BILL ANALYSIS �
SB 30
Page 1
Date of Hearing: August 21, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 30 (Calderon) - As Amended: August 13, 2013
Policy Committee: Revenue and
Taxation Vote: 9-0
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill extends, for one additional taxable year, the tax
relief for income generated from the discharge of qualified
principal residence indebtedness. Specifically, this bill:
1)Provides Internal Revenue Code Section 108, relating to income
from discharge of mortgage debt, as amended by the Federal
American Taxpayer Relief Act (FATRA), shall apply, except as
otherwise specified.
2)Applies to discharge of mortgage debt occurring on or after
January 1, 2013, and before January 1, 2014.
3)Takes effect immediately as a tax levy.
4)Provides it becomes operative only if SB 391 is enacted.
FISCAL EFFECT
The Franchise Tax Board (FTB) estimates an annual revenue loss
of $50 million in fiscal year 2013-2014, and $5 million in
2014-15.
COMMENTS
1)Purpose . The author states SB 30 is a federal tax conformity
bill that extends the sunset date on an important piece of
legislation that has lapsed at the end of the 2012 year. The
author notes, homeowners currently in short sale negotiations
cannot finalize transactions without potentially incurring a
tax they already cannot afford, yet they do not have the
SB 30
Page 2
luxury of time to wait to see if the state will act to provide
relief from this tax. According to the author, if a lender
agrees to forgive some of a borrower's mortgage debt, forgiven
debt is taxed as ordinary income in the year which the debt is
forgiven. The author argues that SB 30 is the right thing to
do as families forced to make the difficult decision to sell
their home as a short sale are already in financial trouble
and they simply cannot afford to pay an additional tax on
money they have never actually received.
2)Support . Proponents of this bill, including the California
Association of Bankers and the California Association of
Realtors, state SB 30 would allow the state to continue
exempting homeowners from paying state income taxes on the
loan amount written down on their principal residence through
a principal reduction or short-sale. They state continuing
this exemption on income the homeowner never realizes is sound
public policy and will allow struggling homeowners to get back
on their feet and continue generating economic activity.
3)Background . In 2008, the Legislature approved SB 1055
(Machado), Chapter 282, which provided modified conformity to
the federal Mortgage Forgiveness Debt Relief Act (MFDRA) for
discharge of mortgage indebtedness in 2007 and 2008 tax years.
In 2010, the Legislature enacted SB 401 (Wolk), Chapter 14,
Statutes of 2010, to extend the mortgage debt forgiveness
provision until January 1, 2013.
On January 2, 2013, the federal government enacted FATRA as
part of the fiscal cliff deal. FATRA extended the exclusion
from gross income for cancellation of indebtedness generated
from the discharge of mortgage debt, as provided for by the
MFDRA, for one additional taxable year, beginning on or after
January 1, 2013.
4)Related Legislation .
a) AB 42 (Perea), introduced in the current legislative
session, would extend the tax relief for income generated
from the discharge of qualified principal residence
indebtedness, in modified conformity to federal law, for
one additional taxable year. AB 42 was held in this
committee.
b) SB 391 (DeSaulnier), among its other provisions, imposes
SB 30
Page 3
a $75 fee on every real estate instrument, paper, or notice
that is required or permitted by law, excluding real estate
instruments, papers, or notices recorded in connection with
a transfer subject to a documentary transfer tax.
1)There is no registered opposition to this bill .
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081