As many of you know, on June 27th, Senators Orrin Hatch (R-UT) and Max Baucus (R-MT) outlined a "Zero Base" plan for tax reform.
What this means is that the Senate's tax reform approach assumes from the start that all tax expenditures will be eliminated, including Section 1031. In a "Dear Colleague" letter, Senators Baucus and Hatch asked every member of the Senate to submit their own letter with a list of expenditures they wish to have placed back into the Code from the "zero baseline."
The Federation of Exchange Accommodators (FEA), the national trade association for 1031 exchange practitioners worked cooperatively with the leaders and lobbyists of the largest trade associations related to the real estate industry. A real estate industry-wide letter was sent to all senators supporting tax reform but calling on senators to preserve key expenditures, including section 1031. View Industry-Wide Letter.
The letter was sent on behalf of the following associations:
American Land Title Association
American Institute of Architects
American Resort Development Association
Associated General Contractors of America
Building Owners and Managers Association International
Federation of Exchange Accommodators
Institute of Real Estate Management
International Council of Shopping Centers
Leading Builders of America
Mortgage Bankers Association
NAIOP, Commercial Real Estate Development Association
National Apartment Association
National Association of Home Builders
National Association of REALTORS�
National Association of Real Estate Investment Trusts
National Multi Housing Council
REALTORS� Land Institute
Society of Industrial and Office REALTORS�
The Real Estate Roundtable
WE NEED YOUR HELP. We ask that you join this effort by contacting your senators. Sample language for a letter can be found below and can be cut and pasted into a letter or email. Click to find contact information for all senators.
Each senator's website has a Contact Me page upon which you can simply cut and paste the text of your letter and hit the send button. Alternatively, you can fax a letter to the Senator's office. Please send your letters as soon as possible, ideally by this Friday, July 26, 2013, which is the deadline for senators to make their submissions to Senators Baucus and Hatch. Even if you can't meet that deadline, send it as soon as you can; your letter will still help.
Your prompt action is appreciated.
Sample Letter to U.S. Senators/Members of Congress
Senate Office Building
Washington, DC 20510
Re: IRC Section 1031 Exchanges
Dear Senator [LAST NAME]:
Building the growth of US industry is vital to the long term recovery of the US economy. Over the years, both political parties have supported key elements of the tax code that assist in achieving this objective. The objective of Section 1031 is very simple. It allows the gain on the sale of certain qualifying assets to be deferred by using the proceeds of the sale of one asset to buy a replacement asset of the same kind or class. This is not a tax avoidance scheme: tax will ultimately be payable, but only when the final asset in the chain is sold. Section 1031 stimulates a wide range of transactions and is critical to a multitude of industries, as well as real estate markets, which are only now tentatively recovering from the financial crisis.
I want to encourage you to strongly support Section 1031 to preserve its proven and substantial economic benefits.
I understand that Senate Finance Committee Chairman Max Baucus and Ranking Member Orrin Hatch have solicited you and your colleagues to provide feedback on what features of the tax code should be preserved in a comprehensive tax reform proposal. They have set July 26th as the deadline for receiving recommendations.
I believe that Section 1031 clearly meets the test laid out by Chairman Baucus and Ranking Member Hatch for sound tax policy. Section 1031 promotes economic growth and is fair. Section 1031:
- Is neither a loophole, nor a tax savings vehicle, but rather a powerful economic engine based on sound tax policy.
- Is an incentive that is available to, and used by, taxpayers of all sizes.
- Permits efficient use of productive capital and cash flow while allowing taxpayers to shift to more productive like-kind property, change geographic locations, diversify or consolidate holdings, or otherwise transition to meet changes in business needs or lifestyle.
- Contributes significantly to the velocity of the economy and promotes investment in the U.S., encouraging owners of domestic real estate to reinvest in the U.S., rather than place their money in other or foreign investments.
- Stimulates the economy, encouraging real estate transactions, and encouraging companies to replace and upgrade machinery and equipment, stimulating purchases and sales of machinery, equipment, railcars, aircraft, trucks and other vehicles sooner, because tax on the gain can be deferred.
Chairman Baucus and Ranking Member Hatch suggest that the large volume of provisions added to the tax code since Congress enacted the last comprehensive tax reform bill in 1986 should be considered in the current tax reform effort. It is important to note that Congress preserved Section 1031 in the 1986 tax reform act. Indeed, it has been a part of the Internal Revenue Code since 1921.
I urge you to include preservation of Section 1031 Like-Kind Exchanges in your response to Chairman Baucus and Ranking Member Hatch's June 27th "Dear Colleague" letter soliciting your feedback on tax reform.
Thank you for your consideration of this critical issue.