Lawmakers Cite Concerns With Proposed Regs Providing Guidance on Patented Transactions

We are writing to express concerns about the proposed regulations above affecting patented tax methods. It is our understanding that the proposed regulations would require separate disclosures be submitted with federal income tax returns by taxpayers who have participated in any tax planning method that has been issued a patent by the U.S. Patent and Trademark Office (PTO) or for which a patent application is pending.

It has been brought to our attention that the proposed regulations will impose substantial paperwork burdens on not only individual taxpaying Americans, but also the IRS itself. We are also concerned that based on this rule, individual taxpayers will be discouraged from calculating their taxes based on such patented methods.

In addition, the proposed regulations treat differently those who paid for a license to utilize the patented tax method and those who did not. As we understand it, those who properly paid for a license would be subject to the reportable transaction rules, while those who utilized the patented method without paying for a license would not be subject to additional reporting. If so, this treatment would unfairly punish those who properly sought and obtained a license to use the patented method and could encourage patent infringement.

Therefore we ask that the Department and the IRS carefully and fairly review the policy decision to require separate reporting of patented tax methods. Of course, we do not expect you to take any action that would be inconsistent with applicable rules, regulations, procedures, or ethical guidelines. Thank you for your consideration.