Letter To The Treasury:
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 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 are 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 specific 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 interpreted” to refer to a wider spectrum of individuals and businesses than intended.
The Act contains a clause requiring anyone or any entity conducting commerce or trade to disclose to the IRS any transactions involving digital assets that exceed $10,000.
Coin Center, a non-profit advocacy organization, specializing in blockchain technology, opposed the requirement earlier this year and sued the Treasury because it would subject Americans to a “mass monitoring” regime.
Senators Warren and Marshall present new legislation to combat cryptocurrency money laundering.
The part is expected to put reporting obligations on the big cryptocurrency exchanges with user information like clients’ names, addresses, and social security numbers, claim Fordham International Law Journal.
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.
The new rule does not apply to parties like crypto miners and stakers, according to a letter that U.S. Senator Rob Portman released on Twitter in February from the U.S. Assistant Secretary for Legislative Affairs, Jonathan Davies.
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 SectionSection.
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.