Congress takes a step toward a de minimis exemption for everyday cryptocurrency transactions
The Virtual Currency Tax Fairness Act of 2020 was introduced with bipartisan sponsors in Congress today. It would create a sensible de minimis exemption 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 Reps. DelBene, Schweikert, Soto, and Emmer, would address the problem by simply treating cryptocurrency similarly to any other foreign currency. 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 Representatives Delbene and Schweikert to get the idea reintroduced. This bill rounds out an important crypto tax agenda in Congress. Earlier this year, 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.