Bill > S2039

This bill modifies Massachusetts tax law to provide relief for homeowners who have had mortgage debt discharged or forgiven, creating a tax exclusion for income resulting from debt reduction on a principal residence. Specifically, the bill allows taxpayers to exclude up to $2,000,000 of forgiven mortgage debt from their gross income (or $1,000,000 for married couples filing separately), but only for "acquisition indebtedness" related to the original home purchase. The exclusion applies to debt reduced through mortgage restructuring or forgiven during foreclosure, with several important conditions: the excluded amount will reduce the taxpayer's basis in the home (but not below zero), the debt forgiveness must be related to the home's value or the taxpayer's financial condition, and the exclusion does not apply to debt forgiven for services performed for the lender. The bill defines "principal residence" using the federal tax code definition and specifies that this provision applies retroactively to debt discharges on or after January 1, 2013. Additionally, the bill requires the tax commissioner to create implementing regulations within 180 days of the act's effective date, providing a clear framework for how these tax exclusions will be administered.