<p>What brings farmers, small business owners, and legislators together to speak out about tax reform? Like-kind exchanges do.</p>

<p>In this week's round-up of 1031 news, Judd Vande Voorte, a fifth generation farmer, calls like-kind exchanges <a href="http://www.thegazette.com/subject/opinion/guest-columnists/encouraging-…; target="_blank">"a continuous circle of economic stimulus and liquidity"</a> and cites a recent study showing that like-kind exchange repeal would shrink overall U.S. GDP by $61 billion to $131 billion over the next ten years. Ben Mattlin, in his <em>Financial Advisor </em>article, quotes one estimate that shows like-kind exchange repeal could raise $41 billion in tax revenue within 10 years but is also quick to point out the long-term negative consequences to the U.S. economy. Carrie Roider, CEO of Erb Equipment, a John Deere distributor, calls like-kind exchanges "a win-win for the country." And don't miss Representative Steve Stivers' support of like-kind exchanges in <em>The Hill</em>.</p>

<p>Help the economy by keeping the like-kind exchange - <em>St. Louis Post-Dispatch</em></p>

<p><a href="http://www.thegazette.com/subject/opinion/guest-columnists/encouraging-… small business growth and paying taxes</a> - <em>The Gazette</em></p>

<p><a href="http://thehill.com/blogs/congress-blog/economy-budget/340000-to-keep-in… keep investment dollars flowing, protect this incentive.</a> - <em>The Hill</em></p>

<p>1031 'Like-Kind' Exchanges Are Under Fire. Again - <em>Financial Advisor</em></p>

<p><a href="http://thehill.com/blogs/congress-blog/economy-budget/340000-to-keep-in…; target="_blank">In an op-ed in <em>The Hill</em></a>, Representative Steve Stivers (R-Ohio) called for the preservation of 1031 like-kind exchanges. Stivers, a member of the Financial Services Committee, called Section 1031 an "important tax benefit," citing the tax provision's value to the community and the economy and stating the importance that it be kept out of the crosshairs of tax reform.</p>

<p><a href="http://thehill.com/blogs/congress-blog/economy-budget/340000-to-keep-in…; target="_blank">Read "To keep investment dollars flowing, protect this incentive" in <em>The Hill</em>.</a></p>

<p>&nbsp;</p>

<p>In a May 8, 2017 <em>Tax Notes</em> article, <a href="http://www.1031taxreform.com/wp-content/uploads/Tax-Notes-LKE-Foster-05…; target="_blank">“Advocates Aim to Preserve Like-Kind Exchange in Tax Reform,”</a> Emily Foster explores&nbsp; the issue of repealing 1031 like-kind exchanges as part of the current tax reform efforts in Washington. In the absence&nbsp; of specific guidance regarding like-kind exchanges in either the House GOP tax reform blueprint or President Trump's&nbsp; one-page tax reform plan, analysts are looking closely at former House Ways and Means Committee Chair Dave Camp's 2014&nbsp; tax reform draft, in which Camp had proposed repeal of Section 1031 in its entirety.&nbsp;</p>

<p>Incorporating views from both opponents and advocates of like-kind exchange repeal, Foster's article discusses the history&nbsp; of 1031 exchanges, how and by whom like-kind exchanges are currently used and the potential consequences of repeal.</p>

<p><a href="http://www.1031taxreform.com/wp-content/uploads/Tax-Notes-LKE-Foster-05…; target="_blank">Read the <em>Tax Notes</em> article by Emily L. Foster</a>,&nbsp; reposted with permission from Tax Analysts.</p>

<p>Original publication: <em>Tax Notes</em> by Tax Analysts. “Advocates Aim to&nbsp; Preserve Like-Kind Exchange in Tax Reform,” by Emily L. Foster. May 8, 2017, pp. 726-730. For more <em>Tax Notes </em>content, please visit <a href="http://www.taxnotes.com&quot; target="_blank">www.taxnotes.com</a>.</p&gt;

<p>Earlier this month, as part of Accruit's ongoing advocacy efforts, I attended the Associated Equipment Distributors (AED) 2017 Washington Fly-In, an opportunity for AED members to actively participate in the legislative process on important issues. Tax reform is one such issue, along with the preservation of Section 1031 like-kind exchanges and the benefit they represent to the industry and the economy.</p>

<p>Our fly-in agenda was packed with meetings with legislators, all of whom play an influential role in the direction that tax reform will take. Over the course of three days, we met with numerous committee and sub-committee chairmen, the Speaker of the House of Representatives, the Secretary of the Interior, and other high-ranking White House advisors.</p>

