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Two Senate bills that would prohibit patents on tax planning methods promise to have serious implications for high-net-worth clients and their advisors.
Without the prohibition, high-net-worth clients would be compelled to pay a license fee to a patent holder for using an investment strategy that may benefit their portfolios, says Dennis Belcher, a tax attorney and partner with McGuireWoods LLP in Richmond, Va. "Every individual should have the right to structure their affairs to minimize taxes. A client should not have to pay a toll charge to use a technique to pay his taxes," says Belcher, who testified in support of the House of Representatives legislation before a subcommittee of the House Committee on Ways and Means in 2006.
Belcher adds that a client and his advisor could also inadvertently violate a tax strategy patent, exposing the client to the risk of legal action by the patent holder for patent infringement.
Tax strategy patents could...