AICPA Urges Congress to Restrict Tax Patents

March 13, 2007

In response to concerns from state societies such as the VSCPA, and CPAs across the country, the American Institute of CPAs (AICPA) is urging Congress to restrict the issuing of patents on tax strategies.

In an October 6, 2006 letter to the AICPA and state societies, the VSCPA expressed serious concern about tax patents and encouraged those organizations to opposed the practice. On October 16, 2006, the AICPA issued an update on the issue, detailing its discussions with goverment officials and formation of a Tax Patents Task Force.

Now, the AICPA has sent letters to the U.S. House and Senate Judiciary Committees, House Ways and Means Committee and the Senate Finance Committee outlining the AICPA's opposition to this practice.

The AICPA's letters underscore the AICPA's belief that patents issued for tax strategies are "contrary to sound public policy because they undermine the integrity, fairness, and administrability of the tax system." The letters also state, "The conflict with Congressional intent highlights a serious policy reason against allowing patent protection for interpreting the law. Allowing patents on strategies for complying with any law or regulation is not sound public policy because it creates an exclusivity on interpreting the law."

The AICPA letters further emphasize that the "growing number of such patents will interfere with the voluntary tax compliance system." The AICPA says it would like to work with Congress to "develop and enact legislation to restrict the application of this type of patent as soon as possible."

In summary, the AICPA told Congress it believes that patents granted for tax strategies:

• Limit the ability of taxpayers to utilize fully interpretations of tax law intended by Congress.
• May cause some taxpayers to pay more tax than Congress intended and may cause other taxpayers to pay more tax than others similarly situated.
• Complicate the provision of tax advice by professionals.
• Hinder compliance by taxpayers.
• Mislead taxpayers into believing that a patented strategy is valid under the tax law.
• Preclude tax professionals from challenging the validity of tax strategy patents.

The AICPA has a new Web page devoted to the tax patent issue, available at http://tax.aicpa.org/Resources/Tax+Patents.

For more information on the VSCPA's position, contact VSCPA Government Affairs Director Erin Collins at (800) 733-8272.