crypto tax proposal
The U.S. Treasury delivered a new proposal for comment on Friday that could raise the bar for crypto business interests dealing in crypto. They’ll need to deliver tax reporting information to the consumer and the government.
The U.S. Treasury press release reads: “Under current law, taxpayers owe tax on gains and may be entitled to deduct losses on digital assets when sold, but for many taxpayers it is difficult and costly to calculate their gains. These proposed rules require brokers to provide a new Form 1099-DA to help taxpayers determine if they owe taxes, and would help taxpayers avoid having to make complicated calculations or pay digital asset tax preparation services in order to file their tax returns. These regulations align tax reporting on digital assets with tax reporting on other assets, and, as a result, avoid preferential treatment between different types of assets.” Read the release.
The new rules which would take effect for the 2025 tax year will be under a comment period until the end of October. The Biden-Harris Administration’s implementation of the bipartisan Infrastructure Investment and Jobs Act (IIJA) is used as the catalyst for the new rules as well as the need to address “tax cheats” and, on the other hand, the unique complexity consumers encounter with digital asset tax reporting.
The Wall Street Journal reports, “The long implementation timeline for the new rules means the government is giving up on some revenue in 2023 and 2024 while allowing exchanges time to build the required tax-compliance systems. Officials said they also want input from industry officials and investors; the rules ask for comment on 51 separate items.” Read the WSJ coverage.
crypto tax proposal – reaction
House Financial Services (HFS) Chair Patrick McHenry (R, NC) was quick to slam the new rulemaking for what he saw as its broad overreach – going around Congress – and concluding, in part: “… The Biden Administration must end its effort to kill the digital asset ecosystem in the U.S. and work with Congress to finally deliver clear rules of the road for this industry. I look forward to advancing my bipartisan solution—the Keep Innovation in America Act [H.R.1414]—to fix these misguided reporting requirements.” Read the release on the HFS website.
Miller Whitehouse-Levine, CEO of DeFi Education Fund, expressed deep misgivings in his initial take about the new rulemaking. He tweeted about the new Treasury proposal and the definition of “broker” contained in the 2021 Jobs Act: “…it makes sense both of these rulemakings ended up being so overly broad because they are attempting to find third-parties responsible for effectuating transactions on behalf of others where there aren’t any, as the proposal itself (correctly) notes.” Read his Tweet thread.
Jason Schwartz, a digital assets lawyer at Fried Frank, urged the industry to respond to the proposed “egregious rules” and noted the impact on web publishers and developers: “The proposed regs’ definition of digital assets middleman would turn website developers into brokers if the websites “facilitate” digital asset sales. That’s bad law and bad policy.” Read his entire Tweet thread.
crypto tax proposal – Senate
Not to be forgotten in this new proposed rulemaking by U.S. Treasury are in-process efforts by Senate Finance Committee Chair Ron Wyden (D, OR) and Ranking Member Ranking Member Sen. Mike Crapo, (R, ID).
As we reported in mid-July, the two Senators reached out to the industry regarding crypto tax regulations and the appropriate treatment under federal tax law. Comments are due by September 8. And as a prelude, the Joint Committee of Taxation has prepared a report on “Selected Issued Regarding The Taxation of Digital Assets.” Download it (PDF).
How the Senate bipartisan effort collides or coalesces with the Biden Administration’s interests remains to be seen. The Committee appears well-positioned to provide a solution and/or compromise with the Biden Administration given the Wyden-Crapo partnership.
Peter Johnson, Co-Head of Venture at Brevan Howard Digital, announced the publication of a new report last week containing facts and figures on stablecoin momentum worldwide. He offers his Top 10 takes on the report on X beginning with “1) In 2022, stablecoins settled over $11tn onchain, dwarfing the volumes processed by PayPal ($1.4tn), almost surpassing the payment volume of Visa ($11.6tn), and reaching 14% of the volume settled by ACH and over 1% the volume settled by Fedwire.” Read his Tweet thread.
If you want the PDF report, click here (an email address required).
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