Are qualified intermediaries licensed or regulated, and in which states?

Federal law defines a qualified intermediary by what it does, not by who licenses it

A qualified intermediary under Reg. section 1.1031(k)-1(g)(4)(iii) is anyone who '(A) Is not the taxpayer or a disqualified person' and '(B) Enters into a written agreement with the taxpayer' to acquire and transfer the properties. That is the whole test. Nothing in it sets capital, insurance, experience or examination standards.

Washington's statute says so in a sentence every facilitator there must print on its website and contract: 'Exchange facilitation services are not regulated by any agency of the state of Washington or of the United States government.' The Washington legislature's finding was that there were 'no statutory requirements' for these firms at all.

So the right question is narrower than 'is it licensed'. It is which state law, if any, applies to your transaction, and what that law requires the firm to prove.

Maine is the state that requires a license

Maine's statute says a person may not act as an exchange facilitator in the state 'without first obtaining a license from the administrator', who is the Superintendent of Consumer Credit Protection. The administrator may require licensing through the nationwide mortgage licensing system and set background checks by rule, and it may examine the firm's books and records.

Section 1397 adds money behind the license: a fidelity bond of at least $250,000, an equal deposit, or a qualified escrow or trust needing both signatures; and errors and omissions insurance or a deposit of at least $100,000.

California, Washington and Virginia regulate conduct and money instead

None of these three issues a license, but each sets minimums that apply when the relinquished property is in the state, when the firm parks property there as an accommodation titleholder, or, in California and Washington, when it keeps an office there to solicit exchange business.

• California Financial Code Division 20.5: a $1,000,000 fidelity bond, a $1,000,000 deposit, or a qualified escrow or trust needing your written authorization; $250,000 of errors and omissions cover; a prudent investor standard; notice to clients within 10 business days of a change in control; and a right to sue.
• Chapter 19.310 RCW: a $1,000,000 fidelity bond or a qualified escrow or trust; $250,000 of errors and omissions cover; a separately identified account in which the client receives all earnings; and violations treated under the state consumer protection act.
• Virginia's Exchange Facilitators Act: a separately identified account or qualified escrow or trust needing your written authorization; $250,000 of errors and omissions cover; change-in-control notice; and civil penalties of up to $2,500 per willful violation.

Worked example: what a $1,000,000 bond actually protects

Hypothetical, round numbers; run your own analysis with your attorney. A California facilitator holds $40,000,000 for 50 clients in a pooled account and carries the statutory minimum $1,000,000 fidelity bond. Under Financial Code section 51005, anyone damaged may claim on the bond, and its amount 'shall be reduced to the extent of any payment made'.

If the funds are stolen, the bond is a shared pool of $1,000,000 against $40,000,000 of losses. Your $800,000 exchange would compete with 49 other clients for it. The alternative the statute allows, a qualified escrow or trust that cannot be drawn without your written authorization, protects the money itself rather than paying a claim afterwards. That is why the account structure matters more than the bond figure; see how to choose a safe qualified intermediary and what happens if a QI goes bankrupt.

What to ask for, whatever state you are in

Ask the firm in writing which state statute it operates under for your property, and for evidence of the bond or account structure and the insurance that statute requires. In Maine, ask for the license. Where no statute applies, you can contract for the same protections: a qualified escrow or trust under Reg. section 1.1031(k)-1(g)(3) with a depository bank. Industry memberships and designations are voluntary and are not a substitute for any of this.

Check the disqualified person rules too, because a firm owned by your own attorney or broker may fail the federal test whatever its state paperwork says; see can my attorney, CPA or agent be my QI. How the earnings on the account are taxed is covered in interest on exchange funds. State-by-state exchange rules are on the 1031 exchange by state hub.

A Delaware Statutory Trust interest is a security, which brings a different regulatory regime to the person selling it; see is a DST a security and who can sell it.