Senator Pat Toomey, ranking member of the Senate Banking Committee, says he’s prepared to fix the broad definition of a cryptocurrency broker that’s contained within the Biden administration’s infrastructure bill bogged down in Congress.
The comments come as the House is pushing for an imminent vote on a $550 billion so-called “hard” infrastructure bill, which would invest in bridges to roads and the nation’s broadband, water and energy systems. The legislative language includes a provision to collect taxes on cryptocurrency gains, estimated to raise $28 billion over ten years to help pay for spending infrastructure.
“I absolutely want to fix this,” Toomey told Yahoo Finance in an exclusive interview on Thursday.
At issue: the legislation defines a cryptocurrency “broker” very broadly, allowing the Internal Revenue Service to target crypto miners, developers and others, who could be considered brokers even if they don’t have any customers or have access to information needed to comply with tax reporting requirements. The industry worries it will discourage innovation in the fast-growing sector.
“The language is badly flawed. It could impose reporting requirements on participants that have no ability to even comply with the reporting requirements, because they don’t have the information that the requirements would impose,”the Pennsylvania Republican added.
Previously, Toomey negotiated a narrower definition with other senators and the administration, which all parties agreed on, but that never made it into the bill.
“It was a procedural problem that prevented us from getting our fix adopted. So, that means we still have the opportunity to fix it,” Toomey told Yahoo Finance. “We’ll have to do it in subsequent legislation if they pass the infrastructure bill in its current form.”
The newer language would narrow the bill’s definition of broker to better apply to true intermediaries in the crypto sphere. It would make clear that the new definition does not apply to cryptocurrency miners, nor sellers of hardware and software wallets.
While traditional securities brokers like Charles Schwab or Fidelity are required to report clients’ proceeds from stock and other transactions to the IRS, the government has not yet required tax reporting from cryptocurrency exchanges.
“This bill is a pay for, it’s not about compliance and it’s not needed because the IRS already has jurisdiction over digital assets,” says Perianne Boring, head of the Chamber of Digital Commerce.
According to Boring, the bigger issue is that the IRS has not issued guidance on complying with taxes for cryptocurrencies — even as companies have asked for guidance and need more details from the IRs to comply with information reporting.