The Pennsylvania General Assembly opened the 2021-2022 session on Tuesday, Jan. 5, 2021. The PAR Legislative Committee has been reviewing legislation as it has been introduced and has identified key priorities for the session.
1031 Like-Kind Exchanges
PAR is strongly advocating for changes to Pennsylvania tax law to bring the commonwealth in line with all other 49 states and the federal government relating to like-kind exchanges. Currently, Pennsylvania is the only state in the nation that does not provide for a state tax benefit to like-kind exchanges.
IRC Section 1031 provides that no gain or loss shall be recognized on the exchange of like-kind property held for productive use in a trade or business or for investment. This includes the exchange of real property and tangible and intangible assets held for business use or investment.
With the exception of Pennsylvania, all states with an income tax regime either follow the federal tax code or alternatively have adopted a like-kind exchange provision. Long referred to as the “most unfriendly state when it comes to 1031,” Pennsylvania taxpayers and property owners must take money out of their pockets to pay the Pennsylvania income tax or pay federal capital gains on property when they sell. This often results in less valuable replacement properties being acquired.
An exchange allows taxpayers to defer current recognition of gain and depreciation recapture. In order to maximize deferral, taxpayers are required to acquire replacement property of equal or greater value and equity. If a taxpayer trades down in value or equity, the taxpayer will have recognized gain.
Not recognizing like-kind exchanges puts Pennsylvania at a competitive disadvantage from other states and discourages investors from purchasing replacement property in the Commonwealth.
Currently, two bills have introduced to adopt like-kind exchanges in the commonwealth. Senate Bill 347 (DiSanto, R-Dauphin) passed the Senate late in 2021 and is now awaiting consideration in the House Finance Committee.
House Bill 105 (Cox, R-Berks) has been voted out of the House Finance Committee an is currently awaiting consideration in the House Appropriations Committee.
PAR strongly supports Pennsylvania recognizing 1031 like-kind exchanges in state tax law and will continue to advocate for its adoption.
Private Roadway Maintenance Agreements
PAR strongly advocated for legislation that would establish statutory provisions regarding the maintenance of private roadways for situations when a private agreement isn’t in place. The legislation is necessary because banking regulations now prohibit federally-backed mortgages on properties accessed by private roads unless enforceable provisions are established, either private or statutory, for maintenance of the shared roadway.
In October, Act 75 of 2021 was signed into law making this change in Pennsylvania. Originally House Bill 523, PAR worked closely with the prime sponsor, Rep. Gary Day (R-Berks) to advance this legislation.
Read more about Private Roadway Maintenance Agreements in JustListed.
First-time Homebuyers Savings Accounts
PAR continues to advocate for enactment of a first-time homebuyers savings account program in the commonwealth. PAR has partnered with Rep. Rosemary Brown (R-Monroe) and Rep. Ryan Bizzarro (D-Erie) in the House and Sen. Bob Mensch (R-Montgomery) in the Senate to advance legislation.
Reps. Brown and Bizzarro have introduced House Bill 730 and Sen. Mensch has introduced Senate Bill 157. These companion bills would create a First-Time Homebuyer Savings Account program in Pennsylvania. If enacted, this program would allow first-time homebuyers to deposit money into a savings account, where it goes for the exclusive purpose of purchasing a first home, and the money can be deducted from their state income tax.
SB157 passed the Senate in October and is now in the House Urban Affairs and Housing Committee awaiting consideration. HB730 was voted out of the House Urban Affairs and Housing Committee in late-May and is now awaiting consideration by the full House.
Emergency Rental Assistance Programs
PAR has supported programs and funding to provide rent assistance to those Pennsylvanians impacted by the COVID-19 pandemic. In March, the Pennsylvania Department of Human Services and certain Pennsylvania counties unveiled the Emergency Rental Assistance Program. ERAP is funded through the second federal stimulus bill approved by the U.S. Congress in late December 2020.
Learn more about ERAP in the PAR COVID-19 resources section.
To review all the key legislation PAR is tracking, please see a listing of bills under each core issue below.