In a vote that may have a wide-ranging effect on the accounting profession, House lawmakers voted 220-175 to overhaul patent rules and place a ban on tax-planning-method patents.HR 1908, the Patent Reform Act of 2007, primarily contains provisions that would make it harder to get patents and harder for companies to be sued for patent infringement. However, it also contains a provision that would protect accounting firms from lawsuits over tax-planning methods.
The bill defines a "tax-planning method" as a plan, strategy, technique or scheme designed to reduce, minimize or defer a taxpayer's tax liability. However, the bill did not include the use of tax preparation software or other tools used "to perform or model mathematical calculations or prepare tax or information returns."
In the House Judiciary Committee report on the bill, Congress noted that if tax strategy patents were allowed to proliferate, there could be a corresponding reduction in tax revenues. "Granting a government monopoly in the form of a patent that undermines another key federal function - the collection of revenue - seems peculiar, if not contradictory, and raises fundamental questions about the appropriateness of such patents," the report said. The committee also noted that both taxpayers and tax advisors could face patent infringement suits for using patented tax strategies.
A vote on the Senate version of the bill could come up before the end of the year.
The American Institute of CPAs hailed the passage of the act. "Our underlying concern with tax strategy patents is that they violate the core principle of equity that is the foundation of our voluntary tax system," said AICPA president and chief executive Barry Melancon in a statement. Melancon noted that 60 tax strategy patents had already been granted and 99 more were pending.
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