BILL ANALYSIS Ó SB 150 Page 1 Date of Hearing: September 11, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 150 (Nguyen) - As Amended June 22, 2015 ----------------------------------------------------------------- |Policy |Revenue and Taxation |Vote:| 7 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: Yes State Mandated Local Program: NoReimbursable: No SUMMARY: This bill provides an exclusion from gross income under the Personal Income Tax Law for income that would otherwise result from a forgiven student loan if: 1)The individual is granted a discharge pursuant to an agreement between ECMC Group, Inc., Zenith Education Group, and the Consumer Financial Protection Bureau concerning the purchase of certain assets of Corinthian Colleges, Inc., dated February 2, 2015; SB 150 Page 2 2)The individual is granted a discharge pursuant to Paragraph 23 of the William D. Ford Federal Direct Loan Program Borrower's Rights and Responsibilities Statement because of either of the following: (a) the individual could not complete a program of study because the school closed; or (b) the individual successfully asserts that the school did something wrong or failed to do something that it should have done; or 3)The individual attended a Corinthian Colleges, Inc., school on or before May 1, 2015, is granted a discharge of any student loan made in connection with attending that school, and that discharge is not excludable from gross income as a result of the reasons listed above. FISCAL EFFECT: 1)Insignificant costs to Franchise Tax Board (FTB) to administer changes to forms and systems. 2)Estimated GF revenue decreases of $34 million, $100,000, and $100,000 in FY 2015-16, FY 2016-17, and FY 2017-18, respectively. COMMENTS: Purpose. According to the author, many former students of the closed campuses of Corinthian College (including many Heald College campuses in California) are seeking a discharge of some or all of their student loan debt. Pursuant to a federal agreement relating to the forced closure, Corinthian agreed to forgive $480 million in outstanding student loans. In addition, based on estimates from the federal Department of Education, Corinthian students in California may be eligible for as much as SB 150 Page 3 $850 million in total federal and private student debt relief. Absent an exclusion, debt that is cancelled, discharged, or forgiven is considered income for tax purposes. The author contends approximately 13,000 California students are unable to complete their degrees as a result of the college closures, and she argues those students should not be responsible for income tax on their forgiven debt. Analysis Prepared by:Joel Tashjian / APPR. / (916) 319-2081