US Congressmen Brad Sherman (D-Calif.) and Stephen Lynch (D-Mass.) have implored the US Treasury and Internal Revenue Service (IRS) to urgently curb “major tax evasion.”
The request follows Treasury’s announcement that cryptocurrency brokers need not track customer transactions until it revised broker reporting regulations included in the Infrastructure Investment and Jobs Act.
Congressmen Urge IRS to Prioritize Broker Definition
The lawmakers argue that brokers need the new laws to comply with filing requirements for the 2023 financial year. The Office of Management and Budget’s Office of Information and Regulatory Affairs reportedly completed its review of planned regulation in February.
“The cryptocurrency industry had all of 2022 to prepare for the infrastructure law’s tax reporting requirements, and now it apparently gets off.”
The laws require brokers to track and report crypto transactions to the US IRS.
The original Infrastructure Bill would have earned the US government over $30 billion from crypto taxes in a decade. Senator Cynthia Lummis (R-Wyo.) and Pat Toomey (R-Pa.) opposed the bill’s broad definition of a crypto broker.
Time will tell whether the new crypto tax rules will further disincentivize the US crypto industry.
A mining excise tax, which for now appears to have been axed, together with the crypto broker rule, could have made mining unprofitable in the US.
Already, China has partially recovered to house one-fifth of the global hashrate, encroaching on the 38% US miners currently enjoy.
Sentiment around the industry is souring after the US Securities and Exchange Commission (SEC) sued the largest US exchange Coinbase for operating as an unregistered broker-dealer.
Bitcoin reserves at US exchanges have also fallen below international rivals. Coinbase CEO Brian Armstrong said he would consider Coinbase leaving the US if regulations remained murky.
Sparse US Case Law Defines Crypto Tax
Until the US Treasury and IRS promulgate revised regulations, rules around crypto tax are primarily built on 2014 guidelines and case law. The IRS taxes digital assets like property.
In 2021, Tennessee couple Joshua and Jessica Jarret sued the IRS for taxing them on self-generated crypto staking rewards. The couple refused a refund.
Instead, they asked the court to grant assurance the IRS would not similarly tax them in the future. The court rejected the request, rendering the case moot.
Case law also fully determines federal attorney-client privilege associated with tax advice.
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