24 Pages Posted: 18 Dec 2007 Last revised: 23 Jul 2009
The U.S. tax administration began a new era of enforcement by focusing on cloned tax shelters that were marketed by ambitious accounting and tax law firms to small groups of customers. That focus led to heightened transparency requirements - new disclosure rules, higher standards for tax reporting, and stiffer penalties. Even the courts, which had seemed reluctant to apply judicial doctrines to stop aggressive tax structuring, have appeared to grow new backbone in this age of stiffer enforcement expectations. Just at the time when it appears that the attention to tax shelter activity may reduce the amount of aggressive planning, the U.S. Patent and Trademark Office has thrown a wrench into the machinery by issuing a series of patents on tax planning strategies, after the State Street decision opened the way for business method patents.
The patenting of tax strategies may have significant effects well beyond the questions of royalties, liabilities for infringement, or difficulties of litigating against validity of a tax patent that are already the subject of discussion among tax practitioners and academics. There are concerns, in particular, that the ability to patent legal processes relating to tax liabilities may make it more difficult for taxpayers to comply with the law. This essay will briefly review the concerns raised by tax strategy patents, including ethical questions confronting practitioners who hold a tax strategy patent, the potential impact of tax patents on the development of the underlying tax minimization norm that this author has noted in earlier papers as a significant factor in tax shelter activity, and the anti-competitive effects of multijurisdictional tax strategy patents.
Suggested Citation: Suggested Citation
Beale, Linda M., Tax Shelters and the Tax Minimization Norm: How Does the Patenting of Tax Advice Transform the (Global) Playing Field. Journal of Law and Society, Vol. 9, No. 2, June/July 2008; Wayne State University Law School Research Paper No. 07-46. Available at SSRN: https://ssrn.com/abstract=1073152