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Patents on Tax Reduction Strategies a Problem
EsonLinji writes "The International Herald Tribune has an article about how some lawyers are realising that patents on tax reduction strategies (a business method) might be a problem. The article states that there are already 50 such patents with more on the way, and at least one lawsuit. Particularly worrying is the idea of needing a license to follow the law. Fortunately, some of the laws get that this is a problem. Tax patents, the lawyers wrote, amount to 'government-issued barbed wire' to keep some taxpayers from getting equal treatment under the tax code."
That line may not mean what you think it means.
No, you're 100% correct. The document you're referring to is http://www.capitolhillblue.com/artman/publish/arti cle_7779.shtml">"Just a goddamned piece of paper". And while some may say that this quote is only hearsay, actions speak far louder than words anyway.
I know you're just expressing frustration, but you're doing it in a very ridiculous way.
The reason we have so many laws is that people require clarity. Let's take for example, a paper that I am currently writing in law school. In essence, so and so was charged with a DUI, but there is sufficient evidence to show that he may have been entrapped. How do we know if he has been entrapped? There's a 2-part test. Was he induced into committing the crime, and was he predisposed to commiting it?
Do you see the problem? How do you define a term like inducement or predisposition? Most of the law on the books (well, case law at least) exists to define these words. Because without that definition, you will never know the standard to which you are being held.
Just my 2 cents, but of course you won't listen, since I'm going to be one of those lawyers you so despise.
Tax shelters, and other creative interpretations of the tax code, are the bane of the IRS's existence. In the late '90s and early '00s, a few accountants went overboard with their tax planning strategies and started selling them as if they were "products", not unlike the what the law firms appear to be doing today. As a result of their marketing of products called BLIPS, FLIP, OPIS, and SOS, KPMG ended up paying the IRS $456 million dollars in penalties. Since 2003, the IRS appears to have focused on cleaning up the accounting industry and the rules around "reportable transactions" (transactions with attributes common to tax shelters) and seems to have the accountants in check. It looks like it's time to turn their attention to the lawyers.
Just like the "confidential transactions" of the accounting industry, where the taxpayer isn't allowed to disclose the details of a transaction to others (presumably for intellectual property protections for the accountant), a lawyer holding a patent on a tax strategy will only serve to draw attention to the strategy and get the whole thing shut down.
Boring but informative:
From the IRS Publication 550 on reportable transations:
See also: Inside the KPMG mess
> have to go to certain places to file my taxes this year
> because otherwise that's a different kind of infringement,
> patent infringement - and it doesn't matter if I read the
> law myself and saw that this is possible
I'm as outraged as you, but patents don't apply to personal use, AFAICT. You can read patents all day and build devices in your private home. They only come into play when you start producing stuff for other people, usually commercial but gifts may be restricted.
So you can still do your own taxes using these strategies, but the various accounting firms are in trouble.
Fortune Magazine has 2 good writeups about this. They say "For tax-shelter touts, the patents are a potentially deceptive marketing tool: Just because a process is "patented" doesn't mean it's legal. "A patent carries with it no assurance whatsoever that the process will pass IRS muster," IRS commissioner Mark Everson told a congressional hearing in July. Giving patent protection to even legit tax strategies alarms many experts. "If you can patent an interpretation of the tax law, why not patent anyone's legal advice?" asks Carol Harrington, a lawyer with the firm McDermott Will & Emery in Chicago."
and
"'A patent carries with it no assurance whatsoever that the patented process, transaction or structure will pass IRS muster,' IRS Commissioner Mark Everson told a Congressional hearing in July. 'We are concerned, however, that taxpayers may be confused about this.'"
You can find the links to the articles here and here.
I made a completely accurate comment that gets modded down to -1 Troll, but the parent which made a completely false and defamatory comment about Bush is modded +5.
It's simply moderation abuse here. I challenge anybody to provide any credible evidence that Bush made the comment the parent posted. If you can't, please mod him Troll because that is the very definition of trolling. It's wrong that false statements are so easily modded up here.
No you can't. Patents apply to use of the patented invention, whether commercial or not. Take a look at 35 USC 271(a). There is an exception for experimental use, but it is extremely limited, and ordinary people who merely wanted to use the patented method would never win on that basis.
-- This and all my posts are in the public domain. I am a lawyer. I am not your lawyer, and this is not legal advice.
Disclaimer - I am a tax lawyer
We've been discussing this internally for a few months now. Looking at the patent applications involving tax, we saw three categories of items:
(1) claims on how to implement data tracking systems in order to pay taxes (think programs for calculating sales taxes depending on where the product is shipped).
(2) claims on automating how to think through the tax consequences of a business deal (wow, if you do it with a database rather than pencil and paper, that should be patentable, right?) Side note: The hard part is not the algorithm, the hard part is getting the data and keeping it up to date.
(3) claims on a certain sequence of transactions that are claimed to be non-obvious and achieve lower taxes than a different sequences of transactions.
These have all the same problems that the software industry is dealing with: Some of this stuff has been done for decades, but is not "obvious" to a patent examiner.
A lot of these seem to be filed for patent troll purposes - if the patent office grants the application, then the patent holder will show up at the big accounting firms and demand a payoff.
There are a couple of interesting additional twists when this stuff starts getting applied to things like tax law. The first relates to type 1 claims (e.g. data tracking implementations). Here is where we argue that the patent system should not be allowed to put roadblocks on people's attempts to follow the law (and we are not even talking about gaming the system, just trying to be legal).
The second tax law specific twist relates to telling the government about your new tax planning idea. A competent government would look at the idea, decide if it should be allowed, and if it doesn't like the idea, change the tax law even before the patent is granted. [Yes, you can argue whether the US has competent government, but hey, we can talk hypothetically.]
I generally agree that the patent system is broken, we've just found additional ways to demonstrate that fact.
If you think deeply enough, you will have no single direction for your outrage.
Check out http://www.uspto.gov/patft/class705_sub36t.html
Alot of these seem to be computerized systems to generate tax advantages for businesses or computer programs to determine a tax benifit. I wonder if anyone can find any 'outrageous' examples in here?
Fourteenth ammendment, section 4:
"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."