NEW IRS APPRAISAL REQUIREMENTS
A "final rule" was adopted by the IRS that sets out a new set of penalties for signing and non-signing tax return preparers. Non-signing tax return preparers includes appraisers, so you may want to take a look at this excerpt from the final IRS rule. The IRS has the discretion to impose section 6694 or 6695A penalties depending on the facts and circumstances of an appraiser's conduct.
Since the IRS rules are not clear with regard to how the "reasonable basis" standard of care test specifically applies to an appraiser/appraisal, appraisers are in limbo until these standards are better explained.
The Pension Protection Act (Public Law 109-280), signed into law in August of 2006, includes a number of reforms relating to charitable activities. Included in these reforms are new definitions relating to appraisers and appraisals of property for charitable deduction purposes, such as conservation and historic preservation easements and estate and gift taxes.
For full details, see IRS Notice 2006-96 at the following link:
Within the above noted notice Section 170(f)(11)(E)(ii) provides that the term “qualified appraiser” means an individual who (1) has earned an appraisal designation from a recognized professional appraiser organization or has otherwise met minimum education and experience requirements set forth in regulations prescribed by the Secretary, (2) regularly performs appraisals for which the individual receives compensation, and (3) meets such other requirements as may be prescribed by the Secretary in regulations or other guidance. Section 170(f)(11)(E)(iii) further provides that an individual will not be treated as a qualified appraiser unless that individual (1) demonstrates verifiable education and experience in valuing the type of property subject to the appraisal, and (2) has not been prohibited from practicing before the Internal Revenue Service by the Secretary under § 330(c) of Title 31 of the United States Code at any time during the 3-year period ending on the date of the appraisal.
Designations conferred by professional appraisal organizations such as the American Society of Appraisers (ASA), American Society of Farm Managers and Rural Appraisers, and Appraisal Institute (MAI) meet this definition, as they require education, testing, experience and demonstration of knowledge, understanding and ability.
Thus, an appraiser will not be treated as a “qualified appraiser” unless the appraiser demonstrates verifiable education and experience for valuing the type of property subject to the appraisal. Also, the appraiser must not have been prohibited from practicing before the IRS at any time during a three-year period prior to the date of the appraisal.
the IRS now has the ability to suspend or disbar an appraiser from practicing before the IRS without the previous “aiding and abetting” standard. Additionally, the IRS now has the ability to enact civil money penalties against appraisers based on “substantial” or “gross” mis-valuations, and the substantial and gross mis-valuation thresholds have been lowered and also apply to estate and gift tax appraisals.
The new IRS Form 8283 is located athttp://www.irs.gov/pub/irs-pdf/f8283.pdf
This web page does not provide legal or tax advice, but it does provided summary information extracted from IRS publications. The reader is responsible for obtaining legal and tax advice from his or her own professional advisors.
It is important that consumers of appraisal services for the purpose of IRS reporting become familiar with the latest changes.