WASHINGTON — The bipartisan infrastructure bill, which passed in the Senate by a vote of 69-30, is a massive document, with more than 2,700 pages. For that reason, there is a lot of confusion about what's included.
The Verify team has tackled claims about various provisions including a proposed mileage tax pilot program and a proposal relating to alcohol-monitoring systems in cars.
Another section of the bill getting a lot of attention, relates to cryptocurrency. The Verify team read through the bill, and spoke with experts, to break down what this policy would actually do.
QUESTION:
Does the infrastructure bill include a section, relating to cryptocurrency regulations? What does this section propose?
SOURCES:
- James Angel, Associate Professor at McDonough School of Business at Georgetown University
- Amy Miller, CPA, Senior Manager for Tax Policy and Advocacy with the American institute of CPAs
- Text of the Bill, H.R. 3684
ANSWER:
Yes. The Infrastructure Bill, passed by the Senate, includes a section that would add regulations on cryptocurrency brokers, mandating that they "make a return" showing profits among their clients.
This would make it easier for the IRS to collect tax revenue from those trading digital assets.
WHAT WE KNOW:
On social media, there's a lot of confusion about what the infrastructure bill did, in regards to cryptocurrency regulations. Some on Twitter claimed that this would "crush" or "kill" the industry.
"Your actions will have a detrimental effect on the cryptocurrency industry in the US," wrote one person. "You are basically handing China the fastest growing sector in the technology space (crypto/blockchain)..."
The policy on cryptocurrency can be found on page 2,433, titled "Information Reporting for Brokers and Digital Assets." The section is only five pages long but makes some important changes.
The following paragraph makes an important change, getting a lot of attention on social media and in the halls of Congress:
RETURN REQUIREMENT FOR CERTAIN TRANSFERS OF DIGITAL ASSETS NOT OTHERWISE SUBJECT TO REPORTING — Any broker, with respect to any transfer (which is not part of a sale or exchange executed by such broker) during a calendar year of a covered security which is a digital asset from an account maintained by such broker to an account which is not maintained by, or an address not associated with, a person that such broker knows or has reason to know is also a broker, shall make a return for such calendar year, in such form as determined by the Secretary, showing the information otherwise required to be furnished with respect to transfers subject to subsection (a).’’
This provision mandates that cryptocurrency brokers report transfers of digital assets, much like a traditional broker would report the sale of a stock or bond. This allows the IRS to more easily tax someone after they sell a digital asset.
"Congress is sending a clear message that it wants tax revenue," said James Angel, a professor at Georgetown University.
Angel said that this change could have major impacts on those who buy and sell digital assets. People are already required to pay taxes on their profits from cryptocurrency, but this policy could make it harder to avoid IRS payments.
"What they're basically doing," he said. "Is what they do to banks and brokerage firms, saying 'hey if you've got customers who are buying and selling these things, you need to report to the IRS."
Lawmakers like Mark Warner of Virginia took to Twitter, to express their support for this policy.
"We need to acknowledge that the innovation and excitement surrounding digital assets has at times obscured some real problems," he wrote. "Perhaps none greater than the tax evasion and non-compliance we have continued to see."
The regulations received some bipartisan blowback from Senators, many of whom considered the definition of 'brokers' to be too vague. Some worried that this would include anyone involved in any kind of cryptocurrency transaction, including "miners," "stakers," and software developers.
In response, multiple amendments were floated by lawmakers, which would attempt to address the issue. In the end, neither amendment was included in the bill.
With the Senate's approval, the bill now moves to the House of Representatives. It's possible that the House offers an amendment to this policy, although this would mean that the bill needs further approval from the Senate. It's also possible that this language is adjusted in a stand-alone bill.
"It sends a strong message to the Crypto world that the government is watching," said Angel.