Appraisals prepared for a noncash charitable contribution now must be qualified appraisals performed by a qualified appraiser. Choosing the wrong appraiser to produce a written appraisal report may result in a very unwelcome outcome.
Although there are no licensure requirements for a qualified appraiser of personal tangible assets (unlike in real estate), it is important to review in-depth the credentials of any appraiser to determine her/his level of expertise in theory and methodology, expertise of subject matter, and experience in complex assignments.
The IRS defines qualified appraiser as an individual who has earned an appraisal designation from a recognized professional appraisal organization (such as American Society of Appraisers (ASA), Appraisers Association of America (AAA), or International Society of Appraisers (ISA).
See section 170(f)(11)(E), as amended by the PPA, § 1.170A–17 of the proposed and final regulations provides definitions for qualified appraisal and qualified appraiser HERE.
A written appraisal report must meet the regulations and standards of the Uniform Standards of Professional Appraisal Practice (USPAP) of The Appraisal Foundation.
January 1, 2018: The Appraisal Foundation (the nation’s foremost authority on valuation services) revised criteria for the recommended minimum education and experience requirements for personal property appraisers which went into effect on May 1, 2018. [The Appraisal Foundation (TAF) is not a credentialing body. Credentialing of qualified appraisers are by appraiser organizations. see more HERE.]
- Classroom hours (120+) in appraisal theory, practice, ethics and methodology and area(s) of appraisal specialization
- Complete a course and successfully pass an examination in valuation theory and principles (45+ hours). Valuation theory must be specific to the appraisal of personal property.
- Uniform Standards of Professional Appraisal Practice Foundation Course (15 hours) and Update courses (7 hours) every two years
- 30 semester credit hours from a college or university (or an associate’s degree or higher)
- American Society of Appraisers senior accredited designation (ASA) requires 10,000+ hours of valuation.
Continuing Education. 100+ hours every five years (required for ASA otherwise 70 hours), which must include at least 20 hours valuation theory-related coursework, and seven hours of a USPAP Update Course every two years or 15 hours of a USPAP Update Course every five years. This can also include attendance of conferences, courses, presentations, teaching, course development, and/or authorship of published scholarly papers, books, or monographs.
Estate attorneys and wealth managers have a greater fiduciary responsibility to their clients to fully understand the qualification criteria and standards when vetting a personal property appraiser.
What is also important to note is the IRS now requires an appraiser to have completed professional or college-level coursework in valuing the type of property to be donated and have two or more years’ experience valuing that type of property. For example, an appraiser who regularly appraises fine art may not be qualified to appraise 18th-century furniture.
Individuals who are not qualified appraisers. The following individuals are not qualified appraisers for the appraised property:
- An appraiser who structured payment for the report as a percentage of the appraised property.
- The donor of the property. (Please — for the love of god — do not call us and state: “I can do it myself, but I need your letterhead to put my values on….”)
- An individual who sold, exchanged, or gave the property to the donor, or any individual who acted as an agent for the transferor or for the donor for the sale, exchange, or gift), unless the property is contributed within two months of the date of acquisition and the appraised value does not exceed its acquisition price.
- A married, related or even an employee of the donor.
- An appraiser who does not perform a majority of your appraisals during the taxable year.
- And, of course, an individual who is prohibited from practicing before the Internal Revenue Service.
Update: The Appraisal Foundation Applauds Circuit Court Ruling Affirming the Primacy of Personal Property Appraisal Profession. see HERE