Speaking of Bipartisanship: Who Wrote Whose Press Release?
(Editor’s Note: As expected, Gov. Arnold Schwarzenegger signed the first California federal tax conformity bill in five years. Here’s how the bill’s author, Sen. Lois Wolk, a Davis Democrat and the GOP governor portrayed the action. The 80-odd page legislation has a large number of other provisions.)
Governor signs Wolk tax relief bill
Bill prevents onerous taxation of debt forgiveness and renewable energy grants
SACRAMENTO— Governor Arnold Schwarzenegger today signed into law Senate Bill 401, a measure by Senator Lois Wolk (D-Davis) to provide tax relief to California homeowners engaged in short sales or loan modifications, and exempting federal renewable energy grants from taxation. According to the Franchise Tax Board, the debt relief provisions take effect immediately and retroactively for the 2009 tax year.
“I am pleased the Governor has acted quickly to get this law in place ahead of the April 15 tax filing deadline,” said Senator Wolk, who chairs the Senate Revenue and Taxation Committee. “The thousands of Californians anxiously awaiting legislative action on this matter can now rest a little easier, knowing they won’t be hit with a large state tax bill after already being forced to sell their home at a huge loss.”
“This legislation is a great example of what we can accomplish when we work together to solve problems that affect Californians, and I applaud Senator Lois Wolk, Senator Ron Calderon, Assemblymember V. Manuel Pérez and Assemblymember Anthony Portantino for their work. It is important that we continue to provide all possible assistance to homeowners who were negatively impacted by the mortgage crisis, and this bill will provide them with necessary mortgage debt relief and protect them from thousands of dollars in unfair taxes,” said Governor Schwarzenegger.
Without SB 401, debt forgiven on many home loans would be considered income and subject to state income tax. Under the new law signed today, taxpayers can exclude up to $500,000 in income from mortgage debt forgiveness resulting from a short sale or loan modification on a recourse loan. SB 401 applies retroactively to the 2009 tax year and through 2012.
SB 401 also accelerates solar and wind energy projects by preventing state taxation of federal renewable energy production tax credits. Congress converted the tax credits to cash grants in 2009 as part of the American Recovery and Reinvestment Act—simultaneously exempting the grants from federal taxation.
The new law also makes numerous updates, conforming state law to federal changes going back to 2005, benefiting California taxpayers and tax preparers by making state and federal law simpler and more consistent.
Senator Wolk urges taxpayers with questions about the new law to contact the Franchise Tax Board (FTB) through their toll free line 800-852-5711, as well as a special page on the FTB website for the mortgage debt relief provisions: http://www.ftb.ca.gov/aboutFTB/newsroom/Mortgage_Debt_Relief_Law.shtml.
And from Schwarzenegger:
Governor Arnold Schwarzenegger today signed SB 401 by Senator Lois Wolk (D-Davis), legislation that will bring much of our state tax policy in line with federal policy while specifically providing greater tax relief to struggling California homeowners who have sold their homes as short sales or modified their mortgage loans. This bill will also assist companies that are developing new renewable energy projects in the state that are financed by economic stimulus grants received through the American Recovery and Reinvestment Act (Recovery Act).
“This legislation is a great example of what we can accomplish when we work together to solve problems that affect Californians, and I applaud Senator Lois Wolk, Senator Ron Calderon, Assemblymember V. Manuel Pérez and Assemblymember Anthony Portantino for their work. It is important that we continue to provide all possible assistance to homeowners who were negatively impacted by the mortgage crisis, and this bill will provide them with necessary mortgage debt relief and protect them from thousands of dollars in unfair taxes,” said Governor Schwarzenegger. “SB 401 will also help promote the growth of renewable energy projects in California by providing tax assistance to businesses to get their projects of the ground, which is good news for our economy.”
SB 401 extends the law providing mortgage debt forgiveness to homeowners who have already lost their homes due to declining home prices and cannot afford to pay thousands of dollars in taxes because the mortgage company forgave the remainder of the loan. This means that Californians who have sold their homes as short sales are allowed to exclude from taxable income the amount that was still owed to the mortgage company. The legislation, which increases the amount of mortgage debt forgiveness available, also applies to homeowners who have made loan modifications in 2009.
The bill also assists renewable energy companies that are currently establishing the financing to build their projects in California. By designating federal economic stimulus grants received through the Recovery Act for renewable energy projects are not treated as income for tax purposes, this legislation will help companies move these projects forward and help their business thrive in the state.
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