‘Forbes’: Donations of Patents

PRESS CLIPPINGS

The Internal Revenue Service is cracking down on companies that inappropriately claimed charitable deductions for donating “what could be clunker patents,” writes Forbes (October 17).

The magazine says the IRS has already denied $1-billion in patent deductions and is auditing another 50 companies that claimed $4.7-billion worth of contributions.

The first public fight over patent gifts involved Procter & Gamble, Forbes says. The company donated 50 patents in 1999 to the Milwaukee School of Engineering. The patents, for injection moldings, could have produced $1-billion annually if the moldings had been produced commercially, the company said, and it claimed a charitable deduction of $86.5-million. But the injection moldings never made it to market because advances in computerized machinery made them irrelevant, the magazine says.

The IRS said that, as a result, the patents were worth just $17-million, and it said that another $207-million in charitable patent deductions the company claimed were worth just $55-million.

The company paid the extra taxes, the magazine says, but now is suing for a refund because it says it based its deductions on independent appraisals of market value. But a patent expert told the magazine that the valuations “ignored the fact that if there had been corporate buyers ready to pay so much for patents, they would have been sold, not donated.”

Patent disputes are unlikely to continue for long, says Forbes. Congress last year limited the breaks companies can take for donations of patents, the magazine notes.

The article is available at http://forbes.com for a fee.