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A blog about the economy and the Sacramento-area real estate market.

March 15, 2010
Politics, politics over mortgage debt forgiveness in California

Sacramento-area residents can almost certainly count on eventually getting state tax relief for 2009 forgiven mortgage debt. But politics abound and the road will be twisting and maybe a few weeks long.
 
  First off,  Gov. Arnold Schwarzenegger signaled his intent earlier today to veto SBX8 32, a wide-ranging bill that, among other things, bans the state from taxing debt forgiven in short sales and loan modifications. The bill's author is Sen. Lois Wolk, a Davis Democrat.

 But the governor's spokesman also said Schwarzenegger is "absolutely, 100 percent" committed to ensuring that Californians who escaped one harrowing financial encounter with lenders don't have another with the state this year. A majority of lawmakers has repeatedly said the same. So that's the big news. It likely will get done.

"We're looking to get this done with another bill," said Schwarzenegger spokesman Aaron McLear on Monday. McLear said the governor is looking at AB 1779 by Assemblyman Roger Niello, a Fair Oaks Republican, and SB X6 14 by Sen. Ronald, D-Montebello.

Both are backup plans that would prevent the state from considering forgiven mortgage debt as extra new income and taxing it.

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