Real estate professionals in all sectors know the value of 1031 like-kind exchanges. They see the impact it has on individuals who exchange unused or underutilized properties for something that better suits their needs, resulting in new businesses opening and job creation. They see how it helps businesses that are growing move to spaces that can accommodate a larger workforce. Their clients invest in the replacement properties, and ultimately when they are sold they are worth more and generate more tax revenue.

That’s what real estate professionals know from their years of experience and seeing the results of the 1031s their clients engage in. Unfortunately, many policymakers see 1031s a different way: as an “easy” target in the tax code to bring in more tax dollars. President Biden announced on the campaign trail in 2020 that his team had an ambitious plan to provide child care and other services to the American public, to be paid for in part by changes to Section 1031. It came as no surprise then when in April 2021 the Administration released the “American Families Plan,” which has as one of its “pay-fors” limiting 1031s to gains of $500,000 or less.

The good news is that the National Association of REALTORS® (NAR) and its coalition partners—other real estate industry groups and stakeholders—already began the work of shoring up support for 1031s on Capitol Hill, building off of and updating the resources used to successfully protect 1031s for real property in the 2017 tax reform bill. The most important part of advocating for 1031s is to first educate policymakers on what they actually are, highlighting their importance to both real estate and the economy as a whole. NAR has invested in multiple studies showing the net positive impact that 1031s have on the economy, by bringing liquidity to an otherwise illiquid asset and allowing owners to find properties that best suit their needs. These exchanges result in higher overall property values, as the replacement properties see new investment, and job creation in their communities.

When updating its resources, NAR turned to its most valuable one: the REALTOR® family. An updated survey in 2020—“Like-Kind Exchange Transactions of REALTORS® in 2016 – 2019”—yielded important and illuminating information. Sixty-one percent of REALTORS® had at least one like-kind exchange transaction during 2016 – 2019. Of those, 84% of the properties were exchanged for properties held by small investors—a statistic that directly contradicts the (erroneous) argument often made that such transactions are largely done by massive corporations and the very wealthy. Eighty-nine percent of those surveyed reported that additional investment was made in the replacement property. When asked about the prospect of Section 1031 being repealed, a majority of respondents reported that they would expect property values to decline, longer holding periods, and higher rent in acquired properties that are being rented out.

In addition to surveying members about 1031s, NAR also wants to hear from them personally. To do that, NAR has a platform for members of the REALTOR® family to share their 1031 “stories” – details of individual exchanges members have facilitated or participated in, which can be used to illustrate and personalize the data provided to Congressional offices. This is especially impactful as it allows NAR lobbyists to share stories of 1031s that are in a Member’s home district or a Senator’s home state with them, showing how their own constituents are using and benefitting from the provision. To that end, please help NAR in its efforts to protect 1031s by going to nar.realtor/like-kind-exchange and clicking on the “Member Experiences” link to share your stories of 1031s and be a part of our fight to protect them!