Tax Strategy Patents

magnifying glass over the word patent

The AICPA supports efforts to stop the issuing of patents on strategies for complying with the U.S. tax code. The AICPA believes 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.

The AICPA strongly supports 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 supports a 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  the bill has been sent to the House for its consideration.

In addition to working with the Senate, the AICPA is currently working with Members of the House Judiciary Committee on this problem.  Both introduction of a freestanding bill and inclusion of a tax strategy patents provision in a larger patent reform measure are under consideration in that chamber and the AICPA hopes that both bills will be introduced soon.

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.

The AICPA urges Senators to co-sponsor S. 139.  Senators interested in supporting the bill should contact Senator Baucus (staff contact: Holly Porter) or Senator Grassley (staff contact: Theresa Pattara) to have their names added to the bill.

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

AICPA Letters to Members of Congress

AICPA Media Articles

AICPA Press Releases

Other Documents and Links

Co-Sponsors

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

Outside Media Coverage

Additional Resources


Staff Contacts

Mat Young
Director, Congressional Affairs
202.434.9273
myoung@aicpa.org

Diana Huntress Deem
Senior Manager, Congressional Affairs
202.434.9276
ddeem@aicpa.org

Eileen Sherr
Senior Technical Manager, Taxation
202.434-9256
esherr@aipca.org

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

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