<p>Below are highlights from our meetings, but I’m happy to share more information if you’re interested. Please contact me or leave a comment on this post.</p>

<h2>AED Washington Fly-In 2017 Highlights</h2>

<ul>
<li>Chairman of the House Rules Committee Pete Sessions (R-TX), a strong supporter of like-kind exchanges, hosted our group at an event at the Capitol Hill Club where House Speaker, Paul Ryan, shared some of the current ideas pertaining to the House Republican Blueprint for tax reform.</li>
<li>We also met with Congressman Ken Buck (R-CO) at this event about the benefits that like-kind exchanges represent to the heavy equipment industry and the positive effects that Section 1031 has been shown to have on the United States economy as a whole.</li>
<li>Secretary of the Interior, Ryan Zinke met with our group to discuss excessive regulation on infrastructure projects. But emphasized the importance of managing and protecting our land, water and wildlife.</li>
<li>Congresswoman Cheri Bustos (D-IL), considered a “blue-dog” Democrat, reminded us that there are several Congressional minority members that recognized the importance of tax reform and strong pro-business policy.</li>
<li>Chairman of the Tax-Policy Subcommittee of the House Ways and Means Committee, Peter Roscam (R-IL), spoke to the AED about the necessity for tax reform, noting, “You can’t jam tax reform down people’s throats. You need permanent reforms to the tax code.”</li>
<li>Assistant to the President and Director for the Office of Public Liaison George Sifakis, Deputy Director Stephen Munisteri, and Special Assistant to the President for Tax and Retirement Policy Shariha Knight were our hosts in the prestigious Indian Treaty Room to introduce the AED to the Trump administration’s Office of Public Liaison and elaborate on its function.</li>
<li>Discussions with Senior White House Advisor, Anthony Pugliese focused on the Department of Transportation and the need for more efficiency within that department.</li>
<li>Finally, a breakfast with House Ways &amp; Means Committee member Representative Patrick Meehan (R-PA), where just the two of us discussed the details of Chairman Brady’s proposed Blueprint and the potential implication businesses will encounter due to the non-deductibility of interest expenses.</li>
</ul>

<h2>Summary</h2>

<p>Tax reform is on the horizon, but just when it will happen is anyone’s guess. There is a collective desire to act prior to Fall recess. If our meetings were any indication, the divisiveness in Congress and the uncertainty of where the Trump administration stands may forestall action on that timetable.</p>

<p>Simplification and fairness are agreed upon goals, however the disagreement is in the details – what stays and what goes, which parts of the tax code are up for repeal. My purpose is to point out unintended consequences that will impact U.S. companies and to advocate for the retention of like-kind exchanges and <a href="/blog/new-study-confirms-like-kind-exchanges-encourage-job-creation-and-stimulate-economic-growth">the benefits they represent in your industry and the economy</a>. I assure you, our message was heard.&nbsp;</p>

<p>Tax reform is certainly forthcoming and necessary, but the shape that reform takes requires careful consideration. If we sacrifice the incentives that allow businesses to grow in return for simply lower tax rates, then we fail at this unique opportunity for actual reform. Please stay engaged and informed through this process, and <a href="http://www.1031taxreform.com/&quot; target="_blank">let your congressional representatives know</a> what does and does not drive your business.</p>

<p>_{Photo: Accruit CEO Brent Abrahm with Representative Pete Sessions (R-TX), Chairman of the House Rules Committee}</p>

<p>Early April is the expected date for committee discussions on a preliminary tax reform bill. Or is it May? Perhaps before the August recess?&nbsp;</p>

<p>That was the comical consensus I received after attending 17 meetings in Washington D.C. last week. Lately, when monitoring the news out of our nation’s capital, we’ve all become a bit skeptical of what defines “good reporting.”&nbsp; The proposed House tax plan labeled <em>A Better Way</em> is reported to have the full support of Republican lawmakers. However, some closed-door conversations with members of Congress last week provided me with an entirely different story.&nbsp;</p>

<h2>Is it Really <em>A Better Way</em>?</h2>

<p>The only real consensus is that <em>A Better Way</em> has a lot of unanswered questions for U.S. business owners. This 35-page document seems to gloss over the fact that business owners want more out of tax reform than simplicity and a lower tax rate.&nbsp; In order to grow, American business needs the ability to do things like expand operations, hire more people, acquire equipment, secure land and facilities, leverage debt fiscally and, when appropriate, be taxed fairly.</p>

