Cryptocurrency tax reporting requirements in bipartisan infrastructure bill draw criticism
The Biden Administration supports the crypto reporting requirements, saying on Thursday that "tax evasion" in the cryptocurrency market needs to be addressed.
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The cryptocurrency provisions of the $1.2 trillion bipartisan infrastructure bill are drawing criticism from both sides of the aisle and sparking proposed amendments.
The latest version of the legislation includes IRS reporting requirements for brokers of cryptocurrency transactions.
The bill defines a cryptocurrency broker as "any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person." A broker who fits that definition would be required to report information about crypto transactions.
Under the legislation, cryptocurrency is considered a digital asset. The penalties in the bill range from $250 to $3,000,000 if a broker does not provide a payee with an information statement for reporting crypto transactions.
These new reporting requirements, if adopted, would generate an estimated $28 billion in revenue over 10 years.
"Congress should not rush forward with this hastily-designed tax reporting regime for cryptocurrency, especially without a full understanding of the consequences," said Pennsylvania Republican Sen. Pat Toomey, a member of the Senate's Banking, Budget, and Finance committees.
"By including an overly broad definition of broker, the current provision sweeps in nonfinancial intermediaries like miners, network validators, and other service providers," Toomey added. "Moreover, these individuals never take control of a consumer's assets and don't even have the personal-identifying information needed to file a 1099 with the IRS."
In response to the language in the bill, the Electronic Frontier Foundation argued "there is a clear and substantial harm in ratcheting up financial surveillance and forcing more actors within the blockchain ecosystem to gather data on users."
The "latest language can still be interpreted by Treasury to cover miners, lightning nodes, and the like," Jerry Brito, executive director of Coin Center, wrote on Twitter. "If that's not Congress's intent, there are easy fixes they can adopt. There's still time."
Toomey, Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Sen. Cynthia Lummis (R-Wyo.) introduced an amendment on Wednesday to change the definition of "broker" in the bill to exempt miners. The Competitive Enterprise Institute is backing the amendment.
"U.S. Treasury wants maximum flexibility to regulate and tax crypto as they see fit," Toomey tweeted after introducing the amendment. "Congress should not allow that to happen. We need to have this debate in public and in full, especially before potentially disruptive changes are made that push crypto overseas."
Wyden said the amendment will "ensure Americans pay the taxes they owe on cryptocurrency while also fostering innovation here at home."
"Our amendment offers a real, commonsense solution to this very real problem," he added.
Treasury Secretary Janet Yellen has reportedly been lobbying against Wyden, Lummis and Toomey's amendment.
A separate amendment introduced on Thursday by Sens. Mark Warner (D-Va.), Rob Portman (R-Ohio) and Kyrsten Sinema (D-Ariz.) would implement more narrow definition of broker in the bill compared to the Wyden, Toomey and Lummis amendment.
White House Press Secretary Jen Psaki said on Thursday that the Biden Administration wants to reduce "tax evasion" in the cryptocurrency market.
Psaki also said the White House supports the Warner, Portman and Sinema amendment.
In a tweet, Brito referred to that amendment as "disastrous."
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