Tax Strategy Patents
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.
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.
AICPA Letters to Members of Congress
- February 10, 2011 AICPA Letter to House Judiciary Chairman Smith and Ranking Member Conyers
- Feburary 2, 2011 National Coaltion 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
AICPA Press Releases
- Aptil 14, 2011 AICPA Writes House Judiciary Committee Chairman in Support of Patent Reform Bill Includes Provision to Stop Tax Strategy Patents
- March 9, 2011 Statement from AICPA President and CEO Barry Melancon on Senate Passage of Bill to Stop Tax Strategy Patents
- February 2, 2011 Coalition Urges Senate Judiciary Committee to Keep Tax Strategy Patent Provision in Patent Reform Act of 2011
- January 25, 2011 AICPA Applauds Senators Baucus, Grassley for Introduction of Legislation Putting a Stop to Tax Strategy Patents
- September 29, 2010 AICPA, U.S. PIRG Coalition Urges Congress to Ban Tax Strategy Patents Before Adjourning
- September 28, 2010 Coalition Urges Congress to Ban Tax Strategy Patents
- June 28, 2010 AICPA Renews Call For Congressional Action To Ban Tax Strategy Patents
- May 21, 2009 AICPA Applauds Introduction of Bill to Prohibit Tax Strategy Patents
- October 20, 2009 Coalition Letter Consumer and Taxpayer Rights Groups Seek Ban on Tax Patents
- October 20, 2009 Consumer and Taxpayer Rights Groups Seek Ban on Tax Patents
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?
- October 21, 2009 CCH Tax News Headlines, AICPA and Coalition of Tax, Consumer and Financial Groups Urge Ban on Tax Patents
Director, Congressional Affairs
Diana Huntress Deem
Senior Manager, Congressional Affairs
Senior Technical Manager, Taxation
For more information on this issue, see Tax Section's Tax Patents page.