New Washington State Law Regulates Qualified Intermediaries
On Monday April 13th 2009, Washington Governor Christine Gregoire signed House Bill 1078 imposing strict requirements on Qualified Intermediaries (“QI”). The new law becomes effective on July 26, 2009.
The bill was put into place as consumer protection for taxpayers who choose to perform an IRC § 1031 tax-deferred exchange. The new rules apply when:
The taxpayer's relinquished property is located in
Qualified Intermediaries are now required to:
1. Notify taxpayers involved in current exchanges within ten business days of certain changes in ownership of the QI.
2. Maintain and provide evidence of adequate financial assurance and errors and omissions insurance or deposits by:
a) Maintaining a Fidelity Bond in the minimum amount of $1,000,000 and Errors and Omission insurance of a minimum $250,000; or
b) Depositing cash or securities or maintaining irrevocable letters of credit in at least these amounts with a financial institution; or
c) Depositing all exchange funds in a qualified escrow or a qualified trust with a financial institution and requiring the QI and the taxpayer’s written authorization for any withdrawal.
3. Deposit exchange funds of $500,000 or more in a separately identified account for each client and each such client must receive all of the earnings on the account.
4. Provide the taxpayer with written notification of the manner in which the taxpayer's exchange funds will be invested or deposited.
5. Act as a custodian for all exchange funds and hold exchange funds in a manner that provides liquidity and preserves principal.
6. Provide the
Your Qualified Intermediary should handle your exchange funds with a sense of care and trust, offering financial strength, experience, and nationwide service, along with solid credentials in facilitating tax-deferred exchanges. You can be assured that First American Exchange Company fully supports this new law and is in compliance in all aspects.