Status of Section 1031 and the Budget Reconciliation Bill

It appears that a $500,000 cap on capital gains deferral allowed under § 1031 of the U.S. Tax Code may no longer be part of the $3.5 Trillion Budget Reconciliation Bill making its way through congress. The Federal of Exchange Accommodators (FEA), the trade association for 1031 Exchange practitioners, issued the update below to its members to share with their clients.

According to Peak 1031 Exchange’s Executive Vice President, Kevin M. Levine, “this is very positive news for both 1031 exchange practitioners, as well as those who wish to defer their capital gains using IRC Section 1031. However, nothing is yet set in stone, so it is important that we continue to keep the pressure on our congressional representatives until the bill is finalized and voted upon.”

FEA Press Release – September 15,2021

On Sept. 15, the House Ways and Means Committee completed the markup of their portion of the $3.5 trillion Budget Reconciliation Bill. We are happy to report that Section 1031 was not amended and remains intact. The Budget Reconciliation Bill could still be modified by the House Budget and House Rules Committees before being voted on by the House; and the legislation may differ from the version being prepared in the Senate committees, which have not yet acted on the legislation. Final passage of the legislation won’t be until the October to December time frame.  Attached is a recent letter the coalition sent to Congress in advance of the budget reconciliation markup – 40 associations signed the letter.

In the meantime, FEA will continue its advocacy efforts to preserve Section 1031. One way we do this is through our leadership in the 1031 coalition.  The multiple associations that make up the coalition allow our collective voice to be more powerful as we work to educate those in Congress about the economic impact of like-kind exchanges.  The Coalition has recently launched a Section 1031 digital ad campaign. The digital ads are running in Politico Morning Money this week and will run in Politico Morning Tax next week. See below for sample messages from the ad campaign. The coalition also created a 1031impact.org website. This website is separate from our 1031BuildsAmerica.org site (owned by FEA).  With our permission, the coalition borrowed heavily from our whitepapers on 1031BuildsAmerica.org and FEA is listed as a coalition member on the site.