Journal of Accounting

September 29, 2010

The AICPA joined a group of national consumer and taxpayer organizations to urge Congress to ban tax strategy patents before adjourning for the year.

In a letter to lawmakers, the groups said that tax strategy patents effectively create a monopoly for patent holders on certain parts of the U.S. tax code that should be public domain. The groups urged lawmakers to include a ban on such patents in a tax bill, the continuing resolution, or any other appropriate “must do” legislation Congress considers before adjourning, according to a press release.

“We cannot afford to postpone addressing this problem” until next year, said the letter signed by the AICPA, U.S. PIRG (the federation of state Public Interest Research Groups), the American Association of Attorney-Certified Public Accountants, American College of Tax Counsel, the American College of Trust and Estate Counsel, American Society of Appraisers, Certified Financial Planner Board of Standards, Citizens for Tax Justice, Consumer Action, Consumer Federation of America, Financial Planning Association, Global Financial Integrity, International Association for Registered Financial Consultants, National Association of Enrolled Agents, New Rules for Global Finance Coalition, Partnership for Philanthropic Planning, Tax Justice Network U.S.A. and The American College.

“Tax advisors,” the letter explained, “who generally are not patent experts, have the burden to be aware of such patents, and either provide tax advice that complies with the patent holder’s requirements, risk a lawsuit for themselves and their clients or potentially not provide the most advantageous advice to clients,” the letter said. “Not surprisingly, these patents create a highly burdensome level of cost ultimately borne by taxpayers.”

To date, 117 tax strategy patents have been issued by the U.S. Patent and Trademark Office and approximately 151 tax strategy patent applications are pending. The existing patents cover a range of tax planning vehicles, including retirement plans, real estate transactions and estate planning transfers, according to the press release. Pending patent applications would “affect taxpayers’ ability to create a financial plan for funding college education; utilize incentive programs for health care savings account cards; insure against tax liabilities; and use life insurance to generate income.”

Earlier in this Congress, Rep. Rick Boucher, D-Va., and Rep. Bob Goodlatte, R-Va., introduced H.R. 2584, which would ban tax strategy patents. The bill has 45 co-sponsors, according to the press release.

A similar bill was introduced in the last Congress by Senate Finance Committee Chairman Max Baucus, D-Mont., and Ranking Minority Member Charles Grassley, R-Iowa. That bill had 29 co-sponsors including then-Sen. Barack Obama. The House passed a ban on tax strategy patents in the last Congress as part of the Patent Reform Act.

The letter was addressed to the Democratic and Republican leaders of the judiciary and tax committees, as well as the lead co-sponsors of the House bill to ban tax strategy patents: Sens. Baucus, Grassley, Patrick Leahy and Jeff Sessions and Reps. Boucher, Goodlatte, John Conyers, Lamar Smith, Sander Levin and Dave Camp. Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell also received copies of the letter, as did House Speaker Nancy Pelosi and Minority Leader John Boehner.

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