Good Morning Gentle Readers,
The governor signed SB 401, the Conformity Act of 2010, into law yesterday. The new law allows taxpayers who had all or part of the loan balance on their principal residence forgiven by their lender to exclude the forgiven debt from California gross income and brings California into substantial conformity with federal tax law.
In anticipation of a continuing sag in the real estate market, the new law applies to discharges of qualified principal residence indebtedness on or after January 1, 2009, and before January 1, 2013.
TWC has seen some venom spread around the tubes about people who shirked their obligations, tried to cheat the system, or were simply dumb as a stump while the rest of us paid our bills. The gist is that the tax boys should stick it to these losers good and hard.
There is maybe a little fire feeding that billowing cloud of smoke, we all know about stuff that just ain't right and TWC could make you a long list of true tales that'd make your blood boil.
But there is something very Snidely Whiplash about the notion that the government should collect taxes on misfortune. That's like taxing cancer treatment, or billing dead soldier's families for the cost of the flag draping the coffin. The lender didn't get the money, and, in fact is barred by state law from collecting any of what's owed after foreclosure. The taxpayer doesn't have the house and it isn't likely that a guy who can't pay his house payments is going to conjure up thousands of dollars to pay the tax man.
And SB 401 ought to serve as an object lesson of the disdain in which your elected leaders hold you. It is two days until the tax filing deadline and hundreds of thousands of people have been waiting for an answer.
Everyone was pretty sure conformity with federal law would come. It should have and could have been put to a voice vote weeks and weeks ago in about five minutes. Further, they knew the old relief law expired after 2008. They knew this two years ago, but the legislature could not take care of business, choosing instead to drag this crap out until the eleventh hour.
Ample illustration of why California is in the outhouse.