<p>My meetings last week ranged from sit-downs with senior staff on the House Ways &amp; Means Committee to heated discussions with notable elected officials who have never run a business. A reoccurring theme of these discussions was that “tax reform is complex.”&nbsp; Unfortunately, running a business is ALSO<br />
complex, and business owners need varied financial tools to return value from their investments.</p>

<h2>Keep Section 1031 of the Tax Code off the Table</h2>

<p>Our elected officials must make the <em>right </em>decisions - not just popular decisions. My most important achievement last week was simply educating lawmakers and their staff about what some of the proposed tax reform components mean for businesses.&nbsp; 1031 exchanges play a vital role in our economy. In addition to supporting the fundamentals of strong tax policy, like-kind exchanges drive real growth by helping businesses acquire equipment, buildings and land. This 1031-induced growth also extends to the ancillary businesses and supporting vendors who provide goods and services to these growing companies. All of this business growth becomes contagious – in a very good way!</p>

<p>We always hear that “everything is on the chopping block” if we want to become competitive, grow the economy and encourage businesses to remain in the U.S.&nbsp; One thing that should <u>not</u> be under the axe is Section 1031. Approaching 100 years in our tax code, Section 1031 exemplifies exactly what the authors of tax reform desire to accomplish.&nbsp; When engaging with your members of Congress, remember some of these helpful talking points:</p>

<h2>Reasons to Preserve 1031 Like-Kind Exchanges</h2>

<ol>
<li>1031 like-kind exchanges (LKEs) encourage investment and reinvestment in U.S. assets and make it easier for taxpayers to relocate or upgrade into assets that better meet their business needs.</li>
<li>Section 1031 was enacted in 1921 for two primary purposes: to avoid unfair taxation of ongoing investments in property and to encourage active reinvestment.</li>
<li>Section 1031 has survived numerous tax reform efforts for almost 100 years because it is based on sound tax policy that prevents taxation of cash flow when there is “continuity of investment” and because it stimulates the economy with transactional activity.</li>
<li>LKEs substantially stimulate a myriad of industries, including real estate, construction, title insurance, mortgage lending, equipment manufacturing, transportation, energy and agriculture.</li>
<li>LKEs ensure both the best use of real estate and a used personal property market that significantly benefits start-ups and small businesses. Eliminating LKEs or restricting their use would have a contraction effect on our economy by increasing the cost of capital.</li>
<li>Without LKEs, businesses and entrepreneurs would have less incentive and ability to make real estate and capital equipment investments.&nbsp;</li>
<li>The forced immediate recognition of gain upon the disposition of investment real estate and other capital assets would result in a higher cost of capital and greater reliance upon debt financing, deterring investment in new assets.</li>
<li>Retention of Section 1031 is complementary to the immediate expensing of equipment and buildings proposal contained in the House Republican Blueprint. &nbsp;However, these proposals are not equivalent substitutes for the benefits generated by §1031, especially when viewed in conjunction with the non-deductibility of interest.</li>
<li>Repealing or restricting LKEs would hamper the ability of businesses to be competitive in our global marketplace.</li>
<li>LKEs are essentially revenue-neutral over the tax life of depreciable assets because gain deferred is directly offset by a reduction in future depreciation deductions available for assets acquired through an exchange.</li>
</ol>

<h2>Help Preserve 1031 Like-Kind Exchanges</h2>

<p>You make a difference! Continue to stay engaged. Don’t assume that the writers of our tax code know what it means to run a business and grow our economy.&nbsp; YOU are an important conduit toward ensuring that the tools your business needs to be successful will be available to you moving forward.&nbsp;&nbsp; <u>Please</u> keep sending me emails and comments about how 1031s help your business. We’ve worked hard to get the attention of our representative government and we are making sure that your voice is heard in Washington.</p>

<h2>Take Action Now</h2>

<p><a href="http://www.1031taxreform.com/take-action/&quot; target="_blank">Visit the FEA Tax Reform portal</a> where it’s easy to let your local members of Congress know that preserving Section 1031 of the U.S. tax code is important to you and your business.</p>

<h2>Professional QIs Are Central to 1031 Exchanges and Help a Wide Variety of Asset Owners</h2>

<p>Las Vegas, Nevada (September 15, 2016)</p>

<p>The U.S. Treasury rules giving rise to the like-kind exchange “Qualified Intermediary” turn 25 this year. Established by Treasury safe harbor regulations in 1991, professional Qualified Intermediaries (QIs) promote compliance with the law and make the benefits of like-kind exchanges, also known as 1031 exchanges, accessible to business and property owners nationwide.</p>

