Diverse coalition outlines support for like-kind exchanges

ICSC, along with more than 30 national organizations representing real estate, farmers, ranchers and environmental groups, joined a letter in support of like-kind exchanges (LKEs) to Congressional tax-writing committees and Treasury Secretary Janet Yellen. 

The Biden Administration has indicated that it is considering repealing LKEs or limiting the amount that can be deferred annually to $1 million (or possibly $400,000) as part of its effort to make the tax code more equitable.

The like-kind exchange of real estate under Section 1031 of the tax code has been allowed since 1921. Under Section 1031, a taxpayer may exchange a property for another of “like kind” without recognizing taxable gain on the disposition of the old assets. The deferral of gain is offset by a reduction in future depreciation deductions for the acquired asset, resulting in increased annual income, taxed at ordinary tax rates.

Section 1031 is integral to the health of today’s real estate marketplace: somewhere between 10-20 percent of all commercial real estate transactions involve a like-kind exchange. LKEs helped stabilize property markets at the height of the COVID-19 lockdown and will facilitate a faster and smoother transition as many real estate assets are repurposed in the post-COVID economy. For these reasons and others detailed in the letter, real estate like-kind exchanges make an important contribution to the U.S. economy and national wellbeing. 

The letter signatories are:

• ADISA—Alternative & Direct Investment Securities Association
• American Farm Bureau Federation
• American Hotel & Lodging Association
• American Land Title Association
• American Resort Development Association
• Asian American Hotel Owners Association
• Building Owners and Managers Association (BOMA) International
• CCIM Institute
• Commercial Real Estate Finance Council
• Federation of Exchange Accommodators
• Forest Landowners Association
• Institute for Portfolio Alternatives
• Institute of Real Estate Management
• International Council of Shopping Centers
• Land Trust Alliance
• Latino Hotel Association
• Mortgage Bankers Association
• NAIOP, the Commercial Real Estate Development Association
• Nareit
• National Alliance of Forest Owners
• National Apartment Association
• National Association of Home Builders
• National Association of Black Hotel Owners, Operators and Developers
• NATIONAL ASSOCIATION OF REALTORS®
• National Cattlemen’s Beef Association
• National Council of Farmer Cooperatives
• National Multifamily Housing Council
• REALTORS® Land Institute
• The Conservation Fund
• The Nature Conservancy
• The Real Estate Roundtable