ALTA Continues to Ask Congress to Support Section 1031 Like-Kind Exchanges

September 9, 2021

ALTA joined 39 other trade associations urging members of Congress to urged senators and representatives to preserve current law as it relates to 1031 like-kind exchanges.

In a letter to the House Committee on Ways and Means and the Senate Committee on Finance, the groups said proposed restrictions on section 1031 of the tax code would undermine the economic recovery and cause unnecessary risks to U.S. real estate if enacted.

“Like-kind exchanges of real estate under section 1031 support jobs and investment, the health of U.S. commercial real estate and real estate markets and the preservation of family-owned farms, ranches and forestland,” the letter said. “Communities and nonprofit organizations use like-kind exchanges to conserve land for the benefit of the public and future generations. Gains reinvested in new property through an exchange create a ladder of economic opportunity for small and minority-owned businesses and entrepreneurs and generate much-needed tax revenue for states and localities.”

As part of American Families Plan, the Biden Administration has proposed capping annual capital gains tax deferral afforded by section 1031 to help fund the proposal. ALTA has advocated this change would hurt the economy and middle-class Americans. Roughly 40% of like-kind exchanges also involve rental housing, offering a critical tool for the expansion of affordable and workforce housing. Additionally, farmers, ranchers and forest owners use 1031s to acquire land, mitigate environmental impacts and improve operations.

The Senate voted unanimously on Aug. 10 to amend the budget resolution to include language aimed at preserving the current law tax treatment of like-kind exchanges. ALTA believes this demonstrates “overwhelming and widespread support” for section 1031 and its economic contributions.

“We share your commitment to addressing structural weaknesses and inequalities in the economy,” the groups wrote. “Today, following years of careful legislating and regulatory rulemaking, section 1031 supports job growth, creates a ladder of economic opportunity for small businesses, cash-poor entrepreneurs, and farm, ranch and forest owners, and constitutes an important tool for the environmental conservation of land for future generations. For these reasons, like-kind exchanges will have an important role in the economic recovery and beyond.”

The letter also outlines these benefits of 1031s:

  • Support 568,000 jobs generating over $55 billion of annual value added, including $27.5 billion of labor income.
  • Land conservation organizations rely on like-kind exchanges to preserve open spaces for public use or environmental protection.
  • Can fill gaps in the housing supply not covered by other incentives for the development of affordable housing.
  • Generate much-needed tax revenue for states and localities.
  • Capital gain deferred in an exchange reduces the owner’s tax basis in the replacement property.

Contact ALTA at 202-296-3671 or [email protected].