A bipartisan group of lawmakers introduced a revised crypto tax bill on Wednesday that aims to update the tax code to better address crypto use cases and which, if signed into law, would direct the IRS to analyze the effect de minimis exemptions could have.
Congressmen Steven Horsford (D-N.V.), Max Miller (R-Ohio), Suzan DelBene (D-Wash.), and Mike Carey (R-Ohio) reintroduced the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Returns Act, also known as the Parity Act, which Horsford and Miller had previously championed multiple times. The new language comes a week after lawmakers reportedly met to discuss cryptocurrency tax reform.
The new version of the bill requires that “payment-regulated stablecoins” generate no gains or losses unless the cost basis is less than 99% of the cash value of the stablecoin, and it also creates a safe harbor for trading through brokers or into taxpayers’ accounts, defines how so-called “wash sale” rules could apply to digital assets, and addresses how digital assets are earned by acting as a validator.
The bill also directs the IRS to examine what type of tax burden cryptocurrency holders face when it comes to “small digital asset transactions” and how many transactions worth less than $200 are covered under current law. This review should include what the IRS would need if there were a de minimis exemption – that is, an exclusion for activity that the law should consider too small to be affected – for crypto transactions, as well as whether and how such an exemption could be abused.
The crypto industry has long argued that freeing taxpayers from the burden of filing and reporting taxes on small transactions would make it easier to use crypto as a payment tool for small items like a cup of coffee.
The bill is meant to be just a first step toward broader crypto tax reform, Horsford said at CoinDesk’s Consensus conference in Miami earlier this month.
“I actually think tax is the foundation. Why? Because it’s tax policy that will determine how these digital assets can be used in our financial system in the first place. And at a time when our federal tax code is outdated, it doesn’t take into account the modernization of digital assets,” he said.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, no current regulatory policy framework tells a consumer, institution, or builder what happens to their taxes when they sell a digital asset, earn a staking reward, lend crypto on the U.S. platform, or make a charitable contribution in bitcoin,” the lawmaker said. “These are tax issues. And they remain completely unresolved.”
