BILL NUMBER: AB 2234	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 20, 2016

INTRODUCED BY   Assembly Member Steinorth

                        FEBRUARY 18, 2016

   An act to amend Section 17144.5 of the Revenue and Taxation Code,
relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2234, as amended, Steinorth. Personal income taxes: gross
income exclusion: qualified principal residence indebtedness.
   The Personal Income Tax Law provides for modified conformity to
specified provisions of federal income tax law relating to an
exclusion of the amount of the discharge of qualified principal
residence indebtedness, as defined, from an individual's gross income
if that debt is discharged after January 1, 2007, and before January
1, 2014, as provided.  The federal income tax law allows this
exclusion for qualified principal residence indebtedness that is
discharged before January 1, 2017, or is subject to an arrangement
that is entered into and evidenced in writing before January 1, 2017.

   This bill would extend this  state tax  exclusion
 indefinitely   to qualified principal residence
indebtedness that is discharged before January 1, 2017, or subject
to an arrangement that is entered into and evidenced in writing
before January 1, 2017,  and would also apply this exclusion
retroactively to discharges of indebtedness that occurred on or after
January 1, 2014, and before January 1, 2016. The bill would also
provide that no penalties or interest with respect to the discharge
of qualified principal residence indebtedness during the 2014 and
2015 taxable years would be due, and would make legislative findings
and declarations regarding the public purpose served by the bill.
   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)  (1)    Section
108(a)(1)(E) of the Internal Revenue Code, is modified to provide
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). 
   (2) Section 108(a)(1)(E) of the Internal Revenue Code, is modified
to delete "which is discharged before January 1, 2015." 
   (b) Section 108(h)(2) of the Internal Revenue Code, relating to
qualified principal residence indebtedness, 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   2007,
  2009, or 2013  taxable year regardless of whether or
not the taxpayer reports the discharge on his or her return for the
 2007 or 2009   2007, 2009, or 2013 
taxable year. 
   (d) 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.  
   (e) 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.  
   (f) The changes made to this section by the act adding this
subdivision shall apply to discharges of indebtedness that occur on
or after 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 2014 or 2015
taxable year, regardless of whether the taxpayer reports the
discharge on his or her income tax return for the 2014 or 2015
taxable year.  
   (d) (1) The amendments made by Section 151 of the federal
Protecting Americans from Tax Hikes Act of 2015 (Division Q of Public
Law 114-113) to Section 108 of the Internal Revenue Code, relating
to income from discharge of indebtedness, shall apply to taxable
years beginning on or after January 1, 2014.  
   (2) Notwithstanding any other law, no penalties or interest shall
be due with respect to the discharge of qualified principal residence
indebtedness during the 2014 or 2015 taxable year, regardless of
whether the taxpayer reports the discharge on his or her income tax
return for the 2014 or 2015 taxable year. 
  SEC. 2.  The Legislature finds and declares that the amendments
made by this act and the retroactive application of the exclusion for
qualified principal residence indebtedness that is discharged on or
after January 1, 2014, and before January 1, 2016, are necessary for
the public purpose of preventing undue hardship to taxpayers whose
qualified principal residence indebtedness was discharged between
those dates, and do not constitute a gift of public funds within the
meaning of Section 6 of Article XVI of the California Constitution.