The 2024 Election and IRC Section 1031
Capitol Hill Update, November 2024
With a Republican sweep of the Presidency, House and Senate it is safe to say that the Biden/Harris budget proposal of a $500,000 cap or repeal of Section 1031 contained in the Democratic 2024 Platform is moot in the sense that the Democrats will not have a seat at the table when the tax bill gets written by Congress next year.
Today, because of IPX1031’s and our industry association, the Federation of Exchange Accommodator’s (FEA) multi-year efforts, we enjoy substantial House and Senate Republican support for the retention of Section 1031, as well as dedicated support among Ways and Means Democrats. Many Senate Finance Committee Democrats are supportive, but the overall number of Democratic Members have been reduced, with four Democratic Members exiting in 2024, and the election defeat of Senators Casey (PA), Tester (MT) and Brown (OH).
President-elect Trump ran on extending the Tax Cuts Jobs Act (TCJA) which expires at the end of 2025. The House and Senate Republicans will use the budget reconciliation process to accelerate tax and spending proposals. Once the House and Senate pass identical budget resolutions, they will proceed to mark up a budget reconciliation package which would be fast tracked through the legislative process.
We need to continue to be on high alert as the budget reconciliation process commences, and the debate on the 2025 tax bill unfolds in the coming weeks and months.
Future advocacy efforts:
IPX1031 and the FEA PAC have sponsored eighteen zoom fundraisers with key members of the tax writing committees, and four in-person events in DC. By year-end, we will have hosted twenty-one fundraisers with legislators. Given the changes on the Democratic side of the Senate Finance Committee, we are reaching out the moderate Democratic Senators who may be in line for a spot on that committee. We need to continue this effort into 2025.
We will have one, or more, fly-ins in 2025 as the process unfolds. In a fast-track legislative process, we could see House Ways and Means Committee action by late spring or early summer with and House floor action to follow. Additionally, IPX1031 and the FEA will need to be prepared to engage in grassroots activity.
We will continue to work with our 1031 Coalition members to coordinate lobbying efforts on the Hill and with the Trump administration.
We will continue to closely monitor the situation to keep you informed while also maintaining our efforts to educate Congress. As we continue to fight for Section 1031, we need your assistance. Elected officials listen more closely to their constituents! In addition to sending electronic letters, below is something you can do to help with the Section 1031 advocacy efforts:
Talk with your contacts about preserving Section 1031. Below are the comments the FEA shared with members of Congress about Section 1031 (see our PDF). Please feel free to use them in your conversations with colleagues, friends, and representatives.
Section 1031 is an important tool used by business owners, farmers and ranchers, middle-class taxpayers, and others to transition into locations that more efficiently meet their needs, instead of being tax-locked into obsolete assets.
The proposed repeal is misguided because larger investors are critical to repurposing and renovating commercial real estate in our post-pandemic economy. The COVID-19 pandemic imposed unexpected and unprecedented trauma on commercial property – particularly retail, hotel, and office space. A significant percentage of these properties need to be repurposed.
These are the types of large-scale projects that revitalize entire neighborhoods, generate significant job growth, and result in widespread community improvement. Section 1031 is an effective tool to encourage this activity while avoiding market disruptions. Allowing businesses to continue to utilize Section 1031 prevents many assets from becoming shuttered blight.
Additionally, recent economic impact studies concluded that Like-Kind Exchanges are a powerful stimulant of transactional activity that, in addition to the benefits described above, generates significant local and Federal tax revenue and contributes to the health of the U.S. economy. The studies found that exchanging buyers make real estate investments that are substantially greater than non-exchanging buyers, resulting in improved communities in which to live, work and play. These studies quantified that limiting or repealing Section 1031 would cause significant economic contraction and job loss.
Most importantly, under Section 1031, taxes are merely deferred, not eliminated!
Thank you for your help in IPX1031’s advocacy efforts. We will keep you updated with additional information as it becomes available.
READ MORE
Talking Points PDF (2024)
Why Like-Kind Exchanges in a Distressed RE Market Make a Difference PDF (2023)
Sustaining American Businesses During Economic Uncertainty brochure
Ernst & Young Study Summary (2022)
Ling and Petrova Study Summary (2021)
IPX1031 Tax Reform resources
