New House Financial Services Committee chair wants to delay crypto tax changes

December 16, 2022 Coin Telegraph

Coin Center

U.S. Republican Representative Patrick McHenry called for clarification on a “poorly” written digital asset tax provision in a letter to the Treasury.

The incoming United States House Financial Services Committee chair, Patrick McHenry, wants the Treasury to delay implementing a section of the Infrastructure Investment and Jobs Act that deals with digital assets and tax collection.

McHenry sent a letter on Dec. 14 to U.S. Treasury Secretary Janet Yellen with questions and concerns about the scope of Section 80603 of the act. In the letter, he requested clarification over the “poorly drafted” and potentially privacy-compromising section that deals with the taxation of digital assets, scheduled to go into effect next yea.

He said the section requires the government to treat digital assets as the equivalent of cash for tax purposes, which could “jeopardize” the privacy of Americans and hamp innovation.

The section, called "Information Reporting for Brokers and Digital Assets," requires brokers to report certain information relating to dealing with digital assets to the Internal Revenue Service (IRS).

McHenry argues the section has been drafted badly and that the term “brokers” could be “wrongly interpreted” as applying to a wider range of people and companies than intended.

The Act contains a provision requiring individuals or entities engaging in a trade or business to report to the IRS any digital asset transactions that exceed $10,000.

The requirement was challenged earlier this year by Coin Center, a nonprofit advocacy group focused on blockchain technology, which filed a lawsuit against the Treasury arguing that the rule will impose a “mass surveillance” regime on U.S. citizens.

According to Fordham International Law Journal, the section is likely to impose reporting requirements on the major cryptocurrency exchanges that already have user information, including customers' names, addresses and social security numbers.

McHenry acknowledged it was a positive step forward to see the Treasury Department state that “ancillary parties” should not be subject to the same reporting requirements as brokers.

In February, U.S. Senator Rob Portman tweeted a letter from U.S. Assistant Secretary for Legislative Affairs Jonathan Davies that clarified that parties such as crypto miners and stakers are not subject to the new legislation.

McHenry's letter concluded by requesting the Treasury “immediately” publish the rules under the section and delay its effective date to give market participants time to comply with any new requirements.

It’s the second letter McHenry has sent to Yellen this year, having sent her a letter on Jan. 26 urging the Treasury secretary to clarify the definition of a broker.

Unchanged crypto tax bill will be put to a vote on Tuesday

August 9, 2021 Coin Telegraph

Coin Telegraph

Senate talks regarding the controversial crypto provisions to the U.S. infrastructure bill have ended without amendment, suggesting the original bill will be voted on come Tuesday.

The provisions aim to raise $28 billion for infrastructure funding through expanded digital asset taxation, and will impose broad third-party reporting requirements on any crypto firm deemed to comprise a “broker.”

On August 9, general counsel to Compound Finance, Jake Chervinsky, tweeted that the Senate had voted 68 in favor to 29 against ending debate surrounding the provisions, halting discussions until Tuesday’s final vote.

However, Chervinsky emphasized that the Senate could still pass an amendment to the bill by unanimous consent before the final vote.

Senate talks over the controversial cryptocurrency tax provisions to the U.S. infrastructure bill have stalled, with an unamended version of the bill set to be put to a vote on Tuesday.

Sunday night infrastructure bill update:

The Senate has voted 68-29 to end debate. We wanted a vote on the Wyden amendment first, or on a Wyden-Warner compromise, but no luck.

The Senate has to wait until Tuesday to do a final vote. They might still amend the bill before then. https://t.co/VFrmnZqOPQ
— Jake Chervinsky (@jchervinsky) August 9, 2021

The broad language used to define a crypto “broker” in the provision has sent shockwaves across the crypto industry, with analysts inferring that miners, stakers and other network validators, and software developers could be subjected to third-party tax reporting requirements despite failing to possess personal information on their counter-parties.

The crypto sector has thrown support behind an amendment proposed by Senators Pat Toomey, Rob Wyden, and Cynthia Lummis that would limit the definitional scope of crypto “brokers” to exempt miners, validators, and software developers from the provision. However, the majority of lawmakers are backing a competing amendment from Rob Portman, Mark Warner, and Kyrsten Sinema that would only exempt miners, proof-of-stake validators, and wallet providers from the bill.

Also Read: Treasury Secretary reportedly against amending crypto language in infrastructure bill

According to an August 8 Twitter thread from Lummis, both sides are now at an impasse over the 30-hour rule — which allows senators to consider a bill for up to 30 hours before voting on it.

Lummis asserted that while “some senators want to keep focusing on the infrastructure bill for 30 hours to raise awareness about its price tag,” Senate Majority Leader Chuck Schumer “wants to quickly vote in order to focus on other legislation, and won’t allow amendment votes unless that happens.” However, Lummis added:

“If we could vote on amendments I think the digital asset community would be pleased with the outcome.”

If passed by the Senate on Tuesday, the legislation would still need to clear the house before becoming mandated as law, giving further opportunity for the crypto provisions to be revised.

Lead Republican behind infrastructure bill negotiations supports crypto amendment

August 5, 2021 Coin Telegraph

Coin Telegraph

The senator's stance is somewhat surprising, given that he previously called the section on brokers in the proposed bill a “common-sense provision.”

Senator Rob Portman, one of the lead Republican voices for negotiations over an infrastructure bill in the United States Senate, said he supports an amendment clarifying the intent of a cryptocurrency provision.

In a tweet today, Portman encouraged his colleagues in the Senate to vote on an amendment proposed this week by Ron Wyden, Cynthia Lummis and Pat Toomey that suggests striking the definition of brokers in the infrastructure bill to no longer include developers, miners, or blockchain firms in the crypto space.

I agree with Senators Wyden, Toomey, Lummis that we can do more to clarify the intent of the cryptocurrency provision & the Senate should vote on their amendment.
— Rob Portman (@senrobportman) August 5, 2021

The senator’s stance is somewhat surprising given he has previously supported the language used in the bill, saying on Tuesday that the legislation “does not impose new reporting requirements on software developers, crypto miners, node operators or other non-brokers” and calling the section on brokers a “common-sense provision.” Ted Cruz, the junior Senator from Texas still under scrutiny for his alleged role in the Jan. 6 attack on the U.S. Capitol, also reportedly put forth an amendment to strike the provision.

The bill, HR 3684, includes funding for roads, bridges and major infrastructure projects, as well as proposes implementing tighter rules on businesses handling cryptocurrencies, expanding reporting requirements for brokers and mandating that digital asset transactions worth more than $10,000 are reported to the Internal Revenue Service (IRS). Majority leader Chuck Schumer is reportedly planning to attempt to keep the Senate in session — the government body is scheduled to be in recess from Aug. 9 — to vote on key amendments.

While the intent behind the bill seems to require crypto exchanges to report certain transactions, many lawmakers and opponents to the legislation immediately criticized the language, implying reporting requirements could potentially be extended to developers, node operators and miners.

According to digital rights advocacy group Fight for the Future, more than 9,000 activists have called to voice their support of the amendment proposed by Wyden, Lummis and Toomey. Industry membership body Global Digital Finance also said they would welcome the clarifying language, noting 114 signatories from the crypto and blockchain space had attached their names to a letter expressing support for the amendment.

Jeff Bandman, a board member of Global Digital Finance, said:

“Assuming the amendment is approved, it would serve to raise revenues from appropriate actors, promote regulatory certainty and allow innovators to continue to develop new financial products, many of which could enhance financial inclusion in the U.S., without fear of unwarranted tax liabilities.”

The amendment would require 60 votes to be added to the legislation. With Portman's support, the amendment may be more likely to receive Republican votes in a U.S. Senate split evenly along party lines.

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