New Law Removes Barriers for Taxpayers

Five-Year Push by AICPA Yields Protection from Royalty Fees and Lawsuits

September 16, 2011

New York (Sept. 16, 2011) – Taxpayers won a significant victory today with the enactment of the America Invents Act, a major patent reform measure that includes a provision to eliminate tax strategy patents fought for by the American Institute of Certified Public Accountants for more than five years.

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.