Are You in Compliance?
New IRS Rules Directly Impact Appraisers

by Kathy Greer

   If you perform estate appraisals, insurance appraisals, even real estate appraisals, the requirements of the Pension Protection Act of 2006 could have a direct impact on your business…and your pocketbook. The new law and IRS rules broadly apply to appraisals related to decedent estates, gift taxes and charitable donations. Penalties used to be levied for "aiding and abetting" and were usually limited to $1000. Appraisers are now subject to a penalty equal to the greater of $1000 OR 10% of the underpayment attributable to a valuation misstatement. In some situations, that amount could be huge.
   Now bear in mind, we are not talking about fund-raising non-profit appraisals, where folks pay $10 to hear an expert give them a verbal ballpark of what an item might be worth. This law is for qualified appraisers, for which the IRS interim guidelines specifically refers to the Uniform Standards of Professional Appraisal Practice (USPAP) for appraisals relating to non-cash charitable donations and decedent estate tax returns.
   So you’re saying to yourself, well I’m not a “qualified” appraiser so this doesn’t apply to me. Well, if that’s the case, then according to the IRS, you shouldn’t be performing estate appraisals, etc.
   Until now, the IRS had avoided denoting any one particular professional association or standard. That is no longer the case. USPAP will set the benchmark for the future. And USPAP is not something new. It has been around since 1987.
   However, this is the first time federal tax law has made specific reference to appraisal standards. The IRS’s own rules regarding valuations for estates and charitable donations have been in place for decades. According to Roger Durkin, a Boston-based attorney and appraiser with over 30 years of experience, “The new issue is that the IRS redefined “qualified appraiser” and will look to USPAP as the appraisal practice standards.”
   While this article is not intended to strike fear into the hearts of appraisers, at the same time persons who routinely provide appraisals for attorneys, families, estates and businesses need to take heed. The days of “that’s my honest opinion” are over. Every appraisal you perform can have any number of repercussions down the road, potentially affecting everything from taxes to divorces.
   Durkin said, "Appraisers affect taxes, estate taxes, gift taxes and charitable deductions. Appraisers affect the division of property in a divorce or division among heirs. Appraisers create evidence to support insurance companies underwriting casualty insurance. Appraisers impact the economy and economic interest of a great many people."
   According to Janet Bixby, President of the NHAA (New Hampshire Auctioneers Asso.), the recent IRS ruling on being USPAP compliant will affect the industry, particularly anyone who appraises.
   She added,"I have been working with NAA (National Auctioneers Asso.) to bring courses to the Northeast since last fall and I am pleased to say that I have scheduled a two day USPAP course on March 26 & 27 at the Southern New Hampshire University and on May 18th, 19th & 20th a CES (Certified Estate Specialist) Course. Thanks to our member and former NHAA President, Frank Eaton of Variety Auctions we will be able to use the university at no charge and also have secured a special rate at the Holiday Inn."
  Bixby explained that while there is a special rate for state association members, these special classes are open to anyone who registers and pays the higher fee. You do not have to be a licensed auctioneer to attend these classes and become USPAP complaint. Completion of the two day March course (see ad on this page) will enable you to write USPAP compliant appraisals
  These classes are being hosted by the NH, MA, & ME state auctioneer’s associations. Bixby said she is working with Maureen Boyd as past president of the Maine association and current Treasurer/Director of New Hampshire along with Stephen Paulin, who is also a member of the NH chapter and President of the Massachusetts association.
   The Appraisal Foundation, of which the NAA is a member, was authorized by Congress to set all appraisal standards and qualifications. This educational and research organization through its Appraisal Standards Board (ASB) established USPAP, and continues to update it on a regular basis. USPAP now identifies a minimum set of standards that apply in all appraisal, appraisal reviews, and appraisal consulting assignments. For more information, go to:
www.appraisalfoundation.org
   Attorney Durkin said that all states require licensed real estate appraisers to perform in accordance with USPAP, and most require their appraisers to take a seven-hour update course each year. He added, "Those who hold themselves out as appraisers, owe it to themselves to be aware of, understand, and correctly employ the national standards of practice. USPAP is not complicated, nor difficult to follow. Antiques dealers and auctioneers who provide appraisals for estates or donation should become proficient with the standards."