H.R. 2584, a Bill to Prohibit the Issuance of Tax Strategy Patents
KEY PERSON ACTION ALERT
Date: September 14, 2009
To: Federal Key Persons for All Members of the House of Representatives
From: Mark Peterson, Vice President, Congressional and Political Affairs
Subject: Please Contact Your Representative and Ask Him/Her to Co-Sponsor H.R. 2584, a Bill to Prohibit the Issuance of Tax Strategy Patents
Action Requested
We are asking Key Persons for the U.S. House of Representatives to contact their Member of Congress and ask him/her to co-sponsor H.R. 2584.
We ask that you do one or both of the following:
1) Make a phone call. If you know your Member personally, call him/her directly. Otherwise, please ask to speak to the Chief of Staff or Legislative Director. If you leave a message, please ask for a return call. A live conversation is the best way to ensure a positive response. (See Talking Points below for your call).
2) Write an email or fax a letter asking him/her to co-sponsor the legislation. (A sample letter is provided below.)
If your Member of Congress is already a co-sponsor of the legislation, please contact him/her and say thank you.
(The 8 current sponsors as of September 1, 2009 are at the end of this email.)
Thank you for your work as an AICPA Key Person to help make the profession’s views known to your Member of Congress.
Congressional Contact Information Available at: www.aicpa.org/advocacy
Here you can find the phone number and email for your Representative.
If you make a phone call, please send a brief note about the conversation to Mat Young on the AICPA Congressional and Public Affairs team. (myoung@aicpa.org or (202) 434-9273) Also, please let us know if the AICPA team needs to answer follow-up questions or provide additional information to a Congressional office.
Brief Background
The patentability of tax strategies is an on-going concern among tax practitioners and taxpayers. In 1998, the U.S. Federal Circuit Court of Appeals, in State Street Bank & Trust v. Signature Financial Group, Inc., held that business methods could be patented. Since then, 77 patents for tax strategies have been granted and over 120 patent applications for tax strategies are pending.
These patents affect all taxpayers and tax practitioners because they cover a broad range of tax planning strategies, including those relating to estate and gift tax, pension plans, tax-deferred exchanges, and deferred compensation. We expect many more tax strategy patents to be issued, directly targeting average taxpayers, in a host of areas including: (1) income tax minimization; (2) alternative minimum tax (AMT) minimization; and (3) income tax itemized deduction maximization.
The AICPA believes that taxpayers should be able to use any legally permissible way to comply with Federal tax law. Denying the public the right to use a certain form of compliance or charging them a royalty undermines fair and equal access to the tax code for taxpayers.
Last Congress, the House of Representatives passed a ban on tax strategy patents as part of a larger patent bill, the Patent Reform Act of 2007 (H.R. 1908). Section 10 of that bill incorporated language banning the issuance of patents for tax planning strategies and was based on a freestanding bill that had been introduced by Congressmen Rick Boucher and Bob Goodlatte. Unfortunately, that legislation (and our provision) did not become law last year.
In May 2009, Congressmen Boucher and Goodlatte re-introduced legislation on this subject, H.R. 2584, which the AICPA supports.
SUGGESTED TALKING POINTS FOR YOUR PHONE CALL
· I am calling today to ask you to co-sponsor H.R. 2584, a bipartisan bill by Congressmen Rick Boucher (pronounced Bouch-ER) and Bob Goodlatte (pronounced Good-LAT). This bill would stop the issuing of tax strategy patents.
· Since 1998, nearly 80 tax strategy patents have been issued and over 120 are pending before the Patent and Trademark Office.
· These patents cover everything from estate planning, real estate transactions, and charitable giving, to retirement planning and pension plans. We expect many more tax strategy patents to be issued, directly targeting average taxpayers, in a host of areas including: (1) income tax minimization; (2) alternative minimum tax (AMT) minimization; and (3) income tax itemized deduction maximization.
· It is unacceptable that someone can patent a way to comply with Federal tax law. Taxpayers and their advisers should be able to use any legal means available to comply with the law without being subject to lawsuits or paying royalties.
· Last year, the House passed a ban on tax strategy patents as part of a larger patent overhaul. That bill did not become law but there is a new freestanding bill that has been re-introduced this past May.
· There is wide-spread bipartisan support for action. President Obama was a co-sponsor of the legislation last year when he was in the Senate. The Senate bill he supported ended the year with 30 co-sponsors. And, it is noteworthy that last Congress 40 members – Democrats and Republicans - co-sponsored the bill in the House. Nina Olson, the National Taxpayer Advocate has also previously called on Congress to act.
· Please co-sponsor this bill today. You can contact Mr. Boucher or Mr. Goodlatte’s office directly to sign on to the bill. Your support is absolutely critical to solving this problem for taxpayers.
SAMPLE LETTER – FOR EMAIL OR FAX (REGULAR MAIL IS NOT ADVISED.)
Dear Representative:
I am writing to ask for your support to stop the granting of tax strategy patents by the Patent and Trademark Office. Please act now to co-sponsor HR. 2584, a bill by Congressmen Rick Boucher and Bob Goodlatte, which addresses this issue. As a CPA, I can tell you that tax strategy patents are a serious and growing concern both for taxpayers and their advisers. Unless they are banned, average taxpayers may find themselves being sued or forced to pay royalties just for trying to pay their taxes.
Last Congress, a similar bill (H.R. 2365) was introduced and a similar provision was included as part of the larger Patent Reform Act (H.R. 1908, Section 10) which passed the House. It is important to build off that precedent and finally resolve this growing problem.
There is simply too much at stake for taxpayers and their advisors to allow the patenting of tax planning methods to continue. I am extremely concerned about this problem for a number of reasons. In particular:
- The issuance of tax strategy patents continues to undermine the ability of taxpayers to pay their taxes in any legally permissible manner;
- The challenges of compliance and the legal jeopardy for taxpayers associated with tax strategy patents are severe and daunting;
- There is little doubt that tax planning method patents undermine lawmakers’ intent when our tax laws were passed;
- As long as patents for tax planning methods are allowed, it is quite possible that taxpayers will find themselves paying more than Congress intended;
- And finally, simply because the Patent and Trademark Office has issued a patent does not mean a tax strategy would be found to be legal by the Internal Revenue Service. A patent imparts a false sense of security about a particular tax strategy.
This proposal to ban tax strategy patents has shown broad and growing support among lawmakers. Last Congress, the freestanding House bill finished the session with 40 Members on the bill, and the Senate bill, sponsored by Senators Max Baucus and Charles Grassley, garnered 30 total co-sponsors, including then-Senator Barack Obama. The National Taxpayer Advocate, Nina Olson, has also previously called on Congress to act on this issue.
With your support, I firmly believe that we can solve this problem quickly. As a taxpayer and as a CPA, I am hopeful that you will co-sponsor the legislation and take on a leadership role in resolving this issue. Thank you for your consideration of this important matter.
Sincerely,
H.R. 2584 Cosponsors - as of September 1, 2009
Lead Sponsors:
Rep. Rick Boucher (D-VA)
Rep. Bob Goodlatte (R-VA)
Cosponsors:
Rep. Mike Conaway (R-TX), CPA
Rep. Lynn Jenkins (R-KS), CPA
Rep. Walter Jones (R-NC)
Rep. Brad Sherman (D-CA), CPA
Rep. John Spratt (D-SC)
Rep. Don Young (R-AK)