Assemblyman Alex Lee (D-San Jose) introduced Assembly Bill 946 February 17, which would deny the deduction for a non-principal residence. The bill would amend Section 51342 of the Health and Safety Code and add Section 17226 to the Revenue and Taxation Code.
Existing law provides a Home Purchase Assistance Fund and allows a deduction for a limited amount of interest paid on acquisition indebtedness for a qualified residence of the taxpayer. As a tax increase, the bill would require a 2/3 vote in both houses of the Legislature.
Section One of the bill would amend Health and Safety Code Section 51342 to provide the State Controller will transfer an amount as notified by the Franchise Tax Board that was received due to the denial of the tax deduction to deposit into the Home Purchase Assistance Fund.
Section Two of the bill would add Revenue and Taxation Code Section 17226 to provide that, for tax years beginning on or after January 1, 2022, specified provisions of the federal Internal Revenue Code related to qualified residences no longer would apply.
In addition, prior to June 1, 2022, the Franchise Tax Board would be required to estimate the amount of revenue that would have resulted if the modifications made with respect to the calculation of taxable income by this section had applied to taxable years beginning on or after January 1, 2021, and before January 1, 2022, and notify the Controller of that amount. This accounting will be required to take place each year so that the Controller can make the annual deposits into the Assistance Fund.
The bill is likely to be heard in its first policy committee in March.