Who Can and Should be Listed as an Intended User Under USPAP
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Tuesday, April 4, 2023 in Ask an Instructor
As an instructor, I often get questions about who can and should be listed as an “intended user” under the Uniform Standards for Appraisal Practice (USPAP). And, I am also often asked what “rights” intended users have under USPAP.
The short answer: Generally, you want to list as few intended users as necessary to meet the client’s needs. And, intended users do not have a right to obtain a copy of the report without client consent.
Let’s start with a definition of "intended user". According to USPAP, an intended user is "the client and any other party as identified, by name or type, as users of the appraisal or appraisal review report by the appraiser, based on communication with the client at the time of the assignment". 2020-2021 USPAP, pg. 4 (extended through 2023). In short, the intended user is (1) the client and (2) any other party identified in the report by the appraiser in consultation with the client. This language gives the appraiser a lot of power (and hence, responsibility) in determining who the intended users of the report should be.
USPAP allows for a wide range of intended users to be identified in an appraisal. The most common intended users are clients, i.e., “the party or parties who engage an appraiser by employment or contract”. USPAP, pg. 4. However, USPAP also recognizes that there may be other parties who have a legitimate interest in the appraisal and may be identified as intended users. For example, in an estate the heirs or the IRS may be listed as an intended user. Other potential intended users may include attorneys, banks, insurance agents, and the courts.
However, not all potential users of the appraisal need to be listed as intended users. In fact, one debate that often arises is whether the IRS should be listed as an intended user in an appraisal report for a charitable donation or an IRS taxable estate. I have always maintained that the IRS is an intended user because it is going to receive a copy of the report and someone at the IRS very well may read the report. However, USPAP makes it clear that listing the IRS as an intended user is not required.
USPAP FAQ 135. “IDENTIFICATION OF INTENDED USERS” reads (in part) as follows:
“I know that it is my responsibility to identify the intended users when I perform an assignment, and that USPAP defines intended user as the client and any other party as identified, by name or type, as users of the appraisal or appraisal review report by the appraiser based on communication with the client. However, I need clarification regarding whether certain parties should automatically be considered intended users in certain circumstances described below.
Question: (1.) If I perform an appraisal for estate tax purposes and the client will provide my report
to the IRS with her tax return, must the IRS be identified as an intended user in this situation?
Question: (2.) I have been hired by an attorney representing a husband in a divorce to appraise certain assets held in the marital estate and to appear as an expert witness. I know my report will go to the court as well as to the parties on the other side of the litigation. Must the court and/or the parties on the other side of the litigation be identified as intended users?
(Questions 3 & 4 omitted because not as relevant to personal property)
Response: The answer for each of the four questions is no. Intended users are identified by the appraiser through communication with client and are not established based on who might receive or use the report.
The definition of intended user has a specific meaning in USPAP. In the context of the USPAP definition of intended user, the fact that the IRS, the court, an independent auditor, or the OCC in the above cases will use your report for review, audit, or other purposes does not automatically make them intended users. These parties receive the report through established processes of disclosure or regulation.
One way to understand the concept is to think about what the intended use is for each party. The appraiser must identify both the intended users and the intended use of the appraisal, because these two factors affect many aspects of the appraisal assignment, such as the appropriate scope of work and the appropriate type of report.
In each case, the use of the report by these other parties is different from the intended use the appraiser identified, which was related to the client’s use. Such other parties may be evaluating the decision made by the appraiser’s client to obtain an appraisal, as well as the appraisal results, and other matters of which the appraiser may not be aware. As an example, the client filing the estate tax return is using the appraisal as an indication of the amount to state on the tax form. However, the IRS may use the appraisal report to determine whether the value reported on the tax return is adequately supported, whether the IRS agrees with the value, and/or whether the IRS should challenge the taxpayer because they disagree with the value.”
USAPAP, pg. 244-245.
Additional guidance is provided in Advisory Opinion 36, Identification and Disclosure of Client, Intended Use and Intended User. USPAP, pg. 161-164.
So, as an appraiser, in consultation with your client, you can decide whether to list the IRS as an intended user in your charitable contribution report. ISA has generally taught listing the IRS as an intended user, while optional under USPAP, is a best business practice because it reminds us who will be reading the report. However, USPAP does not require you to do so.
It is important to note that the identification of intended users is not just a matter of following USPAP guidelines. It is also an important ethical consideration for appraisers. Appraisers have a responsibility to provide accurate and reliable appraisals that are useful to their clients and other intended users. By identifying the intended users and their needs, appraisers then have a responsibility to make sure that the appraisal report meets the needs of all intended users. This may expand the scope of work required for the assignment.
Furthermore, it is important to remember that appraisers have a duty of care to listed intended users, not just their clients. This means that appraisers may have more legal obligations to intended users than a third party who is not listed. So, if you list the heirs as intended users you may owe them a higher duty of care than if they were not listed. Therefore, an appraiser may choose to keep the number of intended users as small as possible.
One last note that always comes up . . . if someone, for example an heir, is listed as an intended user in an estate’s appraisal report, is that intended user/heir entitled to a copy of the appraisal report?
No. Under the Ethics Rule, “An appraiser must not disclose: (1) confidential information; or (2) assignment results to anyone other than: the client; parties specially authorized by the client; state appraiser regulatory agencies; third parties as may be authorized by due process of law; or a duly authorized professional peer review committee except when such disclosure to a committee would violate applicable law or regulation.” USPAP, pg. 8-9. Under the Ethics Rule an appraiser can only give the report to her client or someone the client specifically authorizes. Therefore, if an heir or other intended user asks for a copy of the report, an appraiser can either (1) ask the intended user/heir to get it from the client, or (2) email the client and obtain written permission via email to pass the report on to the intended user/heir.
By Kirsten Rabe Smolensky, ISA CAPP, JD