WASHINGTON – Sen. Chuck Grassley of Iowa with colleagues today introduced bipartisan legislation to prevent any individual or firm from being able to receive patents on tax strategies. The tax patent legislation also is included in the broad patent reform bill under review in the Judiciary Committee.
“Tax patents prevent taxpayers from being able to use certain tax strategies unless they’re willing to pay for them,” Grassley said. “It’s unfair for taxpayers to have to pay for these methods. Also, tax patents undermine a tax system based on voluntary compliance. Our legislation reins in the cottage industry of those trying to own tax planning strategies that should be available to everyone or that would encourage inappropriate tax avoidance.”
Grassley co-authored the Equal Access to Tax Planning Act, which was introduced today with Finance Committee Chairman Max Baucus and other senators. The bill also is included in the Patent Reform Act of 2011, which the Judiciary Committee will begin considering on Thursday. The patent legislation is described as offering a long-needed update of patent laws to preserve American invention and innovation, the cornerstones of the economy and job creation.
Grassley is outgoing ranking member of the Finance Committee, with jurisdiction over tax policy, and incoming ranking member of the Judiciary Committee. He remains a senior member of the Finance Committee.
The text of the tax patent legislation is available at http://finance.senate.gov/legislation/. Following is Grassley’s statement of introduction on the legislation submitted to the Senate record.
Senator Grassley Statement Regarding the Equal Access to Tax Planning Act
Mr. President, Senator Baucus and I first introduced a bill to ban patents for tax inventions in the 110th Congress. Since then we have worked with the leaders of the Judiciary Committee, the Patent and Trademark Office, the American Institute of Certified Public Accountants, industry, and members of the patent bar to perfect the language. I am pleased to introduce this new and improved bill today with Senators Baucus, Levin, Wyden, Bingaman, Conrad, Enzi and Kerry.
There are strong policy reasons to ban tax strategy patents. Tax strategy patents may lead to the marketing of aggressive tax shelters or otherwise mislead taxpayers about expected results. Tax strategy patents encumber the ability of taxpayers and their advisors to use the tax law freely, interfering with the voluntary tax compliance system. If firms or individuals were able to hold patents for these strategies, some taxpayers could face fees simply for complying with the tax code. And, tax patents provide windfalls to lawyers and patent holders by granting them exclusive rights to use tax loopholes, which could provide some businesses with an unfair advantage.
Tax strategy patents are unlikely to be novel given the public nature of the tax code. Moreover, tax strategy patents may undermine the fairness of the Federal tax system by removing from the public domain particular ways of satisfying a taxpayer’s legal obligations. The Equal Access to Tax Planning Act expressly provides that a strategy for reducing, avoiding or deferring tax liability cannot be considered a new or non-obvious idea, and therefore, a patent on a tax strategy cannot be obtained. This ensures that all taxpayers will have equal access to strategies to comply with the tax code. I encourage support for this bill.
