House Financial Services Chair Urges IRS to Revised Proposed Digital Asset Reporting Regs

In a letter to Assistant Treasury Secretary Lily Batchelder, the Chair of the House Financial Services Committee and a bipartisan group of other House members have urged the Treasury Department to revise the proposed digital asset reporting regs released this past August. According to the letter, the proposed reg “would inhibit innovation and harm the digital asset ecosystem, if finalized in its current form.”

Of particular concern to the representatives are the proposed regs’ definitions of “broker,” and “digital asset.” According to the letter,

• “The definition of “Broker” remains too broad and would “capture entities that do not possess traditional characteristics of a broker,” and
• The definition of “Digital Asset” fails to “consider or differentiate the uses or attributes of different types of digital assets.”

The representatives also worry about the expedited time frame provided for the regs’ comment period and implementation phase. Comments on the proposed regs were due by October 30, 2023.

The letter notes that that the shortened time frame for comments “limits the amount of feedback and the [IRS’] ability to make changes to the final rule.” The letter asks the IRS to set a new comment deadline for December 31, 2023.

As for the proposed implementation phase (which requires reporting of gross proceeds from the sale of digital assets after January 1, 2025, and reporting of adjusted basis information for sales after January 1, 2026), the representatives feel that the timing “strains market participants who will need additional time to come into compliance,” and that the implementation phase should also be extended.

For more information regarding the reporting the sale or exchange of digital assets under current law, see Checkpoint’s Federal Tax Coordinator ¶S-3708.