AB 2234, as introduced, Steinorth. Personal income taxes: gross income exclusion: qualified principal residence indebtedness.
The Personal Income Tax Law provides for modified conformity to specified provisions of federal income tax law relating to an exclusion of the amount of the discharge of qualified principal residence indebtedness, as defined, from an individual’s gross income if that debt is discharged after January 1, 2007, and before January 1, 2014, as provided.
This bill would extend this exclusion indefinitely and would also apply this exclusion retroactively to discharges of indebtedness that occurred on or after January 1, 2014, and before January 1, 2016. The bill would also provide that no penalties or interest with respect to the discharge of qualified principal residence indebtedness during the 2014 and 2015 taxable years would be due, and would make legislative findings and declarations regarding the public purpose served by the bill.
Vote: majority. Appropriation: no. 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).
9(b) Section 108(h)(2) of the Internal Revenue Code, is modified by
11substituting the phrase “(within the meaning of section
12163(h)(3)(B), applied by substituting ‘$800,000 ($400,000’ for
13‘$1,000,000 ($500,000’ in clause (ii) thereof)” for the phrase
14“(within the meaning of section 163(h)(3)(B), applied by
15substituting ‘$2,000,000 ($1,000,000’ for ‘$1,000,000 ($500,000’
16in clause (ii) thereof)” contained therein.
17(c) This section shall apply to discharges of indebtedness
18occurring on or after January 1, 2007, and, notwithstanding any
19other law to the contrary, no penalties or interest shall be due with
20respect to the discharge of qualified principal residence
21indebtedness during the 2007 or 2009 taxable year regardless of
22whether or not the taxpayer reports the discharge on his or her
23return for the 2007 or 2009 taxable year.
amendments made by Section 202 of the American
25Taxpayer Relief Act of 2012 (Public Law 112-240) to Section 108
26of the Internal Revenue Code shall apply.
27(e) The changes made to this section by
begin delete the act adding this shall apply to
29discharges of indebtedness that occur on or after January 1, 2013,
30and before January 1, 2014, and, notwithstanding any other law,
31no penalties or interest shall be due with respect to the discharge
32of qualified principal residence indebtedness during the 2013
33taxable year, regardless of whether the taxpayer reports the
34discharge on his or her income tax return for the 2013 taxable year.
The Legislature finds and declares that the amendments
6made by this act and the retroactive application of the exclusion
7for qualified principal residence indebtedness that is discharged
8on or after January 1, 2014, and before January 1, 2016, are
9necessary for the public purpose of preventing undue hardship to
10taxpayers whose qualified principal residence indebtedness was
11discharged between those dates, and do not constitute a gift of
12public funds within the meaning of Section 6 of Article XVI of
13the California Constitution.