California Assembly Bill AB2640 Is Not Good For California Real Estate!

California State Assembly member Arambula (D-Fresno) has just introduced a new bill that is aimed at increasing tax revenue by limiting 1031 Exchanges, as well as 1033 Exchanges, as a tax deferral option in the State of California. The proposed Assembly Bill AB2640 would essentially eliminate an investor’s ability to defer his or her California state tax from the sale of rental or investment real estate through 1031 Tax Deferred Exchange transactions.  The Bill, if passed in its present form, will have a disastrous effect upon the California real estate market.

Contrary to the stated intent of AB2640, passage of the Bill would actually be a net tax reduction to the State of California and would further worsen its already critical fiscal position.  AB2640 would actually reduce the number of real estate transactions within the State of California, which would in turn would reduce the income earned, and therefore taxes paid, by Realtors©, Appraisers, Transaction Coordinators, Mortgage Brokers, Loan Officers, Escrow Companies, Title Insurance Representatives, 1031 Exchange Companies, etc.  The list goes on and on.

1031 Exchanges actually stimulate the economy by encouraging real estate purchase and sale transactions.  Investors continue to remain invested, real estate service providers continue to earn income and therefore pay income taxes, and our economy continue to grow. Without 1031 Exchanges, many transactions will be delayed or scrapped completely by investors.  

Let's not make our current woes worse by passing bad legislation.  AB2640 is not good legislation and is not good for California real estate business.

Comments

[Dave Salcido]

what impact will the passage of HR4173 have on the transfer of real estate from an investment standpoint?

[Randy]

It just dosnt stop. Thanks for bringing this to light. Instead of finding ways to increase transactions and get property moving, our political reps, clueless to the real world just keep shooting themselves and inturn hurting alot of businesses. Hopefully we will all get involved and vote these people out!

[Staff]

Hi Dave, fortunately, the changes to Section 1031 were deleted from this bill and are no longer a threat. However, it would have had a very serious effect on investment real estate.

We met with the California Assemblyman that was behind the Bill and convinced him to withdraw it.

[Staff]

Hi Randy, you are so right. They viewed this as a revenue raiser when it would actually be a revenue loser for the State of California.

[Edwin Brown]

This seems so obvious to business owners, but it seems to be missed upon the minds of politicians. New laws do not govern old habits, new laws create new habits. Taxation is the governing of incentives. Knowing when an incentive loses its shine is the primary responsibility of any good lawmaker.

[Tim]

Nice to hear that someone had the sense (or was convinced) to delete this from the bill.

[Mike Johnson - Real Estate Agent]

Once again politicians are thinking outside of their jurisdiction, eh? Are none of these people reformed business owners or professionals? I'm lucky, legislation is less aggressive in Regina, it's easier to avoid this type of thing.

[Amy Sites]

This is just another example of bad decisions. When is the insanit with the real estate industry going to stop? When are the politicians going to wise up? It AMAZES me how politicians seem to know more about the real estate industry then the people actually IN the field?

Where do they get their ideas from? As a real estate agent that is not even FROM California I stumble across this article and it sickens me that the great state of California is going to get screwed by stupid ideas.

I think I read correctly that they deleted this since the article was written and I hope that is true. Glad to hear it but that is for now, don't be surprised if they try to reword the same thing and get it passed in the near future.

[Chris Clothier - Memphis Real Estate Investor]

The Tennessee legislature is considering several pieces of legislation that are harmful to the Tennessee investment real estate environment, including one similar to this. Was the piece of legislation in California aimed at stopping or limiting 1031 and 1033 exchanges simply in California or California investors buying anywhere?

We have a lot of investors from other states who use 1031 exchanges to invest in wholesale properties in Memphis and Tennessee is actually wanting to limit the tax strategy for Tennessee real estate investors no matter where the investment property is purchased.

Is there anything you would suggest we do to help fight this type of legislation?

[Staff]

As a follow-up to this running discussion, both legislative initiatives proposed in California to limit 1031 and/or 1033 Exchanges have been discarded. There is no pending legislation at this point in time.