On June 10, 2016, Congress passed the Indian Trust Asset Reform Act (ITARA), and on June 22, 2016, President Barack Obama signed it into law.1 According to the Senate Committee on Indian Affairs, the purpose of the Act “is to reaffirm the Federal government’s fiduciary trust responsibilities to Indian Tribes.”2 Although the ITARA contains the outline of an ambitious program pursuant to which a Tribe may take over administration of tribal trust resources from the Bureau of Indian Affairs (BIA), the first element of the Act to be reflected in final regulations are those contained in the Final Rule published June 26, 2017. The new Rule establishes an alternative procedure for the appraisal or valuation of Indian lands when a Tribe or Individual Indian landowner submits to the Department of the Interior (DOI) an appraisal or valuation and requests the DOI to use the appraisal submitted to value the land or other trust resources. Parties acquiring rights-of-way or other interests in trust land or resources should be aware of this new, alternative procedure—and its consequences.

The ITARA authorizes the BIA to use appraisals and valuations without specific Secretarial approval of the appraisal report in its decisions whether to approve agreements, so long as three conditions are met, as discussed in more detail below. Under those circumstances, the Act provides that no additional BIA review of the appraisal or valuation is required and the appraisal or valuation “shall be considered final for purposes of effectuating the transaction for which the appraisal or valuation is required.”3

The implementing regulations, published at 82 Fed. Reg. 28777 (June 26, 2017), form a new 25 CFR Part 100, (entitled, “Waiving Departmental Review of Appraisals and Valuations of Indian Property”). As summarized in the published final rule, the regulations “establish the minimum qualifications for appraisers employed by or under contract with an Indian tribe or individual Indian, to become qualified appraisers who may prepare an appraisal or valuation of Indian property that will, in certain circumstances, be accepted by the DOI without further review or approval.”4 Specifically, the regulations provide that the DOI “will not review the appraisal or valuation of Indian property and the appraisal or valuation will be considered final,” as long as these three conditions are met: (1) the submission of the appraisal or valuation “acknowledges the intent of the tribe or Individual Indian landowner to waive Departmental review and approval” of the appraisal or valuation; (2) “the appraisal or valuation was completed by a qualified appraiser meeting the requirements of [Part 100]”; and (3) “[n]o owner of an interest in the Indian property objects” to use of the appraisal or valuation without Departmental review and approval.5

Applicability: If the three conditions in Section 100.301 are satisfied, the new Rule may apply to all valuations of trust or restricted real property and of timber, minerals or other property, whether or not such elements “contribute to the value of real property.”6 To grasp the possible effect of the Rule, one might contemplate the case where a seller’s appraiser can set any value he or she may determine, and the other parties to the transaction must accept it. Under several statutes, BIA may not approve or grant an interest in trust property for “not less than the fair market value” of the interest to be acquired. See, e.g.,25 C.F.R. § 169.112(a). Because, under the new Part 100 regulations, the DOI or BIA must accept an appraisal or valuation by a properly qualified appraiser submitted by the Indian landowner, the only limitations upon acceptance of the appraisal become those setting the requirements appraisers must satisfy to insulate their appraisal from DOI’s review. Appraiser qualifications: The critical determinant of the qualifications of an appraiser is whether the appraiser holds a “current Certified General Appraiser license in the State in which the property appraised or valued is located” and is in good standing.7 Although the Rule references the Uniform Standards of Professional Appraiser Practice (USPAP), which applies to all appraisals of value for United States’ acquisitions of property, it does so only with respect to the qualifications of the appraisers, including their qualifications to value specific interests such as timber or minerals. However, the regulation does not require the appraiser’s appraisal to comport with the many USPAP criteria to which a USPAP appraisal must conform. Consequently, under the new regulations, whatever value the “qualified appraiser” may place on a property in an appraisal submitted by the Indian landowner, it will be immune from review by Interior and Interior must accept it.

What’s the upshot? Although it is difficult to predict the effect of the new Rule, it is clear that Indian landowners and parties seeking to acquire interests in Indian lands should be aware of the changes and fashion conduct accordingly.

It’s just an alternative. It bears noting that Part 100 does not require any appraisal to be submitted under its provisions: the new Rule does not require a change from prevailing current practice, i.e., a party acquiring a right-of-way or other interest required to be appraised prepares an appraisal and submits it to the Indian landowners and BIA to establish value. In fact, if the Indian landowner accepts the value so determined, it could submit a company-prepared appraisal under Part 100 to expedite BIA approval.

Escalating values? It is difficult to predict the effect the new rule will have on valuation of interests valued by a Part 100 appraisal. One suspects that the absence of BIA review and approval of appraisals submitted by Indian landowners may encourage appraisers to estimate values more favorable to Indian clients. In addition, prior BIA appraisal approval standards incorporated compliance with USPAP standards governing preparation of appraisals, which contain detailed guidance to ensure that it is the property that is being valued—and not the use to which the acquiring party will put the property. It is difficult to predict the extent to which State-licensed appraisers, with knowledge that their reports will be accepted without either independent review or approval, will yield to the temptation to report values more favorable to tribal or individual Indian clients than they would have if they expected BIA review and approval.

Focus on qualifications. Appraiser qualifications are the single factor that may support an opposition to use of an appraisal or valuation submitted by an Indian landowner. New Part 100 likely will lead to increased emphasis on State standards for appraiser certification—and the standing of licensure of appraisers at the time an appraisal is prepared or submitted.