On Sept. 7, the House of Representatives
passed major patent reform legislation, which would
ban the issuance of patents on tax strategies. The
AICPA is a strong advocate of Congress’ work in this
The comprehensive patent reform bill
(HR 1908) also contains provisions unrelated to
patents on tax strategies, including measures to
improve patent quality and reduce costly litigation.
In the days prior to the House vote, the Bush
administration made its first formal statement on
the tax patent issue, stating it understands the
concerns surrounding the trend toward patenting tax
strategies and will work with Congress on a
The House Judiciary Committee,
which has jurisdiction over patent legislation,
issued its report on the patent bill, and it signals
that serious consideration is being given to the tax
patent issue on Capitol Hill. The report outlines a
number of concerns about the phenomenon of patented
tax strategies and their potential impact on the tax
system. Among those concerns, the committee wrote,
are the potential for lost revenue, the removal of
particular ways to satisfy legal obligations from
the public domain, and long-term damage to the tax
system. The report is available on the committee’s
Web site at http://judiciary.house.gov
. It is legislative report number 110-314.
In addition, in the first public statement from
major tax writers on Capitol Hill, House Ways and
Means Committee Chairman Charles Rangel, D-N.Y., and
ranking member Jim McCrery, R-La., sent a letter to
all their colleagues in the House urging support for
a legislative ban on these patents.
action now shifts to the Senate, where a bipartisan
group of senior senators from the Judiciary,
Finance, and Homeland Security & Government
Affairs committees are drafting a similar proposal
to ban patents on tax strategies. The senators have
expressed concern that tax patents interfere with
tax compliance and undermine the integrity and
fairness of our tax system.
could move in the Senate in one of several ways. It
could be attached as an amendment to the Senate’s
own patent reform legislation (S 1145), a measure
that the Senate Judiciary Committee approved in July
and does not include tax patents. Alternatively, it
could be introduced as a free-standing bill and
passed on its own or get attached to another piece
of legislation on the Senate floor.
Federal Housing Administration
(FHA) Overhaul Legislation
urgency to pass FHA reform legislation was given new
impetus by the recent problems in the home mortgage
market that have curtailed funding for home loans.
FHA officials have asked Congress to quickly enact
legislation to help the program compete more
effectively against subprime lenders that have cut
into the agency’s market share.
passed its FHA bill on Sept. 18. It includes several
features that enjoy widespread support, including
the risk-based pricing of mortgage insurance
premiums, a zero down payment provision, elimination
of the cap on Home Equity Conversion Mortgages, and
an easing of limits on the value of mortgages that
can be insured in high-cost areas.
bill (HR 1852) makes the financial statement audits
of FHA brokers and correspondent lenders voluntary
for five years, with the goal of encouraging more
brokers to sell FHA products. If a broker does not
get an audit, they must get a surety bond instead.
The bill would require the Government
Accountability Office to study the new provision’s
impact on default rates.
The AICPA strongly
opposes the congressional effort to remove the
audited financial statement requirement for mortgage
brokers originating FHA loans.
audit is the only tool the federal government has at
its disposal to ensure that the 7,500 mortgage
brokers and loan correspondents who wish to offer
FHA loans do so in accordance with all applicable
laws and regulations. These audits protect not only
the safety and soundness of the FHA, but homebuyers
as well. Without it, federal regulators may not
recognize the harm to both the FHA and consumers
until it is too late.
To satisfy the annual
reporting requirements, mortgage brokers and loan
correspondents must submit audited financial
statements that are in accordance with the GAO’s
Government Auditing Standards. HUD program managers,
in turn, use these audits to determine that
non-supervised mortgagees and loan correspondents
use internal controls to provide reasonable
assurance that FHA requirements are followed and
expend federal funds properly with supporting
At a time of rising defaults,
it is critical to both the FHA and its customers
that adequate supervisory processes remain in place.
The Senate Banking Committee approved its
version of FHA legislation on Sept. 19, and it does
not contain an audit provision. The next step is for
the full Senate to consider the bill, which it is
expected to do before the end of the year.
Senate Hearings Explore
Chuck Landes told a Senate panel on Oct. 25 that
debate should no longer focus on whether U.S. GAAP
converges with international accounting standards
but when. Landes, the AICPA’s vice president for
Professional Standards and Services, spoke during
hearings of the Senate Banking Subcommittee on
Securities, Insurance, and Investment that examined
Landes told the panel that the
AICPA supports the goal of creating a single set of
high-quality, comprehensive accounting standards for
public companies in preparation of transparent and
comparable financial reports throughout the world.
Subcommittee Chairman Jack Reed, D-R.I., said
everyone supports the goal of convergence, but
certain steps must be taken before it is achieved.
The SEC is weighing whether to allow U.S.
firms to report financial results using
International Financial Reporting Standards (IFRS)
rather than U.S. GAAP. The SEC’s concept release
comes on the heels of a proposed rule that would
allow foreign companies filing with the SEC to use
IFRS without reconciling to U.S. GAAP. The proposed
rule considers whether to require additional
disclosures from companies that are not required to
reconcile. The proposed rule is available at www.sec.gov/rules/proposed/2007/33-8818.pdf
. The comment period ended Sept. 24. The concept
release, issued in July, explores the possibility of
giving domestic issuers the alternative to report
using IFRS. The concept release is available at www.sec.gov/rules/concept/2007/33-8831.pdf
. The comment period ended Nov. 13.
Chairman Robert Herz suggested developing a
blueprint for coordinating and completing the
transition to IFRS agreed to by all major
stakeholders. The blueprint should identify the most
orderly, least costly and least disruptive approach
for a transition and should include target dates.
Lisa M. Dinackus is manager of
congressional affairs on the AICPA’s Congressional
& Political Affairs Team.