Bill Text: CA SB907 | 2015-2016 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Personal income taxes: gross income exclusion: mortgage debt forgiveness.

Spectrum: Bipartisan Bill

Status: (Vetoed) 2016-11-30 - Last day to consider Governor's veto pursuant to Joint Rule 58.5. [SB907 Detail]

Download: California-2015-SB907-Amended.html

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BILL NUMBER: SB 907	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MARCH 28, 2016

INTRODUCED BY   Senator Galgiani
    (   Principal coauthor:   Senator 
 Cannella   ) 
    (  Principal coauthor:   Assembly Member
  Bonta   ) 
    (   Coauthor:   Senator   Nguyen
  ) 
    (   Coauthors:   Assembly Members 
 Bigelow   and Gordon   )

                        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 amended, 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,  
agreements and  the federal  extensions,  
extensions, some of which would be applied retroactively. The bill
would  discharge indebtedness for related penalties and 
interest,   interest  and  would  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,  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) (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.  
   (2) 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.  
   (e) 
    (d)  (1) The amendments made by Section 102 of the 
federal  Tax Increase Prevention Act of 2014 (Public Law
113-295) to Section 108 of the Internal Revenue Code  , relating
to income from discharge of indebtedness,  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) 
    (e)  (1) The amendments made by Section 151 of the 
federal  Protecting Americans from Tax Hikes Act of 2015
 (Public   (Division Q of Public  Law
114-113) to Section 108 of the Internal Revenue  Code
  Code, relating to income from discharge of
indebtedness,  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.   (a)    The amendments made by this act
that conform to the amendments made by Section 102 of the 
federal  Tax Increase Prevention Act of 2014 (Public Law
113-295) to Section 108 of the Internal Revenue Code,  relating
to income from discharge of indebtedness,  apply to qualified
principal residence indebtedness that is discharged on and after
January 1, 2014, and before January 1, 2015.  The 
    (b)     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  federal  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.   (a)    The amendments made by this act
that conform to the amendments made by Section 151 of the 
federal  Protecting Americans from Tax Hikes Act of 2015
 (Public   (Division Q of Public  Law
114-113) to Section 108 of the Internal Revenue Code,  relating
to income from discharge of indebtedness,  apply to qualified
principal residence indebtedness that is discharged on and after
January 1, 2015, and before January 1,  2017. The 
 2017, except for an discharge of qualified principal residence
indebtedness that is subject to an arrangement that is entered into
and evidenced in writing before January 1, 2017, in which case the
amendments made by this act to conform to the amendments made by
Section 151 of the Protecting Americans from Tax Hikes Act of 2015
(Divisions Q of Public Law 114-113) apply to principal residence
indebtedness that is discharged after January 1, 201   7.

    (b)     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  federal  Protecting Americans
from Tax Hikes Act of 2015  (Public   (Division
Q of 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.