A bipartisan group of lawmakers on Wednesday introduced a revised cryptocurrency tax bill that would update the tax code to better address cryptocurrency use cases and, if signed into law, direct the Internal Revenue Service to analyze the possible impact of de minimis exemptions.
Congressmen Steven Horsford (D-N.V.), Max Miller (R-Ohio), Susan DelBene (D-Wash.), and Mike Carey (R-Ohio) have reintroduced the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Revenue Act, also known as the Parity Act, that Horsford and Miller had previously pushed several times. The new language comes a week after lawmakers reportedly met to discuss cryptocurrency tax reform.
The new version of the bill requires that “regulated payment stablecoins” will not generate any gain or loss unless the cost basis is less than 99% of the stablecoin’s redemption value, and it also creates a safe harbor for transactions through brokers or taxpayer accounts, defines how so-called “wash sale” rules apply to digital assets, and addresses how to earn digital assets by acting as a validator.
The bill also directs the IRS to examine the tax burden faced by cryptocurrency holders on “small digital asset transactions,” as well as how many transactions worth less than $200 are captured under current law. This review should include the IRS’s need for a de minimis exemption (i.e., an exclusion of activity that the law should deem too minor to warrant concern) for cryptocurrency transactions, and whether and how such exemptions might be abused.
The cryptocurrency industry has long argued that freeing taxpayers from the burden of filing taxes on small transactions would make it easier for cryptocurrencies to be used as payment for small items such as a cup of coffee.
Horsford told CoinDesk’s Consensus Miami conference earlier this month that the bill is just the first step toward broader cryptocurrency tax reform.
“I actually think tax is fundamental. Why? Because tax policy will determine, number one, how these digital assets are used in our financial system. And at a time when our federal tax code is outdated, it doesn’t take into account the modernization of digital assets,” he said.
“For example, none of the current regulatory policy frameworks tell consumers, institutions, or builders what will happen to their taxes when they sell digital assets, earn staking rewards, lend cryptocurrencies on U.S. platforms, or make charitable donations with Bitcoin,” the lawmakers said. “These are tax issues. And they remain completely unresolved.”
