IRS Part III - Administrative, Procedural, and
Guidance Regarding Appraisal Requirements for Noncash Charitable Contributions Notice 2006-96.
SECTION 3 (2) (1). TRANSITIONAL GUIDANCE
Generally accepted appraisal standards. An
appraisal will be treated as having been conducted in accordance with generally accepted appraisal standards within
the meaning of § 170(f)(11)(E)(i)(II) if, for example, the appraisal is consistent with the substance
and principles of the Uniform Standards of Professional Appraisal Practice (“USPAP”), as developed by
the Appraisal Standards Board of the Appraisal Foundation.
for aiding and abetting understatement of tax
A penalty is imposed on a person who: (1) aids or assists in or
advises with respect to a tax return or other document; (2) knows (or has reason to believe) that such document will be used
in connection with a material tax matter; and (3) knows that this would result in an understatement of tax of another person.
In general, the amount of the penalty is $1,000. If the document relates to the tax return of a corporation, the amount of
the penalty is $10,000.
An appraiser who aids or assists in the preparation or presentation
of an appraisal will be subject to disciplinary action if the appraiser knows that the appraisal will
be used in connection with the tax laws and will result in an understatement of the tax liability of another person. The Secretary
has authority to provide that the appraisals of an appraiser who has been disciplined have no probative effect in any administrative
proceeding before the Department or the IRS.
Present law requires a taxpayer to obtain a qualified appraisal for donated property with a
value of more than $5,000, and to attach an appraisal summary to the tax return [Sec.
170(f)(11)]. Treasury Regulations state that a qualified appraisal
means an appraisal document that, among other things: (1) relates to an appraisal that is made not earlier
than 60 days prior to the date of contribution of the appraised property and not later than the due
date (including extensions) of the return on which a deduction is first claimed under section 170; (2) is prepared, signed,
and dated by a qualified appraiser; (3) includes (a) a description of the property appraised; (b) the
fair market value of such property on the date of contribution and the specific basis for the valuation; (c) a statement that
such appraisal was prepared for income tax purposes; (d) the qualifications of the qualified appraiser;
and (e) the signature and taxpayer identification number of such appraiser; and (4) does not involve
an appraisal fee that violates certain prescribed rules [Treas. Reg. sec. 1.170A-13(c)(3)].
Treasury Regulations define
a qualified appraiser as a person who holds himself or herself out to the public as an appraiser or performs
appraisals on a regular basis, is qualified to make appraisals of the type of property being valued (as determined by the
appraiser’s background, experience, education and membership, if any, in professional appraisal associations), is independent,
and understands that an intentionally false or fraudulent overstatement of the value of the appraised property may subject the appraiser to civil penalties [Treas. Reg. sec. 1.170A-13(c)(5)(i)].
The Secretary is authorized to regulate the practice of representatives of persons before the Department of the Treasury
(“Department”) [31 U.S.C. § 330]. After notice and hearing, the Secretary
is authorized to suspend or disbar from practice before the Department or the Internal Revenue Service (“IRS”)
a representative who is incompetent, who is disreputable, who violates the rules regulating practice before the Department
or the IRS, or who (with intent to defraud) willfully and knowingly misleads or threatens the person being represented (or
a person who may be represented). The Secretary also is authorized to bar from appearing before the Department
or the IRS, for the purpose of offering opinion evidence on the value of property or other assets, any individual against
whom a civil penalty for aiding and abetting the understatement of tax has been assessed. Thus, an appraiser who aids or assists
in the preparation or presentation of an appraisal will be subject to disciplinary action if the appraiser knows that the
appraisal will be used in connection with the tax laws and will result in an understatement of the tax liability of another
person. The Secretary has authority to provide that the appraisals of an appraiser who has been disciplined have no probative
effect in any administrative proceeding before the Department or the IRS.
Committee on Ways and Means
Pension Protection Act of 2006
of Charitable Provisions
Thomas (R-CA) Committee on Ways and Means 07/28/2006 4:00 P.M
The provision raises the charitable deduction limit
from 30 percent of adjusted gross income to 50% of adjusted gross income for qualified conservation contributions,
provided that such contribution does not prevent the use of the donated land for farming or ranching purposes. The charitable deduction limit is raised to 100% of adjusted gross income for eligible farmers and ranchers. Allows
a taxpayer to carry forward the deduction for 15-years, provided the taxpayer is a farmer or rancher
in the year of the carry-forward. Effective for two years through 2007.
Charitable Contributions of Facade Easements
the provision, a charitable deduction is allowed with respect to easements concerning buildings located in a registered historic
district. The easement must provide that no portion of the exterior of the building may be changed or altered in a manner
inconsistent with the historical character of the exterior. The provision also clarifies that the charitable
deduction is reduced if a rehabilitation tax credit has been claimed with respect to the donated property.
Substantiation of Exempt Use Property
The provision limits the basis for donated taxidermy
property to the cost of preparing, stuffing and mounting an animal. The value of the deduction would
be equal to the lesser of basis or fair market value.
and Household Items
The provision specifies that no deduction is allowed for charitable contributions of clothing and
household items if such items are not in good used condition or better. In addition, the Secretary may deny a deduction for
any item with minimal monetary value.
Modification of Recordkeeping Requirements for Certain Charitable Contributions
provision requires that in the case of a charitable contribution of money, regardless of the amount, the donor must maintain
a cancelled check, bank record or receipt from the donee organization showing the name of the donee organization, the date
of the contribution, and the amount of the contribution.
Partial Interest in Donated Property
that charities receiving a fractional interest in an item of tangible personal property must take complete ownership of the
item within 10 years or the death of the donor, whichever is first. In addition, the donee must have (i) taken possession
of the item at least once during the 10-year period as long as the donor remains alive, and (ii) used the item for the organization’s
exempt purpose. Failure to comply with these requirements results in the recapture of all tax benefits plus interest and the
imposition of a 10 percent penalty.
The provision lowers the thresholds
for imposing accuracy-related penalties on a taxpayer who claims a deduction for donated property for
which a qualified appraisal is required. The provision also applies for purposes of estate tax appraisals
and provides definitions of a qualified appraiser and qualified appraisals.
IRS and the Treasury
Department Amend Circular 230 to Promote Ethical Practice by Tax Professionals
Department Circular No. 230 (Rev. 6-2005) Regulations Governing
the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the Internal
Revenue Service Department of the Treasury Internal Revenue Service Title 31 Code of Federal
Subtitle A, Part 10, revised
as of June 20, 2005
Subpart C--Sanctions for
Violation of the Regulations
(a) Authority to censure, suspend, or disbar. The Secretary of the Treasury, or his or her
delegate, after notice and an opportunity for a proceeding, may censure, suspend or disbar any practitioner
from practice before the Internal Revenue Service if the practitioner is shown to be incompetent or disreputable,
fails to comply with any regulation in this part, or with intent to defraud, willfully and knowingly misleads or threatens
a client or prospective client. Censure is a public reprimand.
(b) Authority to disqualify. The Secretary of the Treasury, or his or her delegate, after due notice and opportunity for hearing, may disqualify
any appraiser with respect to whom a penalty has been assessed under section 6701(a) of the Internal
(1) If any appraiser is disqualified pursuant to this subpart C,
such appraiser is barred from presenting evidence or testimony in any administrative proceeding before the Department of Treasury
or the Internal Revenue Service, unless and until authorized to do so by the Director of Practice pursuant to §10.81,
regardless of whether such evidence or testimony would pertain to an appraisal made prior to or after such date.
Any appraisal made by a disqualified appraiser after the effective date of disqualification will not have any probative effect
in any administrative proceeding before the Department of the Treasury or the Internal Revenue Service. An appraisal otherwise
barred from admission into evidence pursuant to this section may be admitted into evidence solely for the purpose of determining
the taxpayer's reliance in good faith on such appraisal.
Incompetence and disreputable conduct.
Incompetence and disreputable conduct for which a practitioner may be censured, suspended or disbarred from practice before the Internal Revenue Service includes, but
is not limited to--
(l) Giving a false opinion, knowingly, recklessly, or through gross incompetence, including
an opinion which is intentionally or recklessly misleading, or engaging in a pattern of providing incompetent opinions on
questions arising under the Federal tax laws. False opinions described in this paragraph (l) include
those which reflect or result from a knowing misstatement of fact or law, from an assertion of a position known to be unwarranted
under existing law, from counseling or assisting in conduct known to be illegal or fraudulent, from concealing matters required by law to be revealed, or from consciously disregarding information indicating that material facts
expressed in the tax opinion or offering material are false or misleading.
For purposes of this paragraph (l), reckless conduct is a highly unreasonable omission or misrepresentation involving an extreme
departure from the standards of ordinary care that a practitioner should observe under the circumstances. A pattern of conduct
is a factor that will be taken into account in determining whether a practitioner acted knowingly, recklessly,
or through gross incompetence. Gross incompetence includes conduct that reflects gross indifference, preparation which is
grossly inadequate under the circumstances, and a consistent failure to perform obligations to the client.