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Published: October 2009

Congress should ban tax patents

Coalition: Tax

Consumer Action signed onto a letter opposing the ability to "patent" tax reduction/evasion strategies. Because of patents, some taxpayers may pay more tax than Congress intended.

Below is an excerpt from the letter:
 
We want to reiterate our gratitude for your work on this issue and to ask for your continued help to pass the Boucher-Goodlatte bill, H.R. 2584.

Our coalition of consumer organizations, taxpayer rights groups and tax planners understands the need for action.  Like the National Taxpayer Advocate, Nina Olson, who has previously called for such legislation, and like President Barack Obama, who co-sponsored legislation on this topic when he was a Senator, we want to see Congress resolve this problem once and for all.

As you know, the problems associated with tax strategy patents are multiple and complex.  First, we believe that they may limit the ability of taxpayers to utilize fully interpretations of tax law intended by Congress.  Barriers to compliance caused by these patents may also cause some taxpayers to pay more tax than Congress intended and may cause other taxpayers to pay more tax than others similarly situated.  This is simply unfair.  Not to mention, tax strategy patents complicate the provision of tax advice by professionals and create a new burdensome level of compliance and cost, ultimately borne by taxpayers.

Finally, as you know, issuance of a patent is no guarantee that the underlying strategy is valid under our tax code.   The Patent and Trademark Office is not an expert on tax law, nor is it charged with its enforcement.  Tax strategy patents may mislead taxpayers into believing that a patented strategy is valid under the tax law simply by virtue of it being patented.

With all of the momentum of the last two years, it seems that Congress would be well poised to act quickly to ban tax patents.  Some have asked, however, whether the need for legislation is as great in light of a recent Federal Circuit decision in a case called Bilski, which addresses the broader question of the patentability of business methods.  The Bilski case is currently pending before the Supreme Court, so the final outcome is unknowable.  While many are watching the implications of this case on business methods patents closely, we do not believe that it will prevent the further issuance of tax strategy patents, and it should not, in any way, delay legislative action on this problem.   Meanwhile, the Patent and Trademark Office has continued to grant tax strategy patents, and new tax strategy patent applications have continued to be filed.  Indeed, as of our sending this letter, 82 tax strategy patents have been issued, and 133 are pending. 

A legislative solution remains absolutely necessary.

Lead Organization

The American Institute of Certified Public Accountants (AICPA)

Other Organizations

American Institute of Certified Public Accountants | American Association of Attorney CPAs | American College of Tax Counsel | American Society of Appraisers Center for Legal Empowerment, Accountability And Reform (CLEAR) | Certified Financial Planner Board of Standards | Citizens for Tax Justice | Consumer Federation of America | Financial Planning Association | International Association for Registered Financial Consultants | National Association of Enrolled Agents | National Association of Personal Financial Advisors | Public Knowledge | Partnership for Philanthropic Planning | U.S. PIRG

More Information

Bill Text - HR 2584

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