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SuraLinkWritten by Dalton Hopper, CFE, CVA, ABV
Recently, I had the opportunity to testify before the IRS in Washington, D.C. as a Standards Board member of the National Association of Certified Valuators and Analysts (NACVA). While this opportunity was both personally and professionally rewarding, I am hopeful the IRS has heard our collective concerns with the proposed Circular 230 rule and will remember our comments as they move forward.
In late December 2024, the IRS proposed changes to Circular 230. Circular 230 has traditionally governed the practice of professionals before the IRS. However, in the recently proposed changes, the IRS has also incorporated guidelines for appraisers that practice before the IRS. As a member of the Standards Board for the NACVA, I served on a task force that submitted public comment to this proposal and testified in person to highlight our concerns with the proposed rule.
Specifically, the concern with the proposed rule related to the following language:
“…require appraisals submitted in an administrative proceeding before the IRS to conform to the substance and principles of the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board of the Appraisal Foundation or the International Valuation Standards (IVS) promulgated by the International Valuation Standards Council.”
The most significant of the proposed changes included in Circular 230 is the requirement that all appraisals submitted in an administrative hearing before the IRS comply with the substance and principles of the professional standards of the USPAP or IVS. This is worrisome for several reasons, including:
- This disrupts the harmony that exists between the professional standards of many valuation professional organizations, including the NACVA and AICPA.
- While the professional standards of many organizations are widely consistent, greater discrepancies exist between the U.S. based valuation standards and the IVS, thereby creating confusion and differences for those in practice.
- The administrative burden of the IRS independently assessing compliance with professional standards will only add to already overextended resources and create unnecessary issues for taxpayers.
- Ultimately, this will lead to a shortage of appraisers that are willing to practice before the IRS, increasing costs and complexity for small business owners and taxpayers.
While everyone agrees that professional standards are crucial safeguards, a mandate from the IRS that requires every professional, regardless of the credential he or she holds, adhere to one body of professional standards is not beneficial to small businesses and taxpayers. Further, the IRS’ proposal would allow the IRS to serve as the judge and jury in assessing noncompliance with professional standards. As a member of the NACVA Standards Board, we take great care in ensuring that our professional standards are principle-based, not strictly rules-based, because we understand that circumstances and businesses are different. Further, we aim to ensure that the professional standards remain relevant and current.
With over 100 public comments submitted and more than 10 individuals providing in-person testimony, we are hopeful that the IRS has heard our concerns loud and clear over these proposed changes. Ultimately, we are confident that the IRS will provide clarity and commonsense regulation that will benefit the appraisal practice, small businesses, and taxpayers.
To read an article from Business Valuation Resources discussing the testimony, please click here.
If you would like to discuss your options for a valuation for your business or estate planning needs, please contact our office at (833) CPA-BMSS or visit our website for more information.