Industry groups are pushing back against proposals to ramp up cryptocurrency reporting and tax enforcement measures to help pay for the White House's $1.2 trillion infrastructure deal, arguing that the measures will have unintended consequences across the digital asset ecosystem.
The current proposals would impose unfair reporting requirements and would ultimately fail to raise the $28 billion that Congress and the White House have hoped, groups such as the Blockchain Association and Coin Center said Thursday.
The Biden administration has pointed to enhanced tax enforcement in the cryptocurrency space as one means of paying for the bipartisan infrastructure deal. The plan, which will soon be considered by the Senate, includes $550 billion earmarked for investments in public transit, bridges, water infrastructure and high-speed internet, among others.
In its current form, the deal would be financed with "a combination of redirecting unspent emergency relief funds, targeted corporate user fees, strengthening tax enforcement when it comes to cryptocurrencies, and other bipartisan measures," as well as additional revenue from economic growth, the White House said in a fact sheet Wednesday.
Cryptocurrency groups are arguing that the measures currently being considered would backfire.
The draft language circulating among some advocates includes an expanded definition of brokers that would encompass any person who, for consideration, regularly provides any service or application to facilitate transfers of digital assets, according to a draft copy of the provision shared with Law360.
That would increase the flow of information to the Internal Revenue Service, potentially aiding its efforts to spot cryptocurrency-linked tax evasion. But Jerry Brito, executive director of advocacy group Coin Center, called the proposed definition far too expansive.
"Unfortunately, in the drafts we've seen, the category of persons who would be obligated to report is so broad that it potentially covers persons who only provide software or hardware to customers and who have no visibility whatsoever into users' transactions," Brito said in a Twitter thread Thursday.
The Blockchain Association echoed that concern, calling such a measure "unworkable" and warning that it could push businesses overseas.
"What Congress is considering with this measure is not a new tax on the cryptocurrency industry," Executive Director Kristin Smith said in a Thursday statement. "Instead, it puts new reporting requirements on individual players in the industry who have no way to comply."
Perianne Boring, founder and president of the Chamber of Digital Commerce, called the measure "rushed," telling Law360 on Thursday that the Chamber has repeatedly pushed the IRS for comprehensive guidance on tax compliance.
The infrastructure plan as a whole is the product of weeks of fraught negotiations between the White House and senators from both parties. The Senate on Wednesday voted 67-32 to move forward with debate on the bill after senators signaled they had reached agreement on the "major issues" at stake, and the broad funding targets.
But it seems cryptocurrency groups, at least, will be pushing for changes.
"We worked all day yesterday trying to fix and will continue to do so today," Brito said in a tweet Thursday. "Stay tuned."
Copyright © 2021, Law360 Tax Authority. All Rights Reserved. Contents of this publication may not be reproduced without the express written consent of Law 360 Tax Authority and CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.
CBIZ MHM is the brand name for CBIZ MHM, LLC and other Financial Services subsidiaries of CBIZ, Inc. (NYSE: CBZ) that provide tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies.