Today's Law As Amended

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SB-434 Personal income taxes: gross income exclusion: mortgage debt forgiveness.(2017-2018)



SECTION 1.

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

17144.5.
 (a) (1)  Except as provided in paragraph (2),  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).
(2) For discharges of indebtedness occurring on or after January 1, 2014, and before January 1, 2017, Section 108(a)(1)(E) of the Internal Revenue Code, is modified to provide that the amount excluded from gross income shall not exceed $250,000 ($125,000 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  2007, 2009,  or 2009 2013  taxable year regardless of whether or not the taxpayer reports the discharge on his or her return for the 2007  2007, 2009,  or 2009 2013  taxable year.
(d) (1)  The amendments made by Section 202 102  of the American Taxpayer Relief  federal Tax Increase Prevention  Act of 2012 2014  (Public Law 112-240) 113-295)  to Section 108 of the Internal Revenue Code  Code, relating to income from discharge of indebtedness,  shall apply.
(e) (2)  The changes made to this section by the act adding this subdivision paragraph  shall apply to discharges of indebtedness that occur on or after January 1, 2013, 2014,  and before January 1, 2014, 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 2013 2014  taxable year, regardless of whether the taxpayer reports the discharge on his or her income tax return for the 2013 2014  taxable year.
(e) (1) The amendments made by Section 151 of the federal Protecting Americans from Tax Hikes Act of 2015 (Division Q of Public Law 114-113) to Section 108 of the Internal Revenue 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 or 2016 taxable year, regardless of whether the taxpayer reports the discharge on his or her income tax return for the 2015 or 2016 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.
(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 (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, except for any 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 that conform to the amendments made by Section 151 of the Protecting Americans from Tax Hikes Act of 2015 (Division Q of Public Law 114-113), including the modification made by paragraph (2) of subdivision (a) of Section 17144.5 of the Revenue and Taxation Code as added by this act, apply to qualified principal residence indebtedness that is discharged after January 1, 2017.
(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, 2017, 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 (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, 2017, 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.