<p>QIs act as independent third-party principals in 1031 exchange transactions. “QIs are equal parts facilitator, educator, and compliance officer,” said Margo McDonnell, president of 1031 CORP., a Philadelphia-based Qualified Intermediary, and outgoing president of the Federation of Exchange Accommodators (FEA), the national 1031 exchange trade association for QIs. “Taxpayers benefit from the guidance Qualified Intermediaries provide. The strict requirement of Internal Revenue Code Section 1031 must be met for an exchange to be approved by the IRS. Without the guidance of Qualified Intermediaries, investors would see many more like-kind exchanges disqualified, negatively affecting business reinvestment and job growth. This would also increase the risk of abuse,” said McDonnell, speaking from the FEA 2016 Annual Conference in Las Vegas on September 14, 2016.</p>

<p>FEA member Qualified Intermediaries help taxpayers of all sizes efficiently redeploy capital across the country, leading to job creating spending in local communities. Professional QIs simplify the exchange transaction for all parties, including the asset owners seeking 1031 tax deferral as well as their tax/legal advisors, the closing officer preparing the closing statements, and real estate professionals assisting the taxpayer. “Investors often need input to understand the strict rules of identification and other procedural issues,” said McDonnell, “QIs are integral to the efficiency of the process.”</p>

<p>Encouraging active and ongoing reinvestment in property were central to Congress’ original intent for enacting the tax deferral status of IRC Section 1031 in 1921. Under the rules, a taxpayer completing an exchange cannot have receipt of the funds from a sale without creating a taxable event. Professional QIs ensure that the sale proceeds are properly restricted. Any funds unused for reinvestment are returned to the taxpayer at termination of the exchange and this portion is then taxable.</p>

<p>The rise of the professional QI in the last 25 years has given small investors valuable assistance in complying with IRC 1031s provisions, while providing a check on exuberant investors trying to abuse the tax code. While larger assets are routinely exchanged, a 2011 survey of members of the Federation of Exchange Accommodators found that more than a third of exchange transactions were below $500,000. “Through Section 1031, many asset owners are exchanging to build or preserve their life savings. We see a significant amount of middle class taxpayers exchanging single family rental homes, farmland, and construction equipment. There’s no doubt that Section 1031 promotes investment in small to medium sized businesses. Most QIs are small businesses, themselves,” said Steve Chacon, incoming president of the FEA and a vice president at Accruit, a national QI firm based in Denver. Typical fees for a Qualified Intermediary’s services are between $750 and $1500 per exchange.</p>

<p>California and Colorado see the highest number of exchange transactions each year, but the use of 1031 exchanges is widespread across the country. QIs facilitate exchanges nationally in many industries, including both residential investment real estate and commercial real estate, construction, the vehicle/equipment rental and leasing industries, transportation, agriculture, farming and ranching and other industries.</p>

<h2>About the Federation of Exchange Accommodators (FEA)</h2>

<p>The FEA (www.1031.org), whose tagline is “The Voice of the 1031 Industry,” is a national trade association representing professionals who conduct like-kind exchanges under Internal Revenue Code Section 1031. Members of the association include Qualified Intermediary firms, title companies, their primary tax and legal counsel, and affiliated industries (TIC sponsors, banks, real estate brokers, title companies, settlement/escrow agents, etc.). The FEA helps QIs raise the professional quality of their services while keeping their fees affordable for small investors. The FEA offers professional QIs the opportunity to demonstrate their experience, technical expertise and commitment to ethical practices by obtaining the Certified Exchange Specialist® (CES®) designation. The designation requires a QI to have three years’ full-time experience as a QI, to pass a rigorous knowledge exam, and to adhere to a strict code of ethics.</p>

<h2>FEA Contacts</h2>

<p>Margo McDonnell<br />
1031 CORP.<br />
Providence Corporate Center<br />
100 Springhouse Drive, Suite 203<br />
Collegeville, PA 19426<br />
Toll-free: (800) 828-1031<br />
Local: (610) 792-4880<br />
Fax: (610) 489-4366<br />
<a href="mailto:margo@1031corp.com">margo@1031corp.com</a></p&gt;

<p>Steve Chacon<br />
Accruit, LLC<br />
1331 17th Street, Suite 1250<br />
Denver, Colorado 80202<br />
(866) 397-1031<br />
<a href="mailto:stevec@accruit.com">stevec@accruit.com</a></p&gt;