January 23, 2008

The Honorable Eric Solomon

Assistant Secretary (Tax Policy)

Department of the Treasury

Room 3120 MT

1500 Pennsylvania Avenue, N.W.

Washington, D.C. 20220

Ms. Linda E. Stiff

Acting Commissioner

Internal Revenue Service

Room 3000 IR

1111 Constitution Avenue, N.W.

Washington, D.C. 20224

Re:    Proposed Regulations Relating to Patents as Reportable Transactions Under Sections 6011and 6111 (REG-129916-07)

Dear Assistant Secretary Solomon and Acting Commissioner Stiff:

The American Institute of Certified Public Accountants (AICPA) is submitting comments on proposed regulations relating to patented transactions as subject to the disclosure rules for reportable transactions under sections 6011 and 6111 of the Internal Revenue Code. These proposed regulations: (1) add a patented transactions category to the reportable transaction regulations under Reg. section 1.6011-4; and conform changes to the rules relating to the disclosure of reportable transactions by material advisors under section 6111, and material advisors required to keep lists under section 6112.

The AICPA is the national professional organization of certified public accountants comprised of more than 350,000 members. Our members advise clients on federal, state and international tax matters, and prepare income and other tax returns for millions of Americans. Our members provide services to individuals, not-for-profit organizations, small and medium-sized businesses, as well as America’s largest businesses. The AICPA and our members have extensive experience in rendering advice to taxpayers on matters of tax planning and compliance. From this unique vantage point, we have considered the broad impact of tax planning method patents on taxpayers, professional tax advisers, and the public interest.

The AICPA has been in the forefront of the public discussion regarding tax strategy patents. We strongly oppose tax strategy patents because of the negative impact such patents have on taxpayers, tax professionals, and on tax administration. We believe that patents for tax planning methods undermine the integrity, fairness, and administration of the tax system and are contrary to sound public policy. The AICPA agrees with the Treasury statement in the proposed regulations that a patent for tax advice or a tax strategy might be interpreted by taxpayers as approval of the transaction by the IRS and Treasury, potentially impeding the government’s ability to obtain information about tax avoidance transactions.

The AICPA appreciates that Treasury is looking for ways to address the proliferation of tax strategy patents, as represented by the proposed regulations. We believe, however, that legislation is the best avenue for stopping the growth in tax strategy patents and their harm to tax administration.

In lieu of adopting the regime described in the proposed regulations, we recommend that Treasury and the IRS establish procedures to coordinate the review and analysis of tax strategy patent applications with the U.S. Patent and Trademark Office before patents are issued. This could be accomplished by requiring either: (1) the PTO to promptly notify the IRS when patent applications related to tax strategies are filed; or (2) that tax strategy patent applications be filed with the PTO and the IRS simultaneously. Alternatively, the IRS can closely monitor tax strategy patents as they are made public and designate potentially abusive ones as transactions of interest. If a reportable transaction regime for patents is deemed appropriate by Treasury, we offer several comments in an attempt to mitigate some of the disproportionate burdens we believe such regulations will impose on taxpayers and advisers.

The AICPA appreciates your consideration of these comments. If you have any questions, please contact me at jeffrey.hoops@ey.com; Michael P. Dolan, Chair, AICPA IRS Tax Practice and Procedures Committee, at mpdolan@kpmg.com; Justin Ransome, Chair, AICPA Tax Strategy Patent Task Force Regulations Working Group, at justin.ransome@gt.com; Benson Goldstein, AICPA Technical Manager at bgoldstein@aicpa.org; or Eileen Sherr, AICPA Technical Manager at esherr@aicpa.org.

Sincerely,

Jeffrey R. Hoops

Chair, Tax Executive Committee

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