Tax News

CCH (cch.taxgroup.com) reports:

Tax professionals around the country are receiving warning notices that their tax- planning strategies could be infringing on patented inventions and methods, Mark Peterson, vice president of Congressional and Political Affairs for the American Institute of Certified Public Accountants (AICPA), told CCH on November 19. The AICPA has endorsed new legislation proposed by the leaders of the Senate Finance Committee to ban the patenting of tax strategies (Sen 2369; TAXDAY, 2007/11/16, C.2). "Taxpayers should not have to worry about infringing patents when preparing their tax returns. Neither should the tax professionals who prepare millions of returns each year," AICPA President and CEO Barry Melancon, said after the Senate bill was introduced.
Warning Notices
"Warning notices (about patent infringement) have gone out to CPAs," Peterson explained. These notices purport to tell the practitioner that the tax-planning strategy he or she is using is protected by a patent. The patent holder claims the exclusive right to use the tax strategy. Some patent holders have even sent out news releases alerting practitioners that a tax strategy has been "patented."
Sixty tax strategy patents have been issued by U.S. Patent and Trade Mark Office, Eileen Sherr, technical manager - taxation, for the AICPA, told CCH. "One hundred and one applications for tax strategy patents are pending."
Patents granted and pending cover a wide variety of tax strategies. Some of the strategies that have been patented are not "new." However, the individual applying for the patent is the first person to claim it as an "invention." Among the inventions that have been patented or are awaiting approval from the Patent Office are strategies involving Code Sec. 1031 through Code Sec. 1033 exchanges; a method of converting delinquent assets to revenue or cash flow; a process for creating a financial plan to fund college education; and a method for controlling the cash growth value of an insurance policy.
Two Bills
The Senate bill is similar to a ban on the patenting of tax strategies that has already passed the House as part of a comprehensive patent reform bill (HR 1908; TAXDAY, 2007/09/10, C.3), Sherr explained. The Senate bill would prohibit the U.S. Patent and Trademark Office from issuing patents covering tax strategies. "It's a straight-up ban" Peterson said. "The Senate bill covers foreign taxes, as well," Sherr added.
Peterson predicted that Congress will ultimately ban the patenting of tax strategies. "The outreach we've done on the Hill, specifically in the Senate, shows a lot of support." Influential senators from both parties have indicated their support for the bill. The ban could be attached to another tax bill or could be part of the overall patent reform bill working its way through the Senate.
Software
Another important distinction between the House and Senate bills is the exception for tax-planning software, Sherr explained. The exception in the Senate bill is narrower that the exception in the House bill. "The Senate bill would not cover mechanical tools," Sherr said. However, tax-planning software would be protected.
By George L. Yaksick, Jr., CCH News Staff