Valuation standards: opposing the inclusion of tax in proposed valuation standards.

• Author: Petersen, Robert A.
• Position: Federal tax

The CalCPA Council passed a resolution July 23, 2005 opposing the inclusion of tax in the AICPA's Proposed Statement on Standards for Valuation Services: Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset. This move followed on the heels of the AICPA formally extending the comment period for the exposure draft until Sept. 30, 2005.

If passed, the standard would apply to all CPA members of the AICPA preparing a valuation report. The standard would apply to all forms of tax practice planning and compliance where a valuation is necessary, including income, gift and estate taxes.

To download the exposure draft, go to www.aicpa.org/exposure/Proposed_Stmt_Stds_Val_Serv.asp.

Following are excerpts from a comment letter sent to the AICPA by Robert Petersen. More information can be found at www.calcpa.org/BUZZ/ValuationGR.htm.

Existing Standards

CPAs providing tax services are subject to the Statements on Standards for Tax Services, which the Tax Executive Committee issued as enforceable standards of conduct in August 2000. They were not new when they became enforceable, rather they had been published over a period of many years, commencing in 1982 as Statements on Responsibilities in Tax Practice.

Regulatory Oversight

The IRS also has regulatory oversight over those providing tax planning and compliance services through its Office of Professional Responsibility. As a key element of that oversight, the Treasury Department long ago issued Circular 230, setting forth Standards of Conduct for tax practitioners.

Coincidentally, Circular 230 has been updated, effective June 20, 2005, setting higher standards for professional conduct, prescribing for the first time the form and content of written tax advice--including valuations and quality assurance for professional tax practices.

While Circular 230 generally applies only to federal tax matters, many states independently have adopted Circular 230 for their state tax planning and compliance practices, and Circular 230 also has become an enforceable standard of conduct for disciplinary action by many state boards of accountancy.

The Internal Revenue Code also includes substantial penalties for valuation misstatements of which a tax practitioner must be aware and protective on behalf of client reporting.

Standards Overload

There has been no demonstrated need for the inclusion of tax services in these valuation standards. Any abuses in tax practice should be addressed by...