California Legislature—2015–16 Regular Session

Assembly Bill No. 2234

Introduced by Assembly Member Steinorth

February 18, 2016

An act to amend Section 17144.5 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

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 1.  

Section 17144.5 of the Revenue and Taxation
Code is amended to read:

17144.5.  

(a)  begin insert (1) end insert begin insert   end insert 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).

begin insert

(2) Section 108(a)(1)(E) of the Internal Revenue Code, is
modified to delete “which is discharged before January 1, 2015.”

end insert

(b) Section 108(h)(2) of the Internal Revenue Code, begin insert relating to
qualified principal residence indebtedness, end insert 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) 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) The changes made to this section by begin delete the act adding this
subdivision end delete begin insert Chapter 152 of the Statutes of 2014 end insert 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.

begin insert

(f) The changes made to this section by the act adding this
subdivision shall apply to discharges of indebtedness that occur
on or after 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 2014 or
2015 taxable year, regardless of whether the taxpayer reports the
discharge on his or her income tax return for the 2014 or 2015
taxable year.

end insert

SEC. 2.  

The Legislature finds and declares that the amendments
made by this act and the retroactive application of the exclusion
for qualified principal residence indebtedness that is discharged
on or after January 1, 2014, and before January 1, 2016, are
necessary for the public purpose of preventing undue hardship to
taxpayers whose qualified principal residence indebtedness was
discharged between those dates, and do not constitute a gift of
public funds within the meaning of Section 6 of Article XVI of
the California Constitution.