AB 42, as amended, Perea. Taxation: cancellation of indebtedness: mortgage debt forgiveness.
The Personal Income Tax Law conforms to specified provisions of federal law relating to the exclusion of the discharge of qualified principal residence indebtedness, as defined, from an individual’s income if that debt is discharged after January 1, 2007, and before January 1, 2013, as provided. The federal American Taxpayer Relief Act of 2012 extended the operation of those provisions to debt that is discharged before January 1, 2014.
This bill would conform to the federal extension.
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 17144.5 of the Revenue and Taxation
2Code is amended to read:
(a) Section 108(a)(1)(E) of the Internal Revenue
4Code, is modified to provide that the amount excluded from gross
5income shall not exceed $500,000 ($250,000 in the case of a
6married individual filing a separate return).
7(b) Section 108(h)(2) of the Internal Revenue Code, is modified
8by substituting the phrase “(within the meaning of section
9163(h)(3)(B), applied by substituting ‘$800,000 ($400,000’ for
10‘$1,000,000 ($500,000’ in clause (ii) thereof)” for the phrase
11“(within the meaning of section 163(h)(3)(B), applied by
12substituting ‘$2,000,000 ($1,000,000’ for ‘$1,000,000 ($500,000’
13in clause (ii) thereof)” contained therein.
14(c) The amendments made by Section 202 of the American
15Taxpayer Relief Act of 2012begin insert (Public Law 112-240)end insert to Section 108
16of the Internal Revenue Code shall apply.
17(d) This section shall apply to discharges of indebtedness
18occurring on or after January 1, 2007, and, notwithstanding any
19other law to the contrary, no penalties or interest shall be due with
20respect to the discharge of qualified principal residence
21indebtedness during the 2007 or 2009 taxable year regardless of
22whether or not the taxpayer reports the discharge on his or her
23return for the 2007 or 2009 taxable year.
24(e) The
amendments made to this section by the act adding this
25subdivision shall apply to discharges occurring on or after January
261, 2013.
This act provides for a tax levy within the meaning of
28Article IV of the Constitution and shall go into immediate effect.
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