The latest proposal from a group of House Democrats seeks to change how updates to the tax code affect crypto entities “who do not engage in brokerage services.”
Lawmakers from both sides of the aisle are fighting back against changes to tax reporting rules for crypto brokers and transactions over $10,000 in the newly passed Infrastructure Bill.
Ten U.S. Democratic Congresspeople led by Rep. Darren Soto from Florida called for revisions to the definition of a broker in the infrastructure bill that was passed into law on Nov. 15.
The group issued an open letter, signed by Soto along with Representatives Ro Khanna, Stacey E. Plaskatt, Eric Swalwell, Tim Ryan, Susan Wild, Marc Veasy, Jake Auchincloss, Al Lawson, and Charlie Crist calling for updates to section 6045(c)(1) in the tax code under the Bipartisan Infrastructure Framework (BIF).
Experts warned that the contentious new rule could see miners, validators, and wallet developers considered as brokers for tax purposes. The letter calls on House Speaker Nancy Pelosi to exclude this group on the grounds that they do not engage in brokerage services.
We stand united to ensure more tax certainty for #cryptocurrency and work with the IRS on key reforms. Together, we will continue to support innovation and protect consumers. pic.twitter.com/xu1Dj2GAqD
— Rep. Darren Soto (@RepDarrenSoto) November 16, 2021
The letter also addresses concerns over negative market effects and how the United States will sustain its rate of technological innovation if the regulations remain unchanged.
“As it is written today, the BIF would increase uncertainty in the cryptocurrency industry, pick winners and losers, and thwart IRS efforts to accurately tax cryptocurrencies, all while ending our country’s competitive edge against other countries on the digital asset marketplace.”
Senators are also pushing to amend the tax reporting requirements in the BIF. As reported by Bloomberg, Democrat Senator Ron Wyden and Republican Senator Cynthia Lumis submitted a bill proposal which they say protects American innovation, ensures Americans pay the taxes they owe, and “do not apply to individuals developing blockchain technology and wallets.”
Republican Senator Ted Cruz also introduced legislation on Nov. 16 to amend the tax code. He calls the new reporting rules a “devastating attack” on the cryptocurrency industry. His concerns echo some of those from the Democratic House Representatives that the current provision will stifle American innovation, and “endanger the privacy of many Americans.”
Senators as a whole are only now beginning to understand with greater depth how the cryptocurrency industry works. U.S. Congress Joint Economic Committee held a Nov. 17 hearing titled “Demystifying Crypto: Digital Assets and the Role of Government.” At this hearing, they discussed the complicated tax entities that should govern centralized exchanges, and agreed that privacy and security are top issues.