Update: Late in the evening of July 8, Gov. Tom Wolf signed the tax code into law (Act 53).
Pennsylvania Realtors® scored a huge advocacy win this week. The Pennsylvania General Assembly approved legislation that will finally recognize 1031 like-kind exchanges in the commonwealth and provide the tax deferral benefit.
House Bill 1342 was approved by the Pennsylvania Senate and House of Representatives late on July 7 and part of the final budget process for the upcoming fiscal year. Included in this tax code bill is language that will codify the tax deferral benefit of like-kind exchanges beginning in the 2023 tax year.
“This is a tremendous legislative win. For many years, PAR has been the strongest advocate for 1031 like-kind exchanges in Pennsylvania to provide further incentives for investing in our communities,” said PAR President Christopher Beadling. “It was just a month ago that PAR members and our advocacy team were meeting with legislators to urge support for 1031s during our PA Realtors® Day on the Hill. It worked. Thank you to the General Assembly and Gov. Wolf for incorporating 1031s into the tax reform package.”
Prior to enactment of this legislation, Pennsylvania was the only state in the nation that did 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.
Like-kind exchanges are an important tool for encouraging investment, building wealth and creating jobs. Passage of this legislation will help ensure Pennsylvania is competitive with all other states.
HB1342 now heads to the governor’s office to officially sign into law.