LOS
ANGELES (May 23) – This morning the Senate Appropriations Committee
approved Senate Bill 30 (R. Calderon), which would extend existing
provisions of state law protecting homeowners from having to pay income
tax on a "short sale." SB 30 is sponsored by the CALIFORNIA ASSOCIATION
OF REALTORS® (C.A.R.).
However, in a surprise amendment, SB 30 was linked by the committee to
another bill that REALTORS®, as well the county recorders, assessors and
title industry, oppose. That measure, Senate Bill 391 (DeSaulnier),
would establish a $75 per document recording tax to fund an affordable
housing trust fund. C.A.R. is opposing SB 391 because it unfairly adds
to the cost of recording real estate documents. The amendment holds SB
30 hostage to the passage of SB 391.
"Families that are forced to make the difficult decision to sell their
home as a short sale are already in financial trouble. And, that
financial trouble may be due to a serious illness and/or loss of
employment. They simply can’t afford to pay an additional tax on money
they’ve never actually received," stated C.A.R. President Don Faught.
"I'm outraged -- as should the voters of California -- that the Senate
leadership would approve linking the fate of SB 30 to that of SB 391,
effectively holding California property owners hostage."
Short sales have become an increasingly important alternative to
foreclosure for homeowners "underwater" on their mortgage. Without
special protection, federal and state law would view the debt forgiven
by a lender in a short sale as income and, as a result, that “income”
would be taxed. In recent years, state and federal law has been amended
to keep this “phantom” income from being taxed, but California
protections have not been extended. Consequently, C.A.R. is sponsoring
SB 30.
While SB 391 does not apply to sale transactions, the measure applies
anytime a home/property owner records a document (e.g., refinancing,
transferring into or out of a trust, liens, quit claim deeds, etc.).
C.A.R. is an aggressive advocate for affordable housing, but believes it
is bad policy to fund affordable housing at the expense of
home/property owners who need to record real estate documents. The
amendment to SB 30 attempts to extort support for the new tax on
homeowners in SB 391.
