The lead Republican negotiator for the infrastructure deal, Sen. Rob Portman of Ohio, said in recent months that he was preparing a bill to increase reporting on transactions involving digital assets such as Bitcoin and Ethereum, and to better define the area for tax purposes. Portman described interest in addressing the “tax gap,” the divide between taxes owed and paid to the government, which Democrats are also looking to as a revenue source.
The Biden administration has pressed for several measures to get at the tax gap, which Internal Revenue Service Commissioner Charles P. Rettig has estimated could be as much as $1 trillion each year including unpaid taxes on cryptocurrencies. The Treasury Department’s tax proposals this year included cryptocurrency-related reporting similar to what is in the infrastructure bill, as well as general funding for the IRS to strengthen enforcement.
Senators considered IRS funding in the bipartisan deal, but it was scrapped after Republicans soured on the idea. Crypto provisions emerged as a way to offset $28 billion of the package’s $550 billion in new spending for roads, highways, bridges and other infrastructure projects as senators finalized a deal over the last week.
The final bill would require business transactions involving more than $10,000 in cryptocurrency to be reported to the IRS, adding digital coins to mandates that already exist for large cash payments.
It would add businesses facilitating digital coin trades to the definition of “brokers” who are required to report information to the IRS. That’s the piece of the proposal that’s generated the most pushback, with industry groups saying it would ask some intermediaries for information they don’t have and risk pushing the cryptocurrency industry to leave the United States.
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