The House has introduced a bill to ban patents on tax-planning methods and strategies after previous versions of the legislation died in the last congressional session.

The bill, which the American Institute of CPAs has lobbied for extensively, would effectively ban patents that keep taxpayers and practitioners from following strategies claimed by a company to save money on their taxes. Rick Boucher, D-Va., and Bob Goodlatte, R-Va., introduced the bill, H.R. 2584. Both are senior members of the House Judiciary Committee, which has jurisdiction over patent legislation. The co-sponsors are Walter Jones, R-N.C., John Spratt, D-S.C., and Brad Sherman, D-Calif.

In the previous Congress, language to prohibit tax strategy patents was passed by the House as part of H.R. 1908, the Patent Reform Act of 2007. A bill containing similar language on tax strategy patent prohibition, S. 2369, was also introduced in the Senate in the last congressional term by Senate Finance Committee Chairman Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, the ranking minority member of the Finance Committee, but the bill never went to the floor of the Senate.

“It’s almost identical to the House-passed version from the last session,” said AICPA senior technical manager Eileen Sherr. “It’s also very similar to the Senate version. It says, ‘methods’ instead of ‘inventions,’ but they mean the same thing.”

An older version of the bill introduced in 2007 by Boucher (pictured), H.R. 2365, provided immunity to enforcement of the patents against practitioners and taxpayers, and effectively made them unenforceable. The new bill prohibits the tax strategy patents from being issued, and is essentially the same provision as was in the Patent Reform Act in the previous Congress, according to Sherr. AICPA members visited the offices of their congressional representatives during the recent Spring Meeting of Council in Washington, D.C., and that was one factor behind re-introduction of the bill (see Council Goes to Washington).

“We need this bill so that U.S. tax laws will be applied equally to all taxpayers,” said AICPA president and CEO Barry Melancon in a statement. “Tax strategies that are patented by the U.S. Patent and Trademark Office can only be used by some taxpayers. That’s not fair and not how Congress intended the tax laws to be administered.”

Melancon noted that 77 tax strategy patents have been approved so far, and 129 are pending. They apply to a broad range of areas affecting regular taxpayers, including charitable contributions, estate and gift taxes, pension plans and deferred compensation.

For example, Melancon noted, a patent has been granted for the process of computing and disclosing the federal income tax consequences involved in the conversion from a standard IRA to a Roth IRA.

In the bill, the term “tax planning method” is defined as “a plan, strategy, technique, or scheme that is designed to reduce, minimize, or defer, or has, when implemented, the effect of reducing, minimizing, or deferring, a taxpayer’s tax liability, but does not include the use of tax preparation software or other tools used solely to perform or model mathematical calculations or prepare tax or information returns.”

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