The QI File

Colorado · C.R.S. §6-1-721 · not legal advice

Colorado exchange-facilitator rules

Colorado does not license qualified intermediaries. C.R.S. §6-1-721 (Like-kind exchanges by exchange facilitators) is a consumer-protection section: treating facilitation without the statute’s financial assurance, change-of-control notice, and custodial rules is a deceptive trade practice. The section requires a $1 million fidelity bond and $250,000 E&O, or a cash/LOC substitute for that combined sum, or all funds in a qualified escrow/trust with dual written authorization — and dual authorization on withdrawals of exchange funds over $250,000. This page reports the cited reprint. Prefer the current official Colorado Revised Statutes if a reprint diverges. Overview:state QI bonding.

Who is covered

“Exchange facilitator” (§6-1-721(2)(c)) is a person that holds a taxpayer’s exchange funds and, for a fee, facilitates a like-kind exchange of Colorado property as QI, EAT, or qualified trustee/escrow holder, or maintains a Colorado office to solicit that business regarding Colorado property. “Colorado property” means real property located in Colorado; replacement property need not be in Colorado. Exclusions include the taxpayer and disqualified persons, specified banks and their operating subsidiaries/exclusive agents, seminar teachers, a facilitator whose sole Colorado business is holding funds from property outside the state, and a wholly owned EAT vehicle.

License

None on the cited section. Change-of-control notice to current clients is due within two business days (fax, email, or first-class mail, plus website posting for at least 90 days), with a publicly traded company remaining public after the change carved out of that notice duty.

Financial assurance and custody

Assurance (§6-1-721(3)(b)). At all times: $1 million fidelity and $250,000 E&O; or cash/LOC at least equal to that combined sum; or all exchange funds in a (g)(3) qualified escrow or qualified trust with taxpayer and facilitator written authorization for withdrawals.

Custodian / prudent investor (§6-1-721(3)(c)). The facilitator is a “custodian” in the sense of protecting and preserving assets — the section says that word does not import a duty to increase assets. Funds over $250,000 need dual commercially reasonable authorization to withdraw. Written notice of how funds will be invested or deposited. Liquidity and preservation of principal. Commingling with operating accounts is a violation; aggregation with subaccounting is defined and permitted. Affiliate loans are restricted (financial-institution parent/affiliate and required EAT transfers excepted).

What to ask on a Colorado file

  • Which (3)(b) path — bond+E&O, combined deposit, or QEA/QTA — and current certificates?
  • If the hold will exceed $250,000: the exact dual-authorization mechanics the depository will enforce.
  • If funds are aggregated: the subaccounting that identifies this taxpayer at the institution.
  • Does §6-1-721 attach (Colorado relinquished property, Colorado office, or both)?

FAQ

Does Colorado license qualified intermediaries?

C.R.S. §6-1-721 does not create a QI license. It is a deceptive-trade-practice statute: acting as an exchange facilitator without the section’s financial assurance, notices, and custodial rules is a deceptive trade practice. There is no Colorado QI roster on the cited section.

What financial assurance does Colorado require?

§6-1-721(3)(b)(I): at all times, (A) a $1 million fidelity bond plus $250,000 E&O; or (B) cash or irrevocable letters of credit equal to that combined sum; or (C) all exchange funds in a qualified escrow or qualified trust under 26 C.F.R. §1.1031(k)-1(g)(3) with dual written authorization (taxpayer and facilitator) for withdrawals.

What is Colorado’s $250,000 dual-authorization rule?

§6-1-721(3)(c): taxpayer exchange funds in excess of $250,000 must be invested or deposited so that both the taxpayer’s and the facilitator’s commercially reasonable authorization is required for withdrawal. That dollar figure is Colorado’s, on this section. Do not copy it onto a California or Nevada file.

May a Colorado facilitator aggregate client funds?

The section distinguishes commingling (mixing taxpayer funds with the facilitator’s own so they cannot be distinguished) from aggregation (combining multiple taxpayers’ exchange funds for investment with an accounting or subaccounting system that identifies each taxpayer). Commingling with operating accounts or with another taxpayer’s funds is a prudent-investor violation except for that aggregation path. Read the definitions in (3)(c)(I).

Other state deep-dives

Related

Sources

This is a QI custody explainer, not a securities offering and not legal advice. Statutes change.