Do I Need a 1031 Exchange Qualified Intermediary Near Me?

While local QIs offer proximity and knowledge of specific regulations, national QIs like Accruit provide broader expertise, resources, and risk management capabilities. National QIs understand regulations across the country, including state-specific mandates, such as those in Colorado and California.  

Local QI vs. National QI 

Generally, the most important aspect of picking a Qualified Intermediary to help an Exchanger carry out their 1031 Exchange is peace of mind, competency, and dependability. These attributes are not exclusive to local businesses, in fact they might be more commonly found with a national QI.  

When considering a QI for a 1031 Exchange, the decision shouldn’t be based on proximity, but rather several other factors that have a greater impact on the exchange, including the following:

• Experience & Expertise 

  • Local: Knowledgeable of specific local regulations & transactions, smaller volume of cases, limited expertise in complex transactions

  • National: Knowledgeable of wide range of regulations & transactions across different states, larger volume of cases, greater expertise with complex transactions 

• Resources to Scale 

  • Local: May be more limited on resources, work on a smaller scale with fewer cases, locally concentrated network

  • National: Typically, robust resources and efficient handling of large volume of cases, wider network of professionals 

• Risk Mitigation 

  • Local: Might not be able to offer the same level of risk mitigation 

  • National: Likely to have strong insurance coverage and bonding in place, added safeguards for clients  

While both types of QIs have their benefits, national QIs tend to offer wider expertise, resources, and risk management capabilities. However, the decision ultimately depends on individual needs, transactional complexity, and personal preferences.  

State Regulations for QIs 

When selecting a Qualified Intermediary, there are many options to choose from, some local and some national. While the idea of a local QI may seem attractive, a nationally recognized QI could provide the Exchanger with a better experience and more robust knowledge of the rules & regulations of IRC Section 1031, including the most recent court cases.  

It’s important to remember there is no federal regulation of Qualified Intermediaries, however there are some state-level regulations in a handful of states that are meant to protect the Exchanger when facilitating an exchange with Relinquished Property within that state. We will focus on Colorado, Accruit’s headquarters, and California, a state with some of the most extensive requirements for Qualified Intermediaries.  

Colorado 

Requirements for Qualified Intermediaries conducting 1031 Exchanges vary from state-to-state. In 2009, Colorado’s legislature passed HB09-1252. This legislation includes the following requirements:  

• QIs must maintain a minimum $1 million fidelity bond, and a $250,000 E&O policy.  

• QIs must deposit exchange funds into an escrow account in which both QI and Exchanger need to authorize withdrawals. If the account holds more than $250,000, the client must provide written authorization for a withdrawal.  

• QIs must notify clients within two days of any changes in asset ownership, as well as always acting as a client fiduciary for the 1031 Exchange funds.  

• QIs are prohibited from storing client exchange funds in the same account as operating funds, as well as lending exchange funds to anyone other than the Exchange Accommodator Titleholder.  

• Seller must set aside money for taxes on the property. To satisfy this requirement, investors executing a 1031 Exchange must sign an “affirmation of reasonably estimated tax to be due”. This is to notify the state that the investor won’t owe taxes, since they will be deferred using a 1031 Exchange.  

California 

California imposes similar requirements for QIs as Colorado, in Senate Bill 1007, Chapter 708  which include: 

• Identical fidelity bond and Errors & Omissions (E&O) policy. 

• QIs must act as custodians and maintain strict management of client funds. 

• The California Franchise Tax Board mandates QIs to withhold 31/3% of the sales price for the Exchanger if the exchange fails. 

• For 1031 Exchanges involving out-of-state property, California enforces a "claw back" policy: 

  • Investors/property owners cannot evade state taxes by exchanging California property for out-of-state property. 

  • Profits from the replacement property sale are taxed both in the selling state and California. 

Other State Regulations 

In addition to Colorado and California, other states with Regulations on Qualified Intermediaries include: 

• Idaho 

• Maine 

• Nevada 

• Virginia 

• Washington 

With help from the Federation of Exchange Accommodators (FEA), several states including Colorado are instituting further requirements, leading by example in assuming higher industry standards for Qualified Intermediaries.  

Requirements include: 

• Qualified escrow and/or trust accounts for client funds. 

• Minimum bond and insurance requirements 

• Fund withdrawal authorization requirements. 

• Registration requirements for QIs. 

• Investment limitations on exchange proceeds. 

To conclude, as an Exchanger, you do not necessarily need to have a Qualified Intermediary near you, since IRC Section 1031 is in the federal tax code, a local presence doesn’t necessarily provide any additional benefit. While an Exchanger might not be able to walk into an Accruit office, Accruit’s effortless and consistent accessibility makes direct communication simple via live chat, phone calls, virtual meetings, and email communication directly with the parties handling your exchange.  

The Accruit Difference 

Accruit is a national leading 1031 Exchange Qualified Intermediary headquartered in Denver, CO with satellite offices across the country including Chicago, IL, Dillon & Bozeman, MT, Miami, FL, Philadelphia, PA, Detroit, MI, and Phoenix, AZ, to name a few. In these cities, Accruit is not only a leading national QI, but also a reliable, local option for those wanting to stick with a QI closer to home. 

While there is an abundance of Qualified Intermediaries available, they do not all offer the same level of service as a national QI, like Accruit. Accruit takes pride in offering boutique-style services across a diverse range of exchanges from simple to the most complex.  

• Accruit sets itself apart from other QIs in a variety of ways, including: $50 million Fidelity Bond, $25 million E&O, and $15 million Cyber Liability.  

• Robust team of 1031 Exchange experts, including five staff attorneys, CPAs, and multiple Certified Exchange Specialists® (CES). 

• The developer of the patented 1031 Exchange workflow technology that allows for a seamless and efficient exchange process in turn allowing our team to provide a better customer experience and more meaningful dialogue with Exchangers since the mundane data collection is electronic and automated through embedded controls. 

Accruit is specialized to accommodate all shapes and sizes of 1031 Exchanges, regardless of a variety of complex factors including:  

• Institutional Investors with High-Volume Exchanges 

• Exchanging involving Multiple Buyers and Sellers, including LLCs, Corporations, and Partnerships 

• Fractional Interests (Delaware Statutory Trusts (DSTs) and Tenants in Common (TICs)) 

• Seller-financed Transactions 

• Multiple Relinquished and Replacement Properties 

• Exchanges That Occur in Multiple States 

Accruit’s patented 1031 Exchange technology, Exchange Manager ProSM, sets us apart from other QI companies. Standardizing workflow with automated deadline reminders and document creation increases efficiency, decreasing error potential throughout the 1031 Exchange process. This software coupled with our Qualified Professionals, including five staff attorneys, Certified Public Accountants (CPAs), and multiple Certified Exchange Specialists® (CES), makes for diligent, streamlined exchanges.   

For an Exchanger, a national Qualified Intermediary with a comprehensive array of services and expertise, like Accruit, makes navigating the complexities of 1031 Exchanges become not just manageable but effortless. Whether you're engaging in forward exchanges, reverse exchanges, or complex transactions involving multiple parties and properties across various states, Accruit’s expert team and advanced technology ensure a seamless experience. At Accruit, we don't merely facilitate 1031 transactions; we enhance them, providing unmatched, meaningful service and expertise at every turn. 

The material in this blog is presented for informational purposes only. The information presented is not investment, legal, tax or compliance advice. Accruit performs the duties of a Qualified Intermediary, and as such does not offer or sell investments or provide investment, legal, or tax advice.