Infrastructure Bill Provision Expands Cryptocurrency Reporting Requirements | McDermott Will & Emery


On August 1, 2021, the US Senate unveiled the draft text of the Infrastructure Investment and Jobs Act (Bill), a highly anticipated $ 1,000 billion infrastructure package negotiated by the White House and a bipartisan group of senators. . As noted below, the bill includes a provision (Section 80603) which, if passed in its current form, would amend the Internal Revenue Code (Code) to expand certain reporting requirements for transactions involving digital assets. , including cryptocurrencies such as Bitcoin and Ether and other forms of digital tokens. The provision, which would typically come into effect on January 1, 2023, aims to close a “tax gap” resulting from the underreporting of cryptocurrency transactions.

Section 6045 of the Code generally imposes reporting requirements on “any person doing business as a broker” with respect to sales affected by the broker on behalf of its clients. Under current law, these statements are currently limited to sales of shares of companies, interests in trusts and partnerships, debt securities, certain commodities and various related derivatives. In accordance with the regulations, these sales are reported by the broker on Form 1099-B and the information to be reported includes identifying information about the taxpayer and the property sold, the date of sale and the gross proceeds of the sale – and only with respect to the sale of a “covered security”, the adjusted basis of the good sold and the nature of the gain or loss on the sale (that is to say, short- or long-term capital gain).

For the purposes of the 1099-B statement, a “broker” is defined as including a “trader, barter exchange and any other person who (for remuneration) regularly acts as an intermediary with respect to goods or services. “. A typical example of a broker subject to the 1099-B declaration is a brokerage firm that facilitates transactions for clients in stocks, bonds and / or commodities.

The bill expands the definition of a broker to include “any person who (for a fee) is responsible for regularly providing any service that transfers digital assets on behalf of another person”. Unless otherwise provided by US Department of the Treasury regulations, a “digital asset” means “any digital representation of value that is recorded on a cryptographically secure distributed ledger or similar technology as specified by [Treasury]. “A cryptocurrency exchange would be considered a broker in that language.

The “basic” statement under section 6045 only applies to “covered securities”. Under current law, the term covered securities generally includes shares of companies, debt securities, certain designated commodities (and their derivatives) and other financial instruments. The bill would expand the definition of covered securities to include any “digital asset”. As a result, dealers subject to Section 6045 will be required to report the adjusted basis and the character of the gain or loss on the sale of digital assets, including utility tokens, stablecoins and backed tokens. actives.


Under current law, section 6045A of the Code imposes additional reporting requirements that are generally applicable to the transfer of covered securities from one broker to another. Specifically, the relinquishing broker must provide a statement setting out certain information (specified in the regulations) about the transferred covered securities so that the receiving broker is able to comply with the 1099-B reporting requirements on a subsequent sale of the securities. transferred. By including digital assets in the definition of covered securities, the bill imposes this transfer reporting reporting requirement on the transfer of digital assets from broker to broker.

The bill also expands Section 6045A by imposing an additional reporting requirement when a broker transfers a covered security that is a digital asset to “an account that is not maintained by, or an address not associated with, a person whom this broker knows or has reason to know is also a broker ”(that is to say, a non-broker). In this situation, the transferor must file an information return with the Internal Revenue Service (IRS) containing the same information that is required in a transfer return for a broker-to-broker transaction. The bill provides for penalties in the event of non-compliance with the information declaration between brokers and non-brokers.


Section 6050I of the Code generally imposes reporting requirements on anyone who carries on a business or trade activity and, in the course of such trade or business activity, receives more than $ 10,000 in cash in a single transaction or in two or more related transactions. These transactions are reported on Form 8300, and the information required includes identifying information about the assignor and assignee and a description of the transaction.

The bill expands the definition of “cash” for reporting purposes to include “any digital asset” so that large transactions in tokens, including cryptocurrency, must be reported even outside of the brokerage context. .

The Senate is expected to amend the bill in the coming weeks. In particular, Senator Ron Wyden (D-OR), chairman of the United States Senate Finance Committee, posted a series of messages on Twitter ahead of the bill’s release. In the posts, Senator Wyden expressed concern that the definition of “broker” was unclear and could encompass certain businesses that play a side role in cryptocurrency trading, such as digital wallets and developers of blockchain technologies, and that imposing reporting requirements on these companies could pose challenges and have unintended consequences. On August 3, 2021, Senator Wyden, along with Senators Cynthia Lummis (R-WY) and Patrick Toomey (R-PA), unveiled an amendment to the bill that generally limits the definition of “broker” to entities with clients, clarifying that Cryptocurrency miners, developers of cryptocurrency hardware and software, and developers of digital assets are not expected to fall within the definition.

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