America Invents Act, Including Tax Patent Ban, Passes Senate

Late Thursday night, the U.S. Senate passed HR 1249, the America Invents Act (PDF), including language to prevent the U.S. Patent and Trademark Office from issuing patents for tax strategy methods.

The bill, which passed by an 89–9 margin, is similar to a bill passed in June by the House of Representatives and will go to President Barack Obama’s desk for his signature.

Several amendments that would have sent the bill back to the House were defeated. The Senate had passed an earlier version of the bill in March.

The bill was sponsored by Senate Finance Committee Chairman Max Baucus (D-Mont.) and senior committee member Chuck Grassley (R-Iowa) and prevents any individual or firm from patenting tax strategies.

“Unfair patents can give a small number of people a stranglehold on tax strategies that should be open to anyone,” Baucus said in a statement. “This bill will bring fairness to the system, and it will deter the use of tax shelters to evade the responsibility we all share. Our ongoing tax reform effort will continue cleaning up the code, and it can create jobs and be a major boost to our economy.”

The VSCPA has been active in its opposition to tax patents and recently sent a letter to all Virginia representatives urging them to support the America Invents Act.

Patents on tax strategies provide windfalls to lawyers and patent holders by granting them exclusive rights to use tax loopholes. If firms or individuals are able to hold patents for tax strategies, some taxpayers could face fees simply for complying with the tax code.

The U.S. Patent and Trademark Office began granting patents for tax-related inventions following a 1998 court ruling that a method of doing business may be patentable. Critics say such patents are unlikely to be novel due to the public nature of the tax code and undermine the fairness of the federal tax system by removing from the public domain particular ways of satisfying legal obligations.



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