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AB-42 Taxation: cancellation of indebtedness: mortgage debt forgiveness. (2013-2014)

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Amended  IN  Assembly  April 08, 2013
Amended  IN  Assembly  March 04, 2013

CALIFORNIA LEGISLATURE— 2013–2014 REGULAR SESSION

Assembly Bill
No. 42


Introduced by Assembly Member Perea
(Coauthor: Assembly Member Gray)

December 07, 2012


An act to amend Section 17144.5 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 42, as amended, Perea. Taxation: cancellation of indebtedness: mortgage debt forgiveness.
The Personal Income Tax Law conforms to specified provisions of federal 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, 2013, as provided. The federal American Taxpayer Relief Act of 2012 extended the operation of those provisions to debt that is discharged before January 1, 2014.
This bill would conform to the federal extension.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   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, 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) 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.
(d) 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.
(e) The amendments made to this section by the act adding this subdivision shall apply to discharges occurring on or after January 1, 2013.

SEC. 2.

 This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.