New House Financial Services Committee chair to delay crypto tax changes

The proposed changes

In a letter to the Treasury, U.S. Republican Representative Patrick McHenry requested clarity on a "poorly" drafted digital asset tax provision.

According to Patrick McHenry, the incoming chair of the House Financial Services Committee, the Infrastructure Investment and Jobs Act's provision on digital assets and tax collection is delayed.

On December 14, McHenry wrote (1) to U.S. Treasury Secretary Janet Yellen with inquiries and reservations on the parameters of Section 80603 of the Act. He asked for clarity in the letter over the "poorly worded" and possibly privacy-invading Section that deals with the taxation of digital assets and is planned to take effect in 2023. According to him, the provision forces the government to regard digital assets as the same as currency for tax reasons, which he claimed might "jeopardize" American citizens' privacy and hinder innovation.

Brokers must submit certain information on their dealings with digital assets to the Internal Revenue Service under the part titled "Information Reporting for Brokers and Digital Assets" (IRS). According to McHenry, the provision was poorly written, and the phrase "brokers" might be "wrongly construed" to refer to a larger spectrum of individuals and businesses than intended. The Act contains a clause requiring anybody or any entity conducting commerce or trade to disclose to the IRS any transactions involving digital assets that exceed $10,000.

What events led to this?

Coin Center made this year's early challenge to the requirement, a non-profit organization that promotes blockchain technology filed a lawsuit against the Treasury because it claims the regulation will subject Americans to a "mass surveillance" system. The part is expected to put reporting obligations on the big cryptocurrency exchanges that already hold user information like clients' names, addresses, and social security numbers, claim Fordham International Law Journal (2). McHenry admitted that the Treasury Department's position that "ancillary parties" shouldn't be subject to the same reporting requirements as brokers was a step in the right direction.

U.S. Senator Rob Portman released a letter in February on Twitter from the U.S. Assistant Secretary for Legislative Affairs, Jonathan Davies, stating that parties like cryptocurrency miners and stakers are exempt from the new regulations. Legislation. To provide "market participants" time to adhere to any additional criteria, McHenry's letter concluded by demanding that the Treasury "quickly" publish the rules under the provision. This is McHenry's second letter to Yellen this year; she received one from him on January 26 asking the Treasury secretary to explain the definition of a broker.