Friday, July 1, 2011

House-Passed Patent Reform Bill Bars Patents For Tax Strategies

On June 23, the House of Representatives by a vote of 304-117 approved H.R. 1249, the “America Invents Act.” This comprehensive patent reform bill would, among other things, prevent individuals or firms from being able to receive patents on tax strategies. The proposed language states that “any strategy for reducing, avoiding, or deferring tax liability, whether known or unknown at the time of the invention or application for patent, shall be deemed insufficient to differentiate a claimed invention from the prior art.”

H.R. 1249 is largely similar to S. 23, also titled the “America Invents Act,” which was approved by the Senate on March 8 by a vote of 95-5.

Both bills provide an exclusion for methods or software used solely to prepare a return or other tax filing, or to transmit or organize related information. However, H.R. 1249 also contains an exclusion for methods or software that are used solely for financial management, to the extent that such is severable from any tax strategy or contains no limits on the taxpayer's (or tax advisor's) use of any tax strategy.

After the July 4 recess, the House and Senate will have to reconcile their differing versions of patent reform.

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