In a meeting arranged by ASA on Feb. 18, ASA along with seven other professional associations met with members of IRS’ Office of Servicewide Penalties to express concerns regarding how IRS implemented the valuation misstatement civil money penalty assessment process called for under Code section 6695A.  ASA, represented by Government Relations chairman Jay Fishman, FASA, identified several key problem areas and urged IRS not to undertake enforcement actions against appraisers until these problems are resolved.  He testified that -

• The process does not afford appraisers due process safeguards, as the first written notice given to the appraiser states that IRS “is proposing a penalty,” thereby precluding appraisers from rebutting alleged valuation misstatements before the penalty assessment letter is sent.
• IRS has yet to define the statutorily mandated the “more likely than not the proper value” safe harbor provision to an allegation of valuation misstatement or offer guidance on how to exercise this defense.
• The wording of Letter 4477, the first notice received by an appraiser that IRS is looking into possible valuation misstatements, would require appraisers to disclose receipt of the letter when they are testifying as an expert witness in a court case; applying for or renewing errors and omissions (E&O) insurance, or, if the individual is a real estate appraiser, securing or renewing a license or certification in some states, severely damaging the appraiser’s reputation – even if it is eventually determined that no misstatement occurred.
• Some members of IRS staff tasked with reviewing appraisals and deciding whether a misstatement has occurred lack professional appraisal credentials, often leading to situations where a non-appraiser or a minimally experienced one is reviewing the work of a private sector appraiser who possesses substantially more education, training, and experience.

ASA offered several recommendations to IRS on how to address these areas of concern, and also called upon the Service to abate penalty proceedings under 6695A until these issues have been resolved.  IRS, at the conclusion of the meeting, said it will be at least two months before the Service has a response to ASA and other organizations’ concerns.

Also attending the meeting were representatives from the National Association of Certified Valuation Analysts (NACVA), the National Association of Independent Fee Appraisers (NAIFA), the Institute of Business Appraisers (IBA), the Appraisal Institute (AI), the American Society of Farm Managers and Rural Appraisers (ASFMRA), the American Institute of Certified Public Accountants (AICPA), and the American Bar Association (ABA).

To read ASA’s written statement to IRS, click here.  To read the original letter sent by the professional appraisal associations to IRS regarding these issues, click here.