUST 13, 2008
	AMENDED IN ASSEMBLY  AUGUST 11, 2008
	AMENDED IN ASSEMBLY  AUGUST 5, 2008
	AMENDED IN ASSEMBLY  APRIL 22, 2008
	AMENDED IN SENATE  FEBRUARY 25, 2008

INTRODUCED BY   Senators Machado, Correa, and Oropeza
   (Principal coauthor: Assembly Member Niello)
   (Coauthors: Senators Alquist, Denham, Steinberg, and Wiggins)
   (Coauthors: Assembly Members Aghazarian, Galgiani, Lieu, and Wolk)

                        JANUARY 7, 2008

   An act to add Section 17144.5 to the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1055, Machado. Taxation: cancellation of indebtedness: mortgage
debt forgiveness.
   The Personal Income Tax Law, in modified conformity to federal
income tax laws, requires a borrower to include in his or her income,
with certain exceptions, the amount of debt canceled or discharged,
as specified.
   This bill would provide further conformity to federal income tax
laws by conforming to specified provisions of the federal Mortgage
Forgiveness Debt Relief Act of 2007, relating to the exclusion of the
discharge of qualified principal residence indebtedness, as defined,
from a taxpayer's income if that debt is discharged after January 1,
2007, and before January 1, 2009, as provided.
   This bill would take effect immediately as a tax levy.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 17144.5 is added to the Revenue and Taxation
Code, to read:
   17144.5.  (a) Section 108 of the Internal Revenue Code, relating
to income from discharge of indebtedness, as amended by Section 2 of
the Mortgage Forgiveness Debt Relief Act of 2007 (Public Law
110-142), shall apply, except as otherwise provided.
   (b) Section 108(a)(1)(E) of the Internal Revenue Code, as added by
Section 2 of the Mortgage Forgiveness Debt Relief Act of 2007
(Public Law 110-142), is modified by substituting the phrase "January
1, 2009" for "January 1, 2010" contained therein.
   (c) Section 108(a)(1)(E) of the Internal Revenue Code, as added by
Section 2 of the Mortgage Forgiveness Debt Relief Act of 2007
(Public Law 110-142), is additionally modified to provide that the
amount excluded from gross income shall not exceed $250,000 ($125,000
in the case of a married individual filing a separate return).
   (d) Section 108(h)(2) of the Internal Revenue Code, as added by
Section 2 of the Mortgage Forgiveness Debt Relief Act of 2007 (Public
Law 110-142), is modified by substituting the phrase "(within the
meaning of section 163(h)(3)(B), applied by substituting '$800,000
($400,000' for '$1,000,000 ($500,000' in clause (ii) thereof)" for
the phrase "(within the meaning of section 163(h)(3)(B), applied by
substituting '$2,000,000 ($1,000,000' for '$1,000,000 ($500,000' in
clause (ii) thereof)" contained therein.
   (e) This section shall apply to discharges of indebtedness
occurring on or after January 1, 2007, and, notwithstanding any other
law to the contrary, no penalties or interest shall be due with
respect to the discharge of qualified principal residence
indebtedness during the 2007 taxable year regardless of whether or
not the taxpayer reports the discharge on his or her return for the
2007 taxable year.
  SEC. 2.  The Legislature finds and declares that the mortgage debt
tax relief allowed to taxpayers in connection with the discharge of
qualified principal residence indebtedness, as described in this act,
serves a public purpose and does not constitute a gift of public
funds within the meaning of Section 6 of Article XVI of the
California Constitution.
  SEC. 3.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.