Californians may have to pay tax on canceled mortgage debt

The Legislature in mid-March approveda bill that would bring the state into conformity with federal tax law on debt cancellation. But Gov. Arnold Schwarzenegger vetoed it Thursday because he opposed some the bill's provisions about tax penalties for businesses, said his deputy press secretary, Mike Naple. Legislators are expected to draft a separate bill to fix the mortgage debt cancellation issue, and Schwarzenegger has said he supports that effort, but the timing is uncertain.