Federal lawmakers have drafted yet another bill that would ban the patenting of tax strategies and planning methods, a controversial practice among attorneys that has grown more popular in recent years.
Senate Finance Committee chairman Max Baucus, D-Mont., and ranking member Charles Grassley, R-Iowa, on Thursday introduced a bill that would prohibit the U.S. Patent and Trademark Office from granting patents for “common tax strategies and tax planning inventions.”
The grant of a patent allows the holder to exclude, for a limited time, others from making, offering for sale, using, or selling the invention in the U.S.
The patent office has granted 60 tax patents since 1998, with nearly 100 final decisions pending.
Most of the municipal bond-related patents granted cover to structured finance products, but bond attorneys have expressed concern that practitioners could seek patents on simple deal structures or financial tools.
The Treasury Department has said it worries patents could give tax shelter techniques the appearance of legitimacy.
In late September the department issued proposed regulations that would require taxpayers who enter into patented transactions to report their activities to the Internal Revenue Service.
Baucus and Grassley’s measure seeks to protect taxpayers and practitioners from incurring fees when they use routine tax strategies, and addresses fears that some tax patent applications are for tax shelters, the Senate leaders said.
“Taxpayers should not have to pay a toll charge or worry that they’re violating patent law when they try to file their tax returns,” Baucus said in a statement Thursday.
“Tax practitioners should be able to provide advice and services to their clients without paying a fee to the patent holder.” Grassley noted that tax patents “undermine the integrity and fairness of the federal tax system.” “Congress needs to level the playing field and improve options for taxpayers,” he said.
Sens. Carl Levin, D-Mich., Ron Wyden, D-Ore., Barack Obama, D-Ill., and Jeff Bingaman, D-N.M., are co-sponsors of the bill. Levin and Obama earlier this year introduced a bill, called the Stop Tax Haven Abuse Act, that similarly bar individuals from obtaining patents for tax strategies that minimize, defer, or avoid tax liabilities.
The House this fall approved a wider patent reform bill that included an amendment crafted from separate legislation previously introduced by Reps. Rick Boucher, D-Va., and Bob Goodlatte, R-Va.. It would also make tax planning methods unpatentable.