AICPA position on patents for tax strategies.

• Author: Sherr, Eileen

The AICPA and its members have extensive experience in rendering advice to taxpayers on tax planning and compliance matters. From this unique vantage point, the AICPA has considered the broad effect of tax-strategy patents on taxpayers, professional tax advisers and the public interest.

Background

The patentability of tax strategies is a growing concern among tax practitioners and taxpayers. In 1998, the Federal Circuit, in State Street Bank & Trust v. Signature Financial Group, Inc., 149 F3d 1368, held that business methods could be patented. Since then, 51 patents for tax strategies have been granted; as of Feb. 28, 2007, 83 patent applications for tax strategies were pending.

These patents have already been granted in a variety of areas, including the use of financial products, charitable giving, estate and girl tax, pension plans, tax-deferred exchanges and deferred compensation. The AICPA expects many more tax-strategy patents to be issued, directly targeting average taxpayers in a host of areas, including income tax, alternative minimum tax and itemized-deduction maximization. (For more details on this subject, see Hoops, DC Currents, "Tax-Strategy Patents and the Tax Gap," p. 290, this issue.)

AICPA's Position

The AICPA believes that patents granted for tax strategies:

* Limit taxpayers' ability to use fully interpretations of tax law intended by Congress;

* May cause some taxpayers to pay more tax than Congress intended and some to pay more tax than others similarly situated;

* Complicate the provision of tax advice by...