The IRS has been in a precarious situation following the controversial crypto infrastructure bill. While the bill gave the agency enormous tracking powers, it failed to arm them with the right way to perform this role.
A Victory At Last For Crypto Miners And Stakers
Nevertheless, a new Bloomberg report revealed that the legislature received a new update regarding the bill on February 11. A quick summary of the update is that the bill has been amended such that crypto miners, stakers, software, and hardware providers will no longer be categorized as brokers. Part of the bill makes it a criminal offense for any broker not to reveal their clients’ crypto transaction details to the IRS.
However, miners and stakers can’t comply with this policy since they can’t access such details. The bill’s update comes after the Treasury took over the responsibility of interpreting the bill based on the regulatory procedure. A section of the Bloomberg report quoted Jonathan Davidson (the Treasury’s assistant secretary), who said, “supporting groups without access to information relevant to the IRS shouldn’t be included in the brokers’ reporting requirements.”
Davidson further said, “the treasury is still considering whether CEX, DEX or even P2P exchanges should be classified as brokers.” Nevertheless, Senator Pat Toomey (the outspoken Pennsylvania rep.) insisted that the market players mentioned above should still be recognized as brokers.
The Origin Of The Modification For The Infrastructure Bill
After the white house agreed to the bill, many senators, notably Portman and Warner, attempted to make these changes. However, they couldn’t get the required 100 senators needed to make the change happen. Senator Richard Shelby from Alabama even objected based on an unrelated matter (military spending).
But the senators need not worry again as the Treasury provides legal clarity regarding the matter. Several lawsuits followed the IRS’ revelation that unsold staked cryptos won’t be taxed. One of such lawsuits was from the Jerret couple who sought a refund from the IRS through Tennessee’s us district court, stating that they paid taxes on their staked cryptos.
However, there will be far-reaching consequences of the outcome of this lawsuit than can be imagined. Nevertheless, the IRS (through special agent Ryan Komer) insists that it is tracking several fraudulent operations such as market manipulation, tax evasion, and money laundering in the crypto and NFT industry. Komer heads the IRS’ Los Angeles criminal investigation department.
Clarity Is Key
While it is usual for the IRS to give notices before modifying current regulations, it seems they have already decided on this one. The Treasury’s clarification is immensely important given that the market players mentioned above can’t access the information required by the authorities – a win-win for everyone.
More importantly, the Treasury’s recommendations will still pass through several phases of revisions, proposals, and public comments before they can be adopted and formalized. Crypto taxes remain controversial as most crypto tax policies are barely implemented before it is discovered that it requires modification. However, many crypto analysts opine that this policy in its current form will hamper the growth and development of the crypto sector.