U.S. infrastructure plan includes enhanced crypto reporting
The Biden Administration revealed their new infrastructure bill and a portion of the cost will be funded by enhanced tax enforcement on cryptocurrencies. The primary purpose of the bill is to bolster the US economy through the creation of 2 million jobs per year over the next decade. However, a portion of the costs will be offset by increasing tax enforcement on cryptocurrencies. The proposed measures look to update the definition of a broker under the existing §6045 regulations and to include that broker reporting applies to all transfers of covered securities including digital assets. The heightened reporting requirements would include transactions of all digital assets, including cryptocurrencies, and transactions of $10,000 or more would be in scope. According to a summary of the plan by the Joint Committee on Taxation, the proposed changes would raise $28 billion over ten years to help offset the $550 billion cost of the infrastructure plan. The proposed measures call for crypto brokerages and exchanges to face heightened reporting requirements for transactions of all digital assets, including cryptocurrencies.
Cryptocurrencies is a continued focus for the Biden Administration. Earlier this year, Treasury Secretary Yellen called for tighter regulation of stablecoins. And the Treasury released General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals (the "green book" proposals). The signature in the green book is a proposal for "comprehensive financial account reporting." The comprehensive financial account reporting of inflows and outflows would also apply to crypto asset exchanges and custodians. Separately, reporting would also apply where a taxpayer buys crypto assets from one broker and transfers the crypto asset to another broker.
The proposed heightened information reporting to the IRS will also pose additional compliance requirements for cryptocurrency brokers and exchanges. Many institutions will need to revisit their onboarding process and ensure they are collecting name and address information on their account holders. Further, there will be a need to collect certified TINs from account holders to properly comply and submit information returns. Many institutions currently don't have these processes in place and this will require potential remediation and account holder outreach.
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