Relates to information to be reported by registered sex offenders

2025 Regular Session Introduced by Peter Oberacker and 1 co-sponsor

Massachusetts excludes from gross income up to $2,000,000 of forgiven mortgage debt on a taxpayer’s principal residence (subject to rules and basis adjustments).

REFERRED TO CRIME VICTIMS, CRIME AND CORRECTION

Summary — S.2039 (An Act relative to the relief of mortgage debt)

Note: the provided package contains inconsistent metadata (title referencing sex-offender reporting, sponsor names that appear federal, and varying committee referrals). This summary is based on the bill text included in the packet, which creates a Massachusetts income‑tax exclusion for certain forgiven mortgage debt on a taxpayer’s principal residence.

Purpose

To exclude from Massachusetts gross income (to the extent not otherwise excluded federally) certain amounts of discharged or forgiven mortgage debt on a taxpayer’s principal residence — including mortgage restructuring and mortgage debt forgiven in connection with foreclosure — subject to limits and conditions.

Key provisions

Amends section 2 of chapter 62 (Massachusetts personal income tax law) by adding a new exclusion for income attributable to discharge of indebtedness on a principal residence.

Eligibility and limits:

Maximum excluded forgiven debt: $2,000,000 per taxpayer ($1,000,000 for married filing separately for federal tax purposes).
Applies only to “acquisition indebtedness” as defined in IRC §163(h)(3)(B) (i.e., debt used to acquire, build, or substantially improve the residence, within Code limits).
“Principal residence” has the same meaning as in IRC §121.

Basis adjustment:

The excluded amount reduces (but not below zero) the Massachusetts tax basis of the principal residence.

Exclusions and exclusions from exclusion:

The exclusion does not apply where discharge is on account of services performed for the lender or other reasons unrelated to decline in home value or taxpayer financial condition.
For partial qualification of discharged loans, the exclusion applies only to the qualifying portion; ordering rules state the principal-residence exclusion takes precedence over an insolvency exclusion unless the taxpayer elects otherwise.

Retroactivity and regulations:

Applies to discharges of indebtedness on or after January 1, 2013.
The Commissioner of Revenue must promulgate implementing regulations within 180 days of the act’s effective date.

Who is affected

Primary: Massachusetts taxpayers who had mortgage debt discharged, restructured, or forgiven on their principal residence (for example, through loan modification or foreclosure) where the debt qualifies as acquisition indebtedness.

Secondary: Massachusetts Department of Revenue (administration/regulation) and state fiscal accounts (revenue impact).

Fiscal/policy implications

Likely reduces Massachusetts taxable income for eligible homeowners, which may lower state income tax receipts; the magnitude depends on the number and size of qualifying discharges.

Basis reduction may increase future state capital gains taxable on sale of the residence.

Administrative burden: DOR must issue regulations and guidance to apply federal definitions (IRC cross‑references) at state level.

Procedural status (as provided)

Introduced: June 11, 2025. Referred to committee(s) (records show multiple referrals including committees on Crime Victims, Crime and Correction; Homeland Security and Governmental Affairs; and Revenue). A hearing was scheduled for 09/15/2025 per the provided actions.

If you want, I can:
- Draft a short fiscal estimate outline (revenue loss scenarios),
- Compare this proposal to past federal/state mortgage forgiveness relief (e.g., Mortgage Forgiveness Debt Relief Act), or
- Create plain-language Q&A for affected homeowners.