All States 1031 and the Federation of Exchange Accommodators (FEA), the nationwide §1031 Qualified Intermediary trade association, supports strong regulation of the QI industry.
The Federation of Exchange Accommodators (“FEA”) is pleased to announce that the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was signed by President Obama today.
The Dodd-Frank Act authorizes the creation of a Bureau of Consumer Financial Protection to be housed within the Federal Reserve. The Bureau is charged with regulating consumer financial products and services. The new law requires the Director of the Bureau to conduct a study and propose legislation and/or regulations to protect consumers using exchange facilitators, also known as Qualified Intermediaries, who facilitate tax-deferred exchange transactions under Internal Revenue Code §1031. The study and recommendations must be completed with 1 year after the new law takes effect, and a program or proposed regulations must be implemented within 2 years after the Director’s report.
The FEA, the trade association representing the exchange facilitator industry, believes that this is an important first step toward assuring comprehensive protection for all consumers. “The FEA especially thanks House Financial Services Committee Chairman Barney Frank and Rep. Mike Michaud and for proposing this provision in the financial reform bill. We are enthusiastic about working with the Bureau of Consumer Financial Protection to develop regulations, especially with respect to the security of client funds held by exchange facilitators,” commented Suzanne Goldstein Baker, chairperson of the FEA’s Federal Legislative Committee.
FEA President David Gorenberg echoed this sentiment, “This is a great beginning. However, there is much work to be done to achieve our goal of comprehensive federal regulation that will cover all exchange clients and transactions.” During the legislative process, the FEA communicated to legislators its support for the bill, along with technical concerns that many transactions will not fit the definitional scope of the Consumer Financial Protection Act of 2010, incorporated within the Dodd-Frank Act, and the need for a broad solution. “We are looking forward to working with the Director and the legislative sponsors to identify and suggest regulations or legislation that will not be limited to transactions solely involving individuals engaged in exchanges for ‘personal, family or household use,’” stated Ms. Goldstein Baker. “The FEA will work to ensure that all taxpayers, regardless of whether they are individuals or business entities, benefit from the same mandatory safeguards that protect consumers,” added Mr. Gorenberg.
The FEA is a robust supporter of federal regulation of its industry to require prudent funds management standards and other protections for its clients. In 2007 the FEA petitioned the FTC for regulatory oversight and submitted to it a comprehensive draft regulation. The FTC denied the petition, opining that there was no evidence of pervasive fraud throughout the industry and thus, the burdens of regulation would outweigh the potential benefits. The FEA has since been actively involved in passing state legislation to regulate exchange facilitators. The FEA drafted a “model law” which the states of California, Colorado, Maine, Nevada, Oregon, Virginia and Washington have adopted with slight variations. The FEA has also submitted to the Secretary of the Treasury and the Internal Revenue Service a proposed amendment to Treasury Regulations which would impose reasonable, understandable standards of prudent funds management requiring that funds held by Qualified Intermediaries be invested in a manner that maintains liquidity and preserves principal.
For more information, please contact Alexandra Hart at All States 1031 toll free at (877)395-1031 ext. 217 or email AHart@AllStates1031.com
Moore McLaughlin, Esq., CPA, CES® proudly announces that Alexandra L. Hart, Vice-President of All States 1031 Exchange Facilitator, LLC has passed the grueling Certified Exchange Specialist® examination and has received the designation of Certified Exchange Specialist® (CES®), a title granted to professionals who demonstrate comprehensive knowledge of Section 1031 of the Internal Revenue Code. An exam is given annually at the Annual Conference of the Federation of Exchange Accommodators (FEA). Alexandra sat for and passed the exam on October 1, 2009 in Orlando, Florida.
Over the next few posts, I will be dispelling many of the common myths surrounding 1031 exchanges. The confusion and misunderstandings caused by the myths has resulted in many taxpayers paying more taxes than they should. By paying the excess taxes, the non-exchangers have reduced the amount that they can reinvest, thereby needlessly reducing their income.
I have read some recent posts on various websites proclaiming that 1031 exchanges are dead among Baby Boomers. As Mark Twain wrote from London after reading his own obituary, “The reports of my death are greatly exaggerated.” In fact, the baby boomers may be the demographic group that uses 1031 exchanges most frequently. The reasons are fairly obvious. Wealth is not accumulated overnight, usually. It takes time. The older you are, the more time you have had to accumulate wealth. Plus, those with wealth tend to have better tax and investment advisors who can teach them all the tricks.