The State of California Appropriations Committee is meeting this Friday. On the agenda a SB 30 which was originally introduced in December 2012 and finally received its first hearing last week. If not approved this Friday, the bill would stall up until January 2014.
Why is SB 30 important? Under the current state law, when a lender forgives mortgage debt in a short sale, the seller must pay state income tax on the amount of forgiven debit (there is currently no federal income tax). If passed, this bill will assist to eliminate the state income tax on short sale transactions. According to the California Association of Realtors (CAR) and many others, passing this bill is the right thing to do. Distressed homeowners are faced with a no-win situation — either pay taxes on money they don’t get or let the home go into foreclosure. They generally have two choices — foreclosure or short sale. If they fear state income tax liability on a short sale, they are likely to choose foreclosure. Foreclosures are bad for everyone….the community, the homeowner and damage property values more than short sales.
Not all delinquent homeowners face foreclosure because they purchased above their means. Many homeowners have financial hardships that have placed them in a difficult situation. If this bill is not passed, these borrowers will face credit challenges and additional financial challenges as a result of having to pay taxes on money they will never see again.
What can you do to help?
Encourage State Assembly member Mike Gatto (Chair of the Appropriations Committee) to pass this bill by visiting his Facebook page: www.facebook.com/mikegatto and sending him a message asking him to support SB 30 and distressed homeowners
Call Assembly Member Mike Gatto at: 1-800-969-3420 — enter PIN number 3043 (call Monday – Friday 9 AM – 5 PM)
If you wish, you can bypass the first part of the message by entering the PIN, followed by the # sign, at any time. You may also bypass the 2nd part of the message by hitting the “1” key to be directly connected to the legislator’s office. Ask him to support distressed homeowners and support SB 30. As the Chair of the Appropriations Committee, he is responsible for the committee’s failure to act on behalf of distressed homeowners.
To read the full bill click here