Patenting taxes

In a posting a couple of years ago, I raised the issue of patents for tax strategies. Since then, the issue has been quietly percolating along. A ban on these types of patents (essentially a specific form of business process patent) was included in the House passed version of patent reform, but not in the Senate bill as reported out of the Judiciary Committee. Now an interesting coalition has written a letter to the House Ways and Means Committee asking that they move on a stand alone bill. The group is made up of consumer organizations, taxpayer rights groups and tax planners including the American Institute of Certified Public Accountants, the American College of Tax Counsel, the American Society of Appraisers, Citizens for Tax Justice, US PIRG, and Consumer Action (to name a few).

This may be a useful strategy. The talk in Washington right now is about some stand alone tax bills passing this year, such as a jobs creation tax credit and extension of the first time homebuyers credit. Even if a stand alone bill doesn’t pass, there are multiple avenues to enactment. There is the patent reform bill (which we continue to hear may be moving this year). The NY Times Economix blog also raises the question if the Administration’s tax simplification efforts will take is on as well. And there is the Bilski case before the Supreme Court on the broader issue of business process patent. With all these venues, something may finally be done about banning patenting tax strategies.

Thanks to Tax Prof Blog for highlighting this letter.

2 thoughts on “Patenting taxes”

  1. Would anyone want to patent a tax strategy anyway? In the UK, advisers (mainly the big accountants) are now required, much against their will, to register all their tax avoidance strategies with the government.
    The Treasury, of course, announces every six months a series of newly closed loopholes based on all the avoidance strategies they have been notified about.
    Of course if people really are filing these patents, then my intuition is proved wrong. But I would expect the IRS to be looking through all the new patents to work out what rules they should be changing: thus before a patent ever gets as far as being accepted, it should be useless.

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  2. IRS has gone out of its way to tell people that having a patent on a tax strategy does not mean that it is legal. Nonetheless, tax strategy patents continue – including the case a couple of years ago from Forbes — Taxing Question For White House:
    Is it a conflict of interest for President Bush’s top economic adviser to be listed on a patent that could help corporations reduce their tax bills?
    That’s what Edward Lazear, chairman of the president’s Council of Economic Advisers, may soon find out. Lazear is the co-inventor of a software program that allows companies to compare ways to optimize their tax savings. He and colleague Alexandre Ziegler, a finance professor at the University of Lausanne in Switzerland, formally filed an application with U.S. officials to patent their invention in October 2006–eight months after Lazear became chairman of the Council of Economic Advisers.

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