In February, the IRS released an updated version of Publication 561: Determining the Value of Donated Property and, in March, an updated version of Publication 526: Charitable Contributions.
While the substance of the publications remains quite similar, there have been notable changes to the definitions of “qualified appraisal” and “qualified appraiser.” These requirements were updated to include language from the final regulations passed in July, 2018. The language emphasizes that a “qualified appraiser” has verifiable education and experience in valuing the type of property being appraised.
Updates to Publication 561: Determining the Value of Donated Property
Qualified appraiser. A qualified appraiser is an individual with verifiable education and experience in valuing the type of property for which the appraisal is performed.
1. The individual:
a. Has earned an appraisal designation from a recognized professional appraiser organization, or
b. Has met certain minimum education and experience requirements and two or more years of experience. To meet the minimum education requirement, you must have successfully completed professional or college-level coursework obtained from:
i. A professional or college-level educational organization,
ii. A professional trade or appraiser organization that regularly offers educational programs in valuing the type of property, or
iii. An employer as part of an employee apprenticeship or education program similar to professional or college-level courses.
2. The individual regularly prepares appraisals for which he or she is paid.
3. The individual is not an excluded individual.
In addition, the appraiser must make a declaration in the appraisal that, because of his or her background, experience, education, and membership in professional associations, he or she is qualified to make appraisals of the type of property being valued. The appraiser must complete the Declaration of Appraiser section on Form 8283, Section B. More than one appraiser may appraise the property, provided that each complies with the requirements, including signing the qualified appraisal and Form 8283, Section B, Part III.
There were also two categories added to the extant list of six types of individuals who would be considered Excluded Individuals:
1. An individual who receives a prohibited appraisal fee for the appraisal of the donated property [generally, the fee cannot be based on a percentage of the appraised value of the property; see Prohibited Appraisal Fee].
2. An individual who is prohibited from practicing before the IRS under section 330(c) of title 31 of the United States Code at any time during the 3-year period ending on the date the appraisal is signed by the individual.
Information included in a qualified appraisal. A qualified appraisal must include the following information.
1. A description of the property in sufficient detail for a person who is not generally familiar with the type of property to determine that the property appraised is the property that was (or will be) contributed;
2. The physical condition of any tangible property;
3. The date (or expected date) of contribution;
4. The terms of any agreement or understanding entered into (or expected to be entered into) by or on behalf of the donor that relates to the use, sale, or other disposition of the donated property, including, for example, the terms of any agreement or understanding that:
a. Temporarily or permanently restricts a donee’s right to use or dispose of the donated property;
b. Earmarks donated property for a particular use; or
c. Reserves to, or confers upon, anyone (other than a done organization or an organization participating with a done organization in cooperative fund-raising) any right to the income from the donated property or to the possession of the property, including the right to vote donated securities, to acquire the property by purchase or otherwise, or to designate the person having the income, possession, or right to acquire the property;
5. The name, address, and taxpayer identification number of the qualified appraiser and, if the appraiser is a partner, an employee, or an independent contractor engaged by a person other than the donor, the name, address, and taxpayer identification number of the partnership or the person who employs or engages the appraiser;
6. The qualifications of the qualified appraiser who signs the appraisal, including the appraiser's background, experience, education, and any membership in professional appraisal associations;
7. A statement that the appraisal was prepared for income tax purposes;
8. The date (or dates) on which the property was valued;
9. The appraised FMV on the date (or expected date) of contribution;
10. The method of valuation used to determine FMV, such as the income approach, the comparable sales or market data approach, or the replacement cost less depreciation approach; and
11. The specific basis for the valuation, such as any specific comparable sales transaction.
Updates to Publication 526: Charitable Contributions
The updates to Publication 526 provide guidance to taxpayers on the substantiation of non-cash charitable contributions of more than $5,000, which now must be substantiated by a contemporaneous written acknowledgement, a qualified appraisal by a qualified appraiser, and a completed Form 8283. Though not the appraiser’s responsibility, it is important to understand what one’s clients may be required to submit as documentation to the IRS.
The publication provides the following information regarding Contemporaneous Written Acknowledgment:
Organizations typically send written acknowledgements to donors no later than January 31 of the year following the donation. For the written acknowledgement to be considered contemporaneous with the contribution it must meet both of the following requirements.
1. Meet all the tests described under Acknowledgement, earlier; and
2. You must get it on or before the earlier of:
a. The date you file your return for the year you make the contribution; or
b. The due date, including extensions, for filing the return.
The full publications can be viewed, downloaded and printed here: