D.C. – “We Want It Both Ways”

This is a minor matter that rubbed me the wrong way. What do you think?

Last week, the Patent Office granted Chainbridge Software Inc. a patent on a method for identifying companies that are avoiding state income taxes by shifting income to low tax states or foreign subs in non-arm’s length transactions, and estimating the amount of state tax underpayments.

I guess it is hard to argue with this. Every state is starved for revenue these days. A software program that would help maximize that income seems like a good idea, right?

But while the good old Patent Office is hard at work on behalf of Chainbridge and those state tax revenue folks the House and Senate are pushing hard on new legislation. They are pushing for passage of a new law, H.R. 1249, S.23.

So what is the intent of the new law?

It would prohibit patents on strategies to avoid, reduce or defer federal, state, local or other taxes.

The word “ludicrous” comes to mind. Software to collect taxes get patent protection while software that would minimize taxes is made illegal. The folks in Washington are trying to have it both ways. And they will succeed.

I can’t think of a better example as to why we should rip up the tax code and do something dramatically different. The system is a joke.