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U.S. House Committee Advances Effort to Erase IRS' DeFi Tax Rule
A joint resolution in Congress seeks to reverse a December move by the IRS to impose a tax regime in DeFi, and the House has taken the first steps to do that.
What to know:
- A significant opening step has been taken toward the elimination of an IRS tax rule that the crypto industry argues would be a major hindrance to decentralized finance, with a U.S. House committee passing a resolution to reverse the rule.
- The House Ways and Means Committee voted 26-16 to recommend to the overall House that the IRS rule be cut under the authority of the Congressional Review Act.
The U.S. House of Representatives has taken the first significant move to erase the work of the Internal Revenue Service to impose a tax regime on decentralized financial (DeFi) platforms in the final days of former President Joe Biden's administration.
The House Ways and Means Committee — the panel responsible for overseeing the Treasury Department's IRS — advanced a resolution in a 26-16 vote to reverse the IRS transaction-reporting policy under the Congressional Review Act. Such an effort requires majority approval in both the House and Senate before a presidential signature would make the move final, and the matter now moves to the overall House.
STORY CONTINUES BELOW
In December, the IRS had approved a system that the crypto industry says forces DeFi protocols into a reporting regime designed for brokers, threatening the way that such protocols work and also potentially including a wide range of entities that aren't brokers at all. Nearly every major name in the crypto sector signed onto a Blockchain Association letter last week calling for the elimination of this rule.
Read More: Crypto Industry Asks Congress to Scrap IRS's DeFi Broker Rule
Senator Ted Cruz, a Texas Republican, has fielded a Senate version of the CRA resolution to cut the IRS rule.
"We must pass this resolution to avoid this nightmare for American taxpayers and for the IRS," said Rep. Mike Carey, an Ohio Republican who has pressed for Congress to cut to rule, which he argued would overwhelm the tax agency.
Democrat Rep. Richard Neal from Massachusetts countered the Republican push.
"The bill before us today would repeal sensible and important Treasury regulations ensuring that taxpayers meet their tax filing obligations and do not skirt the law by selling crypto currency without reporting the gains," he said. "It's really that simple."
Eliminating the specific tax approach to decentralized crypto platforms would cut U.S. revenue by an estimated $3.9 billion over a decade.
Rep. Jason Smith, the Republican chairman of the committee from Missouri, accused the IRS of going behind "the letter of the law" when it approved the rule during Biden's final days in office.
"Not only is it unfair, but it's unworkable," he said.
Jesse Hamilton
Jesse Hamilton is CoinDesk's deputy managing editor on the Global Policy and Regulation team, based in Washington, D.C. Before joining CoinDesk in 2022, he worked for more than a decade covering Wall Street regulation at Bloomberg News and Businessweek, writing about the early whisperings among federal agencies trying to decide what to do about crypto. He’s won several national honors in his reporting career, including from his time as a war correspondent in Iraq and as a police reporter for newspapers. Jesse is a graduate of Western Washington University, where he studied journalism and history. He has no crypto holdings.
