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AICPA task force examines patenting of tax planning ideas
The patenting of tax planning ideas has become an emerging issue for tax practitioners. The AICPA Tax Division has been in discussions with government officials on the issue for the past year and formed a Tax Patents Task Force. We have alerted AICPA members to the issue in an Aug. 1, 2006 e-alert. If you have any comments on the issue, feel free to e-mail them to Esherr@aicpa.org.
As some background on the issue, since 1998, patents for "business methods" have been issued by the Patent and Trademark Office. A number of these patents (40 so far, with 60 more applications now being considered) have been issued for tax reduction strategies, particularly in the area of estate and gift taxation.
Recently, a wealth management company (Wealth Transfer Group LLC v. John W. Rowe; No. 3:06-cv-00024-AWT), filed a complaint in a U.S. district court for Connecticut, alleging that an individual infringed its tax strategy patent for establishing and managing grantor retained annuity trusts funded by nonqualified stock options. It is seeking an injunction and damages.
The issue was first discussed by AICPA Tax Division members with IRS officials in October 2005. Following that discussion, the Tax Executive Committee (TEC) considered the issue at their Feb. 2, 2006 meeting. The consensus of the TEC was the patenting of tax planning ideas was not a good idea and formed a task force to consider an appropriate response.
The AICPA Tax Patents Task Force is composed of both small and large firm members from many tax areas, including trust, estate and gift, partnership, S corporation, individual, international, and legislative and policy. The task force and its members have had several conference calls, including with the IRS person assigned to this issue and with a patent attorney who provided background on the patent process. At a June 19, 2006 meeting, the AICPA Tax Executive Committee approved participation in a joint multi-organization Tax Patents Task Force with the American Bar Association, American Bankers Association and American College of Trust and Estate Counsel.
AICPA staff and the AICPA Tax Patent Task Force Chair attended a July 13, 2006 congressional (House Ways and Means Select Revenue Subcomittee) hearing on the issue and provided informal background and input during a June 27, 2006 conference call with the Chief Counsel of the House Ways and Means Committee and other Hill staff prior to the hearing. Copies of the witness statements and a transcript of the hearing can be found here.
The AICPA's task force continues to consider this issue and its ramifications on tax practice and will be developing related tools and guides for members, which will be available here. If you would like to discuss this issue further or if we can be of further assistance, please contact Eileen Sherr, the AICPA technical manager staffing the task force, at esherr@aicpa.org or (202) 434-9256.
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