Colorado & Washington enact Qualified Intermediary model law; Is your state next? Has anyone heard of reciprocity?

As we told you last week, the FEA was successful once again in pushing regulations through the Colorado House and Senate to provide consumer protection for those conducting 1031 like-kind exchanges in the state. The Governor signed HB09-1254 into law on 4/16/09. Washington's Governor signed a similar law on Monday, April 13. Who next? Texas? Maine? Arizona? Oklahoma? The ideal goal is to maintain reciprocity between these states so that QIs can deliver consistent guidance and maintain reasonable standards for customers across the country.

Right now there are five states (CA, NV, ID, WA & CO) that have some form of qualified intermediary regulations on the books. California took the lead by adopting regulations that provide exchangers certain levels of protection and requiring prudent investment standards ensuring liquidity and protection of principal. Colorado recognized the importance of achieving consistency; it also understood the importance of safeguarding consumers while simultaneously protecting an industry that facilitates growth for Colorado companies. Texas, Arizona, Oregon and Oklahoma are all leaning toward a model law that supports reasonable regulations, but Nevada and Idaho have passed regulations that are either very difficult to follow or aren't business friendly at all. It's been two years since Nevada enacted their law and they still don't have final guidance on how exchangers need to ensure compliance. Now it seems that Maine wants to follow Idaho's laborious, expensive and unrealistic standards, forcing QIs to complete reams of paperwork, provide background checks, register with the state and create very specific banking structures just to provide a well established federal tax service to businesses in their state - all at a tremendous cost.

There will be more states, more laws, more dollars spent to accomplish - in the end - the same result. Encouraging your state to adopt model law is a good idea for everybody. There's no reason to reinvent the wheel.