In a letter addressed to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, Members of Congress Brad Sherman and Stephen Lynch have urged the prompt implementation of tax regulations for the cryptocurrency industry. The lawmakers expressed concerns about tax compliance practices within the crypto space, highlighting the industry’s contribution to the United States tax gap.
Citing an audit report from September 2020 by the Treasury Inspector General for Tax Administration (TIGTA), Sherman and Lynch pointed out the IRS’s inability to identify taxpayers involved in cryptocurrency transactions due to inadequate reporting requirements. Despite the passage of the Infrastructure Investment and Jobs Act (Bipartisan Infrastructure Bill) in November 2021, which mandated the reporting of crypto transactions starting in 2023, the proposed regulations have yet to be finalized.
Congressmen Sherman and Lynch emphasized the need to promptly release the proposed regulations to close the tax gap and ensure full tax compliance within the cryptocurrency industry. They argued that implementing effective tax regulations would help address the long-standing issue of tax evasion associated with cryptocurrencies.
The Biden administration had previously proposed a 30% Digital Asset Mining Energy (DAME) tax on cryptocurrency miners as part of the FY2024 budget in March 2023. However, the proposed tax did not make it into the May legislation to raise the U.S. debt ceiling. While concerns over the 30% mining tax have subsided for now, crypto advocates believe it may resurface in future legislation.
Crypto proponents, including Nic Carter, co-founder of Coin Metrics, anticipate that the Biden administration will reintroduce the mining tax in some form within an omnibus bill down the line. This suggests that the 30% tax on crypto mining, while temporarily off the table, remains a possibility in the future.
The call for robust tax regulations becomes increasingly important as the crypto industry continues to grow and gain mainstream attention. Congressmen Sherman and Lynch’s letter serves as a reminder of the pressing need to ensure tax compliance within the cryptocurrency sector. Implementing clear and comprehensive regulations will not only aid in closing the tax gap but also contribute to the overall legitimacy and transparency of the industry.
