Americans for Tax Reform submitted a letter to Commerce Secretary Howard Lutnick opposing reports that the Department of Commerce is considering a new annual, value-based tax on patents.

The full text of this letter can be found here and below:

August 15, 2025

The Honorable Howard W. Lutnick

Secretary

U.S. Department of Commerce

1401 Constitution Avenue, N.W.

Washington, D.C. 20230

Dear Secretary Lutnick,

I write to express Americans for Tax Reform’s opposition to the US Department of Commerce’s reported consideration of a proposal to introduce an annual, value-based tax on patents.

According to reporting from the Wall Street Journal, Commerce Department officials are discussing charging patent holders 1% to 5% of their overall patent value, a proposal that could raise taxes on American businesses by “tens of billions of dollars” per year.

Such a tax increase would directly contradict the pro-growth, pro-innovation wins of President Trump’s One Big Beautiful Bill Act (OBBBA), particularly full expensing for research and development costs. It would also necessitate an expansion of IRS enforcement, weaken intellectual property rights, and discourage U.S. innovation.

Under our current patent system, patent holders pay fixed maintenance fees at 3.5, 7.5, and 11.5 years after patent issuance for the purposes of the U.S. Patent and Trademark Office’s (USPTO) “self-funding” model. Currently, the USPTO collects roughly $4.5 billion in fee revenue annually, and is one of the few “self-funded” federal agencies. A value-based tax on patent seeking would radically depart from the longstanding principal that the USPTO collects revenue only for the purposes of maintaining our patent system.

If adopted, the proposed value-based maintenance tax would represent a fundamental shift in U.S. patent policy, significantly increasing costs for patent holders that would be passed on to consumers in the form of higher prices while reducing the attractiveness of the U.S. patent system for innovators.

The OBBBA, President Trump’s signature legislation, permanently allows businesses to immediately deduct domestic research and experimental costs. This pro-growth tax cut allows American industry to outcompete China and Europe with lower taxation, less regulation, and greater innovation. The Council of Economic Advisors (CEA) released a May analysis examining the impact of President Trump’s tax plan. The CEA report found that permanently instituting full equipment and R&D expensing alone would increase long-run GDP up to 0.7 percent, investment up to 3.2 percent, and real wages and take-home pay up to $2,601.

A new tax on patents would undermine the benefits of R&D expensing by increasing costs for businesses maintaining patents, discouraging patent filings and leading to less innovation.

The implementation of a value-based patent tax would create an unworkable system in which the patent office would have to track every patent through its entire life, collecting the 1–5 percent every time it is licensed, embedded in a new product, or even sold.

This would require an expansion of IRS authority and enforcement personnel to put a government-set price tag on the value of a patent and then facilitate collection of the tax. Handing the IRS sweeping new powers stands in stark contrast to conservative efforts to roll back the IRS weaponization of the Biden Administration.

Republicans in Congress have rightly clawed back roughly $21 billion of IRS funding for increased enforcement from Biden’s misnamed Inflation Reduction Act. We must continue reining in the size and scope of the IRS and avoid handing the agency additional powers to harass and intimidate American households and businesses.

Americans for Tax Reform strongly urges the Department of Commerce to reject any effort to introduce a value-based tax on patents. We stand ready to work with you on policy that promotes President Trump’s pro-growth policies that increase American competitiveness and innovation.

Onward,

Grover Norquist

President, Americans for Tax Reform