Reps. Polis & Schweikert introduce Cryptocurrency Tax Fairness Act in Congress
Bipartisan bill will make it much easier to use Bitcoin to pay for every day goods and services.
In April, Coin Center explained how the tax laws affecting digital currency transactions create serious friction for consumers and merchants and discourages the use of Bitcoin (or any cryptocurrency) as an everyday payment method. We also outlined how Congress could address this problem. Since then we have been working with congressional staff to develop legislation that would address the problem, and today I’m thrilled that with the leadership of Rep. Jared Polis and Rep. David Schweikert, co-chairs of the Blockchain Caucus, the Cryptocurrency Tax Fairness Act has been introduced in Congress.
The bill does two things. First, it creates a de minimis exemption for cryptocurrency transactions for goods or services. Today, if you buy a cup of coffee with bitcoins, you’ll have to calculate and report any gains that you experienced and pay tax on any gains. Under the bill, any transaction under $600 would be completely exempt, so you’d neither have to worry about keeping track of gains on all the little purchases you make, nor would you owe taxes on those small gains. This mirrors the same kind of exemption that foreign currency enjoys today and we think it’s a simple and fair way to avoid discouraging the use of cryptocurrency.
Now, there are many other transactions above $600, such as getting in and out of investment positions, on which capital gains tax will be owed. Today, you are responsible for keeping track of and accurately reporting every cent of gain. This is in contrast to your stock broker, who provides you and the IRS with a 1099-B form accounting all your gains and losses. Indeed, in answering Coin Center’s amicus brief opposing the IRS’s unprecedented and overbroad John Doe summons against Coinbase users, the Department of Justice noted that, “If Congress had subjected bitcoin exchanges like Coinbase to similar reporting requirements as those imposed on an online stock broker or a barter exchange, no John Doe summons to Coinbase would likely have been necessary[.]”
We’re not sure if such informational reporting requires an act of Congress, or whether the IRS could have provided for it through rulemaking and has simply opted not to. Whatever the case, the other thing the Cryptocurrency Tax Fairness Act would do is require the Treasury Department to issue guidelines for informational reporting on digital currency transactions for which capital gains is due.
A de minimis exemption that completely excludes all small transactions, as well as clear IRS guidance and informational reporting, would be a lifesaver at tax time for cryptocurrency users. This is the first time a bill has been introduced in Congress to encourage cryptocurrency’s use and development and Coin Center is thrilled to be a part of it. Now the real work begins: getting it passed–and we’ll need your help!