Should Tax-Saving Schemes be Patented?

“To the extent that anything positive can be said about [tax strategy patents],” Gigi Sohn wrote last fall, “it is that these patents are so jaw dropping that it might actually cause some movement in the stalled attempt to reform patents in Congress. Seems like the accounting and tax legal professions may soon join their brethren in the tech and financial communities to bring an end to the endless cycle of silly patents that limit innovation and commerce.”

Now that's what seems to be happening, writes Tom Herman in The Wall Street Journal's Tax Report (subscription).

Pressure is mounting on Congress to restrict government issuance of patents for tax-planning strategies. Critics say these types of patents can raise troublesome issues for taxpayers. In addition to checking out whether a proposed technique is legitimate, taxpayers also may need to find out if someone holds a patent on the idea. Otherwise, they could get sued -- as one man was last year in Connecticut. Recently, influential groups of accountants and lawyers have stepped up efforts to limit or ban patents on tax-related ideas.

The American Institute of CPAs has urged Congress to restrict tax strategy patents. Either there should be outright restrictions on issuing such patents or, “at a minimum, taxpayers and tax practitioners be made immune from liability for tax strategy patent infringement.”