BILL NUMBER: AB 1779	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Niello

                        FEBRUARY 9, 2010

   An act to amend Section 17144.5 of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1779, as introduced, Niello. Taxation: cancellation of
indebtedness: mortgage debt forgiveness.
   (1) The Personal Income Tax Law conforms to specified provisions
of the federal Mortgage Forgiveness Debt Relief Act of 2007, relating
to the exclusion of the discharge of qualified principal residence
indebtedness, as defined, from a taxpayer's income if that debt is
discharged after January 1, 2007, and before January 1, 2010, as
provided. The Emergency Economic Stabilization Act of 2008 extended
the operation of those provisions to debt that is discharged before
January 1, 2013.
   This bill would provide further conformity to those federal acts,
as provided.
   (2) This bill would take effect immediately as a tax levy.
   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) Section 108 of the Internal Revenue Code, relating
to income from discharge of indebtedness, as amended by Section 2 of
the Mortgage Forgiveness Debt Relief Act of 2007 (Public Law
110-142),  and as amended by Section 303 of the Emergency
Economic Stabilization Act of 2008 (Public Law 110-343),  shall
apply, except as otherwise provided. 
   (b) Section 108(a)(1)(E) of the Internal Revenue Code, as added by
Section 2 of the Mortgage Forgiveness Debt Relief Act of 2007
(Public Law 110-142), is modified by substituting the phrase "January
1, 2009" for "January 1, 2010" contained therein.  

   (c) Section 108(a)(1)(E) of the Internal Revenue Code, as added by
Section 2 of the Mortgage Forgiveness Debt Relief Act of 2007
(Public Law 110-142), is additionally modified to provide that the
amount excluded from gross income shall not exceed $250,000 ($125,000
in the case of a married individual filing a separate return).
 
   (d) Section 108(h)(2) of the Internal Revenue Code, as added by
Section 2 of the Mortgage Forgiveness Debt Relief Act of 2007 (Public
Law 110-142), 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.  
   (e) 
    (b)  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 taxable year
regardless of whether or not the taxpayer reports the discharge on
his or her return for the 2007 taxable year.
  SEC. 2.  The Legislature finds and declares that the mortgage debt
tax relief allowed to taxpayers in connection with the discharge of
qualified principal residence indebtedness, as described in this act,
serves a public purpose and does not constitute a gift of public
funds within the meaning of Section 6 of Article XVI of the
California Constitution.
  SEC. 3.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.