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SB-763 Personal income tax: gross income exclusion: discharge of qualified principal residence indebtedness: federal disaster areas.(2019-2020)

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Date Published: 07/03/2019 09:00 PM
SB763:v98#DOCUMENT

Amended  IN  Assembly  July 03, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 763

Introduced by Senator Galgiani

February 22, 2019

An act to amend Section 17144.5 of the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


SB 763, as amended, Galgiani. Personal income tax: gross income exclusion: discharge of qualified principal residence indebtedness: federal disaster areas.
The Personal Income Tax Law provides for modified conformity to specified provisions of federal income tax law relating to the exclusion 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 provide that discharges of qualified principal residence indebtedness occurring on or after January 1, 2017, and before January 1, 2019, due to the loss of a principal residence within a federally declared disaster area, are also excluded from an individual’s gross income. The bill would discharge indebtedness for related penalties and interest. The bill would also make other nonsubstantive changes.
The bill would require the Legislative Analyst’s Office to collaborate with the Franchise Tax Board to review the effectiveness of the above-described exclusion and, on or before January 1, 2021, submit a report of the review to the Legislature, as provided.
Existing state constitutional law prohibits the Legislature from making any gift, or authorizing the making of any gift, of any public money or thing of value to any individual, association, municipal corporation, or any other corporation.
The bill would make certain legislative findings and declarations that preventing undue hardship to taxpayers whose qualified principal residence indebtedness was discharged due to the loss of a principal residence within a federally declared disaster area serves a public purpose, as provided.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   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, 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 or 2009 taxable year regardless of whether or not the taxpayer reports the discharge on the taxpayer’s 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 Chapter 152 of the Statutes of 2014 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 the taxpayer’s income tax return for the 2013 taxable year.
(f) This section shall apply to discharges of indebtedness occurring on or after January 1, 2017, and before January 1, 2019, with respect to the discharge of qualified principal residence indebtedness for the loss of a principal residence within a federally declared disaster area, 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 2017 or 2018 taxable year year, regardless of whether or not the taxpayer reports the discharge on the taxpayer’s return for the 2017 or 2018 taxable year.

SEC. 2.

 It is the intent of the Legislature to apply the requirements of Section 41 of the Revenue and Taxation Code to this act. Therefore, the Legislature finds and declares the following with respect to the exclusion from gross income allowed by subdivision (f) of Section 17144.5 of the Revenue and Taxation Code, as amended by Section 1 of this act:
(a) The specific goal, purpose, and objective that the exclusion will achieve is reducing the financial burden on taxpayers who experience the loss of a principal residence within a federally declared disaster area and a discharge of qualified principal residence indebtedness in connection therewith.
(b) The detailed performance indicator for the Legislature to use when measuring whether the exclusion meets the specific goal, purpose, and objective described in subdivision (a) is the number of people allowed the exclusion.
(c) The Legislative Analyst’s Office shall collaborate with the Franchise Tax Board to review the effectiveness of the exclusion. The review shall include, but is not limited to, an analysis of the economic impact of the exclusion and the information specified in subdivision (b). The Legislative Analyst’s Office shall submit a report of the review to the Legislature on or before January 1, 2021. The report shall be submitted in compliance with Section 9795 of the Government Code.
(d) The data collection requirements to enable the Legislature to determine whether the exclusion is meeting, failing to meet, or exceeding the specific goal, purpose, and objective described in subdivision (a) are as follows:
(1) To assist the Legislature in determining whether the exclusion meets the specific goal, purpose, and objective described in subdivision (a), and in order to carry out its duties pursuant to subdivision (c), the Legislative Analyst’s Office may request information from the Franchise Tax Board.
(2) The Franchise Tax Board shall provide any data requested by the Legislative Analyst’s Office pursuant to this subdivision.

SEC. 2.SEC. 3.

 The amendments made by this act apply to qualified principal residence indebtedness that is discharged on or after January 1, 2017, and before January 1, 2019. 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 preventing undue hardship to taxpayers whose qualified principal residence indebtedness was discharged on or after January 1, 2017, and before January 1, 2019, due to the loss of a principal residence within a federally declared disaster area, and do not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution.

SEC. 3.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 California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to provide tax relief and protection to a taxpayer due to the loss of a principal residence within a federally declared disaster area at the earliest possible time, it is necessary that this act take effect immediately.