Lawmakers Of The Congressional Blockchain Caucus Introduce The Cryptocurrency Tax Fairness Act Of 2017
September 7, 2017 ..... by Jeremy Nation
In an effort to promote consumer spending, lawmakers have drafted legislation that would make purchases of less than $600 made with cryptocurrency exempt from income taxation.
On September 7, 2017, Colorado Democratic Rep. Jared Polis, and Arizona Republican Rep. David Schweikert, in a bipartisan effort, introduced the Cryptocurrency Tax Fairness Act.
The two lawmakers are distinguished as the co-chairs of the Congressional Blockchain Caucus that was launched earlier this year, as reported by ETHNews. The act would create taxation guidelines for purchases made in cryptocurrencies similar to foreign currency transactions, allowing consumers to make purchases up to $600 with cryptocurrencies, and skirt "burdensome reporting requirements." As written, the proposed bill would amend the Internal Revenue Code of 1986 to exclude gross income de minimus gains from certain sales or exchanges of virtual currency.
In a statement released on Polis' website, 2014 IRS regulations regarding digital currencies as property are deemed "outdated guidance" which likens the classification of cryptocurrency to equities, thus disincentivizing consumers to spend them on goods and services. Polis explained the many use-cases for cryptocurrencies:
"Cryptocurrencies can be used for anything from buying a cup of coffee to paying for a car, to crowdfunding a new startup and more and more consumers are choosing to use this type of payment. To keep up with modern technology, we need to remove outdated restrictions on cryptocurrencies, like Bitcoin, and other methods of digital payment. By cutting red tape and eliminating onerous reporting requirements, it will allow cryptocurrencies to further benefit consumers and help create good jobs.”
Schweikert spoke of the role the United States plays in the ecosystem, and described how the legislation will help consumers. He said, "Individuals all over the world are starting to use cryptocurrencies for small everyday transactions, yet here in the States we have fallen behind and make cryptocurrency use more of a challenge than it needs to be. With this simple legislative change, anyone can make digital payments to buy a newspaper or a bike without worrying about tax code challenges.”
It remains to be seen, however, how adoption of the ability to spend cryptocurrencies will go over with consumers. Often referred to is the now-famous, cryptocurrency use-case when Laszlo Hanyecz spent 10,000 bitcoins on pizza, which today would be valued at over $40,000,000. The growth that cryptocurrencies are capable of experiencing may present a barrier to consumer use, given a fear of missing out on what might be a highly lucrative long-term investment. Such was the case with Hanyecz, who made an initial investment of $25 that could have been worth so much more.
Still, Jerry Brito, Executive Director of the cryptocurrency thinktank Coin Center, sees the Cryptocurrency Tax Fairness Act as a positive move for the ecosystem at large.
“While Bitcoin and other cryptocurrencies are technologically innovative payment methods, today you have to keep track of and report every transaction you make using them, whether it’s a $10,000 investment trade or whether you’re buying a 99¢ song online or a latte at a café. This obviously creates friction and puts cryptocurrencies at a disadvantage relative to other digital payment methods. We applaud Representatives Polis and Schweikert for their leadership in introducing the Cryptocurrency Tax Fairness Act, which would treat cryptocurrencies similarly to how foreign currency is now treated and relieve users from having to keep track of small personal transactions. Not only will this create a level playing field for digital currencies, it will also help unleash innovation on applications like micropayments, which can consist of dozens of transactions per minute and thus are difficult to square with the current law.”
If made into a law, the amendments to the tax code would apply to transactions taking place after December 31, 2017.
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