At this point, I would be super surprised if this "temporary" relief measure was ever repealed. I think that Webster needs to add a second definition for "temporary" for cases when the federal government uses it.
"Temporary (adjective). When used by any government official, see also 'permanent'."
First off, even if your state is non recourse, like Arizona, you actually can and will owe the tax depending on your conditions. If the law is not extended (not repealed as posted above, the original law ended the end of this year)
even so, the law only provided tax forgiveness on your resident property, or on investment property if you were insolvent at the time of the foreclosure/short sale. I know people who let the investment properties go first, since that way they were still insolvent due to owing so much on their primary residence, and after all the investments were gone, let the primary residence go.
do not use any of this for personal advice, seek the help of a competent real estate/tax attorney for your own situation, this law is complex, and mistakes could be very expensive to you!
"In Arizona, this would mean you would not be subject to taxation for any deficiency between the property value and mortgage balance after a deed in lieu on a one or two-unit building so long as the loan or loans were taken out to purchase the property."
except for our current tax law which is set to expire.
no, that's not what it says:
"Unless your debt falls into either an exception to or exemption from the IRS debt rules, you will be taxed on the value of any unpaid debt after a deed-in-lieu, in Arizona or any other state. One key exception to the taxation rule, according to the IRS, is non-recourse loans. Because a non-recourse loan prevents personal liability beyond the property itself, any unpaid debt is not viewed as income."
This is just my general understanding, that non-recourse loan defaults are not taxable income since there can be no deficiency judgment with them.