posted on:  7/30/2006     revised: 3/9/2010

The U.S. Patent Office issued seven patents for tax planning strategies last year, boosting the total to 49 such patents issued over the past decade.  Imagine how this would work:  I know of a way for you to reduce your taxes but I won't tell you because that would be patent infringement.  You might get this advice from another tax adviser, but only if you agree to pay a royalty fee first based on the amount of money that you save.  Ridiculous!  Imagine that this were medical advice instead of tax advice; would the public tolerate this position?  Absolutely not.

Advocates of these patents argue that certain tax planning strategies require significant research and development and then consume an enormous amount of legal fees during testing in the legal arena.  Protecting the rights of the developers spurs innovation. 

Opponents say that it is unprofessional to restrict the free flow of advice.  This side appears to be winning the argument.  A growing list of attorneys and tax advisers feel that it is should be illegal to monopolize the methods in which a taxpayer can legally reduce their taxes.  Yet it appears that the Patent Office will change its procedures only if required to do so by Congress. 

By the way, the IRS makes it clear that the existence of a patent is not relevant in determining whether or not a tax strategy is legal or will be allowed by the IRS.  For that opinion, you might have to pay again.

keywords:   Tax planning, financial advice

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Copyright 2010 by Tony Novak. Originally produced and published for the "AskTony" column syndication prior to 2007. Edited and independently republished by the author in March 2010. All rights reserved.