The new chairman of the US House Financial Services Committee, Patrick McHenry, wants the Treasury Department to delay implementation of the portion of the Infrastructure Investment and Jobs Act that deals with digital assets and tax collection.
On Dec. 14, McHenry sent a letter to U.S. Treasury Secretary Janet Yellen with questions and concerns about the scope of Section 80603 of the Act. In the letter, he asked for clarification on a “badly drafted” and potentially compromising section dealing with the taxation of digital assets, which is due to come into effect in 2023.
He said the section requires the government to treat digital assets as the equivalent of cash for tax purposes, which could “threaten” Americans’ privacy and have a negative impact on innovation.
The section titled “Reporting Information for Brokers and Digital Assets” requires brokers to report certain information related to the handling of digital assets to the Internal Revenue Service (IRS).
McHenry argues that the section is poorly drafted and that the term “brokers” could be “misconstrued” as referring to a wider range of people and companies than intended.
The law contains a provision that requires individuals or entities engaged in trade or business to report to the IRS all digital asset transactions that exceed $10,000.
The requirement was challenged earlier this year by the Coin Center, a nonprofit advocacy group focused on blockchain technology, which filed a lawsuit against the Treasury Department saying the rule would impose a regime of “massive surveillance” on US citizens.
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According to the Fordham International Law Journal, the section is likely to impose reporting requirements on major cryptocurrency exchanges that already have user data including customers’ names, addresses and Social Security numbers.
McHenry acknowledged that it was a positive step forward that the Treasury Department had stated that “subsidiaries” should not be subject to the same reporting requirements as brokers.
In February, US Senator Rob Portman shared a letter from US Assistant Secretary of State for Legislative Affairs Jonathan Davies via Twitter which clarified that parties such as crypto miners and stakers are not subject to the new law.
McHenry’s letter ended by requesting that the Treasury Department “immediately” promulgate rules under the section and delay their effective date to give “market participants” time to comply with any new requirements.
This is the second letter McHenry has sent to Yellen this year after he sent her a Jan. 26 letter urging the Treasury secretary to clarify the definition of a broker.