Federal Issues

    Tax Strategy Patents 

    On September 16, 2011, President Obama signed the America Invents Act, which contains a provision that eliminates the patenting of new tax strategy patents. The AICPA strongly supported this legislation and worked towards its passage over a period of several years. The AICPA maintains that no one should have a monopoly over any part of the tax code and all Americans should be free to use any legally permissible means to comply with the law.  Taxpayers should not be required to pay royalties or be subject to litigation for patent infringement just for paying their taxes.

    In the 112th Congress, the AICPA strongly supported S. 139, a bill to stop the issuance of patents on tax strategies, introduced by Senators Max Baucus, a Montana Democrat, and Charles Grassley, an Iowa Republican.  The AICPA also supported the provision to stop tax strategy patents, included in the Senate patent reform bill, S. 23, commonly referred to as the America Invents Act.  The America Invents Act passed the Senate on March 8, 2011, and a similar version passed the House on June 23.  The Senate adopted the House bill on September 8, and it was signed into law by President Obama on September 16.

    Legal Background

    In 1998, the U.S. Federal Circuit Court of Appeals, in State Street Bank & Trust v. Signature Financial Group, Inc., held that business methods could be patented. Since then, over 130 patents for tax strategies have been granted and over 150 patent applications for tax planning methods are pending.  These tax strategy patents cover a wide range of activities including real estate transactions, charitable giving, retirement planning, and the granting of stock options.  It is an unfair burden on American taxpayers and their advisers to expect them to become experts in all issued and pending tax strategy patents.

    U.S. Supreme Court Bilski case

    The U.S. Supreme Court heard arguments on Dec. 7, 2009 in the Bilski v. Kappos case, which involved a challenge to a business method patent.  Tax strategy patents are a subset of business method patents. The lower court in Bilski had narrowed the standard of patentability for business method patents, but did not eliminate them.  It said nothing explicitly about tax strategy patents.  Following the lower court’s decision in Bilski, the U.S. Patent and Trademark Office continued to grant tax strategy patents, and new tax strategy patent applications continue to be filed.  The U.S. Supreme Court issued its decision on Bilski, June 28, 2010,  which did not affect the issuance of tax strategy patents.  The AICPA continues to believe that a legislative solution is essential to resolving this problem.

    History and Status of Legislative Action

    In the 110th Congress, the House of Representatives included a ban on tax strategy patents in the major patent reform bill that passed the House, 220-175.  Unfortunately, that bill did not become law.   In addition, Representatives Rick Boucher and Bob Goodlatte introduced freestanding legislation, H.R. 2365, to try to fix this problem.  In the Senate, in the 110th Congress, Senators Baucus and Grassley introduced freestanding legislation, S. 2369, which garnered 30 co-sponsors, including then-Senator Barack Obama. 

    In the 111th Congress, Representatives Rick Boucher and Bob Goodlatte re-introduced freestanding legislation, H.R. 2584, which garnered 45 co-sponsors.

    Copy of Legislation

    A copy of the bill is available on THOMAS.  The most recent version of the bill, and all Congressional actions, are available by searching for S. 139 or S. 23 by bill number.

    Issue Paper

    112th Congress AICPA Position on Patents for Tax Planning Methods

    AICPA Letters to Members of Congress

    September 6, 2011 AICPA Letter to all United States Senators

    February 10, 2011 AICPA Letter to House Judiciary Chairman Smith and Ranking Member Conyers

    February 2, 2011 National Coalition Letter to Senate Judiciary Chairman Leahy and Ranking Member Grassley

    September 28, 2010 Eighteen Organization Coalition Letter to Senators Leahy, Sessions, Baucus, Grassley, and Representatives Conyers, Smith, Levin, Camp, Boucher and Goodlatte

    October 20, 2009 Coalition Letter to Representatives Conyers, Smith, Rangel, Camp, Boucher and Goodlatte

    AICPA Media Articles

    March 8, 2011 Journal of Accountancy Article, Senate Passes Bill Addressing Tax Strategy Patents

    October 22, 2009 Journal of Accountancy Article, Coalition Urges Congress to Ban Tax Strategy Patents

    April 2008 Journal of Accountancy Interview, On Equal Terms: Rep. Rick Boucher tells why patents on tax planning methods run counter to public policy

    Other Documents and Links

    March 3, 2011 Floor Statement, Tax Patents Provision in Patent Reform Bill by Senator Charles Grassley

    May 20, 2009 Dear Colleague letter by Representative Rick Boucher

    September 9, 2007 Dear Colleague letter by Representatives Charlie Rangel and James McCrery


    A full list of co-sponsor is available on THOMAS.

    Outside Media Coverage

    March 9, 2011 InvestmentNews, Tax Strategy Patents May Be Headed for the Ash Heap

    March 8, 2011 AccountingToday, Senate Approves Tax Patent Reform 

    October 1, 2010 The Hill, On the Money, THE HILL's Finance & Economy Blog, Groups call for ban on tax patents by year end

    October 1, 2010 WebCPA, Unresolved Tax Questions Dog Lame Duck Session

    September 29, 2010 accountingWEB, Organizations ask Congress to ban tax strategy patents

    March 20, 2010 AL.com Press-Register Commentary, Your Word: No one should be able to monopolize strategy

    October 30, 2009 Pittsburgh Business Times Article, Accountants, consumer groups push for passage of legislation to eliminate tax strategy patents

    October 23, 2009 WebCPA Article, Patently Indefensible

    October 21, 2009 New York Times Economix Blog Article, Should You Be Able to Patent a Tax Strategy?

    Additional Resources
    AICPA Tax Patent Information web page

    Staff Contacts

    Diana Huntress Deem
    Senior Manager, Congressional Affairs

    Eileen Sherr
    Senior Technical Manager, Taxation

    For more information on this issue, see Tax Section's Tax Patents page.

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    Congressional and Political Affairs Advocacy

    Overview The AICPA monitors and advocates on legislative and other matters that affect the accounting profession. Working with state CPA societies and other professional organizations, the AICPA provides information to and educates federal, state and local policymakers regarding key issues.
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    Federal Law This page highlights the advocacy issues in which the Congressional & Political Affairs Team is advocating on behalf of the profession, and also those issues that the team has recently followed.
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    Cash Accounting Bipartisan Letter to the House of Representatives

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    Legislative Letters The American Institute of CPAs (AICPA) voices strong opposition to draft legislation that would limit the use of the cash method of accounting for pass-through entities and personal service corporations.
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    Article International Financial Reporting Standards (IFRS) set by the International Accounting Standards Board (IASB) in London is a response to worldwide demand from regulators, investors, businesses, and auditing firms for a single set of high-quality, globally-accepted accounting standards.
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    Comment Letter AICPA comments on the SEC's proposed new Regulation Crowdfunding under the Securities Act of 1933 and the Securities Exchange Act of 1934 to implement the requirements of Title III of the JOBS Act as published in SEC File No. S7-09-13.
    Published on February 06, 2014

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    Article AICPA provided a Statement for the Record to the Senate Homeland Security and Government Affairs Committee in  response  to the hearing held on January 14, 2014 entitled, "Examining Conference and Travel Spending Across the Federal Government."
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    Published on January 07, 2014

    ERISA Fiduciary Definition - Appraisers of Employee Stock Ownership Plans

    Article The AICPA believes that the U.S. DOL should implement rules that would require appraisers of ESOPs to meet minimum qualification requirements, including holding relevant credentials and training, and comply with applicable professional valuation standards.
    Published on December 30, 2013

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