A Democratic state Senator introduced the bill, and Republican Senator Joel Anderson has signed on as a co-author.  He says homeowners going through a short sale need help:

ANDERSON: "Let's not kick them when they're down."

Here's how a short sale works:  Say you owe $300,000 on your home, but it's only worth $200,000. You sell it for $200,000 and the lender forgives the other $100,000. That's taxable income under current state law. The legislation would exempt that forgiven debt for California tax purposes this year.

ANDERSON: "These people are upside down and to get them back on the path to prosperity as quickly as possible is necessary for our state to move forward."

The bill would bring California into line with federal law. The Franchise Tax Board says the measure would cost California about 50 million dollars in lost revenue this year.