Amended in Assembly April 20, 2016

California Legislature—2015–16 Regular Session

Assembly BillNo. 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 amended, 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.begin insert The federal income tax law allows this exclusion for qualified principal residence indebtedness that is discharged before January 1, 2017, or is subject to an arrangement that is entered into and evidenced in writing before January 1, 2017.end insert

This bill would extend thisbegin insert state taxend insert exclusionbegin delete indefinitelyend deletebegin insert to qualified principal residence indebtedness that is discharged before January 1, 2017, or subject to an arrangement that is entered into and evidenced in writing before January 1, 2017,end insert 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:

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SECTION 1.  

Section 17144.5 of the Revenue and Taxation
2Code
is amended to read:

3

17144.5.  

(a) begin delete(1)end deletebegin deleteend deleteSection 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).

begin delete

7(2) Section 108(a)(1)(E) of the Internal Revenue Code, is
8modified to delete “which is discharged before January 1, 2015.”

end delete

9(b) Section 108(h)(2) of the Internal Revenue Code, relating to
10qualified principal residence indebtedness, 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 thebegin delete 2007 or 2009end deletebegin insert 2007,end insertbegin insert 2009, or 2013end insert taxable
22year regardless of whether or not the taxpayer reports the discharge
23on his or her return for thebegin delete 2007 or 2009end deletebegin insert 2007, 2009, or 2013end insert
24 taxable year.

begin delete

25(d) The amendments made by Section 202 of the American
26Taxpayer Relief Act of 2012 (Public Law 112-240) to Section 108
27of the Internal Revenue Code shall apply.

28(e) The changes made to this section by Chapter 152 of the
29Statutes of 2014 shall apply to discharges of indebtedness that
30occur on or after January 1, 2013, and before January 1, 2014, and,
31notwithstanding any other law, no penalties or interest shall be
32due with respect to the discharge of qualified principal residence
33indebtedness during the 2013 taxable year, regardless of whether
P3    1the taxpayer reports the discharge on his or her income tax return
2for the 2013 taxable year.

3(f) The changes made to this section by the act adding this
4subdivision shall apply to discharges of indebtedness that occur
5on or after January 1, 2014, and notwithstanding any other law,
6no penalties or interest shall be due with respect to the discharge
7of qualified principal residence indebtedness during the 2014 or
82015 taxable year, regardless of whether the taxpayer reports the
9discharge on his or her income tax return for the 2014 or 2015
10taxable year.

end delete
begin insert

11
(d) (1) The amendments made by Section 151 of the federal
12Protecting Americans from Tax Hikes Act of 2015 (Division Q of
13Public Law 114-113) to Section 108 of the Internal Revenue Code,
14relating to income from discharge of indebtedness, shall apply to
15taxable years beginning on or after January 1, 2014.

end insert
begin insert

16
(2) Notwithstanding any other law, no penalties or interest shall
17be due with respect to the discharge of qualified principal residence
18indebtedness during the 2014 or 2015 taxable year, regardless of
19whether the taxpayer reports the discharge on his or her income
20tax return for the 2014 or 2015 taxable year.

end insert
21

SEC. 2.  

The Legislature finds and declares that the amendments
22made by this act and the retroactive application of the exclusion
23for qualified principal residence indebtedness that is discharged
24on or after January 1, 2014, and before January 1, 2016, are
25necessary for the public purpose of preventing undue hardship to
26taxpayers whose qualified principal residence indebtedness was
27discharged between those dates, and do not constitute a gift of
28public funds within the meaning of Section 6 of Article XVI of
29the California Constitution.



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