BILL NUMBER: SB 907 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Galgiani
JANUARY 25, 2016
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
SB 907, as introduced, Galgiani. Personal income taxes: gross
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. The federal Tax Increase Prevention Act of 2014 extended
the operation of those provisions to debt that is discharged before
January 1, 2015. The federal Protecting Americans from Tax Hikes Act
of 2015 extended the operation of those provisions to debt that is
discharged before January 1, 2017, and provides that its discharge
provisions apply to specified written agreements entered into before
January 1, 2017.
This bill would conform to that additional discharge provision
relating to specified written agreements, the federal extensions,
discharge indebtedness for related penalties and interest, and make
legislative findings and declarations regarding the public purpose
served by the bill.
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 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).
(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) (1) 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)
(2) The changes made to this section by the
act adding this subdivision 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.
(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.
(2) The changes made to this section by the act adding this
paragraph 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.
(f) (1) The amendments made by Section 151 of the Protecting
Americans from Tax Hikes Act of 2015 (Public Law 114-113) to Section
108 of the Internal Revenue Code shall apply.
(2) Notwithstanding any other law, no penalties or interest shall
be due with respect to the discharge of qualified principal residence
indebtedness during the 2015 taxable year, regardless of whether the
taxpayer reports the discharge on his or her income tax return for
the 2015 taxable year.
SEC. 2. The amendments made by this act that conform to 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, 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 conforming state law
to the amendments to the Internal Revenue Code as made by the Tax
Increase Prevention Act of 2014 (Public Law 113-295), 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. The amendments made by this act that conform to the
amendments made by Section 151 of the Protecting Americans from Tax
Hikes Act of 2015 (Public Law 114-113) to Section 108 of the Internal
Revenue Code, apply to qualified principal residence indebtedness
that is discharged on and after January 1, 2015, and before January
1, 2017. The Legislature finds and declares that the amendments made
by this act and the retroactive application contained in the
preceding sentence regarding debt discharged before January 1, 2016,
are necessary for the public purpose of conforming state law to the
amendments to the Internal Revenue Code as made by the Protecting
Americans from Tax Hikes Act of 2015 (Public Law 114-113), thereby
preventing undue hardship to taxpayers whose qualified principal
residence indebtedness was discharged on and after January 1, 2015,
and before January 1, 2016, and do not constitute a gift of public
funds within the meaning of Section 6 of Article XVI of the
California Constitution.
SEC. 4. 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.