CPA Cafe: Another Attempt to Ban Tax Strategy Patents

Is the tax patent saga almost over? We have renewed hope that it’s coming to a close, and we have Virginia legislators to thank for staying on top of this aggravating issue!

On May 21, Reps. Rick Boucher (D-Va.) and Bob Goodlatte, (R-Va.) introduced HR 2584, legislation that would prohibit patents on tax planning methods.

Although previous versions of the bill have died in Congress, the VSCPA and CPA profession continue to lobby for a ban on the issuance of such patents.My fingers are crossed that the legislation will pass, ending a three-year struggle to squelch this practice.

Currently, 77 tax strategy patents have been approved and there are 129 pending. These strategies apply to common areas of tax planning, including charitable contributions, estate and gift taxes, pension plans and deferred compensation.

The VSCPA doesn’t think it’s fair for taxpayers to essentially pay extra for various tax planning methods — or for tax practitioners to be prohibited from making smart tax savings choices for their clients, for that matter. These strategy patents are bad public policy.

A step in the right direction, Boucher introduced HR 2365 in 2007, which effectively rendered such tax patents unenforceable. But the current legislation would take the issue one step further, prohibiting the patents from being issued in the first place.

Last Congress, language to prohibit tax strategy patents was passed by the House as part of the Patent Reform Act of 2007. A bill containing similar language on tax strategy patent prohibition, S 2369, was introduced in the U.S. Senate last Congress by Senate Finance Committee Chairman Max Baucus (D-Mont.) and by Sen. Chuck Grassley (R-Iowa), the ranking minority member of the Finance Committee. But the bill never made it onto the Senate floor.

The AICPA and VSCPA have both lobbied for a solution to this issue since 2006. In fact, this topic was high on the agenda during our Congressional representative visits during the recent AICPA Spring Meeting in Washington, D.C.
The VSCPA hopes Congress will pass a permanent solution to the issue this year. Stay tuned to www.vscpa.com for the latest news on tax strategy patents.

Check out past action from the VSCPA regarding tax strategies patents:

2008: