1031 Tax Reform Update – May 2015
During March and May, John Wunderlich and Suzanne Goldstein Baker of IPX1031® participated in multiple FEA fly-in meetings on Capitol Hill. IPX1031® has been working closely with the Federation of Exchange Accommodators (FEA), the national trade association for qualified intermediary companies, with a shared goal to keep Section 1031 out of future legislation.
The threat of a repeal of Section 1031 is real. Although a repeal proposal has not progressed to law, the preventive work must be done now. Keeping a repeal of Section 1031 out of any tax reform proposals, whether written in 2014 or 2017, is the most important goal. This becomes startlingly more important as tax reform becomes entwined with other agendas, such as House Majority Leader Kevin McCarthy’s goal to tie a large-scale highway bill to tax reform later this year.
During the past 60 days, FEA members, including IPX1031®, have attended about 85 meetings with legislators, staffers and committees. These included meetings with key members of the House Ways and Means and Senate Finance Committee and with Congressional leaders.
We were met with differing reactions from Members of Congress. Many told us that we were there at the right time, and they appreciated the information we shared, especially the results of the Ernst & Young Economic Impact Study that quantified the effects of 1031 repeal on the US economy. We found some legislators support like-kind exchanges, understand the value, and will be champions for our cause. Some are calling for outright repeal and are very focused on reducing the corporate tax rate. At this point, we found most are non-committal.
However, we found that many legislators are still unaware of the important benefits that Section 1031 brings to the real estate, construction, commercial transportation, equipment and auto leasing industries, and ultimately to the overall US economy.
Based on what we’ve learned at our meetings, we will continue to focus on awareness and education which becomes increasingly timely as the outline for tax reform is being conceptualized and drafted now. A recent Deloitte report echoed what we’ve heard in our meetings, “The work that the tax writing committees have done so far and the work they do in the 114th Congress is likely to form the basis of future reform efforts.”
The window of opportunity for phased business tax reform this summer may or may not materialize, but we all must continue to make our voices heard, even if this takes two more years. We need to ensure that our legislators understand the importance of Section 1031 BEFORE a bill is drafted, and the policy and political positions have locked in.
“If you are not at the table, you’re on the menu,” a BNA article quotes Ray Beeman, a former tax restructuring advisor to then-House Ways and Means Committee Chairman Dave Camp (R-Mich.). “[Tax reform] work is continuing every day. It’s important to be involved,” he said.
IPX1031® plans on staying at the table. Please continue to share this messaging.
- Deloitte & Touche Politics of Tax Reform in the 114th Congress article from the Wall Street Journal can be found here
- The entire Deloitte & Touche Politics of Tax Reform in the 114th Congress report can be found here
- The full Ernst & Young Study can be found here
- Ernst & Young Study Synopsis can be found here