Biden-era regs classifying some decentralized digital asset entities as brokers subject to IRS reporting rules are one step closer to elimination following a bipartisan House vote that has Republicans enthused.
The House passed H.J. Res. 25 March 11 by a vote of 292-132. A joint resolution for congressional disapproval under the Congressional Review Act (CRA), the bill would overturn IRS rules relating to gross proceeds reporting by brokers that regularly provide services effectuating digital asset sales pursuant to the Infrastructure Investment and Jobs Act.
If signed into law, the IRS final rule treating decentralized digital asset traders that provide front-end services as brokers required to complete Forms 1099-DA, Digital Asset Proceeds From Broker Transactions, would no longer remain in effect.
Representative Mike Carey (R-OH) introduced the measure in January with 9 others joining as cosponsors, including one Democrat. Tuesday evening’s vote saw 76 Democrats break rank and join with Republicans in favor of undoing one of the last regulatory actions taken by the IRS during the Biden administration.
After the joint resolution’s passage, several Republicans celebrated the vote outcome and further pressed the attack on the regs. Representative French Hill (R-AR) said in a statement that the rule “is a clear example of government overreach.”
Hill seeks a bipartisan approach to “ensure the digital asset reporting requirements” are in-line with how blockchain technology works. “We must bring legal and regulatory certainty to ensure these technologies and entrepreneurs can flourish here in the United States,” he added.
Representative Mark Alford (R-MO) said on social media platform X that the rule was one of Biden’s “11th hour attacks on the digital asset ecosystem.” Eliminating it would “prevent blockchain innovation from moving overseas,” he said.
“This rule would place impossible burdens on software developers,” said Representative Tim Moore during debate. Later on X, Moore in similar comments asserted the CRA resolution stops the IRS from “crippling innovation.”
The joint resolution for disapproval advanced out of the House Ways and Means Committee February 26 on a 26-16 margin. An identical Senate bill introduced by Senator Ted Cruz (R-TX) also drew Democrat support, as the upper chamber voted 70-28 March 6. During House floor proceedings, Ways and Means Chair Jason Smith (R-MO) offered a motion to return Cruz’ joint resolution back the Senate, to which the House agreed.
Smith, quoting former IRS Commissioner Chuck Rettig in remarks on the House floor during debate, said requiring Forms 1099-DA from DeFi exchanges will “overwhelm the agency and have little or no value to effective and efficient tax administration.” Moreso, “only American companies and taxpayers will need to spend billions of dollars to change their business models and report billions of pieces of taxpayer data,” said Smith.
Ways and Means in a press release commended the House for “overwhelmingly” approving the joint resolution. The committee’s majority claimed the IRS had expected “at least 8 billion new pieces of paperwork for taxpayers to submit to the agency and for IRS employees to collect and analyze.”
Finalized in at the end of December, the so-called midnight rule on the CRA chopping block currently applies to transactions beginning January 1, 2025. Repealing it, according to the Congressional Budget Office, would incur a $4.5 billion hit to the federal deficit through fiscal year 2035.
However, the resolution “has broad bipartisan support,” said Carey ahead of the vote, citing the 18 Democrats and one Independent who voted in favor of the Senate bill last week. The rule at issue “implements stringent reporting requirements on decentralized finance exchanges, or DeFi exchanges,” according to Carey.
He added that treating certain DeFi exchanges “as traditional brokers” like their centralized counterparts ignores how such exchanges “don’t have the ability to collect any information that the IRS requires from individuals using their platforms.”
Tuesday evening, Carey posted online: “Now we need to get it on [President Trump’s] desk and signed into law.”
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