Patently Bad Idea: Tax Strategy Patents

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Next week the Senate is expected to take up the patent reform bill which, as of today, includes a provision to prohibit patents on tax strategies. Opponents are expected to offer amendments to weaken the language or completely strip this provision from the legislation.

Since 1998, when a federal appeals court ruled that business methods could be patented, the U.S. Patent Office has granted more than 115 tax strategy patents and more than 150 applications are in process. The holders of these patents can charge a fee to taxpayers that use their strategies.

Citizens for Tax Justice joined other national organizations in a letter to the Senate Judiciary Committee to make sure the provision banning tax strategy patents stays in the bill. As Senator Carl Levin has noted, the primary rationale for issuing patents is to encourage innovation and "the last thing we need is a further incentive for aggressive tax shelters."

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