Issue link: https://viewer.e-digitaledition.com/i/597330
LEGISLATIVE UPDATE A BILL TO PROTECT homeowners took an important step in the legislative process as the Joint Committee on Revenue gave Senate Bill 1521 "An Act relative to discharge of indebtedness of principal resi- dence from gross income," a favorable report. Sponsored by State Senator Mark Montigny (D-New Bedford) and strongly backed by the Massachusetts Association of REALTORS, the bill would remove the tax on "phantom" income that homeowners, who are trying to avoid foreclosure by completing loan modi- fications or selling via short sale, currently have to pay. As written, the bill would mirror the federal law, the Mortgage Debt Relief Act of 2007, to allow taxpayers to apply for this exclusion on their state tax return. " We've sa id this before, a nd it 's wor th saying again that making a homeowner who has experienced a true economic loss pay tax on 'phantom income' is just adding salt to their wounds," says 2015 MAR President Corinne Fitzgerald, broker-owner of FITZGERALD Rea l Estate in Greenf ield. " Preventing a foreclosure via short sale not only reduces some of the credit impact on the homeowner, but just as importantly preserves home values for the rest of the houses in the neighborhood. Encouraging short sales or loan modifications are the best way to go in these types of di¥cult situations and this bill would help do that." "Distressed homeowners facing default or foreclosu re a re a l rea dy str ug g li ng to make ends meet on a daily basis," says Sen. Montig ny. " W hile Wa ll Street received a massive bailout on the backs of hardworking taxpayers, homeowners have been forced to pay tax on income never actually received, def ying a ny sense of fairness or common sense. This legislation will ensure that debt discharged from one's principal residence will no longer count against them when filing their state return." Only homeowners who are in financia l ha rdship a re able to pursue a loa n mod- if ication or a shor t sa le. In both of these situations, the lender forgives a portion of the mor tga ge debt. Unfor tunately, under current state ta x law, the mor tga ge debt that was forgiven by the lender is considered income, even though no cash has changed ha nds. T he a dd it iona l t a x t hat needs to be paid on this "phantom" income is often what determines whether the homeowner is able to keep the property from going into foreclosure or not. "These homeowners are trying to do the right thing. If they could a¡ord to pay the tax on the 'phantom' income, then the odds are they wouldn't be in the financial di¥culty they are in," Fitzgerald says. ■ REALTOR Bill to Protect Homeowners Gains Support on Beacon Hill Joint Committee on Revenue gives Senate Bill 1521 favorable recommendation. ADVERTISERS' INDEX ABX .............................................................46 All-Pro Electric ..............................................32 Steven Baczek, Architect ..............................24 Best Tile .......................................................47 Beverly Overhead Garage Doors ..................23 California Closets ...........................................3 Clean Soils Environmental Ltd. .....................26 Cranston Electric Inc. ...................................39 Horner Millwork ............................................2 David Fell Photography ..................................6 Meridian Associates .....................................44 Olde New England Granite ............................7 One Way Lumber/ Customkitchenswholesale.com ....................30 Pella Windows and Doors ............................48 Solect ..........................................................28 Sterritt ...........................................................5 Weaver Glass ...............................................42 Werner Stock ...............................................40 Yaro Windows and Doors ............................41 | Greater Boston Builder+Architect BOSTON.BUILDERARCHITECT.COM