Pictured at the signing ceremony are Barry Melancon, AICPA president and CEO (left), Stephanie Peters, president
and CEO of the Virginia Society of CPAs, and AICPA Chair Paul Stahlin
For more than five years the American Institute of Certified Public Accountants spearheaded a fight to have Congress pass legislation to protect taxpayers’ rights by stopping the issuance of tax strategy patents. The AICPA, state CPA societies and a coalition of financial planners and consumer and taxpayer rights groups won their battle on Sept. 16 when President Barack Obama signed the Leahy-Smith America Invents Act into law.
Nick Lascari, CPA, a partner with Balistreri, Jezo & Lascari, LLP in Brookfield, Wis., said, “The ban on tax strategy patents was a long and uphill battle for CPAs. Advocating on behalf of all taxpayers, we CPAs voiced concern about the issuance of patents for tax strategies that should be legitimately available to every taxpayer.”
To expect to pay a patent-holder for the “privilege of computing the tax benefit and compliance burden of a conversion of a traditional IRA to a Roth IRA is inequitable,” Lascari said, “and a significant barrier to compliance. A patent associated with this available opportunity would complicate advice provided by tax professionals and create additional levels of compliance unanticipated with the enactment of the laws surrounding the opportunity.”
Dan Vuckovich, CPA, a shareholder with Anderson Zurmuehlen in Great Falls, Mont., said, “I have really never considered myself a law breaker, but that is exactly what I might have been if not for the law to ban tax patents. It seems very clear to me that Congress, when they were writing the tax laws, never intended that the taxpayer would have to pay for patents as a prerequisite to finding the best way to minimize their tax liability. And that is exactly the situation tax patents created.”
“If allowed to proliferate, this form of patent would have complicated tax compliance for countless Americans and exposed many to royalty fee charges and patent infringement litigation,” AICPA President and CEO Barry Melancon said. “We are grateful that Congress and the President recognized this and acted to correct the inequity.”
In effect, tax strategy patents erect a barrier to the use of legitimate methods to reduce or defer tax liability. That can lead to disparities in which one taxpayer faces a higher tax burden than another, even when the two have essentially the same tax situation. Eliminating the issuance of new tax strategy patents will level the playing field so that every American can take all legal steps to keep his or her taxes as low as possible.
“Navigating the tax code should be a simple, clear and fair process,” Melancon said. “The remedy contained in the new law reinforces this goal and makes it easier for financial professionals to give appropriate tax advice.”
The new law deems any “strategy for reducing, avoiding, or deferring tax liability” to be “prior art” under patent law, and therefore not patentable. Under the law, “tax liability” is broadly defined to mean any tax liability under federal, state, local or foreign law.
The AICPA appreciates the leadership of Congressmen Lamar Smith, a Republican from Texas, and Bob Goodlatte, a Republican from Virginia, and Senators Patrick Leahy, a Democrat from Vermont, Charles Grassley, a Republican from Iowa, and Max Baucus, a Democrat from Montana, who were all steadfast champions in this important pro-taxpayer effort.
The AICPA sends a warm and heartfelt thanks to all the state CPA societies and individual CPAs who volunteered countless hours to help create this success for the accounting profession and U.S. taxpayers.
For more information about the new law, read the Sept. 16 Journal of Accountancy story.