Amended in Assembly February 18, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 99

Introduced by Assembly Member Perea

January 8, 2015

An act to amend Section 17144.5 of the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

AB 99, as amended, Perea. Personal income taxes: income exclusion: mortgage debt forgiveness.

The Personal Income Tax Law provides for modified conformity to specified provisions of federal income tax 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, 2014, as provided. begin insert The federal Tax Increase Prevention Act of 2014 extended the operation of those provisions to debt that is discharged before January 1, 2015. end insert

begin delete

This bill would extend the operation of those provisions to qualified principal residence indebtedness that is discharged before January 1, 2015, thereby no longer conforming to federal income tax law. The bill would also discharge indebtedness for related penalties and interest and would make legislative findings and declarations regarding the public purpose served by the bill.

end delete begin insert

This bill would conform to the federal extension, discharge indebtedness for related penalties and interest, and make legislative findings and declarations regarding the public purpose served by the bill.

end insert

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. 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(a)(1)(E) of the Internal Revenue
Code, is modified begin delete as follows: end delete

begin delete (1) end delete begin delete   end delete begin delete By providing end delete begin insert to provide end insert that the amount excluded from gross
income shall not exceed $500,000 ($250,000 in the case of a
married individual filing a separate return).

begin delete

(2) By substituting “January 1, 2014” for “January 1, 2015.”

end delete

(b) Section 108(h)(2) of the Internal Revenue Code, 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.

(c) 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 or 2009 taxable year regardless of
whether or not the taxpayer reports the discharge on his or her
return for the 2007 or 2009 taxable year.

(d)  begin insert (1) end insert begin insert   end insert The amendments made by Section 202 of the American
Taxpayer Relief Act of 2012 (Public Law 112-240) to Section 108
of the Internal Revenue Code shall apply.

begin delete

(e)

end delete

begin insert (2) end insert  The changes made to this section by Chapter 152 of the
Statutes of 2014 shall apply to discharges of indebtedness that
occur on or after January 1, 2013, and before January 1, 2014, and,
notwithstanding any other law, no penalties or interest shall be
due with respect to the discharge of qualified principal residence
indebtedness during the 2013 taxable year, regardless of whether
the taxpayer reports the discharge on his or her income tax return
for the 2013 taxable year.

begin insert

(e) (1) The amendments made by Section 102 of the Tax
Increase Prevention Act of 2014 (Public Law 113-295) to Section
108 of the Internal Revenue Code shall apply.

end insert begin delete

(f)

end delete

begin insert (2) end insert  The changes made to this section by the act adding this
begin delete subdivision end delete begin insert paragraph end insert shall apply to discharges of indebtedness
that occur on or after January 1, 2014, and before January 1, 2015,
and, notwithstanding any other law, no penalties or interest shall
be due with respect to the discharge of qualified principal residence
indebtedness during the 2014 taxable year, regardless of whether
the taxpayer reports the discharge on his or her income tax return
for the 2014 taxable year.

SEC. 2.  

The amendments made by this act that begin delete extend the
operation of end delete begin insert conform to end insert the amendments made by begin delete Section 202 of
the American Taxpayer Relief Act of 2012 (Public Law 112-240) end delete
begin insert Section 102 of the Tax Increase Prevention Act of 2014 (Public
Law 113-295) end insert to Section 108 of the Internal Revenue Code, apply
to qualified principal residence indebtedness that is discharged on
and after January 1, 2014, and before January 1, 2015. The
Legislature finds and declares that the amendments made by this
act and the retroactive application contained in the preceding
sentence are necessary for the public purpose of begin delete extending for an
additional year, end delete begin insert conforming state law to end insert the amendments to the
Internal Revenue Code as made by the begin delete American Taxpayer Relief
Act of 2012 (Public Law 112-240), end delete begin insert Tax Increase Prevention Act
of 2014 (Public Law 113-295) end insert thereby preventing undue hardship
to taxpayers whose qualified principal residence indebtedness was
discharged on and after January 1, 2014, and before January 1,
2015, and do not constitute a gift of public funds within the
meaning of Section 6 of Article XVI of the California Constitution.

SEC. 3.  

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

In order to provide tax relief to distressed homeowners at the
earliest possible time, it is necessary that this act take effect
immediately.