Poison Pill Killing Two Real Estate Measures

Poison pill would kill two real estate measures

By Dan Walters


Published: Friday, Sep. 6, 2013

Senate Bill 391 would impose fees on real estate transaction
documents to raise money for low-income housing, at least $300 million a year.

It would, in effect, address a problem that the Legislature itself
created when it abolished city redevelopment agencies two years ago.

Those agencies had been required to set aside a major portion of
their property tax revenue for low-income housing.

The real estate industry opposes the measure, saying it would hurt
the revival of California’s housing market, which had been clobbered by
recession. The bill has been stuck in the Assembly ever since because it
requires a two-thirds vote and Democrats temporarily lack an Assembly

The Senate also passed another bill this year, this one by a 36-0 vote and it, too, is stuck in the Assembly. Supported by the same real estate interests that oppose SB 391, Senate Bill 30 would reinstate a tax break for homeowners who have sold their underwater homes or gone through foreclosure.

Technically, mortgage debts that are forgiven in bankruptcy or
short sales are income to the distressed homeowners. The federal government has
shielded that paper income from taxation and the state followed suit, but the
exemption ran out at the end of 2012.

SB 30 would reinstate the tax break for another year, and there’s
no opposition to the measure. But one day before SB 391 went through the Senate
last May, Senate leaders inserted a brief provision in SB 30: “This act
shall become operative only if Senate Bill 391 of the 2013-14 Regular Session
is enacted and takes effect.”

In legislative jargon, that’s known as a “poison pill” and
is aimed at overcoming real estate industry and Republican opposition to SB
391. But so far, the California Association of Realtors isn’t budging, and with
just a few days left in the legislative session, it’s unlikely that the
months-long impasse will be resolved.

If both bills remain in limbo, it would mean that many thousands
of former California homeowners would be hit with hefty state income tax bills,
about $50 million in all, for the unpaid portions of their former mortgages.

That’s how the Legislature works – or doesn’t.

Source: Sacramento Bee

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