Congress takes a step toward a de minimis capital gains exemption for everyday cryptocurrency transactions
The Cryptocurrency Tax Fairness Act has been introduced in the Senate
The Virtual Currency Tax Fairness Act of 2022 was introduced with bipartisan sponsors in the Senate today. This is a companion to a bill with the same name that has been introduced in the House the last four congresses. It would create a sensible de minimis exemption from capital gains tax for low value cryptocurrency transactions in day-to-day use.
Bitcoin and other cryptocurrencies exist in a gray area: they are commodities that can be spent as easily as any currency. This creates a complication in their tax treatment that we have been lobbying to change for years . Every time someone spends cryptocurrency, a taxable event occurs. This means that a user must calculate how much the particular coin they are spending has appreciated or depreciated in value any time they buy a cup of coffee, or send a fraction of a penny to an internet metered chicken feeder , and they must report that in their taxes.
This bill, introduced by Senators Pat Toomey and Kyrsten Sinema, would address the problem by simply treating cryptocurrency similarly to foreign currencies. Low value day to day transactions would be exempted from capital gains, up to a point. This easy solution to an obvious problem with today’s tax treatment of cryptocurrencies would help level the playing field for this technology.
We have been advocating for a solution like this for years and are proud to have worked with Senators Toomey and Sinema to have this bill introduced in the Senate, making it the first bi-partisan and bi-cameral cryptocurrency legislative effort. We are also thankful to Representatives Delbene, Schweikert, Emmer, and Soto who re-introduced the House version earlier this year.
This bill is an important piece of our crypto tax agenda in Congress. Previously, Representative Tom Emmer introduced legislation to create a safe harbor from tax penalties for taxpayers who have made good faith efforts to comply with tax guidance. Additionally, as we have recently noted, several members of Congress asked the IRS to fix its broken guidance on forks and airdrops .
We look forward to continuing to work to support and promote this policy agenda to ensure clarity in the area of crypto of tax treatment.