Bill Introduced to Address Tax Strategy Patents


On January 25, Senators Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, introduced legislation intended to stop the granting of patents for tax strategies. The Equal Access to Tax Planning Act of 2011 (S. 139) would provide that “any strategy for reducing, avoiding, or deferring tax liability” is deemed to be “prior art” under patent law, and therefore not patentable.

The proposed legislation would apply to any attempt to patent a strategy to reduce tax liability under federal, state, local or foreign law. Similar language is included in the Patent Reform Act of 2011 (S. 23), also introduced on January 25.

“The AICPA strongly supports the legislation that Sens. Baucus and Grassley are introducing this week, and we applaud the decision by Sens. [Patrick] Leahy [D-Vt.], Grassley and [Orrin] Hatch [R-Utah] to include it in their comprehensive patent reform bill,” Barry Melancon, president and CEO of the AICPA, wrote in a letter to the chairmen and ranking members of the Senate Finance and Judiciary committees.

The AICPA has for several years opposed the issuance of patents for tax strategies. Specifically, the AICPA in letters to Congress and the IRS has expressed its concerns that allowing tax strategies to be patented:

  • Limits taxpayers’ ability to use fully tax law interpretations intended by Congress;
  • May cause some taxpayers to pay more tax than Congress intended or more than others similarly situated;
  • Complicates the provision of tax advice by professionals;
  • Hinders compliance by taxpayers;
  • Misleads taxpayers into believing that a patented strategy is valid under the tax law; and
  • Precludes tax professionals from challenging the validity of a patented strategy.

In a prepared statement, Grassley said, “tax patents undermine a tax system based on voluntary compliance. Our legislation reins in the cottage industry of those trying to own tax planning strategies that should be available to everyone or that would encourage inappropriate tax avoidance.”

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