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US Amendment Would Grandfather In Pending Tax Strategy Patents

Published Tuesday, 21st June 2011 02:22 am - © 2011 Dow Jones


By Kristina Peterson

Of Dow Jones NEWSWIRES

WASHINGTON -(Dow Jones)- An amendment filed by Rep. Jared Polis (D., Colo.) could double the number of patents issued for tax strategies--even if Congress passes a bill that would stop the practice entirely.

The amendment filed last week by Polis would grandfather in the roughly 160 pending tax strategy patents, even if the House votes later this week to stop the patent office from approving them in the future. The Senate has already approved a similar provision in its broad patent bill.

Tax preparers and consumer groups have eagerly anticipated the end of tax strategy patents, which they argue have made complying with the tax code more difficult and expensive.

The current bill would not touch the approximately 140 patents already issued to individuals or firms for devising methods of "reducing, avoiding or deferring" taxes, but would not permit any pending or future applications to be approved. There are 162 pending tax strategy patents as of late May, according to the American Institute for Certified Public Accountants.

Polis spokesman Chris Fitzgerald said the lawmaker agreed with the bill's approach to ending tax strategy patents, but felt that those who have already revealed their strategies should be protected.

"He is concerned that failing to grandfather pending applications places the applicants at a disadvantage, as they've already disclosed sensitive information in the process," Fitzgerald said.

But the tax preparer and consumer groups that have pushed opposition to tax strategy patents since 2007 aren't happy that the amendment could double the number of tax strategy patents that are ultimately approved.

The amendment "provides a loophole in meaningful legislation that finally has a chance of passing," said Nicole Tichon, executive director of Tax Justice Network USA, a nonprofit focused on closing tax loopholes and ending tax evasion.

Some critics contended that the amendment counters the spirit of the provision.

"Why, at the point that lawmakers have decided this is bad policy, create a loophole to double the number of tax patents out there?" asked Mat Young, director of Congressional and political affairs at the American Institute for Certified Public Accountants. Anyone applying for a patent faces the risk that the patent office may decide not to approve their application, he noted.

The provision in the current bill does not apply to patents for tax preparation software, such as Intuit Inc.'s (INTU) TurboTax.

-By Kristina Peterson, Dow Jones Newswires; 347-882-7215; kristina.peterson@dowjones.com

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