Congressional leaders are attempting to ascertain how they can capture billions of dollars in tax revenue from the cryptocurrency ecosystem, but have obviously not been able to agree on how it should happen. Despite recent approvals of a taxation infrastructure bill that includes cryptocurrency tax language, representative Anna Eshoo sent a letter to Speaker of the House Nancy Pelosi yesterday, relaying concerns about the controversial cryptocurrency tax reporting mandate.
In her letter, Eshoo requests that Pelosi amend the definition of cryptocurrency broker, claiming that miners, validators and wallet developers won’t be able to comply with the requirements. Additions to the bipartisan infrastructure deal made in the 11th hour saw some lawmakers propose a more wide-reaching cryptocurrency tax structure that, they hope, will give them another $28 billion in revenue. That structure adds new reporting requirements for any cryptocurrency company or organization deemed to be a “broker,” but the definition is very broad. Brokers, who would be required to report certain transactions to the IRS, are defined as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
Eshoo is only one of many lawmakers who aren’t happy with the language. Along with Senators Pat Toomey, Cynthia Lummis, Ron Wyden and others, she asserts that miners, stakers, validators, software developers and hardware manufacturers should not fall into this classification. She explains in her letter to Pelosi, a copy of which she published on Twitter, “In the decentralized system of cryptocurrencies, these individuals and entities do not know who the buyers and sellers are and would be unable to comply with the broker requirements.”
Fortunately, the final language of the bill has not yet been completely approved. The latest version still needs to be greenlighted by the full House, and the resistance to the wording could cause delays. Representative Tom Emmer, who’s behind the Security Clarity Act that was introduced last month, has circulated a letter along with his fellow Blockchain Caucus co-chairs to fellow representatives, urging updates to the bill. He asserts, “Cryptocurrency tax reporting is important, but it must be done correctly. We must prioritize amending this language to clearly exempt noncustodial blockchain intermediaries and ensure that civil liberties are protected.”
Eshoo isn’t opposed to taxing cryptocurrency, as she feels that tax evasion needs to be addressed. However, she asserts, “The House must amend the bill to meet this goal without stifling innovation in a nascent industry by imposing unworkable regulations.”
The bill was approved this past Tuesday; however, there was no clarification provided on cryptocurrency or other amendments after a single senator objected to the amendments being considered during the vote.