A bipartisan compromise amendment to the $1 trillion infrastructure bill regarding cryptocurrency tax reporting was rejected by the Senate on Monday.
The compromise amendment, presented by Sens. Pat Toomey, R-Pa., Cynthia Lummis, R-Wyo., Kyrsten Sinema, D-Ariz. and Rob Portman, R-Ohio, would have clarified the definition of a “broker,” who under the current provision text, will be required to report crypto gains in a type of 1099 form.
Currently, the bill defines a “broker” as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person,” which crypto advocates say is too broad. As written, it could potentially target miners, developers, stakers and others who do not have customers and therefore wouldn’t have access to the information needed to comply.
In the compromise amendment, the definition of a “broker” was clarified to exclude validators, like miners and stakers. The amendment received support from Treasury Secretary Janet Yellen.
However, the Senate did not vote unanimously, with Sen. Richard Shelby, R-Al., objecting. Because unanimous consent was required for the compromise amendment to pass, the original definition will remain.
Crypto advocates worry that without adjustment, this provision will stifle crypto innovation in the U.S. and push business overseas since it would potentially cause confusion and set up reporting expectations that are unable to be fulfilled.
“There is nobody that disputes that there is a problem here. We’re going to ask these people to provide information that they don’t have,” Toomey said after the objection. “[We’re] going to have to clean up a mess which we could’ve prevented.”
The Blockchain Association also expressed concern following the rejection: “As written, the infrastructure bill contains harmful IRS reporting requirements that many in the crypto ecosystem lack the capabilities to comply with. As a result, many crypto players will be forced to move overseas, leaving future jobs and economic growth on the table.”
The vote on the overall infrastructure bill is set to commence on Tuesday. Even if it passes, there will still be continued opportunities to alter any provisions, including the one on crypto tax, before it is signed into law.