Key Takeaways:
- The new legislation seeks to clarify the digital asset reporting requirements signed into law as part of the 2021 Infrastructure Investment and Jobs Act.
- Senators argue that the broker definition in the bill is too “broad” since crypto miners/stakers can’t comply with the tax reporting requirements of a broker.
- The latest legislation introduced is the same text as the bipartisan amendment introduced 2021 August.
A bipartisan group of 5 U.S. senators is looking to make amendments to the 2021 infrastructure law that impose new tax reporting requirements on those facilitating crypto transactions.
On August 3, U.S. Senators Rob Portman (R-OH), Pat Toomey (R-PA), Mark Warner (D-VA), Cynthia Lummis (R-WY), and Kyrsten Sinema (D-AZ) introduced legislation to clarify the digital asset reporting requirements signed into law as part of 2021 Infrastructure Investment and Jobs Act.
The crypto industry has earlier also expressed concerns about a tax reporting requirement within the bill that seeks to expand the definition of a broker for Internal Revenue Service purposes. The reporting requirement would require all brokers to report transactions under the current tax code.
The Crypto industry worries the definition would be too broad, capturing entities like miners and wallet providers that don’t facilitate transactions. With this new legislation, U.S. lawmakers want to ensure the definition of a crypto “broker” for tax reporting purposes is not too broad.
Senator Toomey states that the bill signed into law in 2021 would impose existing reporting requirements on many people who don’t have the information needed to comply with them. “By clarifying the definition of a broker, our legislation will protect innovation by exempting miners, network validators, and other service providers from onerous and unworkable requirements” he added.
The 2021 amendment wanted services like mining and wallet providers excluded from reporting requirements since they do not take custody of other individuals’ cryptocurrency, nor can they comply with the reporting requirements of a broker. The amendment enjoyed strong bipartisan support last August, however, the Senate did not pass it owing to a procedural haul. The latest legislation introduced is the exact same text as the bipartisan amendment introduced 2021 August.
“Nothing in this section or the amendments made by this section shall be construed to create any inference that a person described includes any person solely engaged in the business of (A) validating distributed ledger transactions, without providing other functions or services, or (B) selling hardware or software for which the sole function is to permit persons to control private keys which are used for accessing digital assets on a distributed ledger,” the new legislation reads.
In a letter sent to multiple lawmakers, the U.S. Treasury also said the tax reporting requirements would only apply to parties with access to the transaction information that would need to be reported. Ever since the infrastructure bill was introduced, several representatives have called out the impractical definition of the crypto broker in the bill.
Earlier this year, 11 representatives, including Patrick McHenry (R-N.C.), Tim Ryan (R-Ohio), and Tom Emmer (R-Minn.), wrote a letter to the Secretary of the Treasury Janet Yellen seeking clarity on how the Infrastructure Investment and Jobs Act defines a broker. In the letter, the lawmakers proposed following a definition that avoids placing “unworkable customer reporting obligations” on entities and parties who do not, in fact, have customers, including crypto miners and stakers.
