Tuesday, May 26, 2009

. . . Try and Try Again - Congress Makes Another Attempt to Ban Tax Strategy Patents

Representatives Rick Boucher (D - Va.), and Bob Goodlatte (R - Va.) introduced legislation last week aimed at prohibiting patents on "tax planning methods." Introduced on May 21, 2009, H.R. 2584 seeks to amend title 35 of the U.S.C. by adding the following:

(1) UNPATENTABLE SUBJECT MATTER.—A patent may not be obtained for a tax
planning method.

(2) DEFINITIONS.—For purposes of paragraph (1)—
(A) the term ‘tax planning method’ means 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;

* * *

(b) APPLICABILITY.—The amendments made by this section—
(1) shall take effect on the date of the enactment of this Act;
(2) shall apply to any application for patent or application for a reissue patent that is—
(A) filed on or after the date of the enactment of this Act; or
(B) filed before that date if a patent or reissue patent has not been issued pursuant to the application as of that date; and
(3) shall not be construed as validating any patent issued before the date of the enactment of this Act for an invention described in section 101(b) of title 35, United States Code, as amended by this section.


According to the American Institute of Certified Public Accountants, 77 tax strategy patents have been approved and the 129 that are pending "apply to a broad range of areas affecting regular taxpayers, including charitable contributions, estate and gift taxes, pension plans and deferred compensation."

Read/download H.R. 2584 here (link)

See:

"AICPA Applauds Introduction of Bill by Representative Boucher and Representative Goodlatte to Prohibit Tax Strategy Patents" (link);

"Congress Tries Again to Ban Tax Strategy Patents" (link)

See Also:

Wayne P. Sobon, "Business methods need patents " (link)

3 Comentários:

Carl said...

Instead of trying to define what a "tax strategy method" is and is not (a dubious undertaking at best), how about a more direct approach that better aligns with Congress' everyday duties:

Each time a tax reduction method is patented, thus presumably disclosing the existence of an unintended tax code loophole, Congress can modify the tax code to eliminate the loophole and make the patent worthless.

After a while, everyone would decide the whole game was pointless and stop trying to patent loophole exploitation methods.

Pat said...

So congress is finally in the same class as the casinos. Las Vegas can throw you out of a casino if you count cards during a blackjack game and congress will make it impossible to run software that exposes loopholes in the tax code. Silly tax payers and card players. Just send your money in.

TJ said...

Wait, so I buy a book online instead of at the local book store, which thereby "has the effect of reducing my tax liability", and that is unpatentable? Doesn't a very large number of business methods have "the effect of reducing . . . a taxpayer’s tax liability"? Not primary effect, not an effect without other business justification, but just effect when implemented.

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