BILL NUMBER: AB 132 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Holden
JANUARY 16, 2013
An act to amend Section 17085 of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 132, as introduced, Holden. Personal income taxes: retirement
plans: early distributions.
The Personal Income Tax Law, in modified conformity to federal
income tax laws, imposes an additional tax upon early distributions
from specified retirement plans, as provided.
This bill would, for taxable years, beginning on or after January
1, 2014, and before January 1, 2017, exclude from that additional tax
the first $6,000 distributed to an individual for the purpose of
paying qualified costs, as defined, with respect to acquisition
indebtedness for a principal residence, 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 17085 of the Revenue and Taxation Code is
amended to read:
17085. Section 72 of the Internal Revenue Code, relating to
annuities, certain proceeds of endowment and life insurance
contracts, is modified as follows:
(a) The amendments and transitional rules made by Public Law
99-514 shall be applicable to this part for the same transactions and
the same years as they are applicable for federal purposes, except
that the repeal of Section 72(d) of the Internal Revenue Code,
relating to repeal of special rule for employees' annuities, shall
apply only to the following:
(1) Any individual whose annuity starting date is after December
31, 1986.
(2) At the election of the taxpayer, any individual whose annuity
starting date is after July 1, 1986, and before January 1, 1987.
(b) The amount of a distribution from an individual retirement
account or annuity or employee trust or employee annuity that is
includable in gross income for federal purposes shall be reduced for
purposes of this part by the lesser of either of the following:
(1) An amount equal to the amount includable in federal gross
income for the taxable year.
(2) An amount equal to the basis in the account or annuity allowed
by Section 17507 (relating to individual retirement accounts and
simplified employee pensions), the increased basis allowed by
Sections 17504 and 17506 (relating to plans of self-employed
individuals), the increased basis allowed by Section 17501, or the
increased basis allowed by Section 17551 that is remaining after
adjustment for reductions in gross income under this provision in
prior taxable years.
(c) (1) Except as provided in paragraph (2), the amount of the
additional tax imposed under this part shall be computed in
accordance with Sections 72(m), (q), (t), and (v) of the Internal
Revenue Code, as applicable for federal income tax purposes for the
same taxable year, using a rate of 21/2 percent, in lieu of the rate
provided in those sections.
(2) In the case where Section 72(t)(6) of the Internal Revenue
Code, relating to special rules for simple retirement accounts, as
applicable for federal income tax purposes for the same taxable year,
applies, the rate in paragraph (1) shall be 6 percent in lieu of the
21/2 percent rate specified therein.
(3) (A) Notwithstanding paragraphs (1) and (2), for taxable years
beginning on or after January 1, 2014, and before January 1, 2017, an
individual shall not pay the additional tax described in paragraph
(1) for early withdrawal of a qualified principal residence payment
distribution from his or her retirement account when the moneys are
used to reduce qualified costs.
(B) For the purposes of this paragraph:
(i) "Acquisition indebtedness" shall have the same meaning as in
Section 163(h)(3)(B) of the Internal Revenue Code, except that the
dollar limitation in Section 163(h)(3)(B)(ii) of the Internal Revenue
Code shall not apply.
(ii) "Qualified costs" means either of the following:
(I) Amounts paid as principal or interest on acquisition
indebtedness.
(II) Amounts paid as part of a loan modification that either
reduces the principal or interest of acquisition indebtedness.
(iii) "Qualified principal residence payment distribution" means
any payment or distribution received by an individual to the extent
that the payment or distribution is used by the individual before the
close of the 60th day after the day on which that payment or
distribution is received to pay qualified costs with respect to a
principal residence of the individual or spouse of the individual.
(C) This paragraph shall only apply to an individual that meets
both of the following requirements:
(i) The individual only owns one home, occupied by the individual
as his or her principal residence, that has a market value that is
less than the amount the individual owes on his or her acquisition
indebtedness on that home.
(ii) The individual receives, and provides certification of,
counseling from a counseling agency approved by the United States
Department of Housing and Urban Development, as provided in Subpart B
of Part 214 of Title 24 of the Code of Federal Regulations. The
certification shall be signed by the individual and the agency
counselor, and shall include the date of the counseling and the name,
address, and telephone number of both the counselor and the
individual.
(iii) The counseling agency shall not receive any compensation,
either directly or indirectly, from the lender or from any other
person involved in originating or servicing the acquisition
indebtedness.
(D) The aggregate amount of qualified principal residence payment
distributions received by an individual for all taxable years shall
not exceed six thousand dollars ($6,000).
(E) The Franchise Tax Board may promulgate regulations as
necessary or appropriate to carry out the purposes of this paragraph.
(d) Section 72(f)(2) of the Internal Revenue Code shall be
applicable without applying the exceptions which immediately follow
that paragraph.
(e) The amendments made by Section 844 of the federal
Pension Protection Act of 2006 (P.L. 109-280) to Section 72(e) of the
Internal Revenue Code, shall not apply. Section 72(e)
(II) of the Internet Revenue Code shall not apply.
SEC. 2. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.