Senate File 860, brought by Senator Gustafson, would make forgiven coerced debt — debt the court has declared a survivor of coercion does not owe — a nontaxable subtraction for income-tax purposes and exclude it from household income calculations for renter credits and homeowner property tax refunds. The Taxes Committee heard the bill Feb. 19 and laid it over for omnibus consideration.

Senator Gustafson said the measure responds to the 2023 “Coerced Debt” law, which created a court process allowing survivors of domestic violence to have debt declared not owed. After that law passed, the sponsor and advocates discovered canceled coerced debt could be treated as canceled debt income (a 1099-C) for tax purposes, creating an unintended tax liability for survivors. Gustafson said the bill clarifies that debt canceled under the 2023 process ‘‘cannot be considered taxable income nor can it be considered income for the purposes of renter’s credit and property tax refund.”

Ron Ellwood of Legal Aid testified in support and thanked the committee for prior work on the underlying law. Senator Klein asked about the statutory definition of coerced debt; Ms. Pollock noted the bill cross-references the existing coerced-debt definition in statute (332.74 sub 3) so no new definition was required. The Department of Revenue provided technical assistance on the drafting and helped shape the bill language, according to testimony.

The committee laid Senate File 860 over for inclusion in the omnibus tax bill; no roll-call tally was provided in the hearing transcript.