What impact will the passage of the “crypto tax” in the US Infrastructure Act have?
U.S. Infrastructure Act has been approved by Congress. The bill changes the definition of “broker” . Trading platforms such as Coinbase that provide custodial encryption services are also included. This means So they may be under the “scope” of the US Internal Revenue Service, and the “good days” may come to an end.
1. Once the new infrastructure bill is approved by the President, the US Internal Revenue Service will be able to obtain an additional $28 billion in tax revenue by taxing cryptocurrencies.
2. The US Congress finally passed the bill by a vote of 228-206.
3. For cryptocurrency users, several key issues related to digital assets have not yet been satisfactorily explained.
Recently, the U.S. Congress officially passed the much-anticipated 1.2 trillion U.S. dollar infrastructure bill in an attempt to improve U.S. infrastructure and at the same time impose taxes on cryptocurrency brokers. In the end, the bill was passed in Congress with a vote of 228-206, which also marked the arrival of a historic moment for American cryptocurrency. It is worth mentioning that when drafting the bill, the senator added a clause to amend the definition of “broker” by the National Tax Administration to include “organizations engaged in crypto asset trading.” .
This also means that once the bill is approved and signed by President Biden, centralized cryptocurrency trading platforms such as Coinbase will also be regarded as “brokers” and must directly file tax returns with the U.S. Internal Revenue Service.
According to the bill, brokers must submit a 1099 form and list the names and addresses of their clients. Moreover, according to the proposal, the U.S. government will be able to obtain an additional $28 billion in tax revenue through cryptocurrency.
When the bill was drafted, crypto companies expressed concern about the new definition of “broker.” As the new definition is too broad, crypto miners, verifiers, and even crypto wallet companies and dApp developers will be included. In view of the decentralized anonymity of cryptocurrency, it is unrealistic to comply with a strict declaration system.
How was the $1.2 trillion infrastructure bill passed?
When the bill was drafted in early August, the Senate rejected an amendment to exclude non-custodial crypto organizations from the scope of the new tax declaration. The Toomey-Warner-Lummis-Sinema-Portman amendment believes that miners, validators, wallet vendors, and protocol developers are non-custodial participants and they do not need to declare to the IRS.
It is worth mentioning that Senator Richard Shelby also tried to attach his own amendment-an increase of $50 billion in military spending-to the Toomey-Warner-Lummis-Sinema-Portman proposal. Subsequently, Senator Toomey asked everyone to pass it unanimously, but Senator Bernie Sanders fought back.
Immediately afterwards, Senator Ted Cruz requested the cancellation of the regulations on cryptocurrencies. Senator Shelby tried to attach his military expenditure amendment to Cruz. After Cruz rejected it, Shelby also opposed Cruz’s proposal.
More ripple effects
There is a cryptographic organization called the Proof of Stake Alliance (POSA). Its members include Solana and Coinbase Custody. The organization issued a report in September that detailed an interpretation of another revised tax law included in the Infrastructure Act. Of Article 6050I. This provision applies to face-to-face cash transactions exceeding US$10,000, and basically requires the recipient to verify the sender’s personal information and record their social security number, the nature of the transaction and other information, and report the transaction to the government within 15 days , Otherwise it is a felony.
In other words, when Americans invest in cryptocurrency, like any other traditional investment, they must declare their crypto income to the U.S. Internal Revenue Service.
More importantly, the amendment to Article 6050I may even be considered unconstitutional. Currently, the tax law requires anyone who receives $10,000 in cash to report to the Internal Revenue Service. According to Peter Van Valkenburgh, Research Director of the Currency Center, for fiat currencies, this declaration obligation is in compliance with the constitution, because banks can act as third parties, but crypto transactions are peer-to-peer, so the government needs this Fourth Amendment As a basis for supervision.
Although the U.S. Treasury Department has clarified that the new definition of “broker” in the bill will not include non-custodial crypto participants, crypto investors are not buying the bill, and the U.S. government obviously still has many things to clarify. In any case, once the President approves the bill, it is a fait accompli for the IRS. Will cryptocurrency participants be heavily taxed by regulators? Let’s wait and see.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/what-impact-will-the-passage-of-the-crypto-tax-in-the-us-infrastructure-act-have/
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