Bill Text: OR HB3495 | 2013 | Regular Session | Enrolled
Bill Title: Relating to exchange facilitators.
Spectrum: Bipartisan Bill
Status: (Passed) 2013-06-13 - Chapter 392, (2013 Laws): Effective date January 1, 2014. [HB3495 Detail]
Download: Oregon-2013-HB3495-Enrolled.html
77th OREGON LEGISLATIVE ASSEMBLY--2013 Regular Session
Enrolled
House Bill 3495
Sponsored by Representatives ESQUIVEL, WITT
CHAPTER ................
AN ACT
Relating to exchange facilitators.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + As used in sections 1 to 6 of this 2013 Act:
(1) 'Affiliate' means a person that controls, is controlled by
or is under common control with another person, directly or
indirectly.
(2) 'Client' means a taxpayer that enters into an agreement
with an exchange facilitator for services.
(3) 'Exchange accommodation titleholder' means an exchange
accommodation titleholder as described in section 4.02(1) of
Internal Revenue Service Revenue Procedure 2000-37.
(4)(a) 'Exchange facilitator' means a person that:
(A) Is engaged in a business in which, for a fee, the person
enters into agreements with clients for the purpose of performing
services as:
(i) A qualified intermediary;
(ii) An exchange accommodation titleholder;
(iii) A trustee of a qualified trust; or
(iv) An escrow holder of a qualified escrow account; or
(B) Maintains an office in this state for the purpose of
soliciting or engaging in business of the type described in
subparagraph (A) of this paragraph.
(b) 'Exchange facilitator' does not include:
(A) A taxpayer or a disqualified person, as defined in 26
C.F.R. 1.1031(k)-1(k), that is seeking to qualify for the
nonrecognition provisions of 26 U.S.C. 1031.
(B) A financial institution, as defined in ORS 706.008, unless
the financial institution is engaged in a business in which, for
a fee, the financial institution enters into agreements with
clients for the purpose of performing services as a qualified
intermediary or an exchange accommodation titleholder, whether or
not the financial institution is:
(i) Acting as a depository for exchange funds;
(ii) Acting solely as a trustee of a qualified trust,
notwithstanding the provisions of paragraph (a)(A)(iii) of this
subsection; or
(iii) Acting solely as an escrow holder of a qualified escrow
account, notwithstanding the provisions of paragraph (a)(A)(iv)
of this subsection.
(C) An escrow agent, as defined in ORS 696.505, title insurance
company or other person unless the person is engaged in a
business in which, for a fee, the person enters into agreements
Enrolled House Bill 3495 (HB 3495-A) Page 1
with clients for the purpose of performing services as a
qualified intermediary or an exchange accommodation titleholder,
whether or not the person is:
(i) Acting solely as a trustee of a qualified trust,
notwithstanding the provisions of paragraph (a)(A)(iii) of this
subsection; or
(ii) Acting solely as an escrow holder of a qualified escrow
account, notwithstanding the provisions of paragraph (a)(A)(iv)
of this subsection.
(D) A person that advertises and teaches seminars or classes or
that otherwise makes presentations for the primary purpose of
educating professionals in the field of taxation about
tax-deferred exchanges or training persons to act as exchange
facilitators.
(E) A qualified intermediary that holds funds from the
disposition of property located outside this state and used in an
exchange under 26 U.S.C. 1031, notwithstanding the provisions of
paragraph (a)(A)(i) of this subsection, or an exchange
accommodation titleholder that does not hold title to property
located in this state.
(F) An entity that an exchange facilitator wholly owns and uses
to take title to property in this state.
(5)(a) 'Exchange funds' means moneys, property, instruments or
other consideration an exchange facilitator receives from or on
behalf of a client in connection with an exchange conducted under
26 U.S.C. 1031.
(b) 'Exchange funds' does not include moneys or other
consideration the exchange facilitator receives from a client as
compensation for the exchange facilitator's services.
(6) 'Fee' means compensation of any nature, direct or indirect,
monetary or in-kind, that a person or another person related to
the person in the manner described in 26 U.S.C. 267(b) or 26
U.S.C. 707(b) receives for services related or incidental to the
exchange of like-kind property under 26 U.S.C. 1031.
(7) 'Financial institution' has the meaning given that term in
ORS 706.008.
(8) 'Person' means an individual, corporation, partnership,
limited liability company, joint venture, association, joint
stock company, trust or other legal entity and the agents and
employees of the entity.
(9) 'Prudent investor standard' means an exercise of judgment
and care under circumstances then prevailing that investors of
prudence, discretion and intelligence exercise in the management
of the investors' own affairs not in regard to speculation but in
regard to the permanent disposition of the investors' funds when
considering probable income and the probable safety of the
investors' capital.
(10) 'Qualified escrow account' has the meaning given that term
in 26 C.F.R. 1.1031(k)-1(g)(3)(ii).
(11) 'Qualified exchange accommodation agreement' means a
qualified exchange accommodation agreement as described in
section 4.02(3) of Internal Revenue Service Revenue Procedure
2000-37.
(12) 'Qualified intermediary' has the meaning given that term
in 26 C.F.R. 1.1031(k)-1(g)(4)(iii).
(13) 'Qualified trust' has the meaning given that term in 26
C.F.R. 1.1031(k)-1(g)(3)(iii).
(14) 'Relinquished property' means relinquished property as
described in 26 C.F.R. 1.1031(k)-1(a).
Enrolled House Bill 3495 (HB 3495-A) Page 2
(15) 'Replacement property' means replacement property as
described in 26 C.F.R. 1.1031(k)-1(a). + }
SECTION 2. { + (1) When a change in control occurs for an
exchange facilitator, the exchange facilitator within 10 business
days after the change in control becomes effective shall notify
the exchange facilitator's clients with relinquished property
located in this state or for which the exchange facilitator holds
replacement property under a qualified exchange accommodation
agreement. If the exchange facilitator is a publicly traded
company and remains a publicly traded company after the change in
control, the publicly traded company need not notify existing
clients about the change in control.
(2) The notice required under subsection (1) of this section
must:
(a) Be delivered by hand, first-class mail, overnight mail,
electronic mail or facsimile;
(b) Be posted on any website the exchange facilitator maintains
for 90 days after the effective date of the change in control;
and
(c) Set forth the name, address, telephone number and other
contact information for the person that assumes control of the
exchange facilitator.
(3) For purposes of this section, a change in control for an
exchange facilitator occurs if more than 50 percent of the
exchange facilitator's assets or ownership interests transfer,
directly or indirectly, to another person within 12 months. + }
SECTION 3. { + (1) An exchange facilitator shall at all times:
(a) Maintain one or more fidelity bonds that are issued by a
corporate surety authorized to do business in this state in an
aggregate amount of not less than $1 million;
(b) Deposit with a financial institution in an interest-bearing
deposit account or money market account, the interest of which
accrues to the exchange facilitator, moneys, securities or
irrevocable letters of credit issued by corporate sureties
authorized to do business in this state in an aggregate amount of
not less than $1 million;
(c) Deposit with a financial institution funds used in an
exchange under 26 U.S.C. 1031 in a qualified escrow account or a
qualified trust and provide that withdrawals from the account or
trust require both the exchange facilitator's and the client's
written authorization; or
(d) Be listed as a named insured on one or more fidelity bonds
that are issued by a corporate surety authorized to do business
in this state in an aggregate amount of not less than $1 million.
(2) An exchange facilitator shall at all times:
(a) Maintain errors and omissions insurance issued by an
authorized insurer, as defined in ORS 731.066, in an amount not
less than $250,000;
(b) Deposit with a financial institution in an interest-bearing
deposit account or money market account, the interest of which
accrues to the exchange facilitator, moneys, securities or
irrevocable letters of credit issued by corporate sureties
authorized to do business in this state in an aggregate amount of
not less than $250,000; or
(c) Be listed as a named insured in an errors and omissions
insurance policy issued by an authorized insurer, as defined in
ORS 731.066, in an amount of not less than $250,000.
(3) An exchange facilitator may maintain bonds or deposits as
provided in subsection (1) of this section or insurance or
deposits as provided in subsection (2) of this section in amounts
Enrolled House Bill 3495 (HB 3495-A) Page 3
in excess of the minimum amounts specified in subsections (1) and
(2) of this section. + }
SECTION 4. { + (1) An exchange facilitator shall act as a
custodian for all exchange funds and shall invest the exchange
funds only in investments that:
(a) Meet a prudent investor standard; and
(b) Satisfy the investment goals of liquidity and preservation
of principal.
(2) An exchange facilitator fails to invest exchange funds
according to a prudent investor standard if:
(a) The exchange facilitator knowingly commingles exchange
funds with the exchange facilitator's operating accounts; or
(b) Exchange funds are loaned or otherwise transferred to a
person or entity, other than a financial institution, that is an
affiliate of or otherwise related to the exchange facilitator,
unless the exchange funds are transferred from an exchange
facilitator to an exchange accommodation titleholder in
accordance with a qualified exchange accommodation agreement.
(3) Exchange funds are not subject to execution or attachment
in any claim against the exchange facilitator.
(4) An exchange facilitator may not knowingly keep moneys or
cause moneys to be kept in a financial institution under a name
that designates the moneys as belonging to a client unless the
moneys belong to the client and the client entrusted the moneys
to the exchange facilitator. + }
SECTION 5. { + An exchange facilitator may not knowingly:
(1) Make a materially false statement, material
misrepresentation or material statement intended to mislead a
client or another person concerning an exchange conducted under
26 U.S.C. 1031, or continue a course of material
misrepresentation through advertising or otherwise;
(2) Fail to account within a reasonable time for moneys or
property in the exchange facilitator's possession that belongs to
another person;
(3) Engage in conduct that constitutes fraud or dishonesty or
commit a crime involving fraud, misrepresentation, deceit,
embezzlement, misappropriation of funds, robbery or theft; or
(4) Materially fail to fulfill the exchange facilitator's
contractual duty to deliver moneys or property to a client,
unless the failure results from circumstances beyond the exchange
facilitator's control. + }
SECTION 6. { + (1) A person that claims to have suffered
damage because an exchange facilitator violated a provision of
section 4 or 5 of this 2013 Act has a right of action on the
bonds or deposits described in section 3 of this 2013 Act. An
action under this subsection does not limit the remedies
available to the person under this section or under other
provisions of law.
(2) An exchange facilitator that violates a provision of
section 4 or 5 of this 2013 Act is subject to an action for
damages brought in a circuit court of this state. + }
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Enrolled House Bill 3495 (HB 3495-A) Page 4
Passed by House May 28, 2013
.............................................................
Ramona J. Line, Chief Clerk of House
.............................................................
Tina Kotek, Speaker of House
Passed by Senate June 6, 2013
.............................................................
Peter Courtney, President of Senate
Enrolled House Bill 3495 (HB 3495-A) Page 5
Received by Governor:
......M.,............., 2013
Approved:
......M.,............., 2013
.............................................................
John Kitzhaber, Governor
Filed in Office of Secretary of State:
......M.,............., 2013
.............................................................
Kate Brown, Secretary of State
Enrolled House Bill 3495 (HB 3495-A) Page 6
