Last week President Bush signed the Pension Protection Act, making it Public Law No: 109-280. The ASA—whose commendable efforts led to the inclusion of certain reforms—is calling the law a “landmark victory” for its members. But for business valuators, “appraisal reform is a misnomer,” says Mike Crain, CPA, ASA, CFA, CFE (Financial Valuation Group, Ft. Lauderdale), the current chair of the AICPA Business Valuation Committee. “It’s not appraisal reform—it’s reform for exempt organizations,” Crain explains, in an interview with BVWire™. “Congressional members saw abuses in exempt organizations, and wanted to change the law regarding them and the people they interact with,” including appraisers.

The law does define “qualified appraiser and appraisals,” which includes business as well as real and personal property appraisers who work in the charitable sector. It also imposes penalties for “gross misstatements” of valuations on exempt-related tax returns. “That’s the first time, to my knowledge, that a tax law has made specific reference to appraisal standards,” Crain notes. But nothing in the law modifies appraisal standards in estate/gift taxation, where most business appraisers work. And though there’s talk about the IRS extending the reforms to estate/gift, “it’s unclear whether the IRS has the authority to do this.” Until the Congress or Treasury acts, Crain says, “it’s business as usual” for business appraisers.

For the provisions of the new law pertaining to appraisal penalties and reform, click here.