California Assembly Bill AB2234 Latest Draft

 BILL NUMBER: AB 2234AMENDED BILL TEXT AMENDED IN ASSEMBLY APRIL 20, 2016 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.  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.  This bill would extend this  state tax  exclusion  indefinitely   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,  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)  (1)    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) Section 108(a)(1)(E) of the Internal Revenue Code, is modified to delete "which is discharged before January 1, 2015."  (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   2007,   2009, or 2013  taxable year regardless of whether or not the taxpayer reports the discharge on his or her return for the  2007 or 2009   2007, 2009, or 2013  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 his or her income tax return for the 2013 taxable year.   (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.   (d) (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 to taxable years beginning on or after January 1, 2014.   (2) 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.  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.