The Personal Income Tax Law Mirrors The Federal Mortgage Forgiveness Debt Relief Act Of 2007
In the first completion of a long overdue process the California State Senate this week passed SB 30 which mirrors the federal Mortgage Debt Forgiveness Relief Act. SB 30 which provides tax relief to those who are selling a home in a short sale will now move on to the state Assembly.
The Personal Income Tax Law conforms to specified provisions of the federal Mortgage Forgiveness Debt Relief Act of 2007, relating to the exclusion of the discharge of qualified principal residence indebtedness, as defined, from a taxpayer’s income if that debt is discharged after January 1, 2007, and before January 1, 2010. The federal Emergency Economic Stabilization Act of 2008 extended the operation of those provisions to debt that is discharged before January 1, 2013.
This bill would extend the operation of the exclusion of the discharge of qualified principal residence indebtedness to debt that is discharged on or after January 1, 2013, and before January 1, 2014.
SB 30 Tied To SB 391
In late May, the California Senate Appropriations Committee linked SB 30 to SB 391, a bill which creates a $75 recording tax to be used of affordable housing. This link, in the form of an amendment, says that SB 30 cannot take effect unless SB 391 does as well.
Politics aside, having SB 30 in place will offer homeowners another option to choose a short sale over a deed-in-lieu or a foreclosure.
If politicians insist on having the bill tied to SB 391 then let it be, because SB 30 offers too much importance for homeowners to allow it to languish in the capital.