CA SB 1055 (Senator Michael Machado; District #05) passed the Senate floor on Aug 19, 2008 (short sale 1099's, CA tax liability). It has now been sent to the Governor. My only concern is it addresses short sales completed in 2007 and 2008 only. With the timeframe it is now realistically taking to complete CA short sales, I am hoping it will be extended through 2009.
Also, the CA Franchise Tax Board site states that if a homeowner can prove insolvency post short sale, the CA tax liability may be waiveable. How often this has successfully occurred, or will occur, is the question.
Also, there is a website to monitor proprosed Bills:
Just thought I'd pass it along.