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Pennsylvania Last State to Recognize 1031 Exchanges, Change May Be Coming

On March 3rd, 2015, House Bill 700 was referred to the House Finance Committee. As part of the Small Business Tax Fairness Package, this bill pertains to 1031 exchanges also known as “like-kind” exchanges.

A like-kind exchange would allow a business to defer taxation on a property or asset that is gained by the exchange of a similar and currently owned property or asset.

If House Bill 700 is passed, PA businesses would not be required to pay taxes on a newly acquired property or asset when acquired through a 1031 exchange. “Not only does this make sense from a business perspective, thus allowing businesses to take advantage of real losses, but it also makes Pennsylvania competitive when business’ are looking to relocate into the state or a new venture to choose PA as their location,” says Chuck Heller, Associate Broker at Landmark Commercial Realty, Inc.

Pennsylvania is the only state in the United States that still does not recognize 1031 exchanges. The recognition of 1031 exchanges could help make PA a better candidate for businesses looking to expand their investments and/or relocate to the keystone state. As commercial real estate professionals, we need to support legislation that improves the business climate for our investors, business owners and perspective corporations. Placing last is not an acceptable answer. House Bill 700 has been long overdue, and it is a step in the right direction in creating a more welcoming business environment.