House Passes $1.2T Infrastructure Bill With Crypto Tax Provision
The U.S. House of Representatives voted in favor of a bipartisan infrastructure bill that contains a controversial cryptocurrency tax reporting requirement. With a final vote of 228-206, thirteen Republicans voted with the majority of Democrats in favor of the bill. Although, six Democrats voted against it.
The House voted to pass the bill late Friday night, fulfilling a key priority for the Biden administration amid controversy over whether an accompanying Democrat-led bill would also move forward. The Senate originally passed the bill in August after lawmakers shot down any attempts at amending the crypto provision.
The next step is for U.S. President Joe Biden to sign the bill. If signed, as is assumed, the bill would introduce new crypto-tax reporting requirements for U.S. citizens beginning in 2024.
The crypto industry voiced concerns about a tax reporting requirement within the bill that sought to expand the definition of a broker for IRS purposes. The reporting requirement would see all brokers report transactions under the current tax code – something that many consider flawed and unworkable. It also threatens future technological innovation.
The issue is that the definition of ‘borker’ is too broad, and as is would capture entities like miners and other parties that don’t actually facilitate transactions.
Another provision included in the bill to amend Tax code section 6050I has also raised fear in the crypto industry.
A crypto advocacy group called the Proof of Stake Alliance (POSA)–which counts Solana and Coinbase Custody among its members, published a report in September detailing an “overlooked” amendment to the tax code (Section 6050I) included in the infrastructure bill that makes it a felony to incorrectly report the receiving of digital assets.
Americans already report their crypto gains to the IRS as with any investment. But the POSA report argued that the bill will mean they’ll have to report holdings of any digital assets worth over $10,000 by including the identity and social security number of the actor making the payment. Failure to do so within 15 days constitutes a felony.
The amendment to Section 6050I could even be considered unconstitutional. The tax code currently obliges anyone who receives $10,000 in cash to report it to the IRS. With fiat money, this obligation is constitutional because a bank acts as a third party, but in the peer-to-peer world of crypto transactions, authorities would need a warrant under the Fourth Amendment, according to Coin Center Research Director Peter Van Valkenburgh.
The Treasury Department still has to explain how it plans to interpret the bill, and publish guidance spelling out how businesses or other entities will have to comply with it.
