BILL NUMBER: AB 111	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MARCH 31, 2009
	AMENDED IN ASSEMBLY  MARCH 5, 2009

INTRODUCED BY   Assembly Member Niello
   (Principal coauthor: Assembly Member Galgiani)
   (Coauthors: Assembly Members DeVore, Harkey, Jeffries, and Silva)
   (Coauthors: Senators Cox, Denham, DeSaulnier, Huff, and Runner)

                        JANUARY 13, 2009

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


	LEGISLATIVE COUNSEL'S DIGEST


   AB 111, as amended, Niello. Taxation: cancellation of
indebtedness: mortgage debt forgiveness.  The Personal Income Tax Law
conforms 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   2010  , as
provided.  The Emergency Economic Stabilization Act of 2008
extended the operation of those provisions to debt that is discharged
before January 1, 2013. 
   This bill would  extend the operation of those provisions
to debt that is discharged after January 1, 2007, and before January
1, 2012   provide further conformity to those federal
acts, as provided  .
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


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

   SECTION 1.    Section   17144.5 of the 
 Revenue and Taxation Code  is amended 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),  and as amended by Section 303 of the Emergency
Economic Stabilization Act of 2008 (Public Law 110-343),  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) 
    (b)  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.  
  SECTION 1.    Section 17144.5 of the Revenue and
Taxation Code is amended 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, 2012" 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 penalty 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.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.