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  • A Bi-Monthly Electronic Publication for Section Members
  • DECEMBER 2007

TE Article


Proposal to Prohibit Tax Planning Patents - S. 2369

By Rana H. Salti

McDermott Will & Emery LLP


On November 15, 2007, legislation was introduced in the Senate that would prohibit the issuance of any patents for tax planning inventions. The bill, S. 2369, was sponsored by Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA), along with Senator Carl Levin (D-MI), Senator Ron Wyden (D-OR), Senator Barack Obama (D-IL), and Senator Jeff Bingaman (D-NM).

S. 2369 would amend Section 101 of Title 35 of the U.S. Code to prevent the grant of patents for any tax planning inventions. “Tax planning inventions” are defined in S. 2369 as “a plan, strategy, technique, scheme, process, or system that is designed to reduce, minimize, avoid, or defer, or has, when implemented, the effect of reducing, minimizing, avoiding, or deferring, a taxpayer’s tax liability or is designed to facilitate compliance with tax laws.” A tax planning invention does not include “tax preparation software and other tools or systems used solely to prepare tax or information returns.”

If successful, the amendments of S. 2369 would apply to any applications for patents or reissue patents that are filed after the date of the enactment of S. 2369. In addition, the amendments would apply to any pending applications for patents or reissue patents.

Senator Baucus noted that “[ t]axpayers should not have to pay a toll charge or worry that they’re violating patent law when they try to file their tax returns. Tax practitioners should be able to provide advice and services to their clients without paying a fee to the patent holder.”

S. 2369 follows the House of Representatives’ efforts to prevent the issuance of tax planning patents. On September 7, 2007, the House passed the Patent Reform Act of 2007 (H.R. 1908) that included a provision making tax planning methods unpatentable. The provision includes a slightly different definition of tax planning method, providing that a tax planning method “does not include the use of tax preparation software or other tools used solely to perform or model mathematical calculations or prepare tax or information returns .”

S. 2369 has been referred to the Senate Judiciary Committee for further review.



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