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.
“Tax strategy patents are the equivalent of private tollbooths that block tax compliance options and could cost Americans more money,” said Barry Melancon, president and CEO of the AICPA. “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.