Exempt Organizations Advisory - IRS Provides Guidance on "Qualified Appraisal" and "Qualified Appraiser"

On October 19, the IRS released Notice 2006-96, which provides transitional guidance on the new definitions of "qualified appraisal" and "qualified appraiser," which were added to Internal Revenue Code Section 170(f)(11) by the Pension Protection Act of 2006. These terms apply to contributions of property by individuals, partnerships, or corporations for which a deduction of more than $5,000 is claimed on returns filed after August 17, 2006 (and before the effective date of IRS and Treasury Department regulations that are to be issued in the future).

The Notice provides that a "qualified appraisal" is one that complies with all of the requirements of Section 1.170A-13(c) of the existing regulations and is conducted by a qualified appraiser in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), as developed by the Appraisal Standards Board of the Appraisal Foundation. (See www.appraisalfoundation.org for additional information.)

A "qualified appraiser" is one who has "demonstrated competency in valuing the type of property for which the appraisal is performed." In regard to real property (for returns filed after October 19, 2006), the appraiser must be licensed or certified for the type of property being appraised in the state in which the appraised real property is located. For other than real property (for returns filed after February 16, 2007), the appraiser must have: 1) successfully completed college or professional-level coursework that is relevant to the property being valued; 2) obtained at least two years of experience in the trade or business of buying, selling, or valuing the type of property being valued; and 3) fully described in the appraisal the appraiser’s education and experience that qualify the appraiser to value the type of property being valued.

The Notice also provides guidance on complying with the revised appraiser declaration required under Section 1.170A-13. An affirmative statement is now required that the appraiser understands that a substantial or gross valuation misstatement resulting from an appraisal of the subject property that the appraiser knows, or reasonably should have known, would be used in connection with a return or claim for refund, may subject the appraiser to a penalty under Section 6695A.

The IRS has requested comments regarding Notice 2006-96, which may be submitted by January 17, 2007 to:

Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044
Attn: CC:PA:LPD:PR
Room 5203

Comments may also be submitted electronically via e-mail to the following address: Notice.Comments@irscounsel.treas.gov.

The Exempt Organization Advisory is a general summary of the law and is not intended as specific legal advice for any organization.

Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

Questions and comments about the Exempt Organizations Advisory are always welcome and should be sent to bstone@steptoe.com.