This Free for all Friday addresses 1031 CORP.'s ongoing commitment to bring like-kind exchanges to Pennsylvania.
As many of you know, my company is based in Pennsylvania which is the only state that has an income tax regime and does recognize section 1031 exchanges. Without a doubt, my home state is the most unfriendly state when it comes to 1031 – no recognition of 1031 and double realty transfer taxes on reverse and improvement exchange. While our individual income tax rate is a flat 3.07%, it does make Pennsylvania less competitive when trying to attract new businesses and investors. It is also no fun at tax time taking the calls from Pennsylvania residents and non-resident property owners who were not advised they would still need to pay the Pennsylvania income tax. We make sure our clients know but unfortunately not all QIs do the same.
Last Wednesday, I was pleased to be part of a state-wide contingency of Commercial REALTOR® members who participated in the Pennsylvania Association of REALTORS® (PAR) first annual “Commercial REALTOR® Day on the Hill” in Harrisburg. Primarily, the day was about educating state representatives about House Bill 700 which would allow for 1031 Like-Kind Exchanges to be added to the Pennsylvania Tax Code. We met with Representative Stephen Bloom, sponsor of the Bill, a representative from the PA Department of Revenue and various members of the PA House, including the Finance Committee members.
I had the opportunity to work with PAR legislative staff in advance and prepare our talking points for the visits. With the help our GAC chairs, we took all of the data from the recent impact studies and our talking points on why it is important to retain section 1031 on the federal side and highlighted how the Commonwealth of Pennsylvania would increase revenue to the state and local municipalities to offset the estimated $10-20 Million of income tax annually. The change could also lead to new job creation, increased construction projects and more efficient use of capital.
Pennsylvania is hoping to approve its budget before breaking on June 30th but there is the possibility of an Omnibus tax bill later this year. HR 700 is currently with the House Finance Committee and if we can move it out, we have a fighting chance of something happening this year. I will continue to work with PAR, Representative Stephen Bloom and the Suburban West REALTOR® Association where I serve on the Board of Directors to solicit support for this Bill. Of course, I will keep my fingers crossed and keep you posted.
