SB 339, as amended, Cannella. Taxation: cancellation of indebtedness: 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, 2013, as provided. The federal American Taxpayer Relief Act of 2012 extended the operation of those provisions to qualified principal residence indebtedness that is discharged before January 1, 2014.
This bill would conform to the federal extension and make legislative findings and declarations regarding the public purpose served by the bill. The bill would also make a continuous appropriation from the General Fund to the Franchise Tax Board in those amounts necessary to make payments to taxpayers who have included in income and paid tax on qualified principal residence indebtedness that was discharged on and after January 1, 2013, and before January 1, 2014.
begin insertThis bill would declare that it is to take effect immediately as an urgency statute.
end insertVote: 2⁄3. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 17144.5 of the Revenue and Taxation
2Code is amended to read:
(a) Section 108(a)(1)(E) of the Internal Revenue
4Code, is modified to provide that the amount excluded from gross
5income shall not exceed $500,000 ($250,000 in the case of a
6married individual filing a separate return).
7(b) Section 108(h)(2) of the Internal Revenue Code, is modified
8by substituting the phrase “(within the meaning of Section
9163(h)(3)(B), applied by substituting ‘$800,000 ($400,000’ for
10‘$1,000,000 ($500,000’ in clause (ii) thereof)” for the phrase
11“(within the meaning of Section 163(h)(3)(B), applied by
12substituting ‘$2,000,000 ($1,000,000’ for ‘$1,000,000 ($500,000’
13in clause (ii) thereof)” contained therein.
14(c) This section shall apply to discharges of indebtedness
15occurring on or after January 1, 2007, and,
notwithstanding any
16other law to the contrary, no penalties or interest shall be due with
17respect to the discharge of qualified principal residence
18indebtedness during the 2007 or 2009 taxable year regardless of
19whether or not the taxpayer reports the discharge on his or her
20return for the 2007 or 2009 taxable year.
21(d) The amendments made by Section 202 of the American
22Taxpayer Relief Act of 2012 (Public Law 112-240) to Section 108
23of the Internal Revenue Code shall apply.
The amendments made by this act that conform to the
25amendments made by Section 202 of the American Taxpayer Relief
26Act of 2012 (Public Law 112-240) to Section 108 of the Internal
P3 1Revenue Code, apply to qualified principal residence indebtedness
2that is discharged on and after January 1, 2013, and before January
31, 2014. The Legislaturebegin insert finds andend insert declares that the amendments
4made by this act and the retroactive application contained in the
5preceding sentence are necessary for the public purpose of
6conforming state law to the amendments to the Internal Revenue
7Code as made by the American Taxpayer Relief Act of 2012
8(Public Law 112-240)begin delete andend deletebegin insert,end insert
therebybegin delete preventend deletebegin insert preventingend insert undue
9hardship to taxpayers whose qualified principal residence
10indebtedness was discharged on and after January 1, 2013, and
11before January 1, 2014begin insert, and do not constitute a gift of public funds
12within the meaning of Section 6 of Article XVI of the California
13Constitutionend insert.
Notwithstanding Section 13340 of the Government
15Code, and without regard to fiscal year, there is hereby
16continuously appropriated from the General Fund to the Franchise
17Tax Board those amounts necessary to make the payments required
18by this act to taxpayers who have included amounts in gross income
19by reason of the discharge of principal residence indebtedness that
20was discharged on and after January 1, 2013, and before January
211, 2014.
This act is an urgency statute necessary for the
23immediate preservation of the public peace, health, or safety within
24the meaning of Article IV of the Constitution and shall go into
25immediate effect. The facts constituting the necessity are:
26In order to provide tax relief to distressed homeowners at the
27earliest possible time, it is necessary that this act take effect
28immediately.
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