VSCPA Urges AICPA, State Societies to Oppose Patenting Tax Advice

October 6, 2006

UPDATE: On October 16, the AICPA released an update detailing its efforts to curb tax patents.

The U.S. House Ways and Means Committee has held recent hearings to investigate patenting certain tax advice strategies. In the past, the U.S. Patent and Trademark Office has issued patents for "business methods," including tax reduction strategies, particularly in the areas of estate and gift taxation.

The VSCPA has serious concerns about patenting such strategies and has determined that the practice is bad public policy. In an October 6, 2006 letter to Leslie Murphy, chair of the American Institute of CPAs (AICPA), the VSCPA urges the AICPA and state societies to oppose tax patents.

In the letter, the VSCPA offers background information on the patenting of tax advice and investigates the ramifications of those patents on public policy and tax practitioners. Tax patents raise several issues, including:

• Who would determine which patent applications should be granted? In the past, the U.S. Patent Office has not been required to employ the tax experts who would be necessary to make those decisions.
• The Internal Revenue Code is a public domain set of laws, available to anyone. Therefore, anyone could read the Code and determine his or her own appropriate tax strategies.
• If tax patents were in place, taxpayers would have to choose between paying a royalty fee to the patent holder or paying a higher tax bill than required by law.
• If tax patents were in place, it would be the taxpayer's responsibility to determine if they were using a patented strategy — or risk violating patent law. However, sufficient information is not available in the U.S. Patent Office database to determine the exact specifics of a tax advice patent award.
• Even if a patent were granted by the U.S. Patent Office, there would be no guarantee that the tax strategy is legitimate and would not be challenged by the Internal Revenue Service.
• CPAs are held to strict client confidentiality standards, and would therefore be in an indefensible position if challenged by a patent holder.
• Tax patents could potentially prevent CPAs from adhering to certain AICPA standards, particularly in a situation where the patent holder obtains an injunction against the practitioner.

For more information on the VSCPA's position, contact VSCPA Government Affairs Director Erin Collins at (800) 733-8272. Stay tuned to the VSCPA Web site for up-to-date information on this important issue.