Recently, the Institute of Business Appraisers received a response to several comments that IBA’s executive director, Howard A. Lewis, addressed in his presentation to the IRS on Appraisal Regulation and appraiser penalties. Mr Lewis previously served as national program manager for the engineering and valuation programs at the IRS.
IBA’s major recommendations were:
IRS should, at a minimum, develop a set of objective standards by which the “more likely than not” exception to the penalty can be evaluated. These standards may include a presentation of the appraiser’s experience, accreditation, training and other measurers of knowledge, skill, and ability to be used as a temporary safe harbor from imposition of the penalty.
IRS staff members authorized to assert the penalty must be fully trained as appraisers and should be accredited and held to the same standards to which the IRS now holds private sector appraisers.
IRS should consider creating a panel of professional appraisers, representing the major appraisal organizations, to evaluate the credibility of the work of appraisers against whom an assertion of the penalty is being considered.
IRS letter 4477, currently proposed to be issued to appraisers notifying them of the penalty examination, should be replaced with a less formal contact to address the potential for misuse of the notification process.
IRS should consider using business appraisers holding a credential in appraisal review, such as the IBA’s ABAR accreditation, to assist in the determination of the applicability of the penalty, especially under the “more likely than not” exception.
Click “here” for a link to the original IBA eNews article.
IBA received the IRS’ response to the recommendations. As a result, IRS is revising the Letter 4477, and reviewing issues involving the “more likely than not” standard. The text of IRS’ letter follows:
The IRS Office Servicewide Penalties met with you in February to talk
about IRC Section 6695A, Penalty for the Substantial and Gross Valuation
Misstatements Attributable to Incorrect Appraisals. This included a
discussion about what is working and what needs improvement relating to
field examiner procedures for implementing IRC Section 6695A.
I would like to update your organizations about two of the issues we are
currently working on as a result of this meeting.
We are revising the Appraiser Appointment Letter 4477. This is
taking longer than expected because this letter has to go through a new
IRS review process designed to simplify correspondence.
Some of the eight Appraiser Organizations requested that the IRS
to suspend enforcement until the phrase “more likely than not” is
defined. The phrase “more likely than not” relating to assessing the
penalty is contained in IRC 6695A(c) Exception. It states: “No penalty
shall be imposed under subsection (a) if the person establishes to the
satisfaction of the Secretary that the value established in the
appraisal was more likely than not the proper value.” The IRS is
reviewing this request.
Thank you for your continued support as we review your concerns and work
towards resolution of issues. I look forward to working with your
organizations to refine and improve our processes.
Susan Deidrich
SB/SE Exam Policy: Sr Mgr Servicewide Penalty Program
IRS
IRS Addresses IBA’s Comments on Appraiser Penalty Administration
Recently, the Institute of Business Appraisers received a response to several comments that IBA’s executive director, Howard A. Lewis, addressed in his presentation to the IRS on Appraisal Regulation and appraiser penalties. Mr Lewis previously served as national program manager for the engineering and valuation programs at the IRS.
IBA’s major recommendations were:
IRS should, at a minimum, develop a set of objective standards by which the “more likely than not” exception to the penalty can be evaluated. These standards may include a presentation of the appraiser’s experience, accreditation, training and other measurers of knowledge, skill, and ability to be used as a temporary safe harbor from imposition of the penalty.
IRS staff members authorized to assert the penalty must be fully trained as appraisers and should be accredited and held to the same standards to which the IRS now holds private sector appraisers.
IRS should consider creating a panel of professional appraisers, representing the major appraisal organizations, to evaluate the credibility of the work of appraisers against whom an assertion of the penalty is being considered.
IRS letter 4477, currently proposed to be issued to appraisers notifying them of the penalty examination, should be replaced with a less formal contact to address the potential for misuse of the notification process.
IRS should consider using business appraisers holding a credential in appraisal review, such as the IBA’s ABAR accreditation, to assist in the determination of the applicability of the penalty, especially under the “more likely than not” exception.
Click “here” for a link to the original IBA eNews article.
IBA received the IRS’ response to the recommendations. As a result, IRS is revising the Letter 4477, and reviewing issues involving the “more likely than not” standard. The text of IRS’ letter follows:
The IRS Office Servicewide Penalties met with you in February to talk
about IRC Section 6695A, Penalty for the Substantial and Gross Valuation
Misstatements Attributable to Incorrect Appraisals. This included a
discussion about what is working and what needs improvement relating to
field examiner procedures for implementing IRC Section 6695A.
I would like to update your organizations about two of the issues we are
currently working on as a result of this meeting.
We are revising the Appraiser Appointment Letter 4477. This is
taking longer than expected because this letter has to go through a new
IRS review process designed to simplify correspondence.
Some of the eight Appraiser Organizations requested that the IRS
to suspend enforcement until the phrase “more likely than not” is
defined. The phrase “more likely than not” relating to assessing the
penalty is contained in IRC 6695A(c) Exception. It states: “No penalty
shall be imposed under subsection (a) if the person establishes to the
satisfaction of the Secretary that the value established in the
appraisal was more likely than not the proper value.” The IRS is
reviewing this request.
Thank you for your continued support as we review your concerns and work
towards resolution of issues. I look forward to working with your
organizations to refine and improve our processes.
Susan Deidrich
SB/SE Exam Policy: Sr Mgr Servicewide Penalty Program
IRS