The California Senate passed the California Association of REALTORS®-sponsored tax relief bill without a single "no" vote on June 20. SB 30 (Calderon, D-Montebello) protects homeowners from having to pay income tax on a short sale.
One of the major successes Congress reached in the "fiscal cliff" negotiations late last year was the extension of the Mortgage Forgiveness Debt Relief Act for another year. The measure will continue to exempt from taxation mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale, loan modification (including any principal reduction) or foreclosure.
Although debt relief was extended at the federal level, the state exemption expired at the end of 2012, so forgiven mortgage debt is still considered taxable state income in California. In order to conform state law to the federal law that passed extending mortgage debt forgiveness, the California Association of REALTORS® sponsored Senate Bill 30, so California homeowners on the brink of foreclosure can get much-needed debt relief. SB 30 (Calderon, D-Montebello) will extend the sunset date in California law to January 1, 2014. Upon its passage, the measure will be retroactive to January 1, 2013. With its passage in the Senate, SB 30 is now headed to the Assembly. Realtors will be urging their Assembly Members to pass the debt relief bill.
The road to the passage of SB 30 is not all smooth, however. In late May, the Senate Appropriations Committee linked SB 30 to SB 391. The state REALTOR® group opposes this bill because it creates a $75 recording tax for all real estate transactions other than the sale of property. The link, in the form of an amendment, says SB 30 cannot take effect unless SB 391 does as well. The state Senate passed SB 391 on May 30 and like SB 30, the bill will go to the Assembly.
"We will continue to work toward delinking the two bills - defeating the recording tax, and passing tax relief for those going through a short sale," says Carolyn Miller, president of the Silicon Valley Association of REALTORS®.
While SB 391 does not apply to sale transactions, the measure applies any time a home/property owner records a document (e.g., refinancing, transferring into or out of a trust, liens, quit claim deeds, etc.).
"REALTORS® are advocates for affordable housing, but we believe it is bad policy to fund affordable housing at the expense of property owners who need to record real estate documents," explains Miller